Corporate Governance Framework

MegaFon has a robust and transparent corporate governance framework which is fully compliant with all applicable regulations. We go beyond merely ensuring that we meet regulators’ mandatory requirements and are committed to consistently improving our existing corporate governance in line with international best practice.

Compliance is the foundation of MegaFon’s corporate governance system. MegaFon complies with all regulations relating to joint-stock companies, including the provisions of Russia’s Federal Law On Joint- Stock Companies, Corporate Governance Code recommendations, and the Moscow Exchange requirements. As a public company listed on the London Stock Exchange (LSE), MegaFon also complies with the Disclosure and Transparency Rules of the UK Financial Conduct Authority for “standard” companies, and the LSE Listing Rules. The Company’s operations are also governed by MegaFon’s Charter and other internal documents.

In 2016, a number of MegaFon’s internal documents were amended to ensure compliance with the Moscow Exchange requirements to keep the Company’s shares on the First Level quotation list. To this end, on 26 July 2016, the Company’s Board of Directors approved:

• a new version of the Regulations on the Audit Committee of the Company’s Board of Directors;
• a new version of the Regulations on Internal Audit;
• a new version of the Regulations on the Remuneration and Nominations Committee of the Company’s Board of Directors;
• amendments to the Regulations on the Corporate Secretary of the Company.

MEGAFON’S CORPORATE GOVERNANCE PRINCIPLES

	Enabling shareholders to fully exercise their rights relating to their shareholdings in the Company.
	Strategic governance and effective supervision of the Company’s executive bodies by the Board of Directors, which in turn is accountable to the General Meeting of Shareholders.
	Appropriate management of MegaFon’s day-to-day operations by the Company’s executive bodies and their accountability to the Company’s Board of Directors and shareholders.
	Timely disclosure of complete and accurate information about the Company, including its financial position, performance, ownership and governance structure.
	Effective control of the Company’s financial and business operations.
	Ensuring the protection of the interests and statutory rights of shareholders and other investors, creditors and other stakeholders, and commitment to high standards of social responsibility in the Company’s activities.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

MegaFon’s operations are governed by the requirements of the Corporate Governance Code approved by the Board of Directors of the Bank of Russia on 21 March 2014. The Corporate Governance Code Compliance Report is presented in an Appendix to this Annual Report.

RELATED-PARTY TRANSACTIONS

Related-party transactions are regulated by Article 11 of Federal Law No. 208- FZ On Joint- Stock Companies. Under these provisions, transactions in which shareholders, Members of the Board of Directors, or members of executive bodies are interested parties must be approved by either the Board of Directors or the General Meeting of Shareholders. The interested Member(s) of the Board of Directors or other executive bodies or the interested shareholder(s) does (do) not vote on the relevant resolution.

MegaFon pays close attention to identifying and controlling transactions in which shareholders, Members of the Board of Directors, or members of executive bodies are interested parties, as required by applicable laws. MegaFon has implemented procedures for determining and monitoring such transactions through its SAP ERP system. In 2016, all MegaFon counterparties were regularly checked for possible relationships with the main shareholders and members of the Company’s executive bodies.

All related-party transactions are subject to preliminary review by specific committees of MegaFon’s Board of Directors, based on the subject matter. In 2016, the Audit Committee carried out preliminary reviews, recommending for the Board’s approval a total of 22 related-party transactions (which the Board of Directors subsequently approved). The Finance and Strategy Committee carried out preliminary reviews, recommending for the Board’s approval 16 such transactions (which the Board of Directors also subsequently approved).

The list of related-party transactions effected by MegaFon in 2016 is presented in an Appendix to this Annual Report.

MAJOR TRANSACTIONS

In 2016, MegaFon signed Addendums to Non-Revolving Credit Facility Agreements between PJSC MegaFon (the Borrower) and PJSC Sberbank (the Lender/Bank). These transactions are classified as major transactions as defined by Article 78 of Federal Law No. 208-FZ On Joint-Stock Companies.

CORPORATE GOVERNANCE AND CONTROL STRUCTURE

MegaFon’s principal corporate governance bodies are the General Meeting of Shareholders, the Board of Directors, the Management Board (collective executive body), and the Chief Executive Officer and the Chief Operating Officer (individual executive bodies). In 2016, changes were made to the name and responsibilities of one of the Board Committees: the Remuneration and HR Development Committee was renamed the Remuneration and Nominations Committee of the Company’s Board of Directors, with corresponding changes to its responsibilities.

CORPORATE GOVERNANCE AND CONTROL STRUCTURE