Board Committees

MegaFon's three principal Board Committees provide oversight and strategic planning in three areas of concern to the Board of Directors:

• Audit Committee;
• Finance and Strategy Committee;
• Remuneration and HR Development Committee.

Committee members are selected upon election of a new Board of Directors. In 2015, the composition of the Board Committees was approved by the Board of Directors at its meeting on 16 July.

Audit Committee

The Board's Audit Committee is responsible for all matters relating to internal and external audits of the Company's financial and business operations.

The Committee's principal responsibilities are to:

• make recommendations regarding external auditors and fees; resolve issues arising during audits; and review the work and performance of internal Auditors;
• analyse the effectiveness of internal controls; review reports and recommendations from the Revision Committee and internal Auditors; and review the effectiveness of procedures of internal control over the Company's financial and business operations;
• continuously evaluate risk management systems; and make recommendations for risk response and systems improvement.

As at 31 December 2015, the following Board Members were members of the Audit Committee:

• Jan Erik Rudberg (Chairman);
• Sergey V. Soldatenkov;
• Ingrid Maria Stenmark.

In 2015, seven meetings of the Audit Committee were held.

The key actions taken in 2015 were:

• review of operation of internal controls;
• analysis of tax exposures and results of tax audits;
• risk identification and operation of the Company's risk management system;
• development of the internal control and risk management systems;
• monitoring of the Company's compliance with the laws of the Russian Federation and the UK regarding disclosures and reporting;
• implementation of the Company's Code of Business Conduct and Ethics;
• consideration of the internal audit reports;
• approval of the annual internal audit plan;
• consideration of related-party transactions relating to business activities or operations and making recommendations on their approval for the Board of Directors;
• monitoring of development of the Company’s governance, risk, and compliance (GRC) system;
• review of the development and implementation of the Company’s insider information protection systems;
• review of the execution of the action plan to improve personal data protection.

Finance and Strategy Committee

The Finance and Strategy Committee exercises control over the Company's strategic development, business planning, budgeting and investment processes.

The Committee's principal responsibilities are to:

• determine the Company's strