Corporate Governance Model Development

Since the beginning of its public history, MTS has been paying great attention to the development of corporate governance and strives to ensure that MTS corporate governance practices meet the best standards.

Work aimed at introduction of the principles and recommendations of the Bank of Russia Corporate Governance Code into the Company’s practices has been carried out since 2014, when a restated Corporate Governance Code was adopted¹.

In 2023, through implementing the principles and recommendations of the CGC, we continued to maintain a high level of corporate governance, taking into account the challenges facing the Company².

¹ Approved on March 21, 2014 by the Board of Directors of the Bank of Russia (Letter of the Bank of Russia No. 06-52/2463 dated April 10, 2014).

² See detailed results in Appendix “Report on Compliance with the Principles and Recommendations of the Corporate Governance Code”.

Corporate Governance Index

Based on the results of 2023, for the sixth year consecutive, MTS is among the “Leaders in Corporate Governance” of the RUCGI National Corporate Governance Index.

MTS has been demonstrating a consistently high level of compliance with the main recommendations of the Corporate Governance Code. A high level of corporate governance is one of the fundamental values for MTS, therefore, the Company will continue to strive to follow the best practices.

MTS Corporate Governance Principles

• Comprehensive protection of shareholder rights and interests;
• Information openness and transparency;
• Single corporate policy in respect of subsidiaries;
• Independence of the Board of Directors when defining the Company’s strategy, approving business plans and making other important decisions;
• Control over the management activities;
• Observance of business ethics when doing business;
• Doing socially responsible business aimed at ensuring sustainable development of the Company and its welfare.

MTS Group Governance System

The current corporate governance system at MTS Group ensures strict observance of rights and legitimate interests of all shareholders, sustainable functioning and initiation of business within the borders of the MTS ecosystem and achievement of the strategic goals of MTS Group. The steps taken to develop the corporate governance system ensure the most effective use of shareholders’ investments and their protection, assist in developing the digital ecosystem of MTS products, taking into account the interconnected relationships and succession in the decisions made by the management bodies of MTS.

Management of MTS Group Subsidiaries

As part of the strategy, development of the MTS ecosystem continues. However, at the same time, there is a transformation into a Group of individual legal entities, many of which will have independent access to the capital market and valuation.

Principles of managing MTS controlled subsidiaries

• Management and control are carried out through representatives of MTS elected to the management bodies of subsidiaries.
• With respect to subsidiaries, the uniform corporate governance standards of MTS Group are applied, including unified internal decision-making procedures and standard corporate documents, as well as uniform standards and procedures of MTS Group in the field of anti-corruption compliance.
• MTS participates in the process of forming the composition of the Board of Directors and determines strategic and priority decisions of the Boards of Directors of subsidiaries.

The Board of Directors of MTS is the center for strategic decisions transmitted to subsidiaries through MTS representatives in the management bodies, including in regard of the following issues:

• strategy and investments;
• business plan and budget;
• remuneration system;
• management control, audit, compliance;
• asset control.
• The following points are taken into account when forming the Boards of Directors at subsidiaries:
• importance of the company for the overall MTS Group strategy;
• current and target scale of the company’s business;
• sector and industry of the company;
• requirements of laws, regulators and exchanges;
• balance between the personal and numerical composition of the Board of Directors.

The Remuneration & Nomination Committee of the Board of Directors of MTS approves the list of subsidiaries, for which it considers information on the formation, termination and change of the composition of the Boards of Directors.

The following criteria are taken into account when selecting candidates for membership in the Boards of Directors of subsidiaries:

• personal skills, qualifications, experience;
• knowledge of industry and sector of the subsidiaries;
• overall employment, including in other management bodies of companies;
• exclusion of a possible conflict of interest;
• candidate’s consent, including consent to meet anti-corruption compliance requirements;
• positive opinion based on the candidate’s inspection results.

Training of MTS representatives in the subsidiary management bodies is carried out in accordance with the regulatory internal documents of MTS. The representatives of MTS participate in the work of the management bodies of subsidiaries guided by the rules of subsidiary internal documents.

In order to fulfill their duties efficiently, the representatives:

• receive and analyze information about the company’s activities;
• initiate issues to be included in the agenda of management bodies;
• take active part in meetings of management bodies;
• vote taking into account the position of the management bodies of MTS, determined in accordance with the MTS Charter;
• control the implementation of the decisions made;
• participate in developing a culture of ethical business conduct and compliance with applicable anti-corruption legislation;
• inform MTS about the occurrence of a conflict of interest and possible violations of the requirements of the applicable anti-corruption legislation by the company.

Management of the companies not controlled by MTS Group, in respect of which persons/entities from MTS Group have the rights of a shareholder (member), involves protecting the interests of MTS in terms of target parameters of profitability, strategy priorities, property rights of shareholders (members). The degree of integration of corporate governance standards and anti-corruption compliance of MTS Group in such companies is influenced by the share of participation of persons/entities being part of MTS Group and/or the terms of the corporate agreement entered into in relation to such a company. Herewith, the Group makes reasonable efforts to ensure compliance with and application of these standards in the companies not controlled by MTS Group.

The anti-corruption compliance program of MTS Group is implemented through the introduction of uniform approaches, standards, policies and procedures both at MTS PJSC and its subsidiaries. Ensuring uniformity in the context of the large composition of MTS Group is achieved through commitment to the principles of corporate governance, efficient conclusion and performance of contracts in investment transactions and a proactive approach to organizing interaction with the heads of new MTS Group companies.