MTS Group Governance System

Model of Group management supposes a single development strategy of Group’s companies with regard to priorities and business peculiarities.

Differentiation is associated not only with our intention to generate value in the promising markets, but also with the desire to diversify the service portfolio, thus mitigating the industry risks and strengthening competitive position of MTS due to the use of synergy effect. Its essence is to take a broader look at the areas of our operations, going beyond the status of a conventional telecommunications operator, and covering not only a full range of communication services but also the related areas such as financial services, М2М, geo-location and cloud-based services. We are looking to create differentiating factors that will enable us to significantly differ from our competitors, to deliver a special value, to provide our customers with a unique customer experience, to create products and services that would not only motivate people to choose MTS, but would also significantly increase our customers’ loyalty.

MTS PJSC is successfully implementing the goals on strengthening of its leadership and maintenance of high business efficiency due to an effective management of the Group of Companies.

MTS PJSC management structure in 2015

System of governance and control bodies

Governance bodies
General meeting of shareholders

Higher Governance Body of MTS PJSC.
Procedure for the General Shareholders’ Meeting is aimed at assurance of adherence to the rights of shareholders, and meets all the requirements of the Russian Federation legislation.
Procedure for preparation, convocation, holding and summarizing results of the General Shareholders’ meeting is defined by the Charter and Regulation on the General Meeting of MTS PJSC Shareholders.

Board of Directors

Board of Directors exercises a general management of MTS PJSC activities.
It is a key element of the corporate governance system of the Company, representing interests of shareholders through the effective management organization.
Establishment procedure, status, composition, functions, purposes and goals, powers of the Board of Directors, its operating procedure and interaction with other management bodies of the company are determined by the Charter and Regulation on the Board of Directors of MTS PJSC.

Management Board

Collective executive body of MTS PJSC.
It shall organize an effective day-to-day management of current activities of the Company, including implementation of decisions taken by the Board of directors within its current competences.
Number and identities of the Management Board members shall be approved by the Board of Directors upon a proposal of the President. Management Board Chairman is the President of MTS PJSC.
Management Board follows the Charter and the Regulation on Management Board of MTS PJSC in its activities.

President

One-person executive body of MTS PJSC.
He exercises a day-to-day management of current activities of the Company.
Activities of the President shall provide for profitability and competitiveness of the Company, its financial and economic stability, enforcement of rights of the shareholders and social guarantees of Company’s employees.
Andrey Anatolyevich Dubovskov has been the President of MTS PJSC from March 5, 2011.
The President governs the Company’s activities in accordance with the Charter and the Regulation on President of MTS PJSC.

Internal Control System
Auditing Commission

Auditing Commission is a permanent elective body of the Company, exercising periodic control over the financial and economic activities of the Company, activities of its management bodies and officers.
Its activities are regulated by the Charter and the Regulation on Auditing Commission of MTS PJSC.

Internal Control and Audit Unit

Internal Control and Audit Unit is an independent structural unit of MTS PJSC, consisting of: Internal Audit Department, Control Department, Administrative Control Department, and Methodology and Coordination Department. Head of the Internal Control and Audit Unit is the Director for Internal Control and Audit who is functionally subordinated to the Chairman of the Audit Committee under the Board of Directors of MTS OJSC, and administratively subordinated directly to the President of MTS PJSC.
Its activities are regulated by the Regulation on Internal Control and Audit Unit.

Audit Committee under the Board of Directors Audit Committee is a collegial deliberative body under the Board of Directors, which reviews matters related to control of functional efficiency of the risk management and internal control system and reliability of the financial statements of MTS Group, considers candidates and results of inspections of external auditors and ensures preparation of recommendations to the Board of Directors in order to take decisions on such matters.
Auditor

Independent estimate of reliability of accounting (financial) statements of the Company.
In order to audit and approve the annual financial statements of the Company, the General Meeting of Shareholders shall annually approve the Auditor.

General Meeting of Shareholders

The General Meeting of Shareholders is the supreme management body of the Company, exercising its activities in accordance with provisions of the Company’s Charter, Regulation on the General Meeting of Shareholders of MTS PJSC, and the requirements of legislation of the Russian Federation.

Company’s shareholders take part in governance over the Company through decisions taken at the general meetings of shareholders. Shareholders may exercise a significant influence on business through the voting. In particular, powers of the general meeting of shareholders encompass the approval of annual report and financial statements, distribution of profit, including payment of dividends, election of key management and control bodies of the Company, approval of significant deals and related-party transactions as well as a number of other important matters.

Procedure for the General Shareholders’ Meeting is aimed at assurance of adherence to the rights of shareholders, and meets all the requirements of the Russian Federation legislation.

Notifying shareholders on holding of the General Meeting of Shareholders

Shareholders shall be notified on holding of the General Meeting of Shareholders through publication of this information at the official website of the Company (www.mts.ru) at least in 30 (thirty) calendar days before its date.

Information on holding of the General Meeting of Shareholders can be additionally sent by registered mail to the address indicated in the list of person with a right to participate in the General Meeting of Shareholders, or handed to such persons directly, under signed receipt within the term set out for publication of information on holding of the General Meeting of Shareholders at the official website of the Company.

With regard to recommendation of the Corporate Governance Code, aimed at creation for the shareholders of best possible conditions for participation in the general meeting; model proxy form shall be published at the official website of the Company.

Within the framework of preparation to the General Meeting of MTS Shareholders the shareholders get the opportunity to ask members of executive bodies and Board of Directors on issues of the agenda of the General Shareholders’ Meeting, and to voice their opinion on issues of the Meeting’s agenda by sending e-mails to the address shareholder@mts.ru.

We are trying to present materials for the General Meeting in a comprehensible form. That is why we create a special section (micro-site) dedicated to the Annual General Meeting of Shareholders where we publish required documents (presentations, document comparisons, comments to them, details on candidates) and provide an access to the online broadcasting of the Annual Meeting.

Holding of the General Meeting of Shareholders

Shareholders may implement their voting right by most simple and convenient for them ways without any encumbrance. Voting at the General Meetings of Shareholders is carried out through a direct participation in the meeting or filling and sending to the Company (and to its registrar) of ballots for voting on the agenda issues. Due to legislation changes allowing to use e-voting options at the General Meetings, the Company closely examines the possibility of organization of this method for participation in the meetings.

Organization and holding of the General Meetings of Shareholders shall be arranged in a way allowing for an unburdensome access for all the shareholders. General meetings held in the form of a joint attendance shall be organized only in the city where the Company is located (Moscow) at addresses convenient for coming and personal participation of the shareholders and their representatives.

In the reporting year we implemented a number of activities related to holding of the Annual General Meeting of Shareholders:

  • a video briefly representing the financial year results was shown for the first time;
  • online broadcasting of the Annual Meeting was organized and successfully carried out at MTS website, allowing shareholders who didn’t attend the meeting in person to follow the course of the meeting in real time. Video record of the meeting is available at MTS website in the “General Meetings of Shareholders” section;
  • Activities allowing to demonstrate innovative technologies of MTS and to receive an interactive consultation on social projects of the Company were arranged during the registration of shareholders and during the break.

Quorum of the Annual General Shareholders’ Meetings in MTS PJSC

General Shareholders’ Meetings in 2015

Three General Shareholders’ Meetings were conducted in 2015:

Annual General Meeting of MTS PJSC shareholders
June 25, 2015
In the form of joint attendance
(Protocol No.35 dated 25.06.2015)

The Annual General Shareholders’ Meeting approved the Annual Report for 2014 and annual accounting statements for 2014. A decision on the profit distribution was taken, and the dividends according to the results for the reporting year 2014 were announced. New compositions of the Company’s Board of Directors and Review Board were elected.
Company’s auditor was appointed
New revisions were approved: of the Charter, Regulation on the Annual General Shareholders’ Meeting, Regulation on the Board of Directors, Regulation on the President, Regulation on the Management Board, and Regulation on the Review Board.
New revisions of the documents were drawn up with regard to legislation changes, requirements of regulating bodies and recommendations of the Corporate Governance Code.

Extraordinary general meeting of MTS PJSC shareholders
August 25, 2015
In the form of absentee voting
(Protocol No.36 dated 25.08.2015)

Decisions at the extraordinary general meeting of shareholders were taken on MTS PJSC reorganization through the acquisition of COMSTAR-Regions CJSC, Penza GSM JSC, SMARTS-Ivanovo JSC, SMARTS-Ufa JSC, and on changing the Charter of MTS PJSC.

Extraordinary general meeting of MTS PJSC shareholders
September 30, 2015
In the form of absentee voting
(Protocol No.37 dated 01.10.2015)

Decision at the extraordinary general meeting of shareholders was taken on a distribution of MTS PJSC profit (payment of dividends) according to the results for the first half of 2015.

Board of Directors

Board of Directors of the Company plays a pivotal role in effective organization of the corporate governance system.

Board of Directors promotes interests of the shareholders and bears responsibility for the increase of business worth by organization of an effective management.

Board of Directors of the Company exercises general governance over Company’s activities in accordance with provisions of the Company’s Charter, Regulation on the Board of Directors of MTS PJSC, and the requirements of legislation of the Russian Federation.

The main purposes of the Board of Directors are:

  • development and analysis of general corporate strategy, control over its implementation;
  • providing for the control over executive bodies and chief executives of the Company, and evaluation of their activities;
  • increase of capitalization of the Company, expansion of its market positions, achievement and preservation of the Company’s competitiveness;
  • maintenance of a stable financial standing, increase of revenues and profitability;
  • protection of rights and lawful interests of Company’s shareholders.

Organization of the Board of Directors’ activities

At least six in-person meetings shall be conducted each year in accordance with the approved plan of meetings of the Board of Directors. If necessary, it is possible to participate in a joint meeting through video conferencing. Extraordinary meetings shall be convened to take decisions on urgent matters. Meetings in the form of absentee voting shall be conducted to vote on issues that members of the Board of Directors don’t have significant contradictions over.

Plan of Board of Directors’ activities for the next year shall be approved in December of the current year. Dates, periods and locations of meetings shall be determined according to the schedules of activities of the Board of Directors members in order to provide for participation of all the directors.

Traditionally the plan of activities includes the main issues of Company’s operation: strategy, finances, budget and risks, HR matters. Such plan shall be prepared with regard to the suggestions of the Board of Directors members and Company’s managers. All issues of the BoD meeting agenda shall normally be reviewed by dedicated committees, allowing to discuss and draw up recommendations for a final decision of the Board of Directors.

In-person meetings of the Board of Directors are usually held in Moscow headquarters. First meeting of the newly elected Board of Directors shell be held with personal attendance, on the day of the General Shareholders’ Meeting which decided on election of the Board of Directors.

To hold the meeting in the headquarters it is necessary to plan and approve the schedule of activities for 2 days: meetings of committees under the Board of Directors, briefing with BoD members (PreBoard), the meeting of the Board of Directors, and to make all practical arrangements: on provision of simultaneous translation, services on hotel booking, transfers, catering, etc.

Chairman of the Board of Directors holds monthly meetings/consultations in the form of audio conferencing with representatives of shareholders and / or managers of the Company. Main topic of such meetings is a matter of the management of strategic changes. This allows to initiate global strategic changes outside of routine management ant to change the focus of a common perception of Company’s systems and processes.

