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

The Board of Directors confirms that the data provided in this report contains complete and reliable information about the Company’s compliance with the principles and recommendations of the Corporate Governance Code (hereinafter the “Code”) for 2018. Complied with

Partially complied with

Not complied with

No. Corporate governance principles Criteria for evaluation of compliance with corporate governance principle Status of compliance with corporate governance principle Explanations concerning the failure to meet the criteria for the evaluation of compliance with corporate governance principle
1.1 The Company should treat all shareholders equally and fairly when they exercise their right to participate in the management of the Company.
1.1.1 The Company has created the best possible conditions for shareholders to participate in General Shareholders Meeting and conditions required to form an informed opinion on the agenda items of the Meeting, aligning the shareholders’ actions, and opportunities for them to express their opinion on the matters being considered. 1. An internal document of the Company adopted by the General Shareholders Meeting and establishing the procedures for conducting the General Shareholders Meeting is publicly available.

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.

Complied with
1.1.2 The procedure for providing notification about a General Shareholders Meeting and providing materials for the meeting enables shareholders to properly prepare for it. 1. Notification about the General Shareholders Meeting is posted on the Company’s website at least thirty days before the date of the meeting.

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.

Complied with
1.1.3 During preparations for the General Shareholders Meeting and the meeting itself, the shareholders had the opportunity to easily receive information on the meeting and related materials in a timely manner as well as to ask the Company’s executive bodies and members of the Company’s Board of Directors questions and communicate with each other. 1. During the reporting period, shareholders were given an opportunity to ask members of the Company’s executive bodies and members of the Company’s Board of Directors questions prior to and in the course of the Annual General Shareholders Meeting.

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

Complied with
1.1.4 The shareholder’s right to request the convening of the General Shareholders Meeting, nominate candidates to governing bodies and propose agenda items for the General Shareholders Meeting was exercised without any unnecessary difficulties. 1. In the reporting period, shareholders were given an opportunity to propose agenda items for the Annual General Shareholders Meeting for at least 60 days after the end of the respective calendar year.

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.

Partially complied with Not observed in terms of the incorporation a 60-day deadline in the Company’s internal documents for shareholders to submit proposals for the agenda of the annual general meeting (clause 1, Evaluation Criteria for Compliance with the Principle of Corporate Governance).

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.

1.1.5 Each shareholder was able to freely exercise the right to vote in the easiest and most convenient way. 1. An internal document (internal policy) of the Company contains provisions whereby each participant of the General Shareholders Meeting may request a copy of the ballot filled in by him/her and certified by the Company’s ballot committee before the end of the respective meeting. Not complied with These Corporate Governance Code recommendations have not yet been reflected in the Company’s Charter and/or its internal documents.

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.

1.1.6 The Company’s procedure for holding the General Shareholders Meetingprovides all meeting participants with equal opportunities for expressing their opinions and asking questions. 1. When conducting the General Shareholders Meeting in the form of a meeting (joint presence of shareholders),
a sufficient amount of time was provided to make reports on agenda items and to discuss these agenda items.

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.

Partially complied with Not complied with in terms of providing shareholders with remote access to participate in general meetings (clause 3 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance).

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.

1.2 The shareholders are given equal and equitable opportunities to receive a share of the Company’s profits by receiving dividends.
1.2.1 The Company has developed and implemented a transparent and clear mechanism for determining the amount of dividends and their payment. 1. The Company has developed and disclosed the dividend policy approved by the Board of Directors.

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.

Complied with
1.2.2 The Company does not decide to pay dividends if such a decision is economically unfeasible or may create a misleading impression as to the Company’s operations, despite its formal compliance with legislation. 1. The Company’s dividend policy clearly stipulates the financial/economic circumstances due to which the Company should not pay dividends. Complied with
1.2.3 The Company does not allow any deterioration in terms of the dividend rights of existing shareholders. 1. The Company did not take any actions causing any deterioration as regards the dividend rights of existing shareholders in the reporting period. Complied with
1.2.4 The Company aims to ensure that shareholders do not have any other ways to receive profit (income) from the Company, except for dividends and liquidation value. 1. In order to prevent shareholders from using other means of gaining profit (income) from the Company, except for dividends and liquidation value, the Company’s internal documents provide control mechanisms which ensure the timely identification and approval of transactions with affiliates (associates) of major shareholders (persons entitled to exercise votes attached to voting shares) in such cases when the law does not officially recognize these transactions as related-party transactions. Not complied with These Corporate Governance Code recommendations have not yet been reflected in the Company’s Charter and/or its internal documents.

