Code of Business Conduct and Ethics of MTS PJSC

The Code of Business Conduct and Ethics of MTS PJSC (hereinafter referred to as the “Code”) includes key principles, a set of standards and requirements accepted at the Company with the purpose of maintaining fair and ethical business of MTS PJSC and preventing abuse. The Company complies with the legislation and generally accepted standards of business ethics and does not accept any other ways of doing business which are contrary to these rules.

The Code contains information about all compliance programs of the MTS PJSC Unified Compliance System. Due to the relaunch of the Code of Business Conduct and Ethics, a large-scale communication campaign was conducted in 2021 using an interactive material and a specially created platform. Supporting communications in the compliance community on the corporate portal were released as interactive materials, including case studies; activities were created on the platform where employees could check their compliance karma and dispel myths through tests, spin the wheel of compliance balance and get acquainted with each section of the Code through infographics, comics, videos. Over 1,200 employees took part in the campaign.

The Board of Directors members, managers and employees of the Company are personally responsible for compliance with the Code.

All employees get acquainted with the Code when being hired at the Company and go through regular training. In 2021, more than 25,500 employees of MTS PJSC completed e-training in the Code of Business Conduct and Ethics.

Code of Business Conduct of MTS PJSC Counterparty

In 2021, the Company updated the Code of Business Conduct of MTS PJSC Counterparty (hereinafter referred to as the “Code”) in accordance with the best global practices, having updated the minimum standards that MTS counterparties are expected to comply with. The provisions of the Code apply to all counterparties of MTS, as well as any third parties involved by a counterparty to act on behalf and/or for the benefit of MTS Group. Familiarization with the Code and acceptance of its commitments are an integral part of the contractual relationship with the Company.

In order to provide timely training of counterparties, MTS implements and supports a risk-based training program through a specially developed training system. Since 2021, an e-training program for counterparties has been launched. Over 1,800 counterparties completed training in various formats during 2021.

Furthermore, an illustrated version of the Code of Business Conduct and Ethics was published on the external website of MTS and MTS Procurement to enhance the apperception of the information contained in the document.

MTS PJSC Unified Compliance System

Since 2016, the Company has been actively developing the Unified Compliance System on the basis of the norms of the applicable law, recommendations of regulatory authorities, the specific nature of the industry and best practices in this sphere.

These compliance areas are supervised by the relevant functional units, each of which implements its compliance program and risk minimization system. Coordination of implementation and operation of the Unified Compliance System is entrusted to the Department of Business Ethics and Compliance of MTS PJSC.

In 2021, a scheduled work was carried out to reassess risks with the subsequent adaptation of compliance programs, including ecosystem and outsourcing risks. The risks of compliance programs are taken into account in the general risk management system of the Company. This makes it possible for the management and management bodies of the Company to gain a structured understanding of the existing compliance risks and to take these factors into account when making management decisions, which positively affects the Company’s overall performance.

In 2021, much attention was paid to measures to inform employees about the Unified Compliance System and compliance programs training. On the platform of MTS Corporate University, the list of training courses of the programs of the Unified Compliance System was updated. The Blog of the Unified Compliance System on the corporate portal regularly published announcements on all compliance programs of the Unified Compliance System according to the schedule. A survey of MTS employees was conducted on the compliance culture at the Company.

Information on violations of business ethics and compliance standards by MTS employees can be reported to the Unified Hotline. All requests received are checked in accordance with the local regulation that determines the procedure for addressing such requests.

The Unified Hotline of MTS Group of Companies is a safe, confidential and accessible method of informing the Audit Committee of the Board of Directors and the Internal Audit Block about violations of the law, internal procedures, the Code of Business Conduct and Ethics of MTS PJSC by any of its employees and (or) any member of a management body or authority supervising the financial and economic activities of MTS PJSC.

Proposals for improvement of anti-corruption procedures and other internal control procedures are received at the hotline addressed to the Audit Committee of the Board of Directors and the Internal Control Block. A person who has submitted relevant information is protected from any forms of pressure (including from dismissal, persecution, any forms of discrimination).

