General Meeting of Shareholders

General Meeting of Shareholders – supreme management body of MTS PJSC Procedure for holding the General Meeting of Shareholders is aimed at ensuring adherence to the rights of shareholders and meets all the requirements of the legislation of the Russian Federation. Procedure for the preparation, convocation, holding and summarizing of results of the General Meeting of Shareholders is determined by the Charter and the Regulations on the General Meeting of Shareholders of MTS PJSC.

The shareholders take part in governance over the Company and significantly impact its priority areas of the business development by making decisions at the General Meeting of the Company’s Shareholders. The powers of the General Meeting of Shareholders encompass the approval of an annual report and accounting statements, distribution of profit, including payment of dividends, election of key management and control bodies of the Company, decision-making concerning the Company reorganization and a number of other important matters.

Notifying the Shareholders on Holding of the General Meeting of Shareholders

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

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

Within the framework of preparation to the General Meeting of MTS Shareholders, the shareholders get the opportunity to ask members of the executive bodies and the Board of Directors on the items on the agenda of the General Meeting of Shareholders, as well as to voice their opinion on the items on the agenda of the meeting by sending e-mails to: shareholder@mts.ru. Materials on the agenda of the meeting are posted on a special page of the website dedicated to the Annual General Meeting of Shareholders.

Holding of the General Meeting of Shareholders

Shareholders may implement their voting right by ways most simple and convenient for them without any encumbrance. Voting at the General Meetings of Shareholders is carried out by direct participation in the meeting or by filling out and sending to the Company (as well as its registrar) ballots on agenda items or by filling out voting e-ballots on the MTS website at: www.mts.ru/shareholder/ via electronic services.

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

Results of the 2023 Annual General Meeting of Shareholders

The Annual General Meeting of Shareholders of MTS PJSC was held on June 18, 2023 in absentia using the Registry-Online e-voting services by Reestr JSC. At the annual General Meeting of Shareholders, 84.5% of those participating in the meeting voted electronically.

Board of Directors

The Board of Directors is a key element of the MTS PJSC corporate governance system representing the interests of its shareholders through efficient management organization.

Establishment procedure, status, composition, functions, goals and objectives, powers of the Board of Directors, the procedure for its operation and interaction with other management bodies of the company are set forth in the provisions of the legislation of the Russian Federation, the Charter, the Regulations on the Board of Directors of MTS PJSC¹, as well as taking into account the recommendations of the Corporate Governance Code of the Bank of Russia.

¹ Regulations on the Board of Directors of MTS PJSC.

Basic functions of the Board of Directors:

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

Composition of the Board of Directors

The composition of the Board of Directors is formed in accordance with the interests of shareholders, taking into account the balance of professional qualifications, experience and business skills of its members. The issues related to the needs of the Board of Directors in the area of professional qualification, background and business skills of its members, as well as to the numerical composition, were considered within the procedure for assessing the Board of Directors’ performance². The present members of the Board of Directors of MTS PJSC were elected at the annual General Meeting of Shareholders of MTS PJSC on June 18, 2023.

² See more in the “Assessment of Performance of the Board of Directors” section.

Over recent years, the majority of seats on the Board of Directors of MTS have been occupied by independent directors. The Board of Directors is well-balanced both in terms of numerical composition and in terms of experience and qualification of its members.

¹ Data as of December 31, 2023 (as of December 20, 2023 — for the Special Committee on FinTech).

Chairman of the Board of Directors

The Chairman of the Board of Directors of MTS PJSC ensures the growth of shareholder value and maintains a balance between short-term financial results and long-term strategic positioning of the business. The key task of the Chairman of the Board of Directors is to create a dynamic and positive environment in the Board of Directors, where each member can show their best qualities.

By a unanimous decision of the MTS Board of Directors, a non-executive director was elected Chairman of the Board of Directors of MTS PJSC on June 22, 2023, and an independent director was elected Deputy Chairman of the Board of Directors.

The Deputy Chairman of the Board of Directors actually performs the functions of the senior independent director provided for by the Corporate Governance Code. He/she coordinates the work of independent directors and builds interaction between independent directors and the Chairman of the MTS Board of Directors.

Independent Directors

Independent directors ensure a reasonable balance of interests of all the parties concerned: the Company itself, its shareholders and other stakeholders. Criteria of independence of the members of the Board of Directors are defined in the Regulations on the Board of Directors of MTS PJSC and correspond to advanced international corporate governance practices.

Since 2020, independent directors make up more than a half of the numerical composition of the Board of Directors.

The Board of Directors includes two independent female directors.

According to the internal requirements of MTS, the Company has to have at least one member of the Board of Directors (in the Audit Committee) with expertise in accounting or relevant financial management experience (financial expert). The Audit Committee of the Board of Directors is headed by an independent director with a “financial expert” status, who has experience and knowledge in preparation, analysis, evaluation and audit of financial reporting. The “financial expert” status was also assigned to another committee member. Thus, two out of three members of the Audit Committee have the “financial expert” status.

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

Independent directors are actively involved in preliminary discussions of interested-party transactions that are major to the Company. The Company also introduced a practice of preliminary review of a number of interested-party transactions at the meetings of the Audit Committee of the Board of Directors consisting only of independent directors.

Independent directors are professional managers, whose experience and knowledge make a significant contribution to the development of the corporate governance system of the Company.

Informing Newly Elected Members of the Board of Directors and the Committees of the Board of Directors about the Company Operation

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

As part of the orientation course, meetings are held with the President and key representatives of senior management of MTS, where members of the Board of Directors can receive any information they need for work.

Role of the Board of Directors in the Organization of an Efficient Risk Management and Internal Control System¹

Within its competences, the Board of Directors is responsible for monitoring the efficiency of the structure and functioning of the Company’s systems for risk management, compliance and internal control; it reviews and approves the reports of the Audit Committee on the work of internal audit, business ethics, compliance and risk management units and the internal control system, as well as reports on risk management in MTS Group and reports on the development of the Unified Compliance System, reports on the development of the anti-corruption compliance system at MTS PJSC and its subsidiaries twice a year.