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.

1.3 The corporate governance system and practices should ensure equitable treatment of all shareholders owning shares of one class (type), including minority (small) shareholders and foreign shareholders, and equal treatment of them by the Company.
1.3.1 The Company has created conditions required to ensure that its governing bodies and controlling entities treat each shareholder fairly, including preventing abuse by major shareholders with respect to minority shareholders. 1. In the reporting period, the management of potential conflicts of interest among major shareholders was efficient, and the Board of Directors paid due attention to conflicts between the shareholders, if any. Complied with
1.3.2 The Company does not take any actions which lead to or may lead to the artificial redistribution of corporate control. 1. There were no quasi-treasury shares in the Company or they did not participate in voting in the reporting period. Complied with
1.4 Shareholders are provided with reliable and effective methods of registering ownership of shares and an opportunity to freely and quickly dispose of their shares.
1.4 Shareholders are provided with reliable and effective methods of registering ownership of shares and an opportunity to freely and quickly dispose of their shares. 1. The quality and reliability of activities carried out by the Company’s Registrar associated with keeping a register of security holders meet the needs of the Company and its shareholders. Complied with
2.1 The Board of Directors is responsible for the strategic management of the Company; it formulates the basic principles and approaches to the development of the risk management and internal control system, supervises the work of the Company’s executive bodies and performs other core functions.
2.1.1 The Board of Directors is responsible for making decisions related to the appointment and dismissal of executive bodies, including due to the improper performance of their functions.

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.

1. The Board of Directors has the power to appoint and dismiss members of executive bodies as well as to determine the terms and conditions of their contracts; these powers are stipulated in the Charter.

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.

Complied with
2.1.2 The Board of Directors decides on the main long-term strategic targets for the Company’s operations, evaluates and approves key performance indicators and the Company’s main business goals, evaluates and approves the strategy and business plans for the Company’s core business areas. 1. In the reporting period, the Board of Directors addressed issues related to the implementation and review of the strategy, approval of the financial and economic plan (budget) of the Company, as well as the consideration of criteria and indicators (including interim indicators) related to the implementation of the Company’s strategy and business plans. Complied with
2.1.3 The Board of Directors determines the principles and approaches to the development of the risk management and internal control system at the Company. 1. The Board of Directors has determined the principles and approaches to the development of the risk management and internal control system at the Company.

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

Complied with
2.1.4 The Board of Directors determines the Company’s policy on the payment of remuneration and/or compensation (reimbursement) to members of the Board of Directors, executive bodies, or other key executives of the Company. 1. The Company has developed and introduced the policy (policies) on remuneration and/or compensation (reimbursement) to members of the Board of Directors, executive bodies, and other key executives of the Company; the policy (policies) has (have) been approved by the Board of Directors.

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

Complied with
2.1.5 The Board of Directors plays a key role in preventing, identifying, and resolving internal conflicts between the Company’s bodies, shareholders and employees. 1. The Board of Directors plays a key role in preventing, identifying, and resolving internal conflicts.

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

Complied with
2.1.6 The Board of Directors plays a key role in preventing, identifying, and resolving internal conflicts between the Company’s bodies, shareholders, and employees. 1. The Board of Directors has approved the Regulations on Information Policy.

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

Complied with
2.1.7 The Board of Directors oversees the Company’s corporate governance practices and plays a key role in the Company’s significant corporate events. 1. In the reporting period, the Board of Directors considered the issue of corporate governance practices at the Company. Complied with
2.2 The Board of Directors reports to the Company’s shareholders.
2.2.1 Information on the performance of the Board of Directors is disclosed and provided to shareholders. 1. The Annual Report of the Company for the reporting period includes information on the attendance of meetings of the Board of Directors and Committees by individual directors.

