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, Regulations on the General Meeting of Shareholders of MTS PJSC, and the requirements of the legislation of the Russian Federation.

In making decisions at the General Meeting of Shareholders, the Company’s shareholders take part in governance over the Company and may significantly influence its business. In particular, powers of the General Meeting of Shareholders on their meetings encompass the approval of an annual report and financial statements, distribution of profit, including payment of dividends, election of key management and control bodies of the Company, adoption of decisions on reorganization of the Company and a number of other important matters.

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

Informing shareholders about the General Meeting of Shareholders, as well as providing shareholders with access to information and materials of the General Meeting of Shareholders

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

The message on holding of the General Meeting of Shareholders may be additionally sent to the persons entitled to participate in the General Meeting of Shareholders and registered in the Company’s shareholders register, by registered mail to the address specified in the register of the Company’s shareholders, or delivered personally to such persons against signature simultaneously with sending or handing over the voting ballots. The information and files on the agenda of the General Meeting of Shareholders are provided to persons registering their rights to the Company’s shares in a depositary by providing them to the Company’s registrar for direction to a nominee holder entered in the register of shareholders in accordance with the Russian Law on securities.

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, a model proxy form for voting shall be published on 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 the Board of Directors on issues of the agenda of the General Meeting of Shareholders, and to voice their opinion on issues of the Meeting’s agenda by sending e-mails to the address: shareholder@mts.ru.

The Company aims to present materials for the General Meeting in a comprehensible form. To achieve that, a special section (microsite) is created dedicated to the annual General Meeting of Shareholders, which contains materials on the agenda of the meeting (certificates, presentations, documents, comments thereto, extended information about candidates), and also provides access to the online broadcast of the annual General 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 General Meetings of Shareholders is carried out by direct participation in the meeting or by filling out and sending to the Company (as well as its registrar) ballots on agenda items or by filling out an electronic form of voting ballots on the MTS website via electronic services.

The General Meetings of Shareholders shall be organized and held in a way allowing for easy access of all the shareholders. General meetings held in the form of joint attendance shall be organized at locations convenient for coming and personal participation of the shareholders and their representatives. During the registration and during the break, the innovative technologies of MTS are demonstrated to shareholders, and the shareholders are also provided with an opportunity to receive the necessary consultations on various projects of the Company.

Over the past years, the Company has been giving its shareholders the opportunity to follow the meeting in real time on the MTS website. Video record of the meeting is available after the end of the meeting on the MTS website in the “General Meetings of Shareholders” section.

General Meetings of Shareholders in 2021

The experience previously gained in terms of on-line support for shareholders during the Annual General Meeting of Shareholders has strengthened the trend for remote communication with shareholders and had a positive impact on the format of the AGMS 2021.

On June 23, 2021, MTS PJSC held the Annual General Meeting of Shareholders (AGMS) using the E-Voting services of the National Settlement Depository (NSD) and Registry-Online of “Reestr” JSC.

According to the recommendation of the Bank of Russia, aimed at containment of the spread of coronavirus, the MTS AGMS was held in absentia. The shareholders were provided with the most comfortable conditions for exercising their rights, with the possibility to choose the electronic voting system.

On June 24, an online conference following the results of the 2021 AGMS was held on the dedicated website named “2021 AGMS”, and the top management of MTS presented their speeches with a detailed review of the results of MTS work in 2020 and answers to questions in real time.

Electronic services for shareholders

In 2021, the successful experience in using e-voting through the internet when holding shareholder meetings was continued. For the first time, MTS shareholders voted electronically at the extraordinary general meeting of shareholders on September 30, 2016. For the last years of using e-voting, the number of shareholders voting through the Internet has increased substantially. At the annual General Meeting of Shareholders held on June 23, 2021, 99% of those participating in the meeting voted electronically.

Our services help MTS shareholders save time!

We have created digital products and services targeted at our shareholders.

State-of-the-art technologies make it possible not to waste time attending offline events, but to vote in comfortable conditions right from home.

Results of the 2021 General Meetings of Shareholders

Extraordinary general meeting of shareholders of MTS PJSC on February 15, 2021 — Report (mts.ru).

Annual general meeting of shareholders of MTS PJSC on June 14, 2021 — Report (mts.ru).

Extraordinary general meeting of shareholders of MTS PJSC on September 30, 2021 — Report (mts.ru).

Board of Directors

The Board of Directors is a strategic management body, whose main objective is to implement general management of the company’s activities, as well as to exercise supervisory and overseeing functions. First of all, its competences include the most important issues of the Company’s management, such as strategy definition, investment and budget planning, developing management motivation and assessment system, as well as supervision of the company’s assets, reliability and effectiveness of risk management systems, internal control, internal audit and corporate governance system.

