REMUNERATION OF MANAGEMENT BOARD MEMBERS AND TOP EXECUTIVE OFFICERS

Principles of remuneration of Management Board members and senior officials

A contract is entered into with every Management Board member, which defines labor terms, the procedure for deciding the amount of remuneration, terms of compensation of expenses connected with execution of duties of the Management Board member and contract termination procedure. The contract is signed on behalf of the Company by the Chairperson 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 Company’s Management Board. The terms and conditions of the contract shall be approved by the Board of Directors of the Company.

Remuneration of senior officials is fixed and calculated based on the Policy for labor payment of employees of MTS PJSC and meets the following principles:

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

The system of remuneration to senior officials includes elements of base remuneration and variable premium part:

• Base remuneration – monthly official salary.
• Short-term motivation system is an annual premium paid for fulfilment of key performance indicators (“KPI”) fixed in general for the Company for a corresponding reporting period as well as for fulfilment of functional individual tasks defined by the Board of Directors.
• The long-term material incentive program is aimed at increasing the Company’s shareholder value as well as preserving long-term labor and corporate relations between the Company and its management.
• 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.

MTS PJSC Business Key Performance Indicators System

• Corporate indicators, which are formed on the basis of the Company’s business plan and include the main financial and economic and industrial indicators. They make it possible to track generalized results of the company’s business and to adjust the strategy.
• Functional indicators, which are formed on the basis of business unit performance strategies.
• Individual indicators of performance are formed on the basis of strategic objectives of a specific director of the Company.

The list of indicators and their target values for the Company’s directors are approved by the Board of Directors of the Company with preliminary discussion at the specialized committees on an annual basis.

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

• OIBDA;
• income;
• integral assessment of the implementation of strategic projects and business development.

Structure of Remuneration of Top Management in 2019

The income structure of the Company’s chief executives varies depending on the post level.

The higher the post in the internal hierarchy of the Company, the larger the share is in the variable remuneration.

The actual element’s value individually varies depending on the work schedule in the reporting year, achieved results as per KPIs and shareholder value according to the long-term bonus payment program.

The typical element ratio is presented in the following options.

Performance assessment of the President and members of the Management Board

One of the tasks of the Board of Directors is to ensure control over the operation of the President and members of the Board of Directors and to evaluate their performance which is done on the basis of materials approved by the Remuneration and Appointment Committee.

The assessment of the President and members of the Management Board for 2019 was performed in accordance with an existing method based on fulfilment of key performance indicators of the Company in general, functional individual tasks and competence development level.

Remuneration of members of the Management Board and senior officials based on 2019 results

Events after the reporting date

In April 2020 there was a change in the size of the shareholding of several Management Board members in the authorized capital of MTS PJSC — participants in the Long-term Material Incentive Program for MTS PJSC top managers based on MTS PJSC ordinary shares approved by the Board of Directors of MTS PJSC in 2013.