Report on Compliance with the Principles and Recommendations of the Corporate Governance Code

2. The Company provides freely available communication channels such as a Hotline, email, or an Internet forum allowing shareholders to express their opinions and send questions regarding the agenda during preparations for the General Shareholders Meeting. These actions were taken by the Company before every General Shareholders Meeting that took place during the reporting period.

2. Notification about the General Shareholders Meeting specifies the venue for the meeting and contains the list of documents required for admission to the premises.

3. Shareholders have been granted access to information about persons who proposed agenda items and nominated candidates to the Board of Directors Audit Commission.

2. The position of the Board of Directors (including dissenting opinions included in the minutes) on each agenda item of the General Shareholders Meetings held in the reporting period was included in the materials for the General Shareholders Meeting.

3. The Company provided authorized shareholders with access to the list of persons eligible to participate in the General Shareholders Meeting, starting from the date when this list was received by the Company; this applies to all such meetings in the reporting period

2. In the reporting period, the Company did not reject proposals regarding agenda items or candidates nominated to the Company’s bodies because of misprints or other minor drawbacks in a shareholder’s proposal.

During the reporting period, there were no situations in which shareholders would not have had enough time to submit proposals within the period specified by law.

There are plans to consider the feasibility and necessity of recording these provisions in the Company’s internal documents at the annual general meeting of shareholders for 2018.

There are plans to consider the feasibility and necessity of recording these provisions in the Company’s internal documents prior to the annual general meeting of shareholders for 2019.

The registrar JSC “New Registrar” performs the functions of the ballot committee for PJSC “Magnit” based on the agreement which terms do not prevent any of the Company’s shareholders from requesting a copy of a completed ballot from the Registrar’s representatives before the end of the meeting. Neither the Company’s registrar nor the Company itself denied such a request at the general meeting of shareholders in 2018.

2. Candidates nominated to the Company’s governing and supervisory bodies were available to answer shareholders’ questions at the meeting during which they were put to a vote.

3. When making decisions on preparations for and holding of the General Shareholders Meetings, the Board of Directors addressed the issue of the use of telecommunications to provide shareholders with remote access enabling them to participate in General Shareholders Meetings.

The Company’s management and the Registrar consider using telecommunications to provide shareholders with the remote access to the general meetings.

There are plans to consider the feasibility and necessity of this practice prior to the annual general meeting of shareholders for 2019.

The Board of Directors did not consider the issue of providing shareholders with the remote access to take part in general meetings during the reporting period.

The Company’s shareholders who are clients of the nominal holders take part in meetings by sending messages to the registrar expressing their will on the general meeting agenda items in the form of electronic documents.

2. If the Company’s results recorded in its financial statements are used for determining the amount of dividends in accordance with the Company’s dividend policy, the consolidated results recorded in the financial statements are considered in its relevant provisions.

There are plans to consider the feasibility and necessity of recording these provisions in the Company’s internal documents at the annual general meeting of shareholders for 2018.

The Company’s Charter specifies a number of transactions that require consent (approval) from the Board of Directors (or the Company’s Management Board) for their completion in cases where the law does not provide for such a need. The Company’s subsidiaries utilize a similar approach.

Such a measure reduces the possible additional risks associated with the failure to comply with this recommendation of the Code.

The Board of Directors also ensures that the Company’s executive bodies act in accordance with the approved development strategy and the Company’s key areas of business.

2. The Board of Directors has considered the report(s) of the sole executive body and members of the collective executive body on the implementation of the Company’s strategy.

2. The Board of Directors assessed the risk management and internal control system of the Company in the reporting period.

2. In the reporting period, the meetings of the Board of Directors addressed issues related to the above policy (policies).

2. The Company has created a system for identifying transactions involving a conflict of interest and a system of measures for resolving such conflicts.

2. The Company has appointed individuals responsible for the implementation of the Information Policy.

2. The Annual Report includes information on the main results of the performance assessment of the Board of Directors carried out in the reporting period

2. In the reporting period, the Board of Directors (or the Nomination Committee) assessed candidates for the Board of Directors in terms of their experience, knowledge, business reputation, lack of a conflict of interest, etc.