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

The primary goals of the Board of Directors include:

• developing and analyzing general corporate strategy, and exercising control over its implementation;
• providing for the control over executive bodies and chief executive officers of the Company, and assessing their activities;
• increasing the Company’s capitalization, expanding its market positions, achieving and preserving the Company’s competitiveness;
• aintaining financial stability, and increasing revenues and profitability;
• protecting rights and lawful interests of the Company’s shareholders.

Composition of the Board of Directors

The composition and structure of the Board of Directors affects its performance, and thus performance of the entire Company; with that, the important aspect is the balance of the composition in terms of qualifications of its members, their experience, knowledge and business qualities.

A member of the Board of Directors should, first of all, be able to communicate effectively with people, participate efficiently in a discussion, understand a difficult situation based on information prepared by management, relying on their experience and ability to quickly analyze information.

The present members of the Board of Directors were elected at the annual General Meeting of Shareholders of MTS PJSC on June 23, 2021.

Throughout 2021, the Board of Directors consisted of nine members. Such number of members of the Board of Directors makes it possible to form the composition, which is balanced from the point of view of professional qualification, experience and business skills of the members of the Board of Directors, and to provide high efficiency of work, and it fully meets the needs of the Company and the interests of its shareholders. Issues related to the needs of the Board of Directors in the area of professional qualification, background and business skills of the members of the Board of Directors, and also to the numerical composition, were considered within the framework of the procedure for assessing the Board of Directors’ work (for more details, see section “Assessment of the Performance of the Board of Directors”).

A high-quality corporate governance system and an efficiently operating Board of Directors are the most important prerequisites for long-term sustainable development of a modern company.

Boards of Directors’ compositions effective in 2021

June 24, 2020 — June 23, 2021	June 23, 2021 — December 31, 2021
Felix Evtuschenkov — Chairman of the Board of Directors, Non-Executive Director	Felix Evtuschenkov — Chairman of the Board of Directors
Artem Zassoursky — Non-Executive Director	Artem Zassoursky — Non-Executive Director
Aleksey Kornya — Executive Director1	Vyacheslav Nikolaev — Executive Director2
Regina von Flemming — Independent Director	Regina von Flemming — Independent Director3
Shaygan Kheradpir — Independent Director	Shaygan Kheradpir — Independent Director
Thomas Holtrop — Independent Director	Thomas Holtrop — Independent Director
Nadia Shouraboura — Independent Director	Nadia Shouraboura — Independent Director
Konstantin Ernst — Independent Director4	Konstantin Ernst — Independent Director4
Valentin Yumashev — Independent Director	Valentin Yumashev — Independent Director

¹ By decision of the Annual General Meeting of Shareholders dated June 23, 2021, the powers of the following member of the Board of Directors were terminated.

² By decision of the Annual General Meeting of Shareholders dated June 23, 2021, the following member was elected.

³ From June 24, 2021 — Deputy Chairperson of the Board of Directors.

⁴ Retired member of the Board of Directors of MTS PJSC. Voluntarily resigned as a member of the Board of Directors of MTS PJSC based on application dated  March 17, 2022.

Chairman of the Board of Directors

The Chairman of the Board of Directors of MTS PJSC bears the main responsibility for ensuring the implementation of the rights and interests of the shareholders and achieving a balance between the short-term financial result and the long-term strategic positioning of the business.

In terms of the personal qualities of the chairman, this means the ability to combine pragmatism and specificity in solving tactical issues with the role of a strategist and visionary who deeply understands the processes occurring in the company and has a clear vision of the local market situation. The Chairman of the Board of Directors has the highest level of personal responsibility for the long-term sustainability of the business and strives to ensure the growth of shareholder value.

Felix Vladimirovich Evtuschenkov was elected Chairman of the Board of Directors of MTS by unanimous decision of the MTS Board of Directors on June 23, 2021.

According to members of the MTS Board of Directors, the nomination of Felix Evtuschenkov is most suitable for fulfilling the role of the Company’s Chairman of the Board of Directors, defined by corporate law, the Corporate Governance Code and the Regulations on the Board of Directors of MTS.

The Chairman of the Board of Directors of MTS is not an independent director, however, on June 24, 2021, an independent director, Ms. Regina von Flemming, was elected Deputy Chairperson of the Board of Directors of MTS. The Board of Directors of MTS considered the election of Ms. Flemming to this position appropriate, since Regina von Flemming has the status of an “independent director” for a long period of time; involved in the work of committees of the Board of Directors and the Board of Directors; has specialized expertise in important ecosystem areas — telecom, media, digital, tech, compliance; is recognized by the professional and business community. In this position, Ms. Flemming, in fact, replacing the senior independent director, performs all of its functions provided for by the Corporate Governance Code — coordinating the work of independent directors and implementing (organizing) the interaction of independent directors with the Chairman of the Board of Directors of MTS.