We believe it is a good practice allowing to share ideas and observations from their experience of work with other companies and businesses, which at the end of the day enriches our discussions in the Board of Directors and forms a strong base for right decisions of the executives.

Our Company has the practice of field meetings of BoD. This approach allows for BoD members to combine participation and discussion of planned meetings’ issues with analysis of Company’s operation in specific regions, and with business meetings with the heads of Company’s branches.

The company has the electronic document management system “Portal of the Board of Directors” implemented in personal tablet computers of the members of the management bodies. The system has significantly facilitated the interaction between the members of the Board of Directors, committee members of the Board of Directors and Company’s managers in elaboration and adoption of key solutions.

2015 saw 12 meetings of the Board of Directors, including 6 in-person meetings and 6 meetings by correspondence.

Number of meetings held by the Board of Directors in 2013–2015

Number of issues considered at meetings of the Board of Directors

Participation of the directors in meetings of the Board of Directors in 2015

Director in-person meetings meetings by correspondence
Ron Sommer 6 6
Anton Abugov1 2 1
Aleksandr Gorbunov 6 6
Andrey Dubovskov 6 6
Sergey Drozdov1 - -
Michel Combes 5 6
Stanley Miller 6 6
Vsevolod Rozanov 6 6
Regina Von Flemming2 4 5
Thomas Holtrop 6 6
Mikhail Shamolin2 3 5

1 Powers of the Board of Directors member terminated on June 25, 2015

2 Elected as a member of the Board of Directors on June 25, 2015.

Structure of matters reviewed at the meetings of the Board of Directors in 2015

Among the matters reviewed at the meetings of MTS PJSC Board of Directors in 2015, it is necessary to emphasize a range of issues with solutions that were important for our Company.

  1. MTS Group Strategy for 2016 – 2018, strategy of business development in the system integration segment, strategy of communications.
  2. Review of the results of MTS Group budget fulfilment for 2014, on MTS Group budget adoption for 2016.
  3. Conclusion of a credit agreement with the Public Development Bank of China on an employment of funds in Chinese yuans and US dollars in the total equivalent of 200 million US dollars for the purchase of telecommunications equipment and related services.
  4. Purchase of Envision Group JSC, the owner and developer of MTS billing and one of the largest in Russia system integrators and suppliers of integrated IT solutions.
  5. Extension of the agreement on a strategic partnership with Vodafone in Ukraine, rebranding of MTS Ukraine.
  6. Review of reports:
    • on risk management;
    • on evaluation of completion of individual tasks of Management Board members;
    • on functioning of the system for control over the insider trading legislation compliance;
    • on operation of the units of internal audit, control and compliance, including the report on risk management system efficiency;
    • on KSO program implementation;
    • on the results of independent evaluation of the compliance system efficiency.
  7. Recommendations of the Board of Directors on a payment of dividends for 2014 and first half of 2015.
  8. Acquisition of subsidiaries and participation of MTS PJSC in other organizations.

Instructions of the Board of Directors given to managers of the Company

In 2015 the Board of Directors gave 33 instructions to managers of the Company.

Members of the Board of Directors get information on the status of completion of Board’s assignments at each in-person meeting.

Proper completion of the Board of Directors’ assignments is one of the conditions for awarding the Company’s personnel.

Composition of the Board of Directors

MTS PJSC Board of Directors consists of 9 (nine) persons.

The current composition of the Board of Directors was elected at the annual General Shareholders’ Meeting of MTS PJSC on June 25, 2015, and was in effect until the end of 2015 after the election.

New composition of the Board of Directors included Mikhail Shamolin (President of JSFC Sistema OJSC) and Regina Von Flemming (CEO of Axel Springer Russia Publishing House until October 2015).

We acknowledge that the Board of Directors needs to include independent directors in order to efficiently discharge their functions and take deliberate substantiated decisions. The presence of independent members of the Board of Directors allows to ensure a reasonable balance of interests of all the parties concerned: the Company itself, its shareholders and other concerned parties. For the independent directors to be able to influence the decisions taken by the Board of Directors, their number must be equal to at least one third of the total composition of the Board of Directors. In this connection, the number of independent directors in our Board of Directors is over 1/3.

Since June 25, 2015 we have increased the number of independent directors in the Board of Directors to four directors. The increase of the independent directors’ number allows the independent standpoint within the Board of Directors to exercise greater influence on the business decisions taken, on the Company’s corporate policy and strategy.

Criteria of independence of the Board of Directors’ members are defined in the Regulation on the Board of Directors of MTS PJSC1 and correspond to state-of-the-art international practices of corporate governance. It is worth noting that current independent members of the Board of Directors fully correspond to the criteria of independence stipulated both in the Corporate Governance Code and in the Listing Regulations of the Moscow Exchange and NYSE.

Composition of the Board of Directors as of December 31, 2015

1 http://www.mtsgsm.com/upload/contents/294/MTS_BoD_Regulations_2015_eng.pdf

Duration of work in the Board of Directors

Information on members of the Board of Directors as of December 31, 2015

Ron Sommer

Non-executive Director
Chairman of the Board of Directors
Chairman of the Strategy Committee under the Board of Directors
Member of the Budget Committee under the Board of Directors

In 2015 entered the rankings of “25 best representatives of the Board of Directors” during the ceremony of “Director of the year 2015” National Awards

He was born in 1949, in Haifa.

In 1971 he graduated from the University of Vienna and earned Ph.D. in Mathematics.

Professional experience:

  • In 1980 he took the position an executive director in the German branch of Sony Group, in 1986 became the Chairman of Sony Deutschland Management Board
  • 1990 – 1993: President and Chief Operating Officer of Sony Corporation (USA)
  • 1993 – 1995: President and Chief Operating Officer of Sony Europe
  • 1995 – 2002: Chairman of the Management Board of Deutsche Telekom AG
  • 2004 – 2009: member of Motorolla Inc. Board of Directors (USA)
  • 2004 – 2012: member of the International Advisory Board of Blackstone Group
  • In 2005 as an independent director he joined the Board of Directors of JSFC Sistema OJSC where he also acted as a Chairman of the Investor Relations Committee
  • 2006 – 2009: member of the Board of Directors in WEATHER INVESTMENTS (Italy)
  • 2009–2011: First Vice President and the Head of “Telecommunication Assets” business unit of JSFC Sistema OJSC.

Member of the Supervisory Board of Munich Reinsurance company, member of the Board of Directors of Tata Consultancy Services, Chairman of the Supervisory Board of MTS UKRAINE PrJSC.

Citizenship: Germany.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 25, 2009.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Andrey Dubovskov

President
Chairman of the Board
Executive Director
Member of the Corporate Governance Committee under the Board of Directors
Member of the Strategy Committee under the Board of Directors

He was born in 1966, in Alma-Ata.

In 1993 he graduated from the All-Russian State University of Cinema n.a. S.A. Gerasimov with the specialty in film direction.

Professional experience:

  • 1993 – 2002: a range of leading positions in Millicom International Cellular S.A., Millicom International Cellular B.V., “Regional cellular communications” LLC, “800” LLC and other companies in Moscow, Alma-Ata, Nizhny Novgorod, Ekaterinburg, Perm and Kiev
  • 2002 – 2004: CEO of “Tele2” Group company in Nizhny Novgorod
  • 2004 – 2006: Director of MTS PJSC Branch in Nizhny Novgorod
  • 2006 – 2007: Director of “Ural” Macro-Region of MTS PJSC
  • 2007 – 2008: First Deputy CEO of MTS UKRAINE PrJSC
  • 2008 – 2011: CEO of MTS UKRAINE PrJSC
  • 2011 to the present day: President, Management Board Chairman of MTS PJSC

Chairman of the Board of Directors in MGTS PJSC and Russian Telephone Company JSC, Deputy Chairman of the Board of Directors in “Mobile TeleSystems” JLLC, member of the Supervisory Board in MTS UKRAINE PrJSC, member of the Board of Directors in JSFC Sistema OJSC, International Cell Holding LTD, SISTEMA SHYAM TELESERVICES LIMITED.

Citizenship: Russia.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 27, 2011.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 202,410 shares.

Aleksandr Gorbunov

Non-executive Director
Deputy Chairman of the Board of Directors
Member of the Strategy Committee under the Board of Directors
Member of the Budget Committee under the Board of Directors

He was born in 1967, in Moscow.

In 1992 he graduated from Moscow Engineering Physics Institute with specialty in experimental nuclear physics and plasma physics.

In 1999 he earned МBA from Harward University.

Professional experience:

  • 2002 – 2003: Deputy CEO of NTP Intellect Telecom OJSC
  • 2003 — 2005: Head of the Strategic Analysis Service, Chief Strategy Officer of the Strategic Analysis Department of MTS OJSC.
  • 2005 — 2006: Head of the Corporate Development Department, acting First Vice President and the Director of Strategy and Development Complex of JSFC Sistema OJSC
  • 2006 – 2010: Vice President for Strategy and Development of Komstar-OTS OJSC
  • 2010 – 2012: Counselor of the President of SITRONICS OJSC
  • 2010 – 2012: Executive Vice President for Telecommunication Assets Development of “Basic Assets” Business Unit of JSFC Sistema OJSC.
  • 2012 – 2015: Executive Vice President (Investment Portfolio) of JSFC Sistema OJSC.
  • 2015 to the present day: Vice President, manager of telecommunication assets of JSFC Sistema OJSC.

Chairman of the Board of Directors in SISTEMA SHYAM TELESERVICES LIMITED, member of the Advisory Committee in Оzon Holdings Ltd.

Citizenship: Russia.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on February 14, 2013.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Michel Combes

Independent Director
Member of the Appointments and Remuneration Committee under the Board of Directors
Member of the Audit Committee under the Board of Directors
Member of the Special Committee under the Board of Directors

He was born in 1962, in Bologna.

He graduated from Ecole Politechnique and National Higher School of Telecommunications in Paris; he has degrees from Paris Dauphine University (Ph.D. in the Corporate Strategy) and Conservatory of Arts and Crafts (Ph.D. in Prognostics).

Professional experience:

  • 1991 – 1995: Government of France, Paris Branch of Transport and Tourism Ministry, Technical Advisor for International Civil Aviation Matters.
  • 1995 – 1999: Chief Executive Officer of Globecast France Télécom, Paris.
  • 1999 – 2001: Chief Executive Officer of Nouvelles Frontières, Paris.
  • 2001 – 2002: Chief Executive Officer of Assystem, Paris.
  • 2003 – 2006: Senior Vice President and Financial Director of France Télécom, Paris.
  • 2001 – 2002: Chief Executive Officer of TDF (Télédiffusion de France), Paris.
  • 2008 – 2012: European CEO of Vodafone, London; Non-executive Director of Vodafone PLC.
  • 2013 – 2015: Chief Executive Officer of Alcatel-Lucent SA.
  • 2014 – 2015: Non-executive Director, member of ALTICE Audit Committee

Non-executive Director in HDL Development, Chairman of the Board of Directors in SFR-Numericable.