An efficient risk management, compliance and internal control system is in place in the Company designed to ensure a reasonable level of confidence in the Company achieving its goals.

¹ See “Risk Management” section for details.

Organization of Activities of the Board of Directors

At least six in-person meetings shall be conducted each year in accordance with the approved plan of meetings of the Board of Directors. If necessary, it is possible to participate in a joint meeting through video conferencing. Extraordinary meetings are convened to make decisions on urgent matters. Issues that have been previously thoroughly worked out and with regard to which members of the Board of Directors do not have significant comments are brought up at the meetings in the form of absentee voting.

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

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

In-person meetings of the Board of Directors are held in the Moscow headquarters. The first meeting of the newly elected composition of the Board of Directors shall be held in person, on the day of the General Meeting of Shareholders or within several business days after the election of the Board of Directors in a new composition, at which a decision on the election of the Board of Directors is made. The Company also uses remote forms of communication.

Corporate Secretary

The Corporate Secretary ensures efficient operation of the Board of Directors, interaction with the shareholders, coordinates the Company’s activities aimed at protection of rights and interests of the shareholders.

The functions of the Corporate Secretary in MTS PJSC are performed by the Corporate Governance Department acting on the basis of the Regulations on the Corporate Governance Department. The Corporate Governance Department is headed by the Corporate Governance Director, who is appointed and dismissed by the President of the Company in agreement with the Board of Directors of the Company.

The functions of the Corporate Governance Department include ensuring efficient ongoing interaction with shareholders, coordinating the Company’s actions aimed at protection of rights and interests of shareholders, as well as supporting the efficient operation of the Company’s Board of Directors.

Secretary of the Board of Directors

The Secretary of the Board of Directors ensures compliance of the Company’s management bodies with the requirements of legislation and internal regulations of the Company which guarantee the enforcement of rights and interests of its shareholders. The Secretary of the Board of Directors performs its functions in accordance with the Charter and Regulations on the Board of Directors of MTS PJSC.

The functions of the Secretary of the Board of Directors include:

• inter alia,
• induction of newly elected members of the Board of Directors,
• notification of members of the Board of Directors and invited persons about upcoming meetings,
• provision of materials on the agenda items and additional information,
• counting voting results,
• keeping minutes of meetings,
• control over execution of decisions of the Board of Directors,
• communication, organizational and other functions.

Report on Activities of the Board of Directors

Examples of Major Issues Reviewed by the Board of Directors of MTS PJSC in 2023

• MTS Group strategy for 2024–2026.
• Status of transformation of MTS PJSC.
• Status of transformation of corporate culture of MTS PJSC.
• Management structure of MTS Group companies.
• Results of assessment of MTS Group compliance culture in 2023, the mitigating action plan for 2024; implementation of the mitigating action plan based on the results of assessment of compliance culture at MTS Group in 2022.
• MTS PJSC initiatives in the field of hiring people with special needs.
• Development of key B2C products of the MTS ecosystem.
• Development of artificial intelligence.
• Status of AI/DeepTech investment projects — startups in 2022.

Assessment of Performance of the Board of Directors

The Assessment Methodology defines the approach to assessment aimed to improve the performance of the Board of Directors, its committees, members of the Board of Directors, as well as to enhance the quality of corporate governance at MTS in general. The assessment is carried out on a regular basis (annually) and can be conducted both independently (by questionnaire method) and with the involvement of an independent advisor.

Assessment objects:

• activities of the Board of Directors;
• activities of committees of the Board of Directors;
• activities of each member of the Board of Directors and committees, including their chairmen;
• activities of the Corporate Secretary.

Objectives of the third party assessment of the activities of the Board of Directors in 2023:

• determine strengths and weaknesses of the current Board of Directors and its committees;
• determine the degree of balance in the composition of the Board of Directors;
• determine the need to adjust the plans and methods of work of the Board of Directors and committees;
• assess the succession planning process for the Board of Directors and determine the need to change the process;
• assess the communication process between the Board of Directors and its committees, between the Board of Directors and management;
• determine areas for optimizing the activities of committees of the Board of Directors;
• compare the practices of the Board of Directors with the best international and (or) Russian practices;
• determine demands by areas for training (advanced training).

Results of the third party assessment of the activities of the Board of Directors in 2023

In 2023, MTS assessed the activities of the Board of Directors with the involvement of an independent advisor (third party assessment). All acting members of the Board of Directors of MTS and 12 representatives of the management and members of the committees of the Board of Directors of MTS took part in the assessment.

Within the third party assessment, participant observations of two committees of the MTS Board of Directors (Audit Committee and ESG Committee) were carried out.

The report on the results of the assessment of the activities of the Board of Directors of MTS was approved at a meeting of the Board of Directors. The results of the third party assessment and recommendations of the independent advisor were taken into account by the Board and management of MTS and are used to develop activities aimed at improving operations of the Board of Directors and its committees.

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

Liability Insurance

The sum insured under the liability insurance contract for members of the Boards of Directors, officials of MTS and MTS Group companies (hereinafter referred to as the “Insurance Contract”) shall be USD 50 million.

The Insurance Contract allows to ensure protection of members of the Board of Directors, Management Board and management of MTS PJSC and MTS PJSC subsidiaries and provide coverage for indemnification of executive officers, in connection with actions or claims submitted against them or their persecution by authorized state authorities for their actions/omission while they exercise office duties in the office held, namely:

• reimbursement of expenses of executive officers for lawyers and legal protection in connection with the above actions or claims;
• indemnification of damages caused to plaintiffs by inadvertent actions/omission of executive officers (in the event that the action is satisfied by court);
• indemnification of damages of MTS PJSC and subsidiaries of MTS PJSC for security-related claims.