The Board of Directors is a well-coordinated mechanism, a united team, where everyone contributes to the management decision-making process. Within the MTS Board of Directors, there is a strong independent block of directors, and six places out of nine have been occupied by independent directors for the last years. The Board of Directors is well-balanced both in terms of numerical composition and in terms of experience and qualification of its members. Each member of the Board of Directors is a high level professional possessing industry-specific knowledge and business expertise, and a generator of advanced ideas. The Chairman is the leader, the central figure of the Board whose main task is to make the subordinated team of professionals work as efficiently as possible. In the course of establishing business-oriented, dynamic, positive atmosphere of work of the Board of Directors, the Chairman moderates the discussion so that each participant can show their best qualities while ensuring that the result of discussions is a unified, balanced, justified and specific managerial decision.

Independent directors

Independent directors shall be members of the Board of Directors for the purpose of effective implementation of its functions and making informed, grounded decisions, ensuring control over management for the benefit of the company’s shareholders. Independent directors make it possible to ensure a reasonable balance of interests of all the parties concerned: the Company itself, its shareholders and other stakeholders. For the independent directors to be able to influence the decisions taken by the Board of Directors, their number shall equal at least one third of the total composition of the Board of Directors.

In June 2020, the number of independent directors in the Board of Directors was increased to six 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. In addition, for the first time in the history of our Company, two female independent directors became members in the Board of Directors.

Criteria of independence of the Board of Directors’ members are defined in the Regulations on the Board of Directors of MTS PJSC and correspond to advanced international practices of corporate governance.

NYSE listing also adds additional obligations for us related to the composition of the Board of Directors: the Company is required to have at least one member of the Board of Directors (in the Audit Committee) with expertise in accounting or relevant financial management experience (financial expert). The Audit Committee of the Board of Directors is headed by Thomas Holtrop, who has experience and knowledge in the preparation, analysis, evaluation and audit of financial statements.

According to recommendations of the Code, the key committees of the Board of Directors (Audit, Remuneration and Nomination) are formed exclusively from independent directors. Other committees include at least one or two independent directors.

For key projects, Special Committees are established, which also include independent directors. For example, in 2019, a Special Committee on Compliance was established, and in 2020 — a Special Committee of Independent Directors on the project for uniting the personnel of MTS PJSC in the integrated office space in Moscow, and at the beginning of 2022 — Special Committee for the Development of Cloud and Infrastructure Assets.

A large proportion of independent directors contributes to an increase in the efficiency of representing the interests of MTS shareholders.

When holding strategic sessions where issues of updating the Company’s strategy are discussed with the participation of members of the Board of Directors, representatives of shareholders and the Company’s management, independent directors contribute to the objective control of the strategic planning process.

Independent directors are actively involved in preliminary discussions of many related party transactions that are significant to the Company. The Company has also introduced the practice of preliminary consideration of a number of related party transactions, including transactions with companies being part of the Sistema Group, at a meeting of the Audit Committee of the Board of Directors, which consists exclusively 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 are professional managers, whose experience and knowledge make a significant contribution to the development of the Company’s corporate governance system. Mastering of the best practices, great managerial experience, understanding of business needs and HR management specifics, proactive approach, strategic thinking, openness in discussions: all this makes an invaluable contribution not only to the results of the activity of the Board of Directors, but also to those of the Company in general.

Results of independent assessment of performance of the Board of Directors for 2020/2021

In 2021, MTS conducted an assessment of  performance of the Board of Directors of MTS in the form of a self-assessment. A questionnaire survey was conducted to evaluate the performance of the Board of Directors and its committees.  All members of the Board of Directors of MTS and 17 representatives of management, members and invited experts of committees of the Board of Directors of MTS took part in the questionnaire survey.

Based on the results of the questionnaire survey, the Corporate Governance Director submitted for consideration by the ESG Committee of the Board of Directors of MTS the Preliminary Report on the results of the assessment. The final report was presented to the MTS Board of Directors.

The results of the assessment proved that the principles of work of the Board of Directors of MTS  
correspond to the best practice. At the same time, some areas for improvement and increasing the efficiency of the Board of Directors performance have been outlined:

In line with international best practice, the Board of Directors will continue conducting self-assessment of its performance on an annual basis, as well as an external independent assessment every three years in order to ensure continuous improvement of the performance by the Board of Directors, its committees and directors.