Citizenship: France.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on February 14, 2013.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Stanley Miller

Independent Director
Chairman of the Remuneration and Nominations Committee under the Board of Directors
Member of the Audit Committee under the Board of Directors
Member of the Budget Committee under the Board of Directors
Member of the Strategy Committee under the Board of Directors
Member of the Special Committee under the Board of Directors

In 2015 entered the rankings of 50 Best Independent Directors during the ceremony of Director of the Year 2015 National Awards

He was born in 1958, in Vinberg.

Degree in Law and Administration from South Africa University and degree in Personnel Management from Management and Trade University in Capetown (South Africa).

He completed several programs of business administration including the Proteus Leadership program in London Business School.

Professional experience

  • 1988 – 1991: CEO of the Group on Operations in South Africa of Electronic Media Network company.
  • 1991 – 1997: various positions in NETHOLD company.
  • 1994 to the present day: Chief Executive Officer of Leaderman – SA Luxembourg.
  • 1997 to the present day: Chief Executive Officer of Leaderman – NV Belgium.
  • 1998 – 2010: Chief Executive Officer of Royal KPN NV.
  • 2001 – 2010: Chief Executive Officer of BASE NV Belgium.
  • 2002 to the present day: Chief Executive Officer and owner of ULS BVBA Belgium.
  • 2005 to the present day: Chief Executive Officer and owner of Milvest BVBA Belgium.
  • 2006 – 2010: member of Royal KPN NV Board of Directors
  • 2006 – 2010: Chairman of the Board of Directors in E-Plus GMBH Germany.
  • 2006 to the present day: owner of Main Branch Pty South Africa.

Director in Main Branch Pty South Africa, Director in Arrow Creak Investments 75 (PTY) LTD South Africa.

Citizenship: Belgium.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 24, 2010.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Vsevolod Rozanov

Non-executive Director
Deputy Chairman of the Board of Directors
Chairman of the Budget Committee under the Board of Directors
Chairman of the Corporate Governance Committee under the Board of Directors

He was born in 1971, in Moscow.

He graduated from the Economic Department of Moscow State University n.a. М.V. Lomonosov with specialty in Economics of Foreign Countries.

Professional experience:

  • 1993 – 2001: various consulting positions in Bain & Company in Moscow, London and Stockholm.
  • 2002 – 2004: Deputy CEO for Economics and Finances in MTU-Inform CJSC
  • 2004 – 2006: Deputy CEO for Economics and Finances in KOMSTAR — United TeleSystems OJSC
  • 2006 – 2008: Vice President for Finance and Investments, Management Board member of MTS OJSC
  • 2008 – 2013: President of SISTEMA SHYAM TELESERVICES LIMITED (India)
  • 2013 to the present day: Senior Vice President, Head of the Finance and Investments Complex, Management Board member in JSFC Sistema OJSC

Chairman of the Board of Directors in MTS-Bank PJSC, Deputy Chairman of the Board of Directors in SISTEMA SHYAM TELESERVICES LIMITED, member of the Board of directors in EAST-WEST UNITED BANK S.A., Landshaft CJSC, Lider Invest CJSC, LesInvest LLC, RTI OJSC, Management Board member in Sistema Charity Fund.

Citizenship: Russia.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 27, 2012.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 72,792 shares.

Regina Von Flemming

Independent Director

She was born in 1965, in Lubeck.

In 1992 she graduated from Free University of Berlin with specialty in Political Science, and from

Institute for Policy Studies (Paris).

In 1993 she graduated from INSEAD Business School (Paris), and finished postgraduate studies in the German Institute of Development Trade (Germany).

Professional experience:

  • 1996 – 1999: CEO of Krone Russia.
  • 1999 – 2000: CEO of Ehrmann AG.
  • 2000 – 2003: Vice President of the American-Russian Investment Fund “Delta Capital”.
  • 2003 – 2009: founder and owner of the consulting company Flemming & Partner GmbH Berlin.
  • 2005 – 2015: CEO of Axel Springer Russia Publishing House.

Management Board member and the Head of Committee for Corporate Social Responsibility of the Russian-German Foreign Trade Chamber (AHK).

Member of Reporters Without Borders Union, member of Paul Klebnikov Fund in New York, member of the European Business Association (Moscow), member of the German-Russian Forum (Berlin), member of “Young Forum Leaders” (Munich), member of FIDAR (initiative women in supervisory boards, Berlin), member of the Club of Independent Directors (Moscow).

Citizenship: Germany.

She was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 25, 2015.

During the reporting year she didn’t own shares of MTS PJSC (directly/indirectly)

Thomas Holtrop

Independent Director
Chairman of the Audit Committee under the Board of Directors
Chairman of the Special Committee under the Board of Directors
Member of the Remuneration and Nominations Committee under the Board of Directors
Member of the Corporate Governance Committee under the Board of Directors

He was born in 1954, in Dortmund.

He studied psychology in University of Freiburg and business administration with the specialty in economics and production organization in the German Academy of Civil Employees.

Professional experience:

  • 1990 – 1999: Vice President of American Express International Inc. in New York, Frankfurt and London, member of the Board of Directors in Bank 24 AG and Deutsche Bank 24 AG.
  • 2001 – 2004: President of T-Online International AG.
  • 2002 – 2004: member of Deutsche Telekom AG Board of Directors.
  • 2005 – 2006: Chief Executive Officer of Thomas Cook AG.
  • 2005 – 2011: member of the Supervisory Board of Gruner + Jahr Publishing House (Hamburg).
  • 2009 – 2011: member of Komstar-OTS OJSC Board of Directors, Chairman of Audit Committee, Strategy Committee and Remuneration and Nominations Committee under the Board of Directors of Komstar-OTS OJSC.

Citizenship: Germany.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on February 14, 2013.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Mikhail Shamolin

Non-executive Director

He was born in 1970, in Moscow.

In 1992 he graduated from Moscow Institute of Road Traffic. In 1993 he obtained a second graduate degree in the Russian Academy of State Service under the President of the Russian Federation.

In 1996 – 1997 he underwent a preparation program for top managers in Finance and Management in Wharton Business School.

Professional experience:

  • 1998 – 2004: various positions in the international consulting company ­ McKinsey&Co.
  • 2004 – 2005: Managing Director for ferroalloy business in Interpipe Corporation (Ukraine)
  • 2005 – 2006: Vice-President for Sales and User Maintenance
  • 2006 – 2008: Vice President, Director of MTS Russia Business Unit
  • 2008 – 2011: President, Management Board Chairman of MTS PJSC
  • 2011 to the present day: President, Management Board Chairman of MTS PJSC.

Member of the Board of Directors, of the Strategy Committee, of the Nominations, Remuneration and Corporate Governance Committee, Investor Relations and Dividend Policy Committee under the Board of Directors of JSFC Sistema OJSC; member of the Guardianship Board of Sistema Charity Fund.

Member of the Board of Directors in Russkaya Zemlya LLC, RZ Agro OJSC, Gruppa Kronshtadt LLC; member of the Supervisory Board of Gruppa Kronshtadt JSC.

Citizenship: Russia.

He was elected as a member of MTS PJSC Board of Directors for the first time at the General Shareholders’ Meeting on June 25, 2015.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

  1. Ron Sommer
  2. Andrey Dubovskov
  3. Aleksandr Gorbunov
  4. Michel Combes
  5. Stanley Miller
  6. Vsevolod Rozanov
  7. Regina Von Flemming
  8. Thomas Holtrop
  9. Mikhail Shamolin

Changes in the composition of the Board of Directors during 2015

Until June 25, 2015, the composition of the Board of Directors was as follows:
1. Anton Abugov
2. Alexander Gorbunov
3. Sergey Drozdov
4. Andrey Dubovskov
5. Ron Sommer
6. Michel Combes
7. Stanley Miller
8. Vsevolod Rozanov
9. Thomas Holtrop

Key competences of the Board of Directors members

Member of the Board of Directors Duration of work in the Board of Directors Key competences
Strategy Finance and Audit Industry Specialization (Telecom) Legal Matters and Corporate Governance Personnel management Risk Management M&A GR/IR
Ron Sommer 6 years (from June 2009)
A. Dubovskov 4 years (from June 2011)
4 years (from June 2011) 2 years (from February 2013)
М. Combes 2 years (from February 2013)
S. Miller 5 years (from June 2010)
V. Rozanov 3 years (from June 2012)
Regina Von Flemming 1 year (from June 2015)
T. Holtrop 2 years (from February 2013)
M. Shamolin 1 year (from June 2015)

Conflict of interests: information is indicated in the section “Regulation of possible conflicts of interests between MTS PJSC management bodies”.

Board of Directors members didn’t make transactions with the Company’s shares in the reporting year.

None of the Board of Directors members received loans (credits) from the Company in 2015.

Events after a reporting date

In April 2016, Chairman of the Board of Directors Son Sommer became holder of 0.0049% of the ordinary registered shares of MTS PJSC.

Role of the Board of Directors Chairman and independent directors in the operation of the Board of Directors

Chairman of the Board of Directors

Last year brought for the Company many events, changes, commercial achievements.

In this context it would be more accurate to say that the main goal of the Board of Directors Chairman is to maintain a balance.

To maintain a balance in many senses. First of all, to preserve a balance between old and new ideas, i.е. between maintenance of the existing fairly effective practices and development of the new ones. This concerns both Company’s development and Board of Directors activities.

Besides, in particular, Ron Sommer, the Chairman of the Board of Directors, managed to maintain a correct balance between stability and development in the Board of Directors due to increase of efficiency of the Board Committees’ operation (e.g. Strategy Committee, Renumeration and Appointments Committee, Corporate Governance Committee, Special Committees for specific projects) and due to his personal participation in selection of the candidates for positions of 4 independent BoD directors.

In particular, Ron Sommer, the Chairman of the Board of Directors, managed to maintain a correct balance between stability and development in the Board of Directors proper due to increase of efficiency of operation of the Committees under the Board of Directors and due to his personal participation in selection of the candidates for positions of 4 independent BoD directors.

Two deputy Chairmen of the Board of Directors were elected to provide for an efficient BoD operation, with competences determined for each of them:

  • Alexandr Gorbunov: strategy, international mergers / acquisitions and partnerships of MTS Group;
  • Vsevolod Rozanov: operational and financial control, management of debt and exchange risks of MTS Group.
Independent directors

From the moment BoD included independent members their role and contribution to representation of interests of our Company have been getting stronger.

Board of Directors annually reviews a compliance with independence criteria and determination of the status of BoD members, as usual, at the first meeting of the newly elected Board of Directors.

Independent directors participate in a strategic session for discussion of Company’s strategy updating with participation of BoD members, representatives of the majority shareholder and managers of the Company. Following the strategic sessions results the matter of update of Company’s strategy and development plan shall be presented for consideration of the Board of Directors. In 2015 the strategic sessions was held in July in Moscow. Matters discussed on the session covered the updated strategy of the Company and key strategic short-term and mid-term initiatives and projects.

Independent directors are actively involved in preliminary discussions of related-party transactions before their review by the Board of Directors.