Committees of the Board of Directors

Committees of the Board of Directors perform preliminary study of issues before they are submitted to the meeting of the Board of Directors. The committee members thoroughly study an issue and propose elaborated alternative decisions to the members of the Board of Directors, making it possible for them to join the discussion of the issue more promptly.

Powers of and requirements to compositions of the committees shall be determined by Regulations on the Committees approved by the Board of Directors. The committees may involve third party experts and advisors in order to execute their objectives. The results of reviews of agenda items by the Committees are communicated to the Board of Directors members prior to every meeting of the Board of Directors.

Each member of the Board of Directors is also a member of one to nine committees. Representation of the Company’s managers in the committees allows for a meaningful dialog during committee meetings.

¹ Data as of December 31, 2023 (as of December 20, 2023 — for the Special Committee on FinTech).

Audit Committee

The Audit Committee assists in efficient implementation of functions of the Board of Directors in terms of control over financial and economic activities of the Company.

In their activities, the Committee members are guided by the applicable legislation, the Charter and the internal documents of the Company, the Corporate Governance Code¹, the Code of Business Conduct and Ethics of MTS PJSC, decisions of the Company’s management bodies, as well as the Regulations on the Audit Committee.

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

Key functions of the Committee:

• oversight of completeness, accuracy, and objectivity of the MTS Group’s financial statements;
• review and analysis, together with management and an external auditor, of the Group’s annual financial statements, interim financial information and relevant documents submitted to the Central Bank of the Russian Federation and other regulatory authorities;
• review of reports on financial and operational performance of MTS Group before issuing press releases;
• monitoring of the efficiency of risk management, internal control system and corporate governance of MTS Group;
• assessment of the performance of procedures used by MTS Group to identify the principal risks and appropriate control procedures in order to determine their adequacy and efficiency;
• review, together with the management, internal auditor and external auditor, of any cases of law violation, fraud and significant deficiencies in internal control and risks management procedures;
• supervision of updating, bringing the Code of Business Conduct and Ethics of MTS PJSC (hereinafter referred to as the “Code”) to the persons covered by the Code;
• review of the measures taken by the management of MTS PJSC to increase the level of corporate, compliance and risk culture, awareness of those covered by the Code about the Code requirements and the consequences of its violation;
• review of proposed measures to resolve the conflict of interests of members of the management bodies of MTS PJSC;
• ensuring independence and objectivity of the internal audit function;
• review and approval of the internal audit policy, the internal audit strategy, the annual audit plan and the main changes made to the plan during the calendar year;
• review, together with the Internal Audit Director, and approval of the internal audit resource plan, budget and KPIs;
• assessment of efficiency of internal audit activities and the implementation of KPIs;
• assessment of the Group’s external auditors’ independence, objectivity, and lack of conflict of interest, including the assessment of candidates for the Group auditors, submission of recommendations on the appointment, re-appointment and discharge of the external auditors of the Group, remuneration for their services and contractual terms;
• supervision of the external audit and assessment of the quality of the audit and audit reports;
• supervision of compliance with the Group’s procedures setting the principles of provision and combination of audit and non-audit services by the auditor;
• supervision of the efficiency of the reporting system on potential cases of fraud committed by the Group’s employees (including violation of anti-corruption policy, unfair use of insider and confidential information) and by third parties, as well as on other violations in the Group;
• review of reports on the work of the MTS Group Unified Hotline, as well as the results of internal audits and investigations held.

Number of Members

There were no changes in the composition of the Committee during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, 22 Committee meetings were held: 18 in-person meetings and 4 meetings in the form of absentee voting.

Besides, the Committee members held meetings with financial executives of the Company and managers responsible for the risk management, internal control system, internal audit, business ethics and compliance, as well as with external consultant of the Company on a number of issues.

Recommendations to the Board of Directors

The Audit Committee provided recommendations to the Board of Directors regarding the review and approval of the following issues:

• restated Regulations on the Audit Committee of the Board of Directors of MTS PJSC;
• restated Policy “Internal Audit of MTS PJSC”;
• report on implementation of the corporate anti-corruption compliance program of MTS PJSC and subsidiaries for 2023;
• plan and results of assessment of MTS Group compliance culture in 2023, the mitigating action plan for 2024; report on implementation of the mitigating action plan based on the results of assessment of compliance culture at MTS Group in 2022;
• risk management and key risk dashboard reports of MTS PJSC for the first six months of the year and for 2023 and assessment of the risk management performance of MTS Group in 2023;
• nominations of the auditor and remuneration of Business Solutions and Technologies JSC for audit services in 2023;
• major transactions and M&A transactions, with interest falling within the competence of review by the Board of Directors.

Key Areas of the Audit Committee Activities and Issues Reviewed in 2023

In the field of financial reporting

During 2023, the Audit Committee reviewed the interim financial information of MTS Group for Q1, Q2, Q3 of 2023 in order to determine the completeness, consistency of information and presentation of reasonable assessment of financial standing, performance indicators and prospects of MTS Group.

The consolidated financial statements of MTS Group for 2023 prepared in accordance with the international financial reporting standards and the accounting statements of MTS PJSC for 2023 prepared in accordance with the Russian accounting and reporting standards were reviewed; an analysis of the audit results was carried out together with the management and the external auditor.

The reports on the financial and operating performance of MTS Group for Q1, Q2, Q3 and 2023 as a whole were reviewed and recommended for subsequent disclosure.

In the field of risk management, internal control and corporate governance system

During 2023, the Committee reviewed the 20-F report for 2023, the reports on risk management at MTS PJSC and dashboards for key strategic risks of MTS Group for the first six months of the year and for 2023. The Audit Committee gave a positive assessment of the work of MTS Group in the field of risk management in 2023.

During 2023, the Committee controlled compliance with the procedures providing for the MTS Group’s compliance with the requirements of Sarbanes-Oxley Act. Plan for 2023 and performance results of the Internal Control Systems Department for the first six months of the year and for 2023 as a whole were reviewed, including the results of testing and certification of the internal control system for reliability of the financial statements of MTS Group. The Committee gave a positive assessment of the unit performance results.