Committees of the Board

Committees of the Board of Directors serve as a tool for the preliminary in-depth study of issues before they are submitted to the meeting of the Board of Directors. Committee members thoroughly study an issue under consideration and propose to the members of the Board of Directors the elaborated alternative decisions, making it possible for them to join the discussion of the issue more promptly.

Committees of the Board of Directors increase the effectiveness of decisions made by the Board of Directors, since important issues within the competence of the Board of Directors are preliminarily considered by committees of the Board of Directors. At the end of 2021, the following committees were active: Audit Committee, Remuneration and Nomination Committee, ESG Committee (Corporate Governance, Environmental and Social Responsibility Committee), Strategy Committee, Special Committee on Compliance, Special Committee for the project of MTS’s staff co-location in Moscow in the united office space.

Powers of and requirements to compositions of the committees shall be determined by regulations on the committees approved by the Board of Directors. The committees may involve external experts and consultants to carry out their tasks. The results of reviews of agenda issues by the Committees are communicated to the Board of Directors members prior to every meeting of the Board of Directors.

Management representatives can take part in committee meetings to accompany agenda items with detailed explanations, if necessary.

Committee	Committee tasks overview
Audit Committee	Preparation of recommendations to the Board of Directors with respect to supervision over the Company’s financial and operational activities
Remuneration and Nomination Committee	Preparation of recommendations to the Board of Directors on issues of HR policy, determination of the incentive and remuneration system, generation of the Company’s corporate culture development strategy
ESG  Committee (Corporate Governance and Environmental and Social Responsibility Committee)	The Committee was established to control the implementation of the principles of sustainable development, as well as to assist the management bodies of MTS PJSC in the development of a common strategy regarding corporate governance, environmental and social responsibility
Strategy Committee	Preparation of recommendations to the Board of Directors upon review of a strategic development of key functions, projects and the Company in general, and implementation of investment projects and long-term investment programs
Special Committee on Compliance	Overall supervision in the sphere of compliance, review of issues and preparation of recommendations for the Board of Directors on compliance issues.
Special Committee for the project of MTS’s staff co-location in Moscow in the united office space	The Committee was established to ensure that the terms of the project of MTS’s staff co-location in Moscow in the united office space meet the interests of the Company and all its shareholders

Audit Committee

The Audit Committee is an auxiliary, collective advisory body of the Company’s 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 their activities, the Committee members are guided by the applicable law, the Charter and the internal documents of the Company, the Corporate Governance Code¹, the Code of Business Conduct and Ethics of MTS PJSC, decisions of the Company’s management bodies, and the Regulations on the Audit Committee.

¹ The Corporate Governance Code recommended for use by the Bank of Russia (Letter No. 06-52/2463 dd. April 10, 2014).

The main task of the Committee is to assist the Board of Directors in performing its oversight functions in relation to financial reporting, risk management, internal controls system, compliance, adherence to the Code of Business Conduct and Ethics of MTS PJSC, conducting internal and external audits, counteracting unfair actions committed by the members of management bodies and employees of MTS PJSC and its subsidiaries (hereinafter referred to as the “Group” or “MTS Group”) and third parties.

Key areas of the Audit Committee’s activities and matters considered in 2021

In financial reporting

During 2021, the Audit Committee reviewed the interim financial data of the MTS Group for the Q1, Q2, Q3 of 2021 in order to determine the completeness, consistency of information and presentation of reasonable assessment of financial standing, performance indicators and prospects of the MTS Group.

The consolidated financial statements of the MTS Group for 2021, prepared in accordance with the international financial reporting standards, and the financial statements of MTS PJSC for 2021, prepared in accordance with the Russian accounting and reporting standards, were considered, and an analysis of audit results was carried out together with the management and the external auditor.

The reports on the financial and operating performance of the MTS Group for Q1, Q2, Q3, Q4 and 2021 as a whole were reviewed and recommended for subsequent disclosure.

In risk management, internal controls and corporate governance system

During 2021, the Audit Committee monitored the effectiveness of risk management, the internal control system and corporate governance of the MTS Group.

The Committee reviewed the 20-F report for 2021 and the reports on risk management at MTS PJSC for the first six months and 20, gave positive assessment of work in the field of risk management at the MTS Group in 2021.

Based on the instructions given by the Audit Committee, a third party consultant completed a project to analyze the level of maturity of the information security management processes of the MTS Group. The Audit Committee gave relevant instructions to the management of MTS and will continue to oversee the development of the information security program in MTS PJSC and its key subsidiaries.