The Company implements a practice of preliminary review of transactions at meetings of the Audit Committee under the Board of Directors, consisting only of independent directors. As common practice shows, this noticeably facilitates the work of independent BoD members as to approval of and agreeing upon transactions.

Our independent directors use their vast experience by participating actively in the strategy discussions and making investment decisions. MTS shareholders may rest assured that the Company is managed by one of the best teams in business with a deep understanding of both telecommunications sector and Russian market.

Secretary of the Board of Directors

Maxim Kalinin

In 2015 Maxim Kalinin entered the rankings of 25 best Corporate Governance Directors and Corporate Secretaries during the ceremony of 10th Director of the year National Award

He was born in 1972, in Moscow.

In 1997 graduated from Moscow State University with the specialty in Law.

From 2005 to the present day exercises the powers of BoD Secretary of MTS PJSC

He is a member of the Council of Corporate Secretaries National Association (CSNA), which allows MTS to strengthen its presence in the corporate governance sphere and promotes a development of the institute of corporate secretaries in general

Professional experience:

  • 2005 to the present day: Corporate Governance Director of MTS PJSC.

Director for Corporate Governance is also responsible for preparation and conduct of meetings of the shareholders of MTS PJSC, Management of subsidiaries of MTS Group, Ensure the timely disclosure of information in accordance with the requirements of the securities market legislation, integrated management of intangible assets, other functions.

Citizenship: Russia.

He doesn’t own either MTS PJSC shares (directly/indirectly) or stocks or shares of MTS PJSC subsidiaries; he is not a relative of any persons who are members of management and/or control bodies overseeing financial and business activities of MTS PJSC.

According to the information available to the Company, the secretary of the Board of Directors had no conflict of interests, in particular – in connection with his participation in thee management bodies of competitors of MTS PJSC.

According to available information in the Company in the reporting year, there was no conflict of interests with the Board of Directors Secretary , including related to his participation in the competition management bodies of MTS PJSC.

  1. Maxim Kalinin

Main purpose of the BoD Secretary of MTS PJSC is to ensure compliance of the Company’s management bodies with the requirements of legislation and internal regulatory documents of the Company which guarantee the enforcement of rights and interests of its shareholders.

Regulatory base for implementation of BoD Secretary’s functions, besides the Charter, is the Regulation on MTS PJSC Board of Directors.

Secretary of the Board of Directors:

  • carries out an instatement of newly elected members of the Company’s Board of Directors
  • informs members of the Board of Directors and invited persons on forthcoming meetings of the Board of Directors;
  • sends to members of the Board of Directors materials on issues of the Board of Directors agenda;
  • upon request, provides to members of the Board of Directors an additional information on Company’s activities;
  • calculates the votes on issues put to a vote and keeps record of the Board of Directors meetings;
  • ensures storage of the Board of Directors documents;
  • controls implementation of the Board of Directors decisions;
  • assists the Chairman of the Board of Directors in planning for activities of the Board.

Committees of the Board of Directors

The following committees operated under the Board of Directors in order to increase the efficiency of decisions taken by the Board of Directors, to exercise a detailed preliminary review of the most topical matters and to prepare the corresponding recommendations by the end of 2015: Budget Committee, Audit Committee, Remuneration and Nominations Committee, Corporate Governance Committee, Strategy Committee, Special Committee of Independent Directors.

Powers of and requirements to compositions of the committees shall be determined by regulations on committees approved by the Board of Directors. Committees may involve external experts and advisors in order to resolve their tasks. Results of review of agenda issues by the Committees shall be communicated to Board of Directors members before each BoD meeting.

Each BoD member is also a member of 2 to 5 committees. Representation of Company’s managers in the committees allows for a meaningful dialog during the committee meetings.

Members of Committees

Attendance of Committee meetings in 2015

Committee Member Remuneration and Nominations Committee Audit Committee Budget Committee Strategy Committee Corporate Governance Committee Special Committee of Independent Directors
(7 in-person meetings) (12 meetings including 9 in-person meetings and 3 meetings in the form of absentee voting) (7 meetings including 6 in-person meetings and 1 meeting in the form of absentee voting) (4 in-person meetings) (3 meetings including 2 in-person meetings and 1 meeting in the form of absentee voting) (10 in-person meetings)
Ron Sommer 6/7 4/4
Anton Abugov1
Andrey Dubovskov 4/4 3/3
Aleksandr Gorbunov 7/7 4/4
Sergey Drozdov1
Ruslan Ibragimov2 1/3
Aleksey Kornya 7/7
Michel Combes
Independent Director not a member of MTS PJSC executive management
4/7 9/12 3/10
Stanley Miller
Independent Director not a member of MTS PJSC executive management
7/7 11/12 6/7 3/4 9/10
Vsevolod Rozanov 7/7 3/3
Thomas Holtrop
Independent Director not a member of MTS PJSC executive management
6/7 12/12 3/3 10/10

1 Powers of the Committee member terminated on June 25, 2015.

2 Elected as a committee member on June 25, 2015.

Activities of committees in the reporting year

Budget Committee

Budget Committee is an auxiliary body of MTS PJSC Board of Directors for preparation of recommendations to the Board of Directors upon review of matters of preparation, approval, amendment and supervision over the execution of budgets, long-term business plans and investment plans of MTS PJSC.

Tasks

Development and provision to the Board of Directors of recommendations on the matters:

  • related to approval and amendment of budgets, long-term business plans and investment plans;
  • of supervision over the progress of budget fulfilment;
  • Methods for determination of key indicators of budgets, long-term business plans and investment plans.
  • budget fulfilment and necessity of its amendment.

Number and identities of the members

Number of the Committee members within the reporting year didn’t change (5 members including the Chairman).

The composition of the Committee was approved at the meeting of the Board of Directors dated June 25, 2015:

Committee members from June 24, 2014 from June 25, 2015
V. Rozanov, Chairman, Non-executive Director
R. Sommer, Non-executive Director
A. Gorbunov, Non-executive Director
S. Miller, Independent Director
A. Kornya, Member of the Management Board, Vice President of MTS PJSC for Finance and Investments

• person was/is a Committee member

Meetings

Reporting year saw 7 (seven) meetings of the Committee:

6 in-person meetings and 1 meeting in the form of absentee voting.

Participation of Committee members in the meetings:

Committee members March 27 (in-person) June 25 (in-person) September 9 (in-person) October 28 (in-person) December 1 (in-person) December 17 (in-person) June 17 (by correspondence)
V. Rozanov
R. Sommer x
A. Gorbunov
S. Miller x
A. Kornya

• Committee member participated in the meeting

x Committee member didn’t participate in the meeting

Issues and recommendations reviewed

  • On preliminary review of MTS Group budget for 2016;
  • On preliminary review of the Report on fulfilment of the capital expenditure budget for the 1st quarter of 2015 and prognosis for 2015;
  • Investment program of MTS for 2015
  • Funding of LTE network construction and expansion using a State support;
  • Management of MTS accounts receivable;
  • Amendment of the capital expenditure budget of MTS for 2015;
  • Management of MTS debt and liquidity;
  • and others

The Committee has provided the following recommendations to the Board of Directors:

  • To approve a budget proposal for 2016 and recommend it for consideration at the meeting of the Board of Directors;
  • To inform the Budget Committee on a status of the accounts receivable management regularly at the Committee meetings;
  • To present to the Budget Committee an issue of the accounts receivable management at the Committee meeting;

Work results in 2015

The Committee considered during the reporting year all required issues related to approval and amendment of budgets, long-term business plans and investment plans.

Besides, the Committee’s operation plan for the next year on main functional areas was drafted and approved.

Audit Committee

The Audit Committee is a collective deliberative body under the Board of Directors. The committee was established for the purposes of assisting in efficient implementation of functions of the Board of Directors in terms of control over financial and economic activities of the Company.

In 2015 as well as in previous years we actively worked on the assurance of control over reliability and efficiency of the system for risk management and internal control of the Company. The Audit Committee reviewed new revision of the Regulation on MTS PJSC Internal Control System, approved by the Board of Directors in September 2015.

In our supervision over the internal and external audit we continued activities related to the control of independence and fairness of internal and external audit functions, and assessed the quality of audit and efficiency of internal and external audit activities.

Thomas Holtrop, Audit Committee Chairman

The committee follows in its activities the recommendations and requirements of the effective legislation, the Charter and internal documents of the Company, Code of Ethics and Business Conduct, decisions of management bodies of the Company, and Regulation on the Audit Committee. On May 21, 2015, MTS PJSC Board of Directors approved new revision of the Regulation on Audit Committee.

Tasks:

  • control over completeness, accuracy and credibility of financial statements of MTS Group of Companies; analysis of annual financial statements, intermediate financial information and corresponding documents submitted to US Securities and Exchange Commission and other regulating bodies for the assessment of their completeness and information consistency, conducted jointly with the executives and external auditor;
  • control over reliability and efficiency of the system for risk management and internal control, and corporate governance system; analysis and evaluation of completion of the procedures for risk management and internal control; control of procedures for compliance of the Group with legislation (anti-corruption, anti-monopoly, etc.) requirements, ethical standards, regulations and procedures of the Group, requirements of stock exchanges;
  • assurance of independence and fairness of internal and external audit implementation; review of internal control and audit policies, plan, corresponding budget and results of Internal Control and Audit Unit activities, as well as assessment of efficiency of Internal Control and Audit Unit activities, including approval and evaluation of KPIs fulfilment; assessment of independence, fairness and lack of a conflict of interests of Group’s external auditors, including evaluation of candidates for the Group’s auditor position, drawing up proposals on appointment, reelection and и dismissal of Group’s external auditors, payment for their services and conditions of their involvement; supervision over the external audit and evaluation of quality of the audit inspection, and assessment of the auditor’s report confirming the veracity of financial statements;
  • control over efficiency of the system for notification on potential cases of unethical practices of the Group’s employees and third parties or other violations in the Group; review of reports on operation of the Single Hotline of MTS Group of Companies; control of ethical standards, analysis and assessment of implementation of policies for the management of conflicts of interests;
  • other tasks.

Number and identities of the members

Number of the Committee members within the reporting year didn’t change (3 members including the Chairman).

The composition of the Committee was approved at the meeting of the Board of Directors dated June 25, 2015:

Committee members from June 24, 2014 from June 25, 2015
T. Holtrop, Chairman, Independent Director, financial expert
М. Combes, Independent Director
S. Miller, Independent Director

• person was/is a Committee member

Meetings

Committee activities were based on the approved action plan according to main functions assigned to the Committee. Reporting year saw 12 (twelve) meetings of the Committee: 9 in-person meetings and 3 meetings in the form of absentee voting.

Besides these meetings the Committee members held meetings with financial executives of the Company and managers responsible for the system of management of risks and internal control, as well as with external advisors of the Company on a number of issues.