The Committee took note of the results of assessment of the internal control system efficiency, risk management processes and corporate governance of MTS Group as of December 31, 2023, carried out by internal audit.

During 2023, the Committee conducted a preliminary review of MTS PJSC transactions with related parties, including materials on upcoming mergers and acquisitions, as well as subsequent review of transactions with related parties in accordance with the procedure described in the Regulations on the Audit Committee. The results of analysis of economic feasibility and compliance with the requirements of the regulations when making such transactions carried out by the internal audit of MTS PJSC and its major subsidiaries, were discussed and taken into account.

In 2023, the Audit Committee carried out follow-up quarterly reviews of transactions related to investing in startups (including purchase, sale and change in ownership interest) made during the reporting quarter.

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

The Audit Committee considered the report on developing the Unified Compliance System of MTS PJSC for 2023.

The Committee reviewed the plan for 2023, strategy for developing the corporate anti-corruption compliance program of MTS PJSC and subsidiaries, as well as reports on the program implementation based on the results of the first six months of the year and for 2023 as a whole. The Audit Committee gave a positive assessment of the activities in the field of business ethics and compliance; the key performance indicators and goals in the field of business ethics and compliance for 2023 were achieved with the expected results.

In December 2023, the Committee reviewed the development strategy for the corporate anti-corruption compliance program until 2025 and plans for 2024 at MTS PJSC and its subsidiaries.

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

In the field of internal audit

The Committee approved the internal audit strategy, audit plan, KPIs and budget for 2023, as well as took into account the 2023 audit plans compiled by the internal audit units of major subsidiaries.

During the year, the internal audit made changes to the 2023 audit plan and, due to the reassessment of risks, the Committee reviewed and approved the revised audit plan.

The Audit Committee reviewed quarterly reports on the status of introduction of audit recommendations and elimination of deficiencies detected by internal audit at MTS PJSC and its subsidiaries.

During 2023, the Audit Committee reviewed and approved reports on the results of activities of the internal audit of MTS PJSC and its subsidiaries for the first six months of the year, Q3 and for 2023 as a whole.

The Audit Committee positively assesses the work of the internal audit and believes that the internal audit function is efficient and that key performance indicators and internal audit goals for 2023 have been fully achieved.

In December 2023, the Committee reviewed and approved the internal audit strategy, audit plan, KPIs and budget for 2024, as well as took into account the 2024 audit plans compiled by the internal audit units of major subsidiaries.

In the field of external audit

The Audit Committee recommended Business Solutions and Technologies JSC as the auditor of financial statements of MTS PJSC for 2023, which was confirmed by the recommendation of the Board of Directors and by the Company shareholders at the Annual General Meeting of Shareholders in June 2023. The Committee previously approved and recommended that the Board of Directors approve remuneration of the auditor.

The Audit Committee discussed and took into account the results and conclusions of the external auditor based on the review of quarterly overviews of MTS Group financial information for Q1, Q2 and Q3 of 2023 and the annual audit, including conclusions on the efficiency of the system of internal control over the preparation of financial statements at MTS Group.

At year-end 2023, the Committee gave a positive assessment of the quality of the audit and the audit reports based on the results of the audit of MTS PJSC accounting statements for 2023 prepared in accordance with the Russian accounting standards, and consolidated financial statements of MTS PJSC and its subsidiaries for 2023 prepared in accordance with the international financial reporting standards.

The Committee supervised the external auditor’s compliance with the principles of independence. During 2023, the Committee considered information on permissible auditing and non-auditing services, which was provided by the external auditor, and discussed with the auditor a possible services’ impact on the independence of the auditor. Permissible auditing and non-auditing services were preliminarily approved by the Committee pursuant to the procedure described in the Regulations on the Audit Committee.

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

During the year, the Audit Committee reviewed the results of internal investigations. The Committee reviewed the results of the work of the Unified Hotline of MTS Group of Companies for the first six months of the year and for 2023 as a whole, as well as initiatives to improve the administration process of the Unified Hotline of MTS Group of Companies.

In December 2023, the Audit Committee approved the work plan for the calendar year 2024.

Remuneration & Nomination Committee

The Remuneration & Nomination Committee is an auxiliary collective deliberative body under the Board of Directors. Main goals of the Committee: formulation of HR policy of the Company, determination of the system for remuneration of chief officers of the Company, generation of the strategy for developing corporate culture at MTS Group.

The Committee members follow the best global practices and trends in generating efficient solutions within the terms of their competence.

In its activities the Committee follows the recommendations and requirements of the applicable legislation, the Charter and internal documents of the Company, the Code of Ethics and Business Conduct, decisions of management bodies of the Company, as well as Regulations on the Committee.

Objectives

• Development and updating of the HR Policy of MTS PJSC, preparation of a succession pool for the positions of chief officers.
• Drawing up of proposals on candidates and on the determination of significant conditions for remuneration of the chief officers, as well as of proposals on an early termination of office.
• Assessment of performance of the Company’s President and Management Board members, direct subordinates to the Company’s President for the reporting period and preparation of proposals on their reappointment and appointment of the Corporate Secretary.
• Development and submission for review by the Board of Directors of internal documents related to the implementation of the Company’s options program.
• Control over meeting the requirements of the applicable legislation, Charter of MTS PJSC and internal regulatory acts of MTS PJSC as to compliance with the Company’s HR Policy, standards and procedures in the sphere of remuneration and nomination.
• Determination of methods and assessment of performance of the Board of Directors of the Company.
• The Committee preliminarily addresses the issues reviewed at meetings of the Company’s Board of Directors in the sphere of appointment and remuneration of senior managers of the Company.

Main Areas of Activities of the Remuneration & Nomination Committee in 2023

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

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

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

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

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

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

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

Issues related to HR Policy and remuneration strategy of the Company

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

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

Assessment of the Board of Directors and Committees of the Board of Directors

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

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

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

Number of Members

The composition of the Committee was changed during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, 16 Committee meetings were held: 12 in-person meetings and 4 meetings in the form of absentee voting.