During 2021, the Committee controlled the procedures providing for the Group’s compliance with the requirements of Sarbanes-Oxley Act. Plan for 2021 and the results of activities of the Internal Control Systems Department for the first six months of the year and for 2021 as a whole were reviewed, including the results of testing and certification of the internal control system for reliability of the financial statements of the MTS Group. The Committee gave a positive assessment of the unit performance results.

The Committee discussed and took note of the report of the Internal Audit Unit on the results of assessing the effectiveness of the internal control system, risk management and corporate governance of the MTS Group for 2021.

During 2021, the Committee conducted a preliminary review of MTS PJSC transactions with related parties, including materials on upcoming mergers and acquisitions, and subsequent review of transactions of MTS Bank, PJSC, MGTS PJSC, MTS Armenia CJSC and RTC JSC with related parties in accordance with the procedure described in the Regulations on the Audit Committee. The results of analysis of economic feasibility and compliance with the requirements of the regulations when making such transactions carried out by the Internal Audit Block of CC of the MTS Group and subsidiary companies, respectively, were discussed and taken into account.

In compliance and observance of the standards of business conduct and ethics

The restated Code of Business Conduct and Ethics of MTS PJSC was reviewed by the Audit Committee and recommended for approval by the Board of Directors.

The Committee considered the report on development of the Unified Compliance System of MTS PJSC for 2021.

The Committee reviewed and approved the functional strategy of the MTS Group in the field of business ethics and compliance for 2021. The report on implementation of the corporate anti-corruption compliance program of MTS PJSC and subsidiaries based on the results of the first six months of the year and for 2021 as a whole was reviewed. The Committee gave a positive assessment to the performance results of the Ethics and Compliance Department. In December 2021, the Committee reviewed and took note of the 2022 plan for the development of a corporate anti-corruption compliance program at MTS PJSC and subsidiary companies.

In 2021, the Committee reviewed and took note of the reports on the implementation of the compliance program at MTS Belarus JLLC.

During the year, the committee reviewed information on the status of conflict of interest management of members of governing bodies, as well as a number of other issues in the field of compliance, compliance with business conduct and ethics of MTS PJSC and subsidiaries in accordance with the Regulations on the Audit Committee.

In the field of internal audit

In 2021, the Audit Committee reviewed the progress of implementation of strategic initiatives in the field of internal audit, including optimization of internal audit processes, improvement of the audit methodology and the process of eliminating deficiencies identified by internal audit in MTS PJSC and its subsidiaries, expansion of data analysis projects and other activities.

In August 2021, the Committee reviewed the main changes to the audit schedule and approved the revised audit schedule for 2021.

Based on the instructions given by the Audit Committee, in 2021 an external assessment of the quality of internal audit activities was carried out, following the results of which its activities were recognized as complying with the International Standards for the Professional Practice of Internal Auditing and the Code of Ethics of the Institute of Internal Auditors and effective in fulfilling its goals and meeting the expectations of stakeholders.

The Committee reviewed and approved the performance results of the internal audit of MTS PJSC and subsidiary companies in the first six months and for 2021 as a whole. The Committee gave a positive assessment to the results of the internal audit performance and believes that the key performance indicators and objectives of the internal audit for 2021 have been achieved in full volume.

In December 2021, the Committee reviewed and approved the internal audit strategy, audit schedule, KPIs and budget for 2022, as well as took into account the audit schedules for 2022 of the internal audit units of significant subsidiaries.

In external audit

The Audit Committee recommended Deloitte JSC and Touche CIS as the auditor of financial statements of MTS PJSC for 2021, which was confirmed by the recommendation of the Board of Directors and by shareholders of the Company at the Annual General Meeting of Shareholders
in June 2021. The Committee previously approved and recommended that the Board of Directors approve the remuneration of the auditor.

Evaluation of efficiency and quality of the audit process shall be prepared by the Committee according to the results of analysis of the auditor’s reports. The Audit Committee discussed and took into account the results and conclusions of the external auditor based on the review of quarterly overviews of MTS Group financial information for Q1, Q2 and Q3 of 2021 and the annual audit, including conclusions on the effectiveness of the internal control system over the preparation of financial statements at the MTS Group.

At the end of 2021, the Committee gave a positive assessment of the quality of the audit and the auditor’s opinions based on the results of the audit of MTS PJSC financial statements for 2021 prepared in accordance with the Russian accounting standards, and consolidated financial statements of MTS PJSC and its subsidiaries for 2021 prepared in accordance with the international financial reporting standards.

The Committee exercised supervision over compliance of the auditors with the independence principles. During 2021, the Committee considered information on permissible auditing and non-auditing 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 auditing and non-auditing services were preliminarily approved by the Committee in accordance with the procedure described in the Regulation on Audit Committee.