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

Complied with
2.2.2 The Chairman of the Board of Directors is available for communication with the Company’s shareholders. 1. The Company has a transparent procedure enabling shareholders to send their questions and opinions on them to the Chairman of the Board of Directors Complied with
2.3 The Board of Directors is an effective and professional governing body of the Company that is able to make objective and independent judgments and make decisions in the interests of the Company and its shareholders.
2.3.1 Only persons having an impeccable business and personal reputation and the knowledge, skills, and experience required for making decisions within the purview of the Board of Directors and for the efficient performance of its functions are elected to the Board of Directors. 1. The Company’s procedure for the performance assessment of the Board of Directors also includes an evaluation of the professional qualifications of members of the Board of Directors.

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.

Complied with
2.3.2 Members of the Board of Directors are elected under a transparent procedure that enables shareholders to obtain information about the candidates which is sufficient to form an opinion about their personal and professional qualities. 1. In all cases when the agenda of a General Shareholders Meeting held in the reporting period included elections to the Board of Directors, the Company provided its shareholders with biographical details of all candidates for the Board of Directors, results of their assessment carried out by the Board of Directors (or its Nomination Committee) as well as information on whether the candidate met the independence criteria in accordance with Recommendations No. 102 - 107 of the Code and the written consent of the candidates for election to the Board of Directors. Complied with
2.3.3 The membership of the Board of Directors is well-balanced, including in terms of its members’ qualifications, experience, knowledge, and business skills, and has the shareholders’s credibility. 1. As part of the performance assessment of the Board of Directors in the reporting period, the Board of Directors analyzed its own needs for professional qualifications, experience, and business skills. Complied with
2.3.4 The number of members of the Company’s Board of Directors makes it possible to organize its work in the most efficient manner, including the opportunity to form Board Committees, and also gives the Company’s major minority shareholders an opportunity to elect a candidate to the Board of Directors in favor of whom they can vote. 1. As part of assessment of the Board of Directors carried out in the reporting period, the Board of Directors considered whether the number of its members met the needs of the Company and corresponded to the interests of its shareholders. Complied with
2.4 The Board of Directors should consist of the sufficient number of independent directors.
2.4.1 A person shall be qualified as an “Independent Director” if he or she has sufficient professional skills, experience and independence to form his/her own opinion and is able to make objective and fair judgments independently of the executive bodies of the Company, individual groups of shareholders, or other stakeholders. At the same time, it should be noted that under normal circumstances a candidate (an elected member of the Board of Directors) associated with the Company, its major shareholder, major counterparty, competitor, or the government cannot be considered independent. 1. In the reporting period, all independent members of the Board of Directors met all independence criteria specified in Recommendations No. 102-107 of the Code or were recognized as independent by the Board of Directors. Complied with
2.4.2 The Company assesses whether candidates for the Board of Directors meet the independence criteria, and a regular analysis is carried out to determine whether independent members of the Board of Directors meet the independence criteria. When carrying out the assessment, content should prevail over form. 1. In the reporting period, the Board of Directors (or the Nomination Committee) formed an opinion on the independence of each candidate nominated to the Board of Directors and provided the shareholders with the relevant statement.

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.

Complied with
2.4.3 Independent directors comprise at least one-third of the elected members of the Board of Directors. 1. Independent directors comprise at least one third of the membership of the Board of Directors. Complied with
2.4.4 Independent directors play a key role in preventing internal conflicts within the Company and in significant corporate actions taken by the Company. 1. Independent directors (who have no conflict of interest) conduct a preliminary assessment of significant corporate actions involving a potential conflict of interest and submit the results of this assessment to the Board of Directors. Complied with
2.5 The Chairman of the Board of Directors ensures that the functions assigned to the Board of Directors are performed most effectively.
2.5.1 The Board of Directors is chaired by an Independent Director, or a Senior Independent Director is elected from among the elected Independent Directors to coordinate the activities of the Independent Directors and communicate with the Chairman of the Board of Directors. 1. The Chairman of the Board of Directors is an Independent Director or a Senior Independent Director who has been selected from among Independent Directors.

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.