The Committee gave the following recommendations to the Board of Directors

Concerning all of the issues reviewed, the Committee provided recommendations for appropriate decisions in accordance with the best global practices, the current business environment and the development strategy of the Company.

2023 Performance

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

The key topics for discussion at the Committee meetings were the issues of succession of members of the Board of Directors and the President of MTS PJSC, updating of the MTS management long-term incentive program, as well as the issues of appointing internal and external nominees for the positions of key Company managers.

ESG Committee (Committee for Corporate Governance and Environmental & Social Responsibility)

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

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

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

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

Number of Members

The composition of the Committee was changed during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, 10 in-person meetings were held, including joint meetings of the ESG Committee and the Remuneration & Nomination Committee.

Issues Reviewed

• Updating and developing the ESG approach at MTS.
• Statuses of developing the ESG agenda in MTS subsidiaries and affiliates.
• Status and measures for energy efficiency management.
• Status and measures to manage greenhouse gases and reduce the carbon footprint of MTS.
• Results of assessing the level of compliance culture at MTS Group.
• Status of development of the anti-corruption compliance system at MTS.
• ESG reporting: sustainability report.
• Procedural issues within the annual assessment of the Board of Directors.
• On the effectiveness of information interaction of MTS PJSC, shareholders, investors and other interested parties.
• Preliminary consideration of draft internal documents of the Company approved by the Board of Directors and the General Meeting of Shareholders of the Company in 2023.

Strategy Committee

The Committee prepares recommendations to the Board of Directors upon review of the general strategy issues of MTS Group, strategic development of key functions, projects and the Company in general, as well as the implementation of M&A transactions and investment projects.

Number of Members

The composition of the Committee was changed during the reporting year.

The composition of the Committee was approved on June 22, 2023.

Meetings

In the reporting year, 15 in-person meetings were held.

Issues Reviewed

• MTS Group Strategy for 2024–2026.
• Strategies for business verticals and key functional horizontals.
• Distribution of profits (payment of dividends) of MTS PJSC.
• Approval of the MTS Group budget for 2024.
• Reports on the current budget execution progress.
• On acquisition and sale of assets.
• On reorganization of MTS PJSC in the form of acquisition and spin off of its subsidiaries.

The Committee gave the following recommendations to the Board of Directors and management of the Company regarding:

• finalizing and approving the strategy of MTS Group for 2024–2026;
• finalizing business vertical strategies;
• paying dividends by MTS PJSC;
• approving transactions;
• approving the MTS Group budget for 2024.

Special Committee for Compliance Matters

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

Number of Members

There were no changes to the composition of the Committee during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, 4 in-person Committee meetings and 1 meeting in absentia were held.

Issues Reviewed

In 2023, the work of the Special Committee for Compliance Matters was focused on promoting the efficient improvement of the compliance program at MTS in accordance with the best Russian and international practices, including with the participation of the parties independent of the Company, as well as on ensuring sustainability and efficiency of the compliance system in the future.

Recommendations to the Board of Directors of the Company

The Committee issued a recommendation to continue supporting and developing the corporate anti-corruption compliance program at MTS Group.

2023 Performance

In the reporting year, the Committee considered the issues related to the measures taken by the Company to improve the compliance program and supervision in this area.

Special Committee for Cloud & Infrastructure Asset Development

The Committee was established to develop recommendations for developing cloud and infrastructure assets transferred to MWS JSC within the reorganization of MTS PJSC.

Number of Members

The composition of the Committee was changed during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, 5 in-person Committee meetings were held.

Issues Reviewed

In 2023, the work of the Special Committee for Cloud & Infrastructure Asset Development was focused on ensuring the growth of the efficiency of the technological and IT infrastructure of MWS JSC, assistance in building the Company as a leading provider of digital infrastructure technologies and cloud solutions in the market of cloud and IT infrastructure services.

Recommendations to the Board of Directors of the Company

• The Committee gave recommendations within the current competence.

2023 Performance

In the reporting year, the Committee reviewed the issues related to cloud and infrastructure asset development measures implemented by the Company.

Special Committee for FinTech

The Special Committee for FinTech was created to elaborate recommendations for developing FinTech in MTS Group.

Number of Members

The composition of the Committee was changed during the reporting year.

At a meeting of the Board of Directors held on June 22, 2023, the personal composition of the Committee was approved. Changes in the personal compositions were approved by making a decision dated November 23, 2023. As decided by the Board of Directors on December 21, 2023, the powers of the Committee were terminated.

Meetings

In the reporting year, 5 in-person Committee meetings were held.

Issues Reviewed

In 2023, the Committee reviewed reports on individual issues in the field of internal controls and compliance procedures related to FinTech in MTS Group.

Recommendations to the Board of Directors of the Company

The Committee issued a recommendation to terminate the powers of the Special Committee for FinTech of the Board of Directors of MTS PJSC due to achieving the objectives assigned to it.

2023 Performance

In the reporting year, the Committee reviewed the issues related to the ongoing improvements in the field of compliance, internal controls and corporate governance related to FinTech in MTS Group.

Special Committee

The Committee was created to ensure compliance with the conditions of the planned major material transactions that potentially affect the activities of MTS Group and the ecosystem development.

Number of Members

The composition of the Committee was changed during the reporting year.

The composition of the Committee was approved at the meeting of the Board of Directors on June 22, 2023.

Meetings

In the reporting year, one in-person Committee meeting was held.

Issues Reviewed

In 2023, the Special Committee reviewed the issues of analyzing the terms of transactions and the risks associated therewith, developing an opinion on the feasibility of making transactions.

2023 Performance

In the reporting year, the Committee reviewed the issues related to ensuring compliance of the terms of transactions with fair market conditions, prepared recommendations to the Board of Directors on the issues related to the implementation of transactions.

Remuneration for Members of the Board of Directors

The procedure and terms of paying remuneration to the members of the Board of Directors of MTS PJSC are determined in accordance with the Regulations on Remunerations and Compensations Payable to Members of the Board of Directors of MTS PJSC.

MTS pays remuneration to directors (including independent directors) who are not employees (including members of executive bodies) of MTS Group companies. Compensation for overhead expenses is made to all directors based on actual and documented target expenses.

Remuneration Paid to Members of the Board of Directors in 2023

Indicator name	Amount, RUB
Remuneration for participation in operations of the management body	205,013,285.73
Reimbursement of expenses	0
TOTAL	205,013,285.73

Remuneration components:

¹ Mandatory committees: Audit Committee, Remuneration & Nomination Committee, ESG Committee, Strategy Committee.

² Special committees: Special Committee for Compliance Matters, Special Project Committee for Co-locating Employees, Special Committee for Cloud & Infrastructure Asset Development, Special Committee.

³ Herewith, should any restrictions on operations (transactions) with shares be introduced in accordance with the legislation of the Russian Federation or the applicable legislation of a foreign country or international instruments, the specified remuneration would be replaced by remuneration in cash. The amount of the specified remuneration is USD 100,000 or the equivalent of the specified amount in another currency, see clauses 6.7, 7.1 of the Regulations on Remunerations and Compensations Payable to Members of the Board of Directors of MTS PJSC for details.

President and Management Board of MTS

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

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

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

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

Powers of the executive bodies:

• organize the Company’s activities and bear liability for the results of these activities, ensure the enforcement of decisions made by the General Meetings of Shareholders and by the Board of Directors;
• assure establishment and maintenance of operation of the efficient risk management and internal control system at the Company, bear liability for implementation of decisions made by the Board of Directors in terms of organization of the risk management and internal control system;
• bear liability for the efficient economic, financial, scientific and technical and social policies of the Company.

The Board of Directors is entitled at any time to decide on the early termination of the President’s powers, as well as on the termination of the powers of an individual member of the Management Board or all members of the Management Board, as well as on establishment of new executive bodies.

Meetings of the Management Board

In 2023, 34 in-person meetings were held.

Remuneration for Members of the Management Board and Senior Executives at Year-End 2023

Principles of Remuneration for Members of the Management Board and Senior Executives

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

Remuneration of senior executives is fixed and calculated based on the Policy for Payment of Labor of Employees at MTS PJSC and meets the following principles:

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

The system of remuneration to senior executives includes elements of basic remuneration and variable bonus part:

• basic remuneration — monthly official salary;
• the variable part of remuneration is determined by the results of the Company’s business in the reporting period in accordance with the Company’s internal regulations and approved by the Company’s Board of Directors and consists of the following:
  • short-term incentive system — an annual bonus paid for achievement of ecosystem and functional key performance indicators (KPIs) determined by the Board of Directors for the corresponding reporting period. Also, a compliance trigger and an additional condition for meeting the OIBDA indicator are applied to the bonus;
  • long-term material incentive program aimed at increasing the Company’s shareholder value, acceleration of its capitalization growth, as well as preserving long-term labor and corporate relations between the Company and its management.

MTS PJSC Business Key Performance Indicators System

Ecosystem indicators are formed on the basis of the Company’s business plan and include the main financial and economic, industrial and strategic indicators. They reflect the general corporate responsibility for the results of the MTS Group business and make it possible to track the generalized results of the Company’s business and adjust the strategy.

Functional indicators are formed on the basis of business blocks strategies and strategic objectives of a specific director of the Company.

The list of indicators for the Company’s directors is approved by the Board of Directors of the Company with preliminary discussion at the relevant committees on an annual basis.

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

• revenue;
• ecosystem indicators;
• integral assessment of the implementation of strategic projects and business development;
• transformation indicators.

Structure of Remuneration for Senior Management in 2023

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

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

Assessment of Performance of the President and Members of the Management Board

One of the tasks of the Board of Directors is to assure control of operation of the President and members of the Management Board, as well as to assess their performance which is carried out based on the materials approved by the Remuneration & Nomination Committee.

The assessment of the President and members of the Management Board for 2023 was performed in accordance with an existing method based on fulfilment of key performance indicators of the Company in general and functional KPIs.

Remuneration Paid to Members of the Management Board in 2023

Indicator name	Amount, RUB
Salary	298,068,242
Bonuses	1,640,752,669
Reimbursement of expenses	53,883,959
Other remuneration types	3,807,438
TOTAL	1,996,512,308

Remuneration Paid to Senior Executives in 2023¹

Indicator name	Amount, RUB
Salary	393,513,909
Bonuses	1,866,741,530
Reimbursement of expenses	69,654,293
Other remuneration types	4,635,074
TOTAL	2,334,544,805

¹ Includes information on remuneration of 30 senior executives of the Company (including members of the Management Board).

Control and Audit

Internal Control System

The internal control system of MTS PJSC is implemented at all management levels on the basis of internal policies, regulations, procedures and methods of internal control and risk management. The functioning of the internal control system provides reasonable confidence in the achievement of the Companyʼs goals, as well as controls financial and economic activities of the Company in order to increase its efficiency.

The Board of Directors of MTS PJSC determines the policy in respect to internal control and audit and reviews the report of the Audit Committee following the performance of the internal audit, risk management, business ethics, compliance and internal control functions of MTS PJSC twice a year, analyzing the existing control system and the violations detected.

The Report of the Auditing Commission is annually attached to the materials of the annual General Meeting of Shareholders of MTS PJSC.

For a comprehensive, independent assessment of reliability and efficiency of the risk management and internal control system and of the corporate governance practice of MTS PJSC, the Internal Audit Block of MTS PJSC uses the results of the completed audits to generate an opinion on the level of maturity within the Company as a whole. The Internal Audit Block is an individual structural unit of MTS PJSC functionally subordinate to the Board of Directors and administratively — directly to the President of MTS PJSC.