In prevention of fraud of the Group’s employees and third parties

The Audit Committee reviewed and took note of the main initiatives to improve the administration of the MTS Group Unified Hotline and the conduct of internal investigations, as well as the disciplinary action.

The Committee reviewed the results of work of the Unified Hotline of the MTS Group of Companies in the first six months and for 2021 as a whole.

The Audit Committee made recommendations to the Board of Directors regarding the consideration and approval of the following items:

• restated Code of Business Conduct and Ethics of  MTS PJSC.
• report on implementation of the corporate anti-corruption compliance program of MTS PJSC and subsidiaries for 2021;
• risk management reports of MTS PJSC for the first six months and for 2021 and assessment of the risk management performance of the MTS Group in 2021;
• nominations of the auditor and remuneration of Deloitte & Touche CIS JSC for audit services in 2021;
• major transactions and M&A transactions, with interest falling within the competences of review by the Board of Directors.

Work results in 2021

In the reporting year, the Audit Committee remained focused on the effectiveness of the systems for internal control, risk management, corporate governance, business ethics and compliance, overseeing the ensuring of completeness and reliability of the financial statements of the MTS Group.

The Audit Committee continues its activities aimed at ensuring the effective functioning of the internal audit service and the external auditor, monitoring their independence and objectivity, and overseeing the quality of their activities.

The Audit Committee developed an operation plan for the next year in the main functional areas and approved it in December 2021.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee is an auxiliary collective deliberative body of the Board of Directors. Main purposes of the Committee are: formulation of HR policy of the Company, determination of the system for remuneration 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.

In its activities the committee follows the recommendations and requirements of the relevant 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 Committee.

Tasks

• Development and updating of the HR Policy of MTS PJSC, preparation of a succession pool for the positions of chief officers;
• Drawing up proposals on candidates and on the determination of significant conditions for remuneration 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, direct subordinates of the Company’s President for the reporting period and preparation of proposals on their reappointment and appointment of the Corporate Secretary;
• Development and submission for BoD review of internal documents related to the implementation of the Company’s Options Plan;
• Control over meeting the requirements of the effective legislation, MTS PJSC Charter and internal regulatory acts of MTS PJSC as to compliance with the Company’s HR Policy, standards and procedures in the sphere of remuneration and appointments;
• Determining methods and evaluation of performance of the Company’s Board of Directors;
• The Committee preliminarily addresses the issues reviewed at meetings of the Company’s Board of Directors in the sphere of appointment and remuneration of top managers of the Company.

Main areas of activities of the Remuneration and Nomination Committee in 2021

1. Issues in the field of appointment to the management and control bodies of MTS

Recommendations to the Board of Directors regarding candidates for the positions of members of the Management Board, President and other key employees of the Company.

Elaboration of proposals on the essential terms of employment contracts concluded with key employees of the Company.

2. Issues in the field of organizational structure, system of motivation and remuneration of employees of the Company and members of the management and control bodies of the Company

Preparation of recommendations to the Board of Directors on approval of the organizational structure of the Company.

Preliminary review of provisions on short-term and long-term motivation of members of the Company’s executive bodies.

Preliminary review of internal documents related to the implementation of the Company’s option program.

3. Issues related to personnel policy and remuneration strategy of the Company

Consideration of a set of measures aimed at implementing the personnel policy at MTS PJSC and providing relevant recommendations to the Board of Directors.

Discussion of ecosystem issues affecting the Company’s personnel development strategy.

4. Assessment of the Board of Directors and Committees of the Board of Directors

Preliminary consideration of the Report on the annual assessment of performance of the Board of Directors and Committees of the Board of Directors.

5. Succession planning for members of the Board of Directors and key employees of the Company

Consideration of organization of the succession planning process for members of the Board of Directors and key employees of the Company, including the annual analysis of the composition of the Board of Directors in terms of the needs of the Company, updating the succession plan, participation in the selection of candidates for members of the Board of Directors.

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

On all of the issues discussed, the Committee provided recommendations for appropriate decisions in accordance with the best world practices, the current business environment and the Company’s development strategy.

Work results in 2021

In the reporting year, the Committee reviewed all the necessary issues related to the competences of the Committee required to effectively support the Company’s activities and its development.

The key topics for discussion at the Committee meetings were the launch of succession programs for members of the Board of Directors and the President of MTS PJSC, approval of a new long-term incentive program for MTS management.

ESG Committee (Corporate Governance, Environmental and Social Responsibility Committee)

The ESG Committee (Corporate Governance, Environmental and Social Responsibility Committee) was established to ensure compliance with the principles of environmental, social and corporate responsibility in the activities of the MTS Group.