In 2021, the processing of reports received at the Unified Hotline (hereinafter referred to as the “UH”) was carried out in accordance with the Regulations on Processing of Reports Received at the Unified Hotline of MTS Group. Conclusions and responses to messages’ authors were prepared in a timely manner. Press releases on UH were posted on the corporate MTS information portal on a monthly basis in order to inform MTS Group employees about the UH operational results.

All situations of conflict of interest, violation of the provisions of the Code of Business Conduct and Ethics, anti-corruption legislation were settled in accordance with the Code of Business Conduct and Ethics, the Conflict of Interest Management Policy and the Anti-Corruption Law Compliance Policy approved by the Company. The employees who committed violations of the internal regulations of the Company, were informed of the necessity to eliminate the conflicts and prevent the repetition of similar situations in the future. Recommendations to address the identified defects were given.

Performance of the recertification audit of compliance of the Unified Compliance System of the Company with the standards ISO 37001:2016 and ISO 19600:2014 Preparation for a surveillance audit taking into account the requirements of the new standard ISO 37301:2021 (formerly ISO 19600:2014)

In January 2021, a new three-year cycle of auditing the compliance with ISO standards began at MTS. At the conclusion of the audit, the Company received a certificate of conformity; in response to the identified comments from the auditors, a plan was presented to eliminate inconsistencies and implement recommendations, which implementation was confirmed during the Supervisory Audit in 2022.

In October 2021, the Department of Business Ethics and Compliance organized an internal workshop for compliance program owners on the preparation for the Supervisory Audit 2022 in accordance with the requirements of the new ISO 37301:2021 standard “Compliance Management Systems” (previously ISO 19600:2014).

Compliance Committee

In 2016, the Company established the Compliance Committee under the President of MTS PJSC, which included the President and executives reporting directly to the President. The Committee is chaired by the Vice President for Business Ethics and Compliance.

The Committee was established to make decisions on the setting-up and implementation of compliance programs that are part of the Unified Compliance System. The main tasks of the Committee are to implement a policy in the area of compliance risk management and to make proposals on the directions of development of MTS Group in this area.

In 2021, two Committee meetings were held where the following issues were considered, inter alia:

• results of the UCS Certification Audit in 2021 for compliance with ISO 19600:2014 and ISO 37001:2016 standards, as well as approval of instructions for the execution of observations and recommendations of the Certification Audit;
• setting compliance key performance indicators (KPIs) for compliance owners of compliance programs of the MTS Unified Compliance System.

Anti-corruption (Anti-corruption compliance and business ethics)

MTS PJSC, as a public company, is aware of the need to develop a favorable business environment in the markets of its presence, and makes efforts to promote the best compliance practices, and always adheres to high standards of business ethics, transparency and the rule of law.

The anti-corruption compliance program at MTS PJSC establishes measures to control regulatory risks, to protect the Company from any manifestations of corruption (both within the Company and attempts to involve the Company in corrupt activity from the outside), to improve the corporate culture, introduce and develop in the Company the best corporate governance practices, as well as standards of responsible and ethical behavior.

The Company has in place a process for investigating any suspicions or violations of business ethics and compliance standards, any suspicions of corruption and other compliance violations. The Company provides an independent and comprehensive investigation of all possible violations. The Discipline Committee of MTS is a permanent body of the Company that reviews cases of violations of compliance requirements and other significant violations, ensuring the observance of the principles of legality, justice, uniformity and reasonableness when making decisions on the application of disciplinary sanctions to employees, and develops sustainable corrective measures. Moreover, the Company has developed and applies compliance KPIs and compliance triggers that support the commitment of all employees to the business ethics and compliance standards.