Committee members February 20
(by correspondence)
March 13
(in-person)
April 14
(in-person)
May 15
(in-person)
June 25
(in-person)
July 6
(by correspondence)
July 30
(by correspondence)
August 17
(in-person)
September 8
(in-person)
October 28
(in-person)
November 16
(in-person)
December 16
(in-person)
T. Holtrop
М. Combes x x x
S. Miller x

• Committee member participated in the meeting

x Committee member didn’t participate in the meeting

Key areas of the Audit Committee activities in 2015 were as follows:

In the sphere of risk management and internal control system

Audit Committee reviewed new revision of the Regulation on Internal Control System of MTS PJSC which was approved by the Board of Directors in September 2015 for implementation in MTS PJSC of provisions of the Corporate Governance Code, and with regard to key changes of COSO Internal Control – Integrated Framework 2013.

During 2015 the Committee controlled the procedures providing for Group’s compliance with the requirements of Sarbanes-Oxley Act. Plan for 2015 and operation results of the Department for Internal Control Systems for the first half of 2015 and for 2015 in general were reviewed;

The analysis of intermediate financial information of the Group was conducted jointly with the executives and external auditor for the first, second and third quarters of 2015; also they analyzed consolidated financial statements of the Group for the year, prepared in accordance with International Financial Reporting Standards (IFRS). Annual Report of MTS PJSC for 2015 by the form 20-F was discussed and approved. Reports on financial and operational results of MTS Group for the 1st, 2nd, 3rd and 4th quarters and for 2015 were reviewed and approved.

During 2015 the Committee was conducting a preliminary review of related-party transactions before their presentation for approval of MTS PJSC Board of Directors.

In the area of the compliance system management

The Committee reviewed strategic areas of compliance activities for 2015 in MTS Group of Companies and discussed reports on the status of compliance system implementation in MTS PJSC and subsidiaries in the first half of 2015, and the results of the year. Evaluation of correspondence of MTS ant-corruption compliance system with the requirements of applicable anti-corruption laws and best international anti-bribery practices was reviewed. The project was implement under instruction of the Audit Committee using assistance of the invited external KPMG advisor. The project included evaluation of compliance system elements and analysis of the efficiency of anti-corruption control procedures and their actual implementation; compliance with the best international anti-corruption practices was found.

During 2015 the Committee was conducting a preliminary review of related-party transactions before their presentation for approval of MTS PJSC Board of Directors.

In the area of internal control and audit management

During 2015 the Committee reviewed information about current operation of the Internal Control and Audit Unit. The Chairman of the Audit Committee held regular meetings with the Director for Internal Control and Audit. The committee reviewed and approved results of the Internal Control and Audit Unit’s operation for the first six months and in general for 2015, and performed evaluation of KPI implementation for 2015. The Audit Committee positively evaluated operations of the Internal Control and Audit Unit, and believes it is efficient.

In 2015 the Committee reviewed and approved the strategy, KPIs, work plan and budget of the Internal Control and Audit Unit for 2016.

In the area of external audit management

The audit committee recommended CJSC Deloitte and Touche CIS as the auditor of financial statements of MTS PJSC, which was then confirmed by a recommendation of the Board of Directors and by shareholders of the Company at the annual general shareholders’ meeting on June 25, 2015.

According to the recommendation of the Audit Committee, on July 31, 2015 the Board of Directors approved the amount of remuneration for the auditor of CJSC Deloitte and Touche CIS for audit of financial statements of MTS Group of Companies in the amount of 121,580 thous. RUB (VAT and overhead expenses excluded).

Each year at the beginning of audit process the auditor shall present to Committee’s consideration a detailed audit plan, identify and evaluate key risks. Evaluation of efficiency and quality of the audit process shall be prepared by the Committee according to the results of analysis of auditor’s reports. Audit Committee discussed and approved results and conclusions of the external auditor based on results of the review of quarterly overviews of financial information for the first, second and third quarters of 2015 and the annual audit, including comments in the area of internal control. Based on 2015 results the Committee gave a positive evaluation of the audit quality and audit procedure efficiency in general.

Besides, the Audit Committee gave a positive evaluation of auditor’s opinions based on results of the audit of MTS PJSC financial statements for 2015 prepared in accordance with Russian accounting standards, and consolidated financial statements of MTS PJSC and its subsidiaries for 2015 prepared in accordance with IFRS.

The Committee exercised supervision over compliance of the auditors with independence principles. During 2015 the Committee considered information an permissible non-audit services, which was provided by the external auditor, and discussed with the auditor a possible impact of the service on independence of the auditor. Permissible non-audit services were preliminarily approved by the Committee in accordance with the procedure described in the Regulation on Audit Committee.

In the area of counteraction to unethical practices of MTS Group employees and third parties

Policies on reception and processing of reports on accounting matters, issues of internal control over preparation of financial statements and audit of their new revisions were approved.

Work results of the Single Hotline of MTS Group of Companies for 2015 were reviewed.

In the area of compliance with ethical standards and management of conflicts of interests

Report on operation of the line under the Committee on Business Conduct and Ethics, and Discipline Committee report for 2015 were reviewed and taken into consideration. Results of the annual testing of knowledge and certification of compliance with the standards of the Business Conduct and Ethics Code and Policies of MTS OJSC “Compliance with Anti-corruption Laws” were analyzed.

Issues and recommendations of the Audit Committee reviewed at the meetings in 2015:

  • Approval of reports on financial and operational results of MTS Group for 2014, and for the 1st, 2nd and 3rd quarters of 2015;
  • Review and approval of reports of CJSC Deloitte and Touche CIS on the results of annual audit for 2014, and quarterly reviews of financial information for the 1st, 2nd and 3rd quarters of 2015;
  • Discussion and approval of the Annual Report of MTS PJSC by the form 20-F;
  • Review and recommendation to the Board of Director on approval of new revision of the Regulation on Internal Control System of MTS PJSC;
  • Review and approval of the strategy, KPIs and work plan of the Internal Control and Audit Unit for 2016, and of operation results for 2014 and the first half of 2015;
  • Review of the plan for 2015 and operation results of the Department for Internal Control Systems for 2014 and the first half of 2015;
  • Review of the results of MTS Group strategy implementation in the compliance area for 2014, and approval of the plan for further development of the anti-corruption compliance system in MTS Group of companies for 2015;
  • Review of the report on status of compliance system introduction in MTS PJSC and subsidiaries in the first half of 2015;
  • Review of work results of the Single Hotline of MTS Group of Companies for 2015;
  • Preliminary review of related-party transactions.

The Committee has provided the following recommendations to the Board of Directors:

  • The Committee recommended CJSC Deloitte and Touche CIS as the auditor of MTS PJSC financial statements for 2015;
  • Amount of renumeration of CJSC Deloitte and Touche CIS auditor was approved following the recommendation of the Audit Committee;
  • New revision of the Regulation on Audit Committee was approved following the recommendation of the Audit Committee;
  • New revision of the Regulation on Internal Control System of MTS PJSC was approved following the recommendation of the Audit Committee.

Work results in 2015

In the reporting year the Committee reviewed all required issues related to the assurance of control over reliability and efficiency of the system for risk management and internal control, veracity of financial statements of MTS Group of Companies, independence and fairness of internal and external audit implementation, efficiency of the system for notifying on potential cases of unethical practices of the Group’s employees and third parties or other violations in the Group.

The Committee’s operation plan for the next year on main functional areas was drafted and approved.

Remuneration and Nominations Committee

The Remuneration and Nominations Committee is an auxiliary collective deliberative body under the Board of Directors. Main purposes of the Committee are: formulation of HR policy of the Company, determination of the system for renumeration of chief officers of the company, shaping the strategy for development of corporate culture in MTS Group.

Committee members follow leading international practices and trends in preparation of effective solutions within the terms of their reference.

Tasks:

  • and update of MTS PJSC HR policy, preparation of a succession pool for the positions of chief officers;
  • Drawing up proposals on candidates and on determination of significant conditions for renumeration of the chief executives, and proposals on an early termination of office;
  • Evaluation of performance results of the Company’s President and Management Board members for the reporting period and preparation of proposals on their reappointment;
  • Development and submission for BoD review of internal documents related to implementation of the Options Plan of the Company;
  • Control over meeting the requirements of the effective legislation, MTS PJSC Charter and internal regulatory acts of MTS PJSC as to compliance with HR policy of the Company, standards and procedures in the sphere of renumeration and appointments;
  • The Committee preliminarily addresses the issues reviewed at meetings of the Company’s Board of Directors in the sphere of appointment and renumeration of top managers of the Company.

Number and identities of the members

Number of the Committee members within the reporting year didn’t change (3 members including the Chairman).

New composition of the Committee was approved at the meeting of the Board of Directors dated June 25, 2015

Committee members from June 24, 2014 from June 25, 2015
S. Miller, Chairman, independent member of the Board of Directors
M. Combes, independent member of the Board of Directors
T. Holtrop, independent member of the Board of Directors

• person was / is a Committee member

Meetings

Reporting year saw 7 (seven) in-person meetings of the Committee.

Participation of Committee members in the meetings is reflected in the table:

Committee members February 25
(in-person)
April 14
(in-person)
June 26
(in-person 1)
June 26
(in-person 2)
September 8
(in-person)
October 28
(in-person)
December 16
(in-person)
S. Miller
М. Combes x x x
T. Holtrop x

• person was/is a Committee member

x person wasn’t/is a Committee member

Key areas of activities:

Matters of appointments and succession assurance

Candidates for positions of an immediate subordination to the company’s President were considered. Experience sufficiency was evaluated; the results achieved in the Company were also analyzed for internal candidates. Candidates for key managerial positions in various functions of the Company were considered, their readiness for appointment as well as strengths and development possibilities were evaluated.

Independence of the candidates for inclusion in the Audit Committee under the MTS PJSC Board of Directors was assessed.

Issues of the systems for remuneration of managers

Key indicators of the performance of company’s top managers were determined, the results of previous period activities were reviewed

Procedures required for the support of long-term motivation program were implemented, including determination of the current-year program participants and program’s KPI targets.

Technical standards for top managers were updated according to the current needs.

Matters related to the efficiency of development of the personnel management function

HR strategy implementation results and objectives for future periods were reviewed. Recommendations on the main areas of activities were given to the company’s managers.

Key transformations of the company’s organizational structure, their correspondence to the upper-level business objectives and the company’s strategy

Issues and recommendations reviewed

  • Assessment of the results of activities performed by the President and top managers of the company in 2014.
  • Setting goals for 2015, including the list, target values and и influence (weight) of each of the parameters upon the resulting renumeration award.
  • Review of KPI results of the long-term awarding programs for 2014 and setting goals for 2015.
  • Drawing up lists of participants of the long-term awarding programs according to the program’s regulations
  • Appointments and employment termination of the Management Board members and top managers.
  • Evaluation of top managers’ renumeration level against the market level and their contribution to company’s results.
  • Evaluation of the candidates for MTS PJSC Board of Directors meeting the independence criteria.
  • Development of the company’s organizational structure.

Corporate Governance Committee

The committee was created in order to develop and improve the system and practices of corporate governance in the Company. The Committee within the terms of its reference preliminarily reviews the most important issues and prepares recommendations for the Board of Directors to take relevant decisions

Tasks

The Committee faces the challenges on a development of priority areas of Company’s activities as to implementation of the corporate governance standards and control over practices in this sphere and settlement of corporate conflicts. In relation to the goals that were set the Committee performs the following functions:

  • control over reliability and efficiency of the system and practices of corporate governance, and preparation of suggestions on their improvement, as well as a comparative analysis of corporate governance policies and programs in other companies;
  • determination of policies in the area of voluntary disclosure of information by the Company and control over the compliance with information policies;
  • assistance in prevention and settlement of corporate conflicts between the shareholders and between the shareholders and executive bodies of the Company, as well as review of complaints and comments of the shareholders;
  • preliminary review of internal regulatory documents of the Company submitted for approval (preliminary review) of the Board of Directors, and of the Company’s annual report.