Within its competence, the committee takes part in the development of initiatives and policies of MTS in the field of sustainable development, monitors the implementation of the principles of sustainable development in the Company, carries out a preliminary review of the most important issues in the field of corporate governance and sustainable development, falling within the competence of the Board of Directors, and prepares recommendations for the Board of Directors to take appropriate decisions.

The committee follows in its activities the recommendations and requirements of the relevant legislation, the Charter and internal documents of the Company, Code of Ethics and Business Conduct, decisions of management bodies of the Company, Regulations on the Audit Committee and best global practices of ESG-agenda management.

Issues reviewed in 2021:

• Members of the ESG Committee and external international experts were presented with the current status of the project to develop the MTS ESG strategy. The main components of the developed ESG strategy were reviewed by the ESG Committee and included in the overall strategy of MTS PJSC.
• Materials on the social profile of MTS Group employees were considered.
• The DE&I policy developed by MTS, taking into account the best Russian and international practices, was considered. The policy was approved by the MTS Board of Directors.
• The main strategic initiatives of MTS PJSC in the field of DE&I were determined.
• The main directions of the social responsibility strategy of MTS PJSC for 2022 were considered and taken into account.
• Monitoring and assessment of the level of culture of business ethics and compliance at the MTS Group were carried out.
• The procedural issues were considered as part of the annual assessment of the Board of Directors’ performance.
• Materials for meetings of shareholders were considered.
• The Annual Report and the Sustainability Report (SR) for 2020 were considered.

Work results in 2021

In the reporting year, the main focus of the Committee’s work was aimed at identifying and developing key strategic initiatives in the field of ESG, including the development of an ESG strategy, determining development directions in DE&I and other areas of social responsibility. The Committee alsoconsidered all the necessary issues related to the development of corporate governance in the Company, including the assessment of the Board of Directors’s performance. Besides, the Committee considered the development of the compliance system and the formation of a culture of business ethics in the MTS Group.

Strategy Committee

The Committee is an auxiliary body of the MTS PJSC Board of Directors for the preparation of recommendations to the Board of Directors upon review of general strategy issues of the MTS Group, strategic development of key functions, projects and the Company in general, and the implementation of M&A transactions and investment projects.

Tasks

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

Main issues reviewed by the Committee in 2021

• MTS Group Strategy for 2022–2024.
• Strategies for business verticals and key functional horizontals.
• MTS cultural reorganization plan.
• Approval of the MTS Group budget for 2022.
• Reports on the current fulfilment of the budget.
• On acquisition and sale of assets.
• On reorganization of MTS PJSC in the form of acquisition of its subsidiaries.

The Committee has provided the following recommendations to the Company’s Board of Directors and management, including but not limited to:

• finalizing and approving the strategy of the MTS Group for 2022–2024;
• finalizing business vertical strategies;
• approving transactions;
• approving the MTS Group budget for 2022.

Work results in 2021

In the reporting year, the Committee considered issues related to the process of strategic planning of the Company’s operations, strategies on the business verticals and key functional areas, M&A transactions and financial issues. Several recommendations were provided to the Company’s Board of Directors and management following the review of issues.

Special Committee on Compliance

The objective of the Special Committee is overall supervision in the sphere of compliance, review of issues and preparation of recommendations for the Board of Directors on compliance issues.

Issues and recommendations reviewed

In 2021, the work of the Special Committee on Compliance was focused on promoting the effective improvement of the compliance system at MTS in accordance with the best Russian and international practices, including with the participation of parties independent of the Company.

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

None.

Work results in 2021

In the reporting year, the Committee reviewed issues related to compliance supervision measures implemented by the Company.

Remuneration paid to 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 Regulations on remunerations and compensations paid to members of the Board of Directors of MTS PJSC.

The remuneration system applicable to the members of the Board of Directors provides for approach of financial interests of directors with long-term financial interests of shareholders.

Detailed information is disclosed in clause 4.2.1 of the Report on Fulfilment of the Principles and Recommendations of the Corporate Governance Code.

Remuneration paid to members of the Board of Directors in 2021

Indicator name	Total, RUB
Remuneration for participation in operations of the management body	177,208,924.50
Cost compensations	267,177.66
TOTAL	177,476,102.16

President and Management Board of MTS

A key role in pursuing the selected strategy, organizing efficient implementation of resolutions of the Board of Directors and managing current operations of the Company is played by the Company’s Executive Bodies: The President (sole executive body) and the Management Board (collective executive body).

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

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

The President and the Management Board act on the basis of the Charter of MTS PJSC, the Regulations on the President of MTS PJSC and the Regulations on the Management Board of MTS PJSC.