Projects and initiatives in the development of the anti-corruption compliance program and strengthening of the compliance culture in 2021

• The study of the compliance culture conducted by Ethisphere Institute — an independent global leader in this sphere showed a high level of understanding of compliance controls, as well as employees’ perception of the compliance culture in the Company generally.
• All local regulations containing compliance controls have been reviewed and updated taking into account the risks identified.
• A methodological framework has been developed and integrated in MTS Group to perform operational tasks in accordance with the requirements of the regulator and anti-bribery and anti-corruption best practices.
• A new faculty of Compliance has been established on the basis of MTS Corporate University.
• A new e-platform for employee training has been implemented, which provides easy access to training, assignment of courses and progress tracking including automatic notifications and training statistics.
• Employees of the Company ensured the taking of mandatory compliance courses at the level of 99 %. More than 5.5 thousand employees completed targeted compliance training in 2021.
• The top management of MTS continued to convey to employees its commitment to the principles of ethical business conduct (“tone-from-the-top”), as well as the “tone-in-the middle” stream began to actively develop — demonstration of conscientious behavior by the middle management through personal example. Directors for regional development and directors of the branches spoke to the employees on the subject of compliance in person and reminded them of the importance of compliance training and conducted activities in the regions, discussed ethical dilemmas in teams. In 2021, more than 400 “tone-in-the-middle” events were held with the participation of more than 57.3 thousand employees.
• Compliance topics were actively covered in internal communications, in particular: posts and information materials were posted in the compliance groups created within the Pulse corporate portal: in the group “Anti-corruption compliance. News” 47 posts were published in 2021 on the anti-corruption stream of compliance, in the group “Unified Compliance System. Blog”, 17 posts were published on other eight streams of the Unified Compliance System; interactive banners on the Pulse corporate portal, screensavers on the desktops of employees on compliance topics were used; the exchange of electronic compliance badges among employees was organized within the framework of the Day of Ethics and Compliance; instructions on the main compliance policies were drawn up; permanent communication columns were organized, namely “Compliance from A to Z” and “Lessons learned from Internal Investigations”; the second issue of the compliance comics about conflicts of interest was released.
• For the purposes of spreading best compliance practices and sharing experience, in 2021, representatives of the Business Ethics and Compliance Department were speakers at 10 external compliance events, including: X Annual Conference “Compliance Manager: Profession and Purpose”, 8th Annual Conference “Compliance and Anti-corruption in Russia and the CIS”, meetings of the Anti-Corruption Activist Group of the Russian Corporate Counsel Association.

Conflict of interest management

For the purposes of establishing a uniform and efficient actual and potential conflict of interest management system as well as determining the requirements for employees’ conduct, the observance of which enables to minimize risks of making decisions under the influence of personal interests and connections, the Company has introduced the Policy “Conflict of Interest Management”.

The Policy “Conflict of Interest Management”, as well as the instruction on the conflict of interest management at the Company are posted on the MTS external website, the corporate portal, and also in the My MTS mobile application.

Employees holding management positions are obliged to provide an example of law-abiding and ethical conduct and actively support execution of the Policy “Conflict of Interest Management”.

When being hired, all employees familiarize themselves with this Policy, fill in the form “Disclosure of information about the conflict of interest”. If and when a conflict of interests arises, each situation must be reviewed and settled.

In 2021, the annual management certification process was redesigned. During the year, 265 situations of the management’s conflict of interest were considered. Furthermore, starting from 2021, members of MTS PJSC management bodies go through a mandatory questionnaire procedure, twice a year, in terms of identifying conflicts of interest. Throughout 2021, information on 467 situations was audited and expert opinion was given in order to identify the presence of a conflict of interest. In 102 instances, the conflict of interest was not confirmed. 365 conflict of interest situations were settled.

System of antimonopoly risk prevention (antimonopoly compliance)

Since 2015, the antimonopoly compliance at MTS PJSC has been successfully functioning and developing in the light of changes in antitrust laws and trends in the development of law enforcement practice. In 2021, the Company conducted a large-scale assessment of antitrust risks in subsidiaries, as a result of which the most risky companies received mandatory extensive antitrust training. Furthermore, with the involvement of legal advisors, an external audit of the effectiveness of the antimonopoly compliance system was conducted, which confirmed the high level of its development, and also measures for further improvement were proposed, which the Company will continue to implement in 2022.

The Company regularly communicates information about antitrust requirements to employees, using various formats of such communication to achieve maximum effect. The ultimate goal of this work is not only to provide employees with theoretical and practical knowledge in the field of antitrust regulation, but also to develop “zero tolerance” to violations of antitrust laws within the Company.

The antitrust risk prevention system is constantly optimizing in order to comply with the development of the MTS PJSC business strategy and with the changes in the regulatory environment.