Complied with
2.5.2 The Chairman of the Board of Directors creates a constructive atmosphere at the meetings, facilitates an open discussion of agenda items, and supervises the implementation of the resolutions adopted by the Board of Directors. 1. The performance of the Chairman of the Board of Directors was evaluated as part of the procedure for assessing the performance of the Board of Directors in the reporting period. Complied with
2.5.3 The Chairman of the Board of Directors takes the necessary measures to ensure the members of the Board of Directors are provided in a timely manner with the information required to adopt resolutions on agenda items. 1. The duty of the Chairman of the Board of Directors to take measures to ensure the timely provision of materials on agenda items of the meeting of the Board of Directors to members of the Board of Directors is stipulated in the Company’s internal documents. Complied with
2.6 Members of the Board of Directors act in a reasonable manner and in good faith in the interests of the Company and its shareholders on the basis of sufficient information, exercising due diligence and care.
2.6.1 Members of the Board of Directors adopt resolutions taking into account all available information, with no conflict of interest, ensuring equal treatment of the Company’s shareholders, and within the limits of standard business risk. 1. The Company’s internal documents stipulate that a member of the Board of Directors shall inform the Board of Directors if there is a conflict of interest in relation to any issue on the agenda of the meeting of the Board of Directors or a Board Committee prior to the discussion of the above issue.

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.

Partially complied with Not complied with in terms of the Company’s internal documents stipulating the obligation of a member of the Board of Directors to report a conflict of interest before a discussion of the relevant agenda item has begun (clause 1, Evaluation Criteria for Compliance with the Principle of Corporate Governance).

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.

2.6.2 The rights and responsibilities of the members of the Board of Directors are clearly formulated and stipulated in the Company’s internal documents. 1. The Company has adopted and published an internal document which clearly specifies the rights and responsibilities of the members of the Board of Directors. Complied with
2.6.3 Members of the Board of Directors have sufficient time to perform their duties. 1. Individual attendance of meetings of the Board and the Committees as well as the time devoted to preparations for participation in the meetings were taken into account when performing the assessment of the Board of Directors in the reporting period.

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.

Complied with
2.6.4 All members of the Board of Directors have equal access to the Company’s documents and information. Newly elected members of the Board of Directors shall be provided with sufficient information on the Company and the work of the Board of Directors in the shortest time possible. 1. In accordance with the Company’s internal documents, members of the Board of Directors have the right to access documents and make inquiries concerning the Company and its affiliated organizations, and the Company’s executive bodies shall provide the above information and documents.

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

Complied with
2.7 Meetings of the Board of Directors, preparations for them, and participation of the members of the Board of Directors in the meetings enable the efficient work of the Board of Directors.
2.7.1 Meetings of the Board of Directors are held when necessary, given the scale of the Company’s operations and challenges facing the Company at any given time. 1. The Board of Directors held at least six meetings in the reporting year. Complied with
2.7.2 The Company’s internal documents set out a procedure for preparing for and holding meetings of the Board of Directors which ensures that the members of the Board of Directors are able to properly prepare for them. 1. The Company has approved an internal document which determines the procedure for preparing for and holding meetings of the Board of Directors and stipulates, among other things, that notification of the meeting shall be generally given at least 5 days before the date of the meeting. Complied with
2.7.3 The form of the meeting of the Board of Directors is determined taking into account the importance of the agenda items. The most important issues are addressed at face-to-face meetings. 1. The Charter or an internal document of the Company stipulates that the most important issues (according to the list given in Recommendation 168 of the Code) shall be addressed at face-to-face meetings of the Board. Not complied with These Corporate Governance Code recommendations have not yet been reflected in the Company’s internal documents.

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.

2.7.4 Resolutions concerning the most important issues of the Company’s business are adopted at the meeting of the Board of Directors by a qualified majority or by a majority of votes cast by all elected members of the Board of Directors. 1. The Company’s Charter stipulates that resolutions concerning the most important issues specified in Recommendation 170 of the Code shall be adopted at the meeting of the Board of Directors by a qualified majority comprising at least three-quarters of votes, or by a majority of votes cast by all elected members of the Board of Directors. Complied with
2.8 The Board of Directors establishes committees for the preliminary consideration of the most important issues related to the Company’s business.
2.8.1 An Audit Committee consisting of Independent Directors has been established for the preliminary consideration of any issues related to the monitoring of the Company’s financial and business operations. 1. The Board of Directors has formed an Audit Committee that consists solely of Independent 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.