The internal control system of MTS PJSC corresponds to the COSO model¹. The Company is creating a control environment, has a risk assessment system in place; the Internal Control Systems Department ensures introduction of control procedures and assesses their efficiency and fulfilment and monitoring of changes in the organizational structure and business processes is carried out.

¹ COSO Internal Control – Integrated Framework 2013.

MTS PJSC approved the Policy for Complying with Anti-Corruption Legislation defining the measures aimed at establishing elements of the corporate culture, organizational structure, rules and procedures assuring non-admission of corruption².

² See “Unified Compliance System” section for details.

The internal control system provides for a range of anti-corruption measures mitigating reputational risks and risks of sanctions for bribery of officials imposed on MTS PJSC. For the purposes of counteracting abuses, authorization of transactions and operations, distinction of powers and rotation of duties, control over the actual availability and condition of facilities is implemented.

The Audit Committee of the Board of Directors of MTS PJSC biannually reviews reports on the operation of the Internal Audit Block, Internal Control Systems Department, Business Ethics & Compliance Department and Risk Management Division and generates conclusions on the efficiency of the internal control and audit function, risk management, compliance and internal control at MTS PJSC.

The Audit Committee positively evaluates the work of the Internal Audit Block and believes that the internal audit function is efficient and that key performance indicators and internal audit goals for 2023 have been fully achieved.

The Audit Committee positively evaluates the work of the Internal Control Systems Department with regard to the creation, introduction and development of an efficient system of internal control over the reliability of generation of financial statements for MTS Group, including in new businesses, for 2023.

The Audit Committee positively assesses performance of the risk management function as efficient and fit for its purposes at the moment.

The Audit Committee positively assesses the work of the Business Ethics & Compliance Department and believes that the objectives of the unit have been completed in full compliance with the expected results.

The Audit Committee quarterly reviews the reports of the external auditor being Business Solutions and Technologies JSC and draws conclusions about the quality of their work.

Audit Committee of the Board of Directors

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

Auditing Commission

On June 18, 2023, the Auditing Commission was elected at the annual General Meeting of Shareholders of MTS PJSC.

Report on Operation of the Auditing Commission

In April 2024, the Auditing Commission audited financial and economic activities of the Company for 2023. The Auditing Commission did not record any material facts of violation of the procedures for accounting and submission of financial statements while carrying out financial and economic activities of the Company.

The Auditing Commission confirmed that the accounting statements of the Company for 2023 and the Annual Report on the Company’s activities for 2023, in terms of the Company’s accounting statements, are true.

The opinion of the Auditing Commission will be submitted for approval to the Annual General Meeting of Shareholders of MTS in June 2024.

Internal Audit Block

For some principal areas, the Internal Audit Block of MTS not only holds the leading positions in Russia, but also meets the strictest global standards of quality in terms of setting goals and performing objectives, communications building, as well as organization of the work and status of the Internal Audit Service. The Internal Audit Block of MTS successfully underwent an external independent evaluation — activities of the unit were recognized as compliant with the International Professional Standards of Internal Audit and Code of Ethics, Institute of Internal Auditors, the reputable international professional association.

The Internal Audit Block is an independent structural unit headed by the Director for Internal Audit.

The Internal Audit Block performs the following functions:

• assessment of efficiency of the internal control system, risk management and corporate governance processes by analyzing the Company’s business operations and its information systems, achieving the Company’s strategic goals, the efficiency and progress of projects and products, the reliability and integrity of information on the Company’s operation, the safety of assets, compliance with internal regulations and external requirements;
• development of recommendations for improving internal control, risk management and corporate governance procedures, as well as assistance to the management in developing corrective measures following the performed audits;
• monitoring of execution of recommendations for elimination of violations and deficiencies discovered following the audits;
• development and introduction of IT analytics for continuous monitoring of risk indicators based on the data from business processes and for increasing the efficiency of audit procedures;
• improvement of the internal audit methodology and the audit quality control system;
• analysis and improvement of efficiency of the Internal Audit Block, coordination of cooperation of the Block units and internal audit functions in subsidiaries;
• registration and coordination of investigation of messages

The activity is structured in accordance with the International Professional Standards of Internal Audit and the Code of Ethics of the Institute of Internal Auditors (The IIA).

Report on Operation of the Internal Audit Block

The Internal Audit Block focuses on the activities of auditors that bring maximum value to the Company and address current and new emerging risks. Internal audit continues to develop the use of IT, analytics and digital solutions in its activities.

The strategic goals of internal audit include the focus on the quality of interaction with management and other stakeholders and units based on transparency and support, they promote further development of a strong professional audit team. The internal audit achieves strategic goals through key initiatives carried out on a regular basis and a number of transformation initiatives.

The strategic goals and key performance indicators set by internal audit for 2023 have been fully achieved. In 2023, all planned key initiatives aimed at improving the efficiency of internal audit activities have been completed as scheduled.

The audit plan of MTS PJSC and its subsidiaries for 2023 has been fulfilled and contributed to the implementation of the internal audit strategy. Scheduled and unscheduled audits provided sufficient coverage of processes and areas with a high level of risk both in MTS PJSC and in MTS Group as a whole.

The improved process of monitoring the implementation of corrective measures based on the results of audits and the additional measures taken led to improved statistics on introduction of internal audit recommendations.

The increased use of Agile approaches in internal audit projects led to improved meeting of the deadlines for completing audit projects and increased management contribution to the results of the audit projects.

Data analytics is widely used both when performing independent projects to build risk indicator systems in processes (logistics, dealers), and as additional procedures within topic-specific audits. Pilot projects were carried out to use the process mining solution within the audits of MTS Group.

Following the internal assessment of the quality of internal audit activities for 2023, its activities were recognized as conforming to the International Professional Standards of Internal Audit and the Code of Ethics of the Institute of Internal Auditors.

Starting from Q3 2023, in agreement with the Chairman of the Audit Committee, the internal audit function reports on the results of its activities to the Audit Committee on a quarterly basis (previously, on a semi-annual basis).