Inside Compliance

MTS PJSC, as a company with on-exchange trading of its financial instruments in Russia and the United States, pays great attention to maintaining an effective system of misuse of insider information and market manipulation.

The Company has a system of measures, procedures and processes aimed at preventing violations of legislation on the use of insider information, built taking into account the best Russian and international practices and based on three basic documents — Regulations on the principles and procedures regarding the prevention of transactions using MTS insider information, the Policy “On counteracting  the misuse of insider information and market manipulation” and the “Conditions for transactions with financial instruments of MTS Group companies by individuals specified in paragraphs 7 and 13 of Article 4 Law on Insider Information¹, included in the list of MTS insiders, and persons related to them.  MTS PJSC local regulations determine the procedure for using insider information, the rules for protecting its confidentiality and monitoring compliance with the requirements of legislation on the use of insider information in order to ensure fair pricing of financial instruments, protect the rights and property interests of all MTS shareholders and ensure equal rights of other investors in terms of timing and volume of information received, strengthening investor confidence and preventing abuse in the form of misuse of insider information and/or manipulation of market.

¹ Federal Law No. 224-FZ of July 27, 2010 “On counteracting the misuse of insider information and market manipulation and on amending certain legislative acts of the Russian Federation”.

In accordance with the best practices, the Company set limits for all employees regarding the performance of operations involving MTS PJSC securities in so-called “closed” periods. The next “closed” period begins each time 14 calendar days before the scheduled date of publication of data on MTS financial results for the previous financial quarter and ends two business days after their publication.2

In order to ensure compliance with the requirements for “closed” periods, the system provides for quarterly reporting (twice per quarter) of employees and members of management bodies on their beginning and end. In addition, special calendar has been created in a special information system for members of the management bodies, which contains up-to-date information on the current “closed” or “open” period.

Since 2014, the Company has operated a full-time training system for all insiders who are employees of the Company. When being hired, each employee reads Company’s regulations aimed at preventing violations of insider laws.

The Company is aware of the severity of the sanctions which may be applied to any employee in case of a violation of insider legislation. Therefore, in order to prevent such negative consequences, in 2017, an interactive course was developed and launched for all company employees, dedicated to insider-law fundamentals. This course was updated in 2022.

Risks related to the violation of insider legislation are recorded in a specialized automated system and are reevaluated on a quarterly basis.

Russian regulation in the field of preventing insider trading has its own specifics. For example, the Company keeps a list of its insiders in this regard. It includes individuals and legal entities.

Pursuant to the requirements of the Insider Information Law, MTS approved the Internal Control Rules to Prevent, Detect and Suppress the Misuse of Insider Information and (or) Market Manipulation, and set up a working group to control compliance with the requirements of the insider information legislation and monitor its implementation . The Internal Control Rules establish the goals, objectives and methods of exercising internal control over MTS compliance with the requirements of the legislation on insider information, the procedure and terms for disclosing MTS insider information, the procedure for accessing insider information and the rules for protecting its confidentiality. The implementation of internal control over MTS compliance with the requirements of the legislation on insider information is included in the official duties of the responsible official holding the position of a member of the Management Board – Vice President for Corporate and Legal Affairs of the MTS Group CC, accountable to the person performing the functions of the sole executive body of MTS (MTS President), regarding the functions of monitoring compliance with the requirements of the legislation on insider information. MTS employees assist the responsible official in the implementation of internal control.

To maintain an effective insider compliance program, the Company audits program controls as necessary (taking into account a risk-based approach) by an internal audit unit headed by a person accountable to the Board of Directors.

Personal data processing organization

In 2021, MTS Group continued its rapid movement towards the image of a digital up-to-date company, there was a strengthening of existing and a substantial development of new competencies in the field of IT and compliance. These changes required an appropriate response from the Information Security Department, which consisted in the adaptation and sometimes even complete revision of the processes in which its divisions are involved.