Complied with
2.8.2 ARemuneration Committee consisting of Independent Directors and chaired by an Independent Director who is not the Chairman of the Board of Directors has been established for the preliminary consideration of any issues related to the establishment of the efficient and transparent remuneration practices. 1. The Board of Directors has formed aRemuneration Committee that consists solely of Independent Directors.

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.

Complied with
2.8.3 A Nomination (Appointment, HR) Committee consisting mostly of Independent Directors has been established for the preliminary consideration of any issues related to workforce planning (succession planning), professional composition and the performance of the Board of Directors. 1. The Board of Directors has established a Nomination Committee (or another committee performs its duties specified in Recommendation 186 of the Code) that consists mostly of Independent Directors.

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

Complied with
2.8.4 Given the scale of business and the risk level, the Company’s Board of Directors has made sure that the membership of its committees meets all objectives of the Company’s operations. Additional committees have been either formed or deemed unnecessary (the Strategy Committee, the Corporate Governance Committee, the Ethics Committee, the Risk Management Committee, the Budget Committee, the Health, Safety, and Environment Committee, etc.). 1. In the reporting period, the Company’s Board of Directors considered whether the membership of its committees was consistent with the duties of the Board of Directors and the objectives of the Company’s operations. Additional committees have been either formed or deemed unnecessary. Complied with
2.8.5 The membership of Committees is determined so that it enables a comprehensive discussion of issues for preliminary consideration taking into account different opinions. 1. Committees of the Board of Directors are chaired by Independent Directors.

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.

Complied with
2.8.6 Chairmen of the Committees regularly inform the Board of Directors and its Chairman on the performance of their Committees. 1. In the reporting period, the chairmen of the Committees regularly reported to the Board of Directors on the performance of their Committees. Complied with
2.9 The Board of Directors arranges a performance assessment of the Board of Directors, its committees, and members.
2.9.1 The performance assessment of the Board of Directors is aimed at evaluating the performance of the Board of Directors, its Committees, and members, determining whether their work meets the Company’s development needs, intensifying the work of the Board of Directors, and identifying opportunities for improving its performance. 1. The self-assessment or external assessment of the performance of the Board of Directors carried out in the reporting period included an assessment of the performance of its Committees, individual members, and the Board of Directors as a whole.

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.

Complied with
2.9.2 The performance assessment of the Board of Directors, its Committees, and members is carried out on a regular basis at least once a year. An external organization (consultant) is hired to perform an independent assessment of the performance of the Board of Directors at least once every three years. 1. An external organization (consultant) was hired to perform an independent evaluation of the performance of the Board of Directors at least once during the last three reporting periods. Not complied with These Corporate Governance Code recommendations have not yet been reflected in the Company’s corporate governance practices.

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.

3.1 The Company’s corporate secretary facilitates efficient ongoing communication with shareholders, coordinates the Company’s efforts aimed at protecting the shareholders’ rights and interests, and supports the efficient work of the Board of Directors.
3.1.1 The Corporate Secretary has the knowledge, expertise, and qualifications sufficient for performing his or her duties and must also have an excellent reputation and enjoy shareholders’ confidence. 1. The Company has adopted and disclosed an internal document: the Regulation on the Corporate Secretary.

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.

Complied with
3.1.2 The Corporate Secretary is sufficiently independent from the Company’s executive bodies and has the necessary powers and resources to carry out his or her tasks. 1. The Board of Directors approves the appointment and dismissal of the Corporate Secretary and his or her additional remuneration. Complied with
4.1 The amount of remuneration paid by the Company is sufficient for attracting, motivating, and retaining employees who have the competence and qualifications required by the Company. Remuneration is paid to members of the Board of Directors, executive bodies, and other key executives of the Company in accordance with the remuneration policy adopted by the Company.
4.1.1 Remuneration paid by the Company to members of the Board of Directors, executive bodies, and other key executives is sufficient to motivate them to work efficiently, thus enabling the Company to attract and retain competent and qualified specialists.