The Audit Committee approved the performance results of the internal audit function of MTS PJSC and subsidiaries in the first six months of the year, Q3 and for 2023 as a whole.

The Audit Committee positively assesses the work of the Internal Audit Block and believes that the internal audit function is efficient and that key performance indicators and internal audit goals for 2023 have been fully achieved.

In December 2023, the Committee reviewed and approved the internal audit strategy, audit plan, KPIs and budget for 2024, as well as took into account the audit plans for 2024 of the internal audit units of major subsidiaries.

Internal Control Systems Department (ICSD)

Starting from 2018, the Internal Control System (hereinafter referred to as ICS) function in subsidiaries is managed in the Corporate Center. This approach has proven its efficiency and has made it possible to optimize the time required to support the internal control system in subsidiaries, while maintaining the proper level of quality of the ICS.

As part of the development of the internal control system, work has been carried out to update and introduce control procedures aimed at covering significant risks.

Testing of control procedures for MTS Group was carried out to the full extent required. The internal control system for 2023 financial reporting reliability for MTS Group was recognized efficient, no material or significant deficiencies were detected.

Significant events/projects of ICSD carried out in 2023 include the following.

• ICS assessment and certification were completed in the automated information system of ICS and risk management.
• Ecosystem-based regulatory documents of the Internal Control Systems Department were introduced for new subsidiaries that were included in the scope of work of the ICS.
• In 2023, employee access rights for eight SOX being significant information systems and three business units of MTS Group of Companies were revised.
• Procedures for analyzing and mitigating SOD risks for MTS and three subsidiaries were completed. Based on the performance, SOD conflicts were compensated by the existing ICS procedures.

In 2024, it is planned to reengineer the ICS processes taking into account the requirements of applicable legislation.

Based on the results of the internal assessment and external audit report, the Internal Control System for proving the accuracy of preparation of financial statements of MTS Group as of December 31, 2023 was found to be efficient and to have no material and significant deficiencies.

External Audit

At the Annual General Meeting of shareholders of MTS PJSC¹, Business Solutions and Technologies Joint Stock Company was approved as the auditor (hereinafter referred to as the “Auditor”) (location: 5 Lesnaya Str., Moscow, 125047, Russian Federation), OGRN [Primary State Registration Number] 1027700425444, certificate of membership in the Self-Regulatory Organization of Auditors of the Association “Sodruzhestvo” (Association) of January 31, 2020, ORNZ [Principal Number of Registration Entry] 12006020384.

¹ The Annual General Meeting took place on June 18, 2023.

Business Solutions and Technologies JSC is one of the leading audit and consulting companies providing services in the field of audit, management and financing consulting, risk management, taxation and accompanying services. Since May 24, 2022, the Russian company, formerly part of the Deloitte international network, has continued to work in Russia under its own brand.

In the reporting year, the Auditor performed:

• an audit of annual financial statements of MTS PJSC for 2023 prepared in accordance with the Russian Accounting Standards as per the International Audit Standards (IAS);
• an audit of consolidated financial statements of MTS PJSC and its subsidiaries prepared in accordance with the International Financial Reporting Standards (IFRS) for 2023, as per the IAS;
• an integrated audit of consolidated financial statements of MTS PJSC and its subsidiaries prepared in accordance with IFRS for 2023 and efficiency of the system of internal control over its preparation as of December 31, 2023, conducted in accordance with the standards of the US Public Company Accounting Oversight Board.

In March and April 2024, the Audit Committee approved the results of the external auditor following the audits performed for 2023, including conclusions on the efficiency of the internal control system over the formation of financial statements at MTS Group.

Following the audits performed, the MTS PJSC auditor expressed opinions on the reliability of the accounting statements of MTS PJSC for 2023 prepared in accordance with Russian Accounting Standards, and the consolidated financial statements of MTS PJSC and its subsidiaries for 2023 prepared in compliance with the IFRS.

Procedure for Selecting the Issuer’s Auditor

A tender for selecting an external auditor for MTS PJSC is conducted at least once every five years. To conduct the tender, MTS PJSC establishes a tender commission. Based on the tender results, the tender commission generates recommendations for selection of the external auditor which are submitted for approval to members of the Audit Committee of the Board of Directors of MTS PJSC.

Should the auditor’s candidacy get approved by the Audit Committee, Board of Directors and the General Meeting of Shareholders of the Company, a contract for the services for auditing the accounting statements shall be signed with the auditing company.

Remuneration of the Auditor

The remuneration of the auditor for auditing the accounts of MTS PJSC and its subsidiaries for 2023 is approved by the Board of Directors of MTS PJSC and, according to the results of 2023, amounted to RUB 169,000,000 thousand, excluding VAT and overhead expenses, including the audit of statements of MTS PJSC in the amount of RUB 15,900,000 thousand.

Regulation of Possible Conflicts of Interest

When managing a conflict of interests the Company is guided by the principles of lawfulness, confidentiality, impartiality, objectiveness and reasonable sufficiency, obligatory immediate disclosure of information by the Company’s employees, as well as directors, about an actual or potential conflict of interests or likelihood of such a conflict.

Members of the Management Board, the Board of Directors and employees are not entitled to participate in approval, agreement, other decision-making in respect of transactions concluded by the Company if they are or may be under the influence of the conflict of interests.

For the purposes of non-admission of conflicts of interests, the Company holds an annual knowledge testing and certification of compliance with the standards of the Code of Business Conduct and Ethics for executives and senior management. The testing results are reviewed by the Audit Committee of the MTS PJSC Board of Directors.

The Company has also created procedures to minimize the risk of making decisions in situations of conflict of interests of directors. Members of the Board of Directors must refrain from any actions which may result in appearance of a conflict of interests and, if such a situation exists or arises, disclose information about it to the Board of Directors and not participate in voting on the conflict agenda items.

Members of the Board of Directors, who have interest in agenda items of the Board of Directors, do not take part in discussion and voting on the specified agenda items.