In order to achieve the consistency and integrated approach to the change of digital transformation processes, in which the divisions of the Information Security Department are involved, basic principles of change were determined:

• customer focus (for information security divisions, product teams are customers, and product clients are clients);
• continuous involvement (starting with the idea of the product and throughout the entire product life cycle, the involvement of information security must be ensured so that there are no misunderstandings or “catching up”);
• assistance of product teams (just as the business works with product teams to help understand the specifics of the market, so product teams should help the information security divisions to understand the specifics of products);
• simplicity (from equivalent optimization proposals, those the simplest are selected);
• mutual trust with product teams (they all have the same goal: to support the business, understanding this must induce both parties to openness and constructive dialogue).

Significant work was carried out with regulatory documentation, which made it possible not only to meet new requirements of the law but also to simplify the work of employees with documentation, in particular, the Policy “Personal Data Processing at MTS PJSC” was modified, information security divisions actively participated in improving Process Regulations RP-151-14 “Staff Selection, Recruitment and Onboarding”, a standard form of consent to the dissemination of personal data was developed and approved.

In order to ensure mutual trust, transparency of work and involvement in the processes of the Company, the Information Security Department continues to raise the level of awareness of MTS employees regarding the personal data processing and the protection of confidential information. In 2021, 31,668 MTS employees completed training in “Personal Data Processing at MTS PJSC”.

Over the past 2021, the scope of providing the consulting and project appraisal service regarding compliance with the requirements of the legislation on personal data of the Russian Federation was expanded: the service was brought to the level of MTS Group.

Risks associated with violation of the legislation on personal data are taken into account in the Company’s risk management system and are reassessed quarterly.

Combatting the legalization (laundering) of criminal proceeds, the financing of terrorism and/or financing of the spread of weapons of mass destruction (CML/FT/MDWSF)

The CML/FT/MDWSF program has been developed pursuant to the requirements of the applicable legislation, which changes are monitored on a regular basis.

As part of the compliance program’s activities implementation, the Department of Regional Security conducts a daily audit of all MTS subscribers to check whether some of the subscribers are included in the list of Rosfinmonitoring. When the Company’s subscribers carry out high-risk transactions on personal accounts, in addition to checking against the lists of Rosfinmonitoring, an additional check is initiated against the database of invalid passports.

The Company also carries out daily monitoring of the termination of communication service contracts with repayment of the balance, as well as monitoring other suspicious subscriber transactions in accordance with Order No. 103 of the Federal Service for Financial Monitoring dated May 08, 2009 “On the Approval of Recommendations for Development Criteria for the Definition and Identifying Signs of Unusual Transactions”, newsletter of Rosfinmonitoring dd. October 2, 2019.

Events are held, on an ongoing basis, to inform regional leaders on the implementation of CML/TF/MDWSF legislation requirements.

In 2021, the Company:

• updated local regulations developed for the purposes of CML/TF/MDWSF;
• conducted scheduled training of the top management in the form of targeted briefing / raising the level of knowledge for the purpose of CML/TF/MDWSF.

Health and Safety Management System¹

¹ Detailed information on the program is contained in the section “Our Employees”.

When building the “Health and Safety Management System” compliance program, the Company is guided by the applicable Russian and international legislation, as well as by local regulations on labor protection.

The Company operates a two-tier system of H&S management, focused on creating a safe working environment, prevention of occupational injuries and personnel training in safe work rules.

As part of the compliance program, the following activities were carried out in 2021:

• special assessment of working conditions and production control;
• procedures for identification, assessment and management of professional risks;
• medical examinations;
• training of employees and experts in the field of health-and-safety;
• provision of the employees with the special clothing, safety shoes and other personal protective equipment;
• various events and communications in order to increase employee awareness of health and safety;
• control procedures of various levels;
• interaction with regulatory authorities.

The costs of organizing occupational safety measures increase annually due to the staff expansion and the list of implemented measures. Thus, in 2021, a number of activities aimed at combating coronavirus infection were added to the OS activities.

Ecology

MTS considers environmental protection activities as an integral component of business and works in the area of environmental balance and stability maintenance. We are consistently reducing our ecological footprint, actively developing digital services using the Internet of Things, artificial intelligence, cloud technologies, Big Data, the introduction of which allows for structurally influencing the change in energy consumption and reducing emissions of hazardous substances in various industries, municipal services and the social sphere of the regions. In the course of implementing the compliance program “Ecology”, a video clip was created on the environmental responsibility of MTS, which all employees could see within the framework of the Day of Ethics and Compliance 2021.