Number and identities of the members

Number of the Committee members within the reporting year didn’t change (4 members including the Chairman).

Composition of the Committee was approved at the meeting of the Board of Directors dated June 25, 2015:

Committee members from June 24, 2014 from June 25, 2015
S. Drozdov, Chairman, Non-executive Director
V. Rozanov, Chairman, Non-executive Director
A. Dubovskov, President, Chairman of MTS PJSC Board, Executive Director
R. Ibragimov, Management Board Member, MTS PJSC-Vice-President on Corporate and Legal Issues
T. Holtrop, Independent Director

• person was/is a Committee member

– person wasn’t/is a Committee member

Meetings

Reporting year saw 3 meetings of the Committee: 2 in-person meetings and 1 meeting in the form of absentee voting.

Participation of Committee members in the meetings is reflected in the table:

Committee members April 14 (by correspondence) May 21 (by correspondence) December 16 (in-person)
S. Drozdov x x
V. Rozanov
A. Dubovskov
R. Ibragimov
T. Holtrop

• Committee member participated in the meeting

x Committee member didn’t participate in the meeting

– person wasn’t a Committee member at the moment of the meeting

Issues and recommendations reviewed

10 issues were reviewed in total during the reporting year.

Besides organizational issues, the Committee within its terms of reference considered the following:

  • preliminary review of the Charter and internal documents of the Company that regulate the activities of the management bodies and Auditing Commission, and new revision of the Regulation on Information Policies;
  • preliminary review the Annual Report of the Company for 2014;
  • review of the Progress Report on Insider Trading Regulatory Compliance for 2014;
  • control over enforcement of the action plan on implementation of recommendations of the Corporate Governance Code in the Company’s practices;
  • and others.

The Committee has provided the following recommendations to the Company’s Board of Directors:

  • to recommend to the Annual General Shareholders’ Meeting members to approve new revisions of the Charter, Regulation on the Annual General Shareholders’ Meeting, Regulation on the Board of Directors, Regulation on the President, Regulation on the Management Board and Regulation on the Auditing Commission;
  • to approve new revision of the Regulation on Information Policies;
  • to approve the Annual Report of the Company for 2014 preliminarily;
  • to approve the Progress Report on Insider Trading Regulatory Compliance for 2014.

Work results in 2015

The Committee considered in 2015 all the matters related to the corporate governance in the Company; no issues on settlement of corporate conflicts arose; no complaints or comments from the shareholders on a competence of the Committee were received.

Besides, a plan of Committee’s work in the main operation areas for the next year was developed and approved in view of upcoming changes in the regulation which affect the Company’s activities.

Strategy Committee

The Committee is an auxiliary body of MTS PJSC Board of Directors for preparation of recommendations to the Board of Directors upon review of a strategic development of key functions, projects and Company in general, and implementation of investment projects and long-term investment programs.

Tasks:

  • preliminary review and provision of recommendations to the Board of Directors on issues within the terms of reference of the Strategy Committee;
  • discussion and drawing up of recommendations on strategic activity areas and projects of the Company

Number and identities of the members

Changes occurred in the composition of the Committee members within the reporting year.

New composition of the Committee was approved at the meeting of the Board of Directors dated December 17, 2015:

Committee members from June 24, 2014 from June 25, 2015 from December 17, 2015
A. Abugov, Chairman, Non-executive Director
R. Sommer, Non-executive Director
A. Gorbunov, Non-executive Director
A. Dubovskov, President, Chairman of MTS PJSC Board, Executive Director
S. Miller, Independent Director
A. Babin, Joint-stock Strategy Department of MTS PJSC
N. Vasilkov, Strategy Complex Manager of JSFC Sistema OJSC
V. Vinogradov, Mergers and Acquisitions Department Director of MTS PJSC

• person was/is a Committee member

– person wasn’t/is a Committee member

Meetings

Reporting year saw 4 (four) in-person meetings of the Committee.

Participation of Committee members in the meetings:

Committee members February 25 (in-person) June 25 (in-person) September 8 (in-person) December 16 (in-person)
A. Abugov x x x
R. Sommer
A. Gorbunov
A. Dubovskov
S. Miller x
A. Babin1 x x x x
A. Vasilkov1 x x x x
V. Vinogradov1 x x x x

• Committee member participated in the meeting

x Committee member didn’t participate in the meeting

1 became the Committee member on December 17, 2015.

Issues and recommendations reviewed

  • Implementation status and development strategy of MTS differentiation projects
  • Status and program of activities aimed for the increase of client perception indicators in Russia in general and in Moscow.
  • On the results of MTS Group strategic session for 2016-2018.
  • Technological strategy of MTS Group for 2016-2018.
  • Marketing strategy of MTS Group for 2016-2018.

The Committee has provided the following recommendations to the Company’s Board of Directors:

  • Finalize the MTS strategy for 2016-2018 in view of the comments of committee members and present it to MTS Board of Directors in October 2015;
  • Consider the matter of MTS Group strategy in the area of marketing at the strategic session of MTS in 2016.

Work results in 2015

In the reporting year the Committee reviewed all required issues related to Company’s strategic development and investment project implementation.

Besides, the Committee’s work plan for the next year on main functional areas was drafted and approved.

Special Committee of Independent Directors

The primary task of the Special Committee of Independent Directors is to analyse transaction execution terms and related risks, work out an opinion on expediency of entering into transactions, prepare recommendations to the Board of Directors concerning approval of transactions, interaction with consultants with respect to transactions and other issues.

Tasks

Committee’s tasks are to monitor transactions for asset acquisition, including, to assure compliance of transaction terms with fair market conditions comparable with other similar transactions, assure compliance of transaction terms with Company’s and all its shareholders’ interests.

Number and identities of the members

Number of the Committee members within the reporting year didn’t change (3 members including the Chairman).

New composition of the Committee was approved at the meeting of the Board of Directors dated June 25, 2015:

Committee members from December 18, 2014 from June 25, 2015
S. Miller, Independent director
М. Combes, Independent Director
T. Holtrop, Chairman, Independent Director

• person was / is a Committee member

– person wasn’t / is a Committee member

Meetings

Reporting year saw 10 (ten) in-person meetings of the Committee.

Participation of Committee members in the meetings:

Committee members February 11
(in-person)
March 5
(in-person)
March 17
(in-person)
April 14
(in-person)
May 19
(in-person)
June 03
(in-person)
June 17
(in-person)
June 24-25
(in-person)
September 09
(in-person)
December 16
(in-person)
T. Holtrop
S. Miller x
М. Combes x x x x x x x

• Committee member participated in the meeting

x Committee member didn’t participate in the meeting

Issues and recommendations reviewed

The Committee has provided the following recommendations to the Company’s Board of Directors:

  • detailed reports and expert reports in respect of the Transaction for Envision Group asset acquisition (hereinafter – the Transaction) were reviewed;
  • a draft memorandum of the Transaction’s structure was reviewed;
  • draft sales-purchase contracts were reviewed;
  • other issues related to preparation for Transaction execution.

Recommend the Board of Directors to approve the Transaction in essence, under terms set out in draft sales-purchase contracts.

Work results in 2015

In the reporting year the Committee reviewed all required issues related to preparation for Transaction’s execution.

Information on remuneration of Members of the Board of Directors

The procedure and terms of remuneration payment to members of the Board of Directors of MTS PJSC are defined in accordance with the Regulation on remunerations and compensations paid to members of the Board of Directors of MTS PJSC.

Remuneration for the fulfilment of obligations of MTS PJSC BoD members shall be paid to the Board of Directors members who are independent directors and to the Board of Directors members who are not employees or or members of management bodies of the companies includedin MTS Group.

All the categories of Company’s Board of Directors members shall have the right for compensation of overhead expenses related to the fulfilment of obligations of a BoD member.

Compensations of expenses

Compensations shall be paid in accordance with actually made and documented target expenses:

  • on travelling to the destination and back
  • on accommodation lease
  • on communication services
  • other documented expenses.

BoD members also get compensations for miscellaneous expenses in amount not more than 200 thousand USD per year.

Directors who are not Russian citizens receive compensations in US dollars.

Remuneration paid to members of the Board of Directors in 2015

Indicator Name Amount, RUB
Remuneration for participation in operations of the management body 68 042 715,03
Cost compensations 3 784 988,22
TOTAL 71 827 703,25

Evaluation of Board of Directors’ performance

The evaluation of Board of Directors performance acts as an efficient tool of corporate governance development and is aimed at raising efficiency of Board of Directors performance.

After adoption of the Code and conduction of the corporate governance audit of MTS in 2015 the Corporate Governance Committee at the Board of Directors made a decision on the need for drafting a new methodology, for which an external consultant was engaged.

In 2016, self-evaluation of Board of Directors using a new evaluation methodology is planned.

Informing newly elected members of the Board of Directors about Company’s operation

In accordance with best corporate governance practices for newly elected members of the Board of Directors an orientation (information) course in the format of interactive presentation in Russian and English is held. This course enables to shortly familiarise new members of the Board of Directors with Company’s development history, operation of the Board of Directors, main documents governing Company’s operations, annual financial reporting, development strategy, Company’s management structure etc.

The President, Company’s management and secretary of the Board of Directors take part in the presentation. Besides, individual meetings with senior functional management of the Company are offered to members of the Board of Directors, at which members of the Board of Directors may obtain any information required for their work.

In June 2015 two members of the Board of Directors were elected in the Company’s Board of Directors: Regina von Flemming and Mikhail Shamolin. Relevant meetings aimed at induction of specified members of the Board of Directors in the office were held.

Role of the Board of Directors in organisation of the efficient risk management and internal control system1

The Board of Directors within its competence is liable for organisation of the risk management and internal control system in the Company, including approved reports of Company’s executive bodies on efficiency of the risk management system, efficiency of the Company’s internal control system, including compliance system.

The Board of Directors is liable for efficiency of the risk management process, for building and maintaining of the Company’s risk management and internal control system; annually reviews a report of the Audit Committee based on annual results with analysis of current control systems and discovered violations.

As of today, an efficiently operating risk management and internal control system aimed at assuring reasonable confidence in achievement of objectives set in the Company was established in the Company.

1 A more detailed information is presented in the section “Risk Management and Internal Control System.”

Officials and MTS Group Companies Liability Insurance

D&O policy

Enables to assure protection of members of the Board of Directors, Management Board and management of MTS PJSC (hereinafter — Officials) and provide coverage for indemnification of Officials, in connection with actions or claims submitted against them or their persecution by authorised state authorities for their actions/omissions while they exercise office duties in the office held, namely:

  • compensation of expenses of Officials for lawyers and legal protection in connection with the above actions or claims;
  • indemnification of damages caused to plaintiffs by actions/omission of Officials (in the event that the lawsuit is satisfied by the court);
  • indemnification of damages of MTS PJSC and subsidiaries of MTS PJSC for claims related to securities (except for lawsuits related to IPO of American depositary receipts).
Insurance sum (limit of liability) for the last 5 (five) years is equal to 250 mln US dollars.