2. In the reporting period, the Board of Directors (or the Nomination Committee) considered the independence of the current members of the Board of Directors who are specified in the Annual Report as Independent Directors of the Company at least once.

3. The Company has developed procedures describing the actions to be taken by a member of the Board of Directors if he or she ceases to be independent, including the obligation to inform the Board of Directors of such a situation in a timely manner.

2. The role, rights, and duties of the Chairman of the Board of Directors (and, if applicable, the Senior Independent Director) are properly specified in the Company’s internal documents.

2. The Company’s internal documents stipulate that a member of the Board of Directors shall refrain from voting on any issue with respect to which he or she has a conflict of interest.

3. The Company has established a procedure which allows the Board of Directors to obtain professional advice on issues within its purview at the Company’s expense.

However, the fact that the obligation of members of the Board of Directors to provide notification about a conflict of interest before a discussion of the relevant agenda item begins is not formally documented does not result in the concealing of such information. The chairman of the Board of Directors requests information about the existence of any conflict of interest and reports it to the Board of Directors prior to the discussion of the relevant agenda item.

There are plans to consider the feasibility and necessity of recording these provisions in the Company’s internal documents at the annual general meeting of shareholders for 2018.

2. In accordance with the Company’s internal documents, members of the Board of Directors shall inform the Board of Directors of their intention to join the governing bodies of any other organizations (apart from organizations controlled by or affiliated with the Company) and the fact of such an appointment.

2. The Company has a formalized introductory program for newly elected members of the Board of Directors.

There are plans to consider the feasibility and necessity of recording these provisions in the Company’s internal documents prior to the annual general meeting of shareholders for 2019.

Moreover, the Company has established the practice of considering the most important issues at in-person meetings of the Board of Directors.

2. The Company’s internal documents set out the duties of the Audit Committee, including those specified in Recommendation 172 of the Code.

3. At least one member of the Audit Committee who is an Independent Director has experience in and knowledge of the preparation, analysis, evaluation, and audit of financial statements.

4. Meetings of the Audit Committee were held at least once a quarter in the reporting period.

2. The Chairman of the Remuneration Committee is an Independent Director who is not the Chairman of the Board of Directors.

3. The Company’s internal documents set out the duties of the Remuneration Committee, including those specified in Recommendation 180 of the Code.

2. The Company’s internal documents set out the duties of the Nomination Committee (or another committee with shared functions), including those specified in Recommendation 186 of the Code

2. The Company’s internal documents (policies) contain provisions whereby persons who are not members of the Audit Committee, the Nomination Committee, or the Remuneration Committee may only attend meetings of the Committees by invitation of the Chairman of the relevant Committee.

2. The results of the self-assessment or external assessment of the Board of Directors carried out in the reporting period were considered at a face-to-face meeting of the Board of Directors.

During the reporting period, the Board of Directors conducted a self-assessment of its work that showed that the effectiveness of the work of the Board of Directors fully meets the Company’s objectives.

At present, the Company sees no need to hire an independent consultant to conduct an independent assessment, although the Company does not rule out this possibility if the Board of Directors deems the self-assessment to be insufficient.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s corporate governance practices prior to the annual general shareholders meeting for 2019.

2. Biographical details of the Corporate Secretary are provided on the Company’s website and in the Annual Report; they are as detailed as those of the members of the Board of Directors and the Company’s executive officers.

At the same time, the Company avoids paying remuneration that is larger than necessary and seeks to prevent an unreasonably large gap between the amounts of remuneration paid to the above individuals and the Company’s employees.

From the approval date of the Regulation, fixed monetary remuneration is the only monetary form of remuneration for members of the Company’s Board of Directors for their work on the Board of Directors.

2. During the last assessment of the system of remuneration for the members of executive bodies and other key executives of the Company, the Board of Directors (the Remuneration Committee) made sure that the Company used an effective combination of fixed and variable components of remuneration.