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.

1. The Company has adopted an internal document(s): a policy (policies) on the remuneration of members of the Board of Directors, executive bodies, and other key executives, which clearly defines approaches to remuneration for above individuals. Complied with
4.1.2 The Company’s remuneration policy has been developed by the Remuneration Committee and approved by the Board of Directors. The Board of Directors, supported by the Remuneration Committee, monitors the adoption and implementation of the remuneration policy at the Company and, if necessary, revises and adjusts it. 1. In the reporting period, the Remuneration Committee considered the remuneration policy (policies) and its (their) implementation and, where necessary, provided the Board of Directors with the relevant recommendations. Complied with
4.1.3 The Company’s remuneration policy includes transparent mechanisms for determining the amount of remuneration for the members of the Board of Directors, executive bodies, and other key executives of the Company; in addition, it regulates all types of payments, benefits, and privileges provided to the above individuals. 1. The remuneration policy (policies) of the Company includes (include) transparent mechanisms for determining the amount of remuneration for the members of the Board of Directors, executive bodies, and other key executives of the Company; in addition, it (they) regulates (regulate) all types of payments, benefits, and privileges provided to the above individuals. Complied with
4.1.4 The Company formulates the policy on the reimbursement of expenses (compensation), which defines the expenses to be reimbursed and the service level which may be provided to members of the Board of Directors, executive bodies, and the other key executives of the Company. This policy may form part of the Company’s remuneration policy. 1. The remuneration policy (policies) or other internal documents of the Company establishes the procedures for the reimbursement of expenses incurred by members of the Board of Directors, executive bodies, and the other key executives of the Company. Complied with
4.2 The system of remuneration for the members of the Board of Directors ensures that the directors’ financial interests are aligned with the long-term financial interests of shareholders.
4.2.1 The Company pays fixed annual remuneration to the members of the Board of Directors. The Company does not pay remuneration for participating in individual meetings of the Board of Directors or Committees of the Board of Directors. The Company does not offer short-term or additional financial incentives to the members of the Board of Directors. 1. Fixed annual remuneration was the only form of financial remuneration paid to the members of the Board of Directors for their work in the reporting period. Partially complied with The annual general shareholders meeting on June 21, 2018 approved a new version of the Regulation on the Board of Directors (unnumbered minutes dated June 21, 2018) that reflects this recommendation of the Corporate Governance Code.

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.

4.2.2 Long-term ownership of the Company’s shares is the most important factor to ensure that the financial interests of the members of the Board of Directors are aligned with the long-term interests of shareholders. Nevertheless, the rights to exercise shares are not conditioned by the achievement of certain goals, and the members of the Board of Directors do not participate in stock options plans. 1. If an internal document (documents), namely the Company’s policy (policies) on remuneration, stipulate(s) that members of the Board of Directors shall be provided with shares, clear rules regarding the ownership of shares by the members of Board of Directors, which are aimed at encouraging long-term ownership of such shares, should be introduced and disclosed. Complied with
4.2.3 The Company’s internal documents do not provide for any additional payments or compensation in the event of the early dismissal of members of the Board of Directors due to a change in control over the Company or other circumstances. 1. The Company’s internal documents do not provide for any additional payments or compensations in the event of the early dismissal of members of the Board of Directors due to a change in control over the Company or other circumstances. Complied with
4.3 The remuneration system for members of executive bodies and other key executives of the Company ensures that the remuneration is linked to the Company’s performance and reflects their personal contribution to this performance.
4.3.1 Remuneration paid to members of executive bodies and other key executives of the Company is determined in such a way as to ensure a reasonable and justified ratio of fixed components of remuneration to its variable components, which depend on the Company’s performance and an employee’s personal (individual) contribution to this performance. 1. In the reporting period, annual performance indicators approved by the Board of Directors were used to determine variable components of remuneration for members of executive bodies and other key executives of the Company.

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.

Partially complied with 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 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.