President and Management Board of MTS

A key role in implementation of the selected strategy, organisation of efficient implementation of resolutions of the Board of Directors, management of current operations of the Company belongs to Executive Bodies of the Company — President (sole executive body) and Management Board (collegial executive body).

Executive bodies are accountable to the Board of Directors and General Shareholders Meeting.

The executive bodies of the Company shall be established by the Board of Directors.

The President and Management Board act on the basis of the articles of association of MTS PJSC, Regulation on President of MTS PJSC and Regulation on the Management Board of MTS PJSC.

Executive bodies:

  • shall organise the Company’s activities and be responsible for results of these activities, ensure the enforcement of decisions made by the General Meetings of Shareholders and by the Board of Directors;
  • assure establishment and maintenance of operation of the efficient risk management and internal control system in the Company, are responsible for implementation of resolutions of the Board of Directors in terms of organisation of the risk management and internal control system;
  • shall be responsible for effective economic, financial, scientific and technical and social policies of the Company.

The Board of Directors is entitled at any time to adopt a resolution on early termination of President’s powers as well as on termination of powers of an individual member of the Management Board or all members of the Management Board and on establishment of new Executive Bodies.

Composition of the Management Board in 2015

During 2015 (from March 5, 2011) Andrey Dubovskov performed functions of the President of MTS PJSC.

Duration of work in the Management Board

Information about the President and members of the Management Board as of December 31, 2015

Andrey Dubovskov

President, Management Board Chairman1

He was born in 1966, in Alma-Ata.

In 1993 he graduated from the All-Russian State University of Cinema n.a. S.A. Gerasimov with the specialty in film direction.

Professional experience:

  • 1993 – 800: a range of leading positions in Millicom International Cellular S.A., Millicom International Cellular B.V., “Regional cellular communications” LLC, “800” LLC and other companies in Moscow, Alma-Ata, Nizhny Novgorod, Ekaterinburg, Perm and Kiev
  • 2002 – 2004: CEO of “Tele2” Group company in Nizhny Novgorod
  • 2004 – 2006: Director of MTS PJSC Branch in Nizhny Novgorod
  • 2006 – 2007: Director of “Ural” Macro-Region of MTS PJSC
  • 2007 – 2008: First Deputy CEO of MTS UKRAINE PrJSC
  • 2008 – 2011: CEO of MTS UKRAINE PrJSC
  • 2011 to the present day: President, Management Board Chairman of MTS PJSC

Chairman of the Board of Directors in MGTS PJSC and Russian Telephone Company JSC, Deputy Chairman of the Board of Directors in “Mobile TeleSystems” JLLC, member of the Supervisory Board in MTS UKRAINE PrJSC, member of the Board of Directors in JSFC Sistema OJSC, International Cell Holding LTD, SISTEMA SHYAM TELESERVICES LIMITED.

As part of the Management Board of MTS PJSC since 2011.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 202,410 shares.

1 Deputy Chairman of the Management Board was not elected.

Mikhail Arkhipov

Member of the Management Board — Vice-President, Human Resources

He was born in 1982, in Murmansk.

In 2004 he graduated from the faculty of sociology of Moscow State University named after M.V. Lomonosov.

Professional experience:

  • 2004 – 2004: LLC MPZ Campomos, HR manager
  • 2004 – 2008: OJSC San InBev, compensations and benefits manager, compensations and benefits director
  • 2008 – 2009: senior human resources manager of CJSC KPMG
  • 2009 — 2013: human resources director of PJSC SIBUR Holding
  • 2013 to the present day: MTS PJSC, member of the Management Board — Vice-President, Human Resources.

Member of the Board of Directors of SISTEMA SHYAM TELESERVICES LIMITED, chairman of the HR and Remunerations Committee at the Board of Directors of PJSC MGTS.

As part of the Management Board of MTS PJSC since 2013.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 10,000 shares.

Kirill Dmitriev

Member of the Management Board — Director, Moscow Macro-Region

He was born in 1978 in the town of Kingisepp.

In 2000 he graduate from St. Petersburg State University of Economy and Finance.

Professional experience:

  • 2006 — 2009: director of key retail accounts of Baltic Beverages Holding (Ukraine)
  • 2009 — 2011: PrJSC MTS Ukraine, director of the Western Territorial Department
  • 2011 — 2014: PJSC MTS, general director of North-West Macroregion
  • 2014 to the present day: PJSC MTS, member of the Management Board — director of Moscow Macroregion

As part of the Management Board of MTS PJSC since 2014.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Ruslan Ibragimov

Member of the Management Board — Vice-President, Corporate and Legal Issues

He was born in 1963 in the town of Taldykorgan.

In 1986 he graduated from the faculty of law of Moscow State University after M.V.Lomonosov.

In 1992 he completed postgraduate studies of Peoples' Friendship University of Russia named after P. Lumumba. PhD in law.

Professional experience:

  • 1992 — 1996: he worked in commercial banks, headed legal services.
  • 1996 — 2002: RSM Top Audit, took the office of the director of legal service, director-partner, deputy general director, head of the department of tax and legal advice
  • 2002 – 2003: he worked as a lawyer in various bar associations
  • 2004-2006: Moscow bar association “Ibgragimov, Kagan and partners, associate
  • 2006 – 2007: MTS PJSC, director of legal department, he was then transferred to the post of the chief legal officer.
  • 2007 – 2008: MTS PJSC, head of the Legal Unit.
  • 2008 – 2013: MTS PJSC — Vice-President, Corporate and Legal Issues
  • 2013 to the present day: MTS PJSC, Management Board Member — Vice-President, Corporate and Legal Issues.

Management Board Member, vice-president of the Non-Profit Partnership “Association of Corporate Lawyers”, member of the Non-Profit partnership “Assistance to Competition Development” and Non-Profit partnership “Assistance to competition development in CIS countries”, member of the All-Russian Public Organisation “Association of Russian Lawyers”, senior director of the Association of Independent Directors, Chairman of the Committee on legal business support of the Association of Russian managers, Chairman of the Management Board of the Association “National Payment Council”, independent director of OJSC “Publishing House “Higher School”, member of the Board of Directors of LLC “Doctor nearby”, PJSC NIS, member of the Corporate Governance Committee at the Board of Directors of MTS PJSC

As part of the Management Board of MTS PJSC since 2007.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 19,824 shares.

Aleksey Kornya

Member of the Management Board — Vice President, Finance and Investments

He was born in 1975, in Bryansk.

In 1998 he graduated from St. Petersburg State University of Economy and Finance.

Professional experience:

  • 2000 – 2000: CJSC PricewaterhouseCoopers Audit, consultant-auditor
  • 2000 — 2004: OJSC North-West Telecom, chief financial consultant, chief specialist on financial consultation
  • 2004 – 2007: MTS PJSC, in July 2004 — financial director of the branch of MTS PJSC of Urals Macroregion; in October 2004 — director of the Financial Planning and Analysis Department of the Financial Unit of MTS Group
  • 2007 – 2008: MTS PJSC, controlling director of the Finance and Investment Unit.
  • 2008 – 2009: MTS PJSC, deputy of the vice-president for finance and investments, acting vice-president for finance and investments
  • 2010 – 2013: MTS PJSC, vice-president for finance and investments
  • 2013 to the present day: MTS PJSC, member of the Management Board — Vice President, Finance and Investments

Member of the Board of Directors of JLLC Mobile TeleSystems, member of the supervisory board of PrJSC MTS UKRAINE, member of the Board of Directors of PJSC MTS-Bank, International Cell Holding LTD, CJSC Russian Telephone Company, LLC MC Sistema Capital, member of the Budget Committee at the Board of Directors of MTS PJSC.

As part of the Management Board of MTS PJSC since 2008.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Vasily Latsanich

Management Board Member — Vice President for Marketing

He was born in 1972 in Veliky Berezniy village (Ukraine).

In 1995 he graduated from the Higher State Institute named after N.Lysenko (Ukraine, Lvov).

Professional experience:

  • 1996 — 2001: Coca-Cola Ukraine Ltd, Coca-Cola Bottlers Siberia, he took a number of marketing and general management offices
  • 2001-2011: PrJSC MTS Ukraine, head of the marketing department, in October 2005 he was appointed to the post of the marketing director of PrJSC MTS Ukraine
  • 2011 – 2011: PrJSC MTS Ukraine, CEO
  • 2011 – 2013: MTS PJSC — Vice President for Marketing
  • 2013 to the present day: MTS PJSC, Management Boar member — vice-president for marketing.

Chairman of the Board of Directors, Chairman of the Appointment and Remuneration Committee at the Board of Directors, member of the Strategy and M&A Transactions Committee at the Board of Directors of LLC Stream, member of the supervisory board of PrJSC MTS Ukraine, member of the Board of Directors of JSC Russian Telephone Company, member of the Board of Directors, chairman of the Strategy Committee at the Board of Directors of OJSC MGTS, member of the Advisory Committee of Оzon Holdings Ltd., member of the Board of Directors of PJSC MTS Bank, Chairman of the Board of Directors, member of the Strategy, Mergers and Acquisitions and International Cooperation Committee to the Board of Directors of PJSC NIS, Chairman of the Board of Directors of JSC SMM, member of the Board of Directors of CJSC Medsy Group of Companies.

As part of the Management Board of MTS PJSC since 2011.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly)

Vadim Savchenko

Member of the Management Board — Vice-President for Sales and Maintenance

He was born in 1974, in Ishim town.

He graduated from the law faculty of the Humanitarian University in Yekaterinburg as well as Kiev National Economic University named after Vadim Getman majoring in corporate economics.

Professional experience:

  • 2005 — 2007: MTS PJSC, director of the Partner Relationship Director of Urals Macroregion
  • 2007 — 2008: OJSC TS-retail, director of Urals branch
  • 2008 — 2011: PrJSC MTS Ukraine, director for sails and subscriber maintenance
  • 2011 – 2013: MTS PJSC — Vice-President for Sales and Maintenance
  • 2013 to the present day: MTS PJSC, member of the Management Board — vice-president for sales and maintenance.

Member of the Supervisory Board of PrJSC MTS UKRAINE, member of the Board of Directors of International Cell Holding LTD, Chairman of the Board of Directors, member of the HR and Remuneration Committee, Strategy Committee of MGTS PJSC, member of the Board of Directors of HC MTS Turkmenistan, JSC RTK.

As part of the Management Board of MTS PJSC since 2011.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 29,220 shares.

Andrey Smelkov

Member of the Management Board — vice-president for foreign companies

He was born in 1976, in Novgorod city.

In 1998 he graduated from the faculty of management and economics of Novgorod State University named after Y.Mudriy. In 2000 he received a degree in Telemark University (Norway) majoring in economics and business administration. In 2012 he completed the course in Wharton business school (USA) for competence development program for heads of companies.