3. The Company has a procedure ensuring that bonuses wrongfully received by the members of executive bodies and other key executives of the Company are returned to the Company.

The recommendations of the Corporate Governance Code concerning the existence of a procedure to ensure the return to the Company of bonus payments wrongfully received by members of executive bodies and other key employees have not yet been reflected in the Company’s internal documents and corporate governance practices.

Moreover, the system of key performance indicators and the practice of setting target values that have been introduced at the Company aim to eliminate the possibility of excessive amounts of variable remuneration being wrongfully charged. In the event of a situation where members of the executive bodies and other key executives of the Company wrongfully receive bonus payments, the situation will be resolved individually in each specific case. As of the end of the reporting year, there were no cases in the Company's practice of members of the executive bodies or other key executives of the Company wrongfully receiving bonus payments.

However, there are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents and corporate governance practices prior to the annual general meeting of shareholders for 2019.

2. The long-term incentive plan for members of executive bodies and other key executives of the Company stipulates that the right to sell shares and other financial instruments used in this plan may be exercised no earlier than three years after their provision. At the same time, the right to sell them is related to the achievement of certain performance targets of the Company.

2. The Company has developed a convenient method for informing the Board of Directors or its Audit Committee about violations of the law, internal procedures, or the Corporate Code of Ethics.

The internal audit unit functionally reports to the Board of Directors.

The Company uses generally accepted performance standards in matters concerning internal audit.

2. The Company uses generally accepted approaches to internal control and risk management.

2. The Board of Directors (or one of its Committees) considered issues related to the Company’s compliance with its information policy at least once in the reporting period.

The recommendations of the Corporate Governance Code concerning the compliance of the Company’s information policy with the Code’s recommendations have not yet been reflected in the Company’s internal documents.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents prior to the annual general meeting of shareholders for 2019.

However, the Company ensures the timely disclosure of complete and reliable information, including its financial position, economic indicators, and ownership structure, in order to provide the Company’s shareholders and investors with an opportunity to make informed decisions.

Information is disclosed in accordance with the requirements of the Russian legislation as well as the rules of the Financial Conduct Authority (FCA) of the United Kingdom.

In 2018, the Company underwent significant changes, including changes related to the Company’s development strategy, and many business processes are in the process of transformation. The Company performs systematic work to bring its corporate governance practices as well as internal documents regulating its activities and the activities of the Company’s management bodies into compliance with the Code.

2. The Company discloses information on the membership of executive bodies and the Board of Directors, independence of its members, and their membership in the Committees of the Board of Directors (as defined in the Code).

3. If there is an entity controlling the Company, the Company publishes a memorandum of this entity detailing its plans concerning corporate governance at the Company.

2. If the Company’s securities are listed on foreign markets, the disclosure of material information in the Russian Federation and on such markets is simultaneous and equivalent during the reporting year.

3. If foreign shareholders own a considerable number of shares in the Company, information was disclosed not only in Russian, but also in one of the prevailing foreign languages during the reporting year.

2. The Company discloses comprehensive information on its capital structure in accordance with Recommendation No. 290 of the Code in the Annual Report and on its website.

The Company has not determined the procedure for disclosing separate additional information about the Company’s capital structure, as specified by Recommendation 290 of the Code, specifically: statements by the Company’s executive bodies indicating that the Company has no information about the existence of share ownership exceeding five percent other than those already disclosed by the Company and no information about the possible acquisition or acquisition by certain shareholders of a degree of control that is disproportionate to their participation in the Company’s authorized capital, including on the basis of shareholder agreements.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents and corporate governance practices prior to the annual general meeting of shareholders for 2019.

Even though information about the Company’s lack of the above data is not disclosed in the form of a statement by the executive bodies, this does not result in any information being concealed concerning the Company’s capital structure in accordance with clause 290 of the Code.

The Company avoids taking a formal approach to the disclosure of essential information about its activities.