4.3.2 The Company has implemented a long-term incentive plan for members of executive bodies and other key executives involving the use of the Company’s shares (options or other derivatives for which the Company’s shares are underlying assets). 1. The Company has implemented a long-term incentive plan for members of executive bodies and other key executives involving the use of the Company’s shares (financial instruments based on the Company’s shares).

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.

Partially complied with Paragraph 2 of the criteria for assessing the principle of corporate governance is not complied with. The Board of Directors approved the long-term motivation program. The aim of the Program is to motivate management to increase the market capitalization of the Company supported by the growth of EBITDA. The program includes remuneration in the form of shares and options which are represented by annual tranches. The remuneration amount will depend on the share price. The program is designed for 5 years. There are no restrictions to sell shares received under the Program.
4.3.3 The amount of compensation (golden parachute) paid by the Company in the event of the early dismissal of members of the executive bodies or key executives at the Company’s initiative and in the absence of wrongdoing on their part does not exceed twice the size of the fixed component of annual remuneration 1. The amount of compensation (the golden parachute) paid by the Company in the event of the early dismissal of members of executive bodies or key executives at the Company’s initiative and in the absence of wrongdoing on their part did not exceed twice the size of the fixed component of annual remuneration in the reporting period. Complied with
5.1 The Company has created an effective risk management and internal control system aimed at providing reasonable assurance that the Company will achieve its goals.
5.1.1 The Board of Directors has established the principles of and approaches to organizing a risk management and internal control system at the Company. 1. The functions of the Company’s various governing bodies and divisions within the risk management and internal control system are clearly defined in internal documents/the relevant policy of the Company approved by the Board of Directors. Complied with
5.1.2 The Company’s executive bodies ensure the creation and support of an efficient risk management and internal control system at the Company. 1. The Company’s executive bodies have ensured the distribution of functions and powers in the sphere of risk management and internal control among heads of units and divisions accountable to them. Complied with
5.1.3 The risk management and internal control system of the Company gives a fair, objective, and clear picture of the current situation at the Company and its prospects and ensures the integrity and transparency of the Company’s statements. It also ensures that risks taken by the Company are reasonable and acceptable. 1. The Company has approved an anticorruption policy.

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.

Complied with
5.1.4 The Company’s Board of Directors takes the necessary measures to make sure that the Company’s risk management and internal control system is in line with the principles of and approaches to its organization formulated by the Board of Directors and that it functions efficiently. 1. In the reporting period, the Board of Directors or the Audit Committee of the Board of Directors assessed the performance of the Company’s risk management and internal control system. The key results of this assessment are included in the Company’s Annual Report. Complied with
5.2 The Company organizes internal audits in order to make an independent and systematic assessment of the reliability and performance of the risk management and internal control system and corporate governance practices.
5.2.1 To conduct an internal audit, the Company has created a separate unit or hires an independent third-party organization. The functional and administrative reporting relationships of the internal audit unit are differentiated.

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

1. To conduct an internal audit, the Company has created a separate unit responsible for internal audits which is functionally accountable to the Board of Directors or the Audit Committee, or an independent third-party organization has been hired following the same accountability principles. Complied with
5.2.2 The internal audit unit assesses the performance of the internal control system, the risk management system, and the corporate governance system.

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

1. In the reporting period, the performance of the internal control and risk management system was assessed as part of an internal audit.

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

Complied with
6.1 The Company and its operations are transparent to shareholders, investors, and other stakeholders.
6.1.1 The Company has developed and introduced an information policy that ensures effective communication between the Company, its shareholders, investors, and other stakeholders. 1. The Board of Directors has approved the Company’s information policy, which was developed taking into account the recommendations of the Code.

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.

Partially complied with Clause 1 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance not observed:

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.

6.1.2 The Company discloses information on the corporate governance system and practices, including detailed information on compliance with the principles and recommendations of the Code. 1. The Company discloses information on its corporate governance system and general corporate governance principles used by it, including disclosure on the Company’s website.

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.

Complied with
6.2 The Company discloses comprehensive, up-to-date, and accurate information about its operations in a timely manner to ensure that its shareholders and investors are able to make justified decisions.
6.2.1 The Company discloses information in accordance with the principles of regularity, consistency and promptness as well as the availability, accuracy, comprehensiveness, and comparability of the data disclosed. 1. The Company’s information policy stipulates approaches to and criteria for identifying information which may have a significant impact on the value of the Company and its securities, as well as procedures ensuring the timely disclosure of such information.