Executive bodies:

• shall organize 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;
• shall assure establishment and maintenance of operation of the efficient risk management and internal control system at the Company, are responsible for implementation of resolutions of the Board of Directors in terms of organization of the risk management and internal control system;
• are responsible for the 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 the early termination of a President’s powers, as well as on the termination of the powers of an individual member of the Management Board or all members of the Management Board and on establishment of new Executive Bodies.

Duties of the President of MTS PJSC since March 13, 2021 have been performed by Vyacheslav Nikolaev.

Before March 13, 2021 the duties of the President of MTS PJSC were performed by Alexey Kornya.

Composition of the Management Board in 2021

• Alexey Barsegian (has been a member of the Management Board since 2020)
• Viktor Belov (has been a member of the Management Board since 2021)
• Sergey Belyakov (has been a member of the Management Board since June 16, 2021)
• Pavel Voronin (has been a member of the Management Board since 2021)
• Inessa Galaktionova (has been a member of the Management Board since 2019)
• Alexander Gorbunov (has been a member of the Management Board since 2018)
• Igor Egorov (has been a member of the Management Board since 2021)
• Olga Ziborova (has been a member of the Management Board since 2021)
• Ruslan Ibragimov (has been a member of the Management Board since 2007)
• Farid Kamalov (has been a member of the Management Board since 2021)
• Andrey Kamenskiy (has been a member of the Management Board since 2018)
• Alexey Kornya (has been a member of the Management Board since March 12, 2021)
• Igor Mishin (has been a member of the Management Board since 2019)
• Vyacheslav Nikolaev (has been a member of the Management Board since 2017)
• Ilya Filatov (has been a member of the Management Board since 2019)
• Dmitry Khalin (has been a member of the Management Board before June 30, 2021)
• Alexander Khanin (has been a member of the Management Board since 2020)
• Dmitry Khomchenko (has been a member of the Management Board before June 16, 2021)
• Tatiana Chernyshova (has been a member of the Management Board before June 30, 2021)

Remuneration of Management Board members and senior executive officers

Principles of remuneration of Management Board members and senior executive officers

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 authorized 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.

Remuneration of senior executive officers is fixed and calculated based on the Policy for labor 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 guidelines approved by the Board of Directors.

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

• base remuneration — monthly official salary;
• variable part of remuneration is determined by the results of the Company’s business in the reporting period in accordance with the Company’s internal regulations and approved by the Company’s Board of Directors and consists of:
  • 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, acceleration of its capitalization growth, as well as preserving long-term labor and corporate relations between the Company and its management.

MTS PJSC Business Key Performance Indicators System

• Ecosystem indicators, which are formed on the basis of the Company’s business plan and include the main financial and economic, industrial and strategic indicators. They reflect the general corporate responsibility for the results of the MTS Group business and make it possible to track the generalized results of the Company’s business and adjust the strategy.
• Functional indicators, which are formed on the basis of business unit performance strategies.
• Individual indicators of performance are formed on the basis of strategic objectives of a specific director of the Company.

The list of indicators and their target values for the Company’s directors are approved by the Board of Directors of the Company with preliminary discussion at the dedicated committees on an annual basis.

The list of corporate performance indicators of the MTS PJSC President includes such indicators as:

• OIBDA;
• income;
• ecosystem indicators;
• integral assessment of the implementation of strategic projects and business development.

Structure of remuneration for top management in 2021

The remuneration structure consists of base and variable payments and depends on the level of the position in the structure of the Company.

Achievement of the established KPIs is the basis for being entitled to receive a variable payment, as it pertains to long-term payments, including an increase in the shareholder value of the Company and growth of its capitalization.

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 members of the Management Board, as well as to evaluate their performance which is performed based on materials approved by the Remuneration and Appointment Committee.

The assessment of the President and members of the Management Board for 2021 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 for members of the Management Board and senior executive officers based on 2021 results

Remuneration paid to members of the Management Board in 2021

Indicator name	Total, RUB
Salary	279,888,418
Bonuses	713,103,972
Cost compensations	34,697,976
Other remuneration types	3,689,786
TOTAL	1,031,380,152

Remuneration paid to senior executive officers in 2021¹

¹ Includes information on remuneration of 31 top officials of the Company (including members of the Management Board).
Remuneration paid to the top officials in 2021 is below the amount of the remuneration paid in 2020, in connection with payment of a portion of the 2020 annual bonus in December 2020.

Indicator name	Total, RUB
Salary	397,140,020
Bonuses	807,307,830
Cost compensations	41,410,241
Other remuneration types	8,478,447
TOTAL	1,254,336,539