In 2018, the Company underwent significant changes, including changes related to the Company’s development strategy, and many business processes are in the process of transformation. The Company performs systematic work to bring its corporate governance practices as well as internal documents regulating its activities and the activities of the Company’s management bodies into compliance with the Code.

2. The Company’s Annual Report contains information on environmental and social aspects of its operations.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents prior to the annual general shareholders meeting for 2019.

However, the Company discloses a sufficiently large amount of information at its own initiative about the legal entities it controls in addition to information whose disclosure requirements are envisaged by existing legislation.

In practice, access to such information is easily provided.

In 2018, the Company underwent significant changes, including changes related to the Company’s development strategy, and many business processes are in the process of transformation. The Company performs systematic work to bring its corporate governance practices as well as internal documents regulating its activities and the activities of the Company’s management bodies into compliance with the Code.

2. In the cases stipulated by the Company’s information policy, shareholders are informed that the information is confidential and undertake to keep it confidential.

The Company’s Charter provides a list (criteria) of transactions or other actions constituting significant corporate actions, and such actions fall within the purview of the Company’s Board of Directors.

2. The Company’s Charter classifies reorganization of the Company, purchase of 30 or more percent of the Company’s voting shares (acquisition), major transactions, an increase or reduction in the Company’s authorized capital, and the listing and delisting of the Company’s shares as significant corporate actions.

Clause 2 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance not complied with.

The list of significant corporate actions and criteria for their determination has not been formally incorporated in the Company’s internal documents.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents prior to the annual general shareholders meeting for 2019.

However, the Company’s corporate governance practices imply that corporate actions which the Code regards as significant are approved by the Board of Directors or the general meeting of shareholders based on a proposal from the Board of Directors, and the position of the Board of Directors on all the agenda items of the general shareholders meeting, including on items that may be regarded as significant corporate actions, is provided to shareholders as part of preparations for the above general meeting.

In 2018, the Company underwent significant changes, including changes related to the Company’s development strategy, and many business processes are in the process of transformation. The Company performs systematic work to bring its corporate governance practices as well as internal documents regulating its activities and the activities of the Company’s management bodies into compliance with the Code.

2. During the reporting period, all significant corporate actions were approved prior to their implementation.

2. The Company’s internal documents establish the procedure for hiring an independent appraiser to carry out a valuation of the Company’s shares for the purposes of purchase or buyback.

3. The Company’s internal documents contain an expanded list of reasons why members of the Company’s Board of Directors and other persons stipulated by applicable laws can be recognized as related parties for the purpose of the Company’s transactions.

The Company’s internal documents envisage a procedure for hiring specialists to obtain professional advice on issues considered at meetings of the Board of Directors without specifying the purpose of the hiring of such a specialist.

Existing legislation envisages cases where the hiring of an independent appraiser is mandatory. Moreover, existing legislation does not preclude the possibility of hiring an appraiser in any of the specified cases (determining the value of property that has been alienated or acquired in a major transaction or a related party transaction or an assessment of the cost of acquiring and redeeming a company’s shares).

Clause 3 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance not complied with:

The recommendations of the Corporate Governance Code concerning an expansion in the list of grounds based on which members of the Company’s Board of Directors and other entities envisaged by law are recognized as interested parties in the Company’s transactions have not been reflected in the Company’s internal documents.

There are plans to consider the feasibility and necessity of incorporating these provisions into the Company’s internal documents prior to the annual general shareholders meeting for 2019.

However, after the Code took effect, significant changes were made to the legislation on the joint-stock companies regarding related party transactions. For example, the range of interested parties was reduced, the procedure for concluding related party transactions was simplified, and there was an expansion in the list of transactions to which the rules on the conclusion of related party transactions do not apply, despite the formal existence of “interest.”

In 2018, the Company underwent significant changes, including changes related to the Company’s development strategy, and many business processes are in the process of transformation. The Company performs systematic work to bring its corporate governance practices as well as internal documents regulating its activities and the activities of the Company’s management bodies into compliance with the Code.