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.

Complied with
6.2.2 The Company avoids using a formal approach to information disclosure and discloses material information on its operations even if the law does not require disclosing such information. 1. In the reporting period, the Company disclosed IFRS financial statements for the six months and for the full year. The Company’s Annual Report for the reporting period includes IFRS annual financial statements and an auditor’s report.

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.

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

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.

6.2.3 As of the most important means of communication with shareholders and other stakeholders, the Annual Report contains information that allows for assessing the Company’s performance during the year. 1. The Company’s Annual Report contains information on the key aspects of its operations and its financial results.

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

Complied with
6.3 The Company provides equal and easy access to information and documents at the shareholders’ request.
6.3.1 The Company provides equal and easy access to information and documents at the shareholders’ request. 1. The Company’s information policy stipulates that shareholders must be granted easy access to information, including information on legal entities controlled by the Company, at the shareholders’ request. Partially complied with The Corporate Governance Code recommendations concerning the provision to shareholders of information on legal entities controlled by the Company 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 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.

6.3.2 When the Company provides information to shareholders, a reasonable balance is maintained between the interests of individual shareholders and those of the Company since the Company is interested in maintaining the confidentiality of important commercial information which may have a material effect on its competitiveness. 1. In the reporting period, the Company did not reject shareholders’ requests for information, or, if it did, it gave reasons for the refusal to provide information.

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.

Complied with
7.1 Actions that have or may have a substantial impact on the Company’s share capital structure and financial position and, accordingly, on the shareholders’ position (significant corporate actions) are taken on fair terms securing the rights and interests of the shareholders and other stakeholders.
7.1.1 Significant corporate actions include the reorganization of the Company, the 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, the listing and delisting of the Company’s shares as well as other actions that may result in a significant change in shareholders’ rights or a violation of their interests.

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.

1. The Company’s Charter provides a list of transactions or other actions constituting significant corporate actions and establishes criteria for their definition. Making decisions about significant corporate actions is within the competence of the Board of Directors. In cases when legislation specifically states that the exercising of corporate actions falls within the purview of the General Shareholders Meeting, the Board of Directors provides the shareholders with the relevant recommendations.

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.

Partially complied with Clause 1 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance partially not complied with.

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.

7.1.2 The Board of Directors plays a key role in making decisions or recommendations with regard to significant corporate actions; the Board of Directors relies on the opinion of the Company’s Independent Directors. 1. The Company has established a procedure whereby Independent Directors express their opinions on significant corporate actions before their approval. Complied with
7.1.3 When taking significant corporate actions that affect the rights and legitimate interests of shareholders, equal conditions are provided for all shareholders of the Company, and if statutory mechanisms aimed at protecting shareholders prove to be insufficient, additional measures are taken to protect the rights and legitimate interests of the Company’s shareholders. At the same time, the Company is guided not only by compliance with the formal requirements of the law but also by the corporate governance principles set out in the Code. 1. Given the nature of the Company’s operations, the minimum criteria established by the Company’s Charter for classifying the Company’s transactions as significant corporate actions are lower than those established by law.

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

Complied with
7.2 The Company ensures that significant corporate actions are taken in a manner that enables the shareholders to receive full information on such actions, provides them with an opportunity to influence such actions, and guarantees that their rights are observed and properly protected when such actions are taken.
7.2.1 Information on significant corporate actions is disclosed, and an explanation of the reasons, conditions, and consequences of such actions is provided. 1. During the reporting period, the Company promptly and thoroughly disclosed information on its significant corporate actions, including the rationale and timing of such actions. Complied with
7.2.2 The rules and procedures for the implementation of significant corporate actions are set forth in the Company’s internal documents. 1. The Company’s internal documents establish the procedure for hiring an independent appraiser to carry out a valuation of the property sold or acquired in a major transaction or a related-party transaction.

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.

Partially complied with Clauses 1 and 2 of the Evaluation Criteria for Compliance with the Principle of Corporate Governance partially complied with:

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.