We use our best endeavors to implement and digitize climate risks together with the risk management section. At the yest-end 2021, climate risks were included in the issuer’s reports and 20F. Furthermore, in 2021, in order to constantly improve knowledge on environmental protection, periodic internal training was conducted for the employees responsible for environmental safety; industrial environmental control was exercised at the negative impact facilities registered. For the purposes of improving the environmental culture, the Day of Ecology with MTS was traditionally held for all employees, which consisted of a set of environmental education and training events. In 2021, the Day of Ecology with MTS was held in two formats: online, which allowed to significantly expand the audience and make content available to people in all regions of MTS presence, and offline: undertaking compensatory plantings in five regions most affected by forest fires over the past five years.

Detailed information on this area is disclosed in MTS PJSC Sustainability Report:

Human rights at the workplace

In 2021, the Company continued work on development of the compliance program “Observance of Human Rights at the Workplace” according to the recommendations received based on the results of the external annual audit of compliance programs and the results of assessment of compliance risks at the level of business processes.

The system to manage risks of human rights violations is a part of the integrated risk management process of MTS Group. An additional risk associated with violation of employee rights during the coronavirus pandemic was added.

Based on 2021 results:

• for the purposes of raising awareness among employees, the section “Human Rights at the Workplace” was updated on the internal corporate web-portal;
• the company developed and launched a training course “Human Rights at the Workplace” to be completed by all employees. The course covers aspects of applicable labor law and provides a clear understanding of how an employee shall act in the event of a violation of his/her rights at the workplace.
• the Policy “MTS Activities in the Field of Diversity, Equality and Inclusion” has been developed and implemented;
• within the framework of the “MTS Inclusion” program, training courses have been created on the topic: why people with disabilities are valuable employees for the team and why it is important to consider such candidates when hiring, as well as how to help a candidate with a disability adapt to working in a team and provide psychological comfort for all. Four educational courses have been developed for executives, recruiters and HR professionals, team members and employees with disabilities.

Detailed information on this area is disclosed in MTS PJSC Sustainability Report

Risk management system in the field of intellectual property

In 2021, the compliance program “Risk Management System in the Field of Intellectual Property” was certified according to ISO 19300 standard and continued to be developed.

In order to optimize the incorporation of the compliance program in business processes and adapt it throughout MTS Group, a new version of the Policy “Intellectual Property Management in MTS and Subsidiaries” was developed and approved. The Policy establishes the procedure for formalizing works made for hire created by the employees of the Company. To implement this procedure, in 2021, addenda to employment contracts were concluded with MTS employees, covering the provisions on intellectual rights.

In 2021, the Company became the winner of the IP Russia Awards 2021 in the field of intellectual property in the nomination “Best IT Protection Strategy”.

In the course of the project, which lasted several years, a service software (SW) registration process was developed, digitized and implemented, criteria for registration of SW and objects of patent law were developed, a quantity of software (Open Source Software) distributed on the basis of open licenses was analyzed to identify risks when borrowing a code in IT products.

The Company continued to work on projects for the risk prevention processes in the field of intellectual property.

Training events were delivered to employees of the Company and its subsidiaries on a regular basis on the issues related to risks in the field of intellectual property and dedicated to topical issues of intellectual property.

Compliance training for members of MTS PJSC Board of Directors

In July 2021, the Vice President for Business Ethics and Compliance, L. E. Lukyanova conducted a series of trainings for members of MTS PJSC Board of Directors, Management Board and members of Committees of the Board of Directors on the topic “Code of Business Conduct and Ethics, Anti-Corruption Policy, Conflict of Interest and other Compliance Issues at MTS PJSC”, where she spoke about the principles of the anti-corruption compliance system, the interaction between the Board of Directors and the compliance function, the “tone-from-the-top”, etc.

The training was attended by 100 % of the members of the Board of Directors, the Management Board and members of Committees of the Board of Directors. Furthermore, on October 28, 2021, the President of MTS PJSC Vyacheslav Nikolaev conducted a training on mandatory disclosure of information by the members of MTS PJSC Board of Directors.