He has extensive professional experience in telecommunication industry in CIS countries.

Professional experience:

  • 2001 – 2002: Arrive AS (Norway), information safety director
  • 2002 – 2002: CJSC Novgorod Telecommunications, marketing and advertisement manager
  • 2002 – 2003: CJSC Novgorod Telecommunications, marketing and advertisement director
  • 2003 – 2004: CJSC Novgorod Telecommunications, deputy general director
  • 2004 — 2006: PJSC Vympelcom, head of the branch in Nizhniy Novgorod.
  • 2006 — 2008: PJSC Vympelcom (subsidiary in Uzbekistan), chief manager for regional network development, deputy general director for business development in regions
  • 2008 — 2010: SkyMobile company (Kyrgyzstan), General Director.
  • 2010 — 2013: Tele2 (Kazakhstan), chief executive officer, chairman of the Board of Director.
  • 2013 – 2013: Tele2 AВ (Sweden), Chief adviser of the vice-president
  • 2013 to the present day: MTS OJSC, Member of the Management Board — Vice President, MTS Foreign Companies Business Unit.

Chairman of the Board of Directors of HC MTS-Turkmenistan and CJSC K-Telecom, Chairman of the Supervisory Board of LLC UMS, member of the Board of Directors of JLLC Mobile TeleSystems, Sistema Shyam Teleservices Limited.

As part of the Management Board of MTS PJSC since 2013.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

Andrey Ushatskiy

Member of the Management Board — Vice President, Engineering and IT

He was born in 1974, in Moscow.

In 1997 he graduate from the Moscow Energy Institute.

In 2002 — 2004 he educated under MBA program for managers in the Academy of National Economy at the RF Government.

Professional experience:

  • He has been working in MTS PJSC since 1996, starting from the post of the radiorelay line service specialist, then head of the network operation service, director of the network operation department and director of MTS Russia business unit.
  • 2009 – 2013: MTS PJSC vice-president for engineering.
  • 2013 to the present day: MTS PJSC, member of the Management Board — vice-president for engineering and IT.

Chairman of the Board of Directors of JSC Metro-Telecom, member of the supervisory board of PrJSC MTS UKRAINE, member of the Board of Directors of HC MTS-Turkmenistan, JSC Intellect Telecom and JSC Envision Group, member of the Board of Directors, member of the Strategy Committee of PJSC MGTS

As part of the Management Board of MTS PJSC since 2009.

During the reporting year he owned ordinary registered shares of MTS PJSC in the amount of 14,000 shares.

Valeriy Shorzhin

Management Board Member — Vice-President, Procurement and Administration

He was born in 1963, in Ulyanovsk town.

In 1986 he graduated from MHTC named after N.A. Bauman.

Professional experience:

  • 1993 – 1996: JSCB Tveruniversal bank, Department of bank technologies automation
  • 1996 – 2000: STS Sovintel, communication engineer, head of the traffic analysis and control group, director of the network control and development department
  • 2000 – 2006: STS Sovintel, IT director.
  • 2006 – 2008: Farlep-Invest (Ukraine), IT director and chief technical officer
  • 2008 – 2011: MTS PJSC, IT director
  • 2011 – 2014. MTS PJSC, director of the procurement department
  • 2014 to the present day: MTS PJSC, Management Board Member — Vice-President, Procurement and Administration.

Member of the Supervisory Board of PrJSC MTS Ukraine, member of the Board of Directors of MGTS PJSC and JSC Envision Group.

He was elected for the first time in the Management Board of MTS PJSC; he was reelected in the Management Board in 2014.

During the reporting year he didn’t own shares of MTS PJSC (directly/indirectly).

  1. Andrey Dubovskov
  2. Mikhail Arkhipov
  3. Kirill Dmitriev
  4. Ruslan Ibragimov
  5. Aleksey Kornya
  6. Vasily Latsanich
  7. Vadim Savchenko
  8. Andrey Smelkov
  9. Andrey Ushatskiy
  10. Valeriy Shorzhin

Information about changes in composition of the Management Board in 2015

In the reporting year, in accordance with a resolution of the Board of Directors of MTS PJSC powers of Ivan Zolochevskiy as a member of the Management Board were terminated. The reason for early termination of powers of Ivan Zolochevskiy was return to a previous management system, in which the General Director of PrJSC MTS was not included in composition of the Management Board. We deem such a scheme to be the most efficient one.

Events after a reporting date

The Board of Directors of MTS PJSC passed a resolution on April 11, 2016 on changes in composition of the Management Board of MTS PJSC since May 17, 2016:

  1. Powers of Vadim Savchenko, member of the Management Board of MTS PJSC, were terminated.
  2. Igor Yegorov was elected as a member of the Management Board of MTS PJSC.
  3. The quantitative composition of the Management Board of MTS PJSC was defined in the following composition:
  4. 1) Andrey Dubovskov – Chairman of the Management Board of MTS PJSC
    2) Mikhail Arkhipov
    3) Kirill Dmitriev
    4) Igor Yegorov
    5) Ruslan Ibragimov
    6) Aleksey Kornya
    7) Vasily Latsanich
    8) Andrey Smelkov
    9) Andrey Ushatskiy
    10) Valeriy Shorzhin

For the previous 2015 the Management Board held 28 meetings:
22 in person form,
6 in the form of absentee voting.

Statistics of Management Board operation

Participation of members of the Management Board in meetings of the Management Board in 2015

Management Boar Member In-person Meetings Meetings by correspondence
A. Dubovskov 22 6
M. Arkhipov 22 6
K. Dmitriev 21 6
I. Zolochevskiy 14 2
R. Ibragimov 22 6
A. Kornya 19 6
V. Latsanitch 21 6
V. Savchenko 19 6
A. Smelkov 16 5
A. Ushatskiy 22 6
V. Shorzhin 20 6

Transactions with shares of MTS PJSC executed by members of the Management Board in 2015

In June 2015 Company’s management acquired shares of MTS PJSC.

Management Boar Member Amount of the share of a corresponding person in the charter capital of MTS PJSC before the transaction Amount of the share of a corresponding person in the charter capital after the transaction Date, from which the share of a corresponding person in the charter capital of MTS PJSC was changed
Mikhail Arkhipov
Member of the Management Board — Vice-President, Human Resources
did not own shares 0,00048% 04.06.2015
Vadim Savchenko
Member of the Management Board — Vice-President for Sales and Maintenance
did not own shares 0,00141% 04.06.2015

Conflict of interests: information is indicated in the section “Regulation of possible conflicts of interests between MTS PJSC management bodies.

The Company did not grant loans (credits) to the President and Management Board in 2015.

Events after a reporting date

In April 2016, the amount of the participation share of the members of the Management Board in the charter capital of MTS PJSC changed as a result of implementation of the first trench of the Program for Lon-Term Material Incentivization of top managers of MTS PJSC based on ordinary shares of MTS PJSC approved by the Board of Directors of MTS PJSC in 2013.

Member of the Management Board Amount of the share of a corresponding person in the charter capital of MTS PJSC before adoption of the Lon-Term Material Incentivization  of top managers of MTS PJSC Amount of the share of a corresponding person in the charter capital after the transaction Date, from which the share of a corresponding person in the charter capital of MTS PJSC was changed
Mikhail Arkhipov
Member of the Management Board — Vice-President, Human Resources
0.00048% 0.00242% 25.04.2016
Kirill Dmitriev
Member of the Management Board — Director, Moscow Macro-Region
did not own shares 0.00141% 25.04.2016
Andrey Dubovskov
President, Management Board Chairman
0.0098% 0.01697% 25.04.2016
Ruslan Ibragimov
Member of the Management Board — Vice-President, Corporate and Legal Issues
0.00096% 0.0035% 25.04.2016
Aleksey Kornya
Member of the Management Board — Vice President, Finance and Investments
did not own shares 0.00419% 25.04.2016
Vasily Latsanich
Management Board Member — Vice President for Marketing
did not own shares 0.00299% 25.04.2016
Vadim Savchenko
Member of the Management Board — Vice-President for Sales and Maintenance
0.00141% 0.00427% 25.04.2016
Andrey Ushatskiy
Member of the Management Board — Vice President, Engineering and IT
0.00068% 0.00316% 25.04.2016
Valeriy Shorzhin
Management Board Member — Vice-President, Procurement and Administration
did not own shares 0.0023% 25.04.2016

Principles of remuneration of Management Board members and senior officials

A contract is entered into with every Management Board member, which defines labour terms, procedure for definition of the amount of remuneration, terms of compensation of expenses connected with execution of duties of the Management Board member and contract termination procedure. The contract shall be signed on behalf of the Company by the Chairperson of the Board of Directors of the Company or by a person authorised by the Board of Directors. The Board of Directors is entitled at any time to terminate the contract with a member of the Company’s Management |Board. Terms and conditions of the contract shall be approved by the Board of Directors of the Company.

Information about principles and system of remuneration of senior officials

Remuneration of senior officials shall be fixed and calculated based on the Policy for labour payment of employees of MTS PJSC and meets the following principles:

  • observation of fairness and competitiveness of remuneration;
  • connection of remuneration with personal contribution and final work results in the Company in general;
  • motivation for achievement of target business development parameters in accordance with strategic development installations approved by the Board of Directors.

The system of remuneration to senior officials includes elements of base remuneration and variable premium part:

  • Base remuneration — monthly official salary;
  • Short-term motivation system is an annual premium paid for fulfilment of key performance indicators (“KPI”) fixed in general for the Company for a corresponding reporting period as well as for fulfilment of functional individual tasks defined by the Board of Directors;
  • The long-term material incentive program is aimed at increasing the Company’s shareholder value as well as preserving long-term labour and corporate relations between the Company and its management.

Evaluation of performance of the President and members of the Management Board

One of the tasks of the Board of Directors is to assure control of operation of the President and member of the Board of Directors as well as evaluate their performance which is performed based on materials approved by the Remuneration and Appointment Committee.

The evaluation of the President and member of the Management Board for 2015 was performed in accordance with an existing method based on fulfilment of key performance indicators of the Company in general, functional individual tasks and competence development level.

Remuneration of members of the Management Board and senior officials based on 2015 results

Remuneration paid to members of the Management Board in 2015
Indicator Name Amount, RUB
Salary 158 520 005,32 
Premiums 285 244 196,00 
Cost compensations 106 686 471,52 
Other remuneration types 1 654 677,02 
TOTAL 552 105 349,86
Remuneration paid to senior officials in 20151

Indicator Name Amount, RUB
Salary 264 330 316
Premiums 406 741 925
Cost compensations 139 400 491
Other remuneration types 1 896 956
TOTAL 812 369 688

1 includes information about remuneration of 22 senior officials of the Company (including members of the Management Board), and for the reporting year 2 (two) officials took their posts for less than 12 months

Structure of remuneration of top management in 2015

The structure of income of Company’s chief executives varies depending on the post level.

The higher is the post in the internal hierarchy of the Company, the larger share is the variable remuneration part.

The actual element value individually varies depending on the work schedule in the reporting year, reached results as per KPIs and shareholder value according to the long-term bonus payment program.

Typical element ratio is presented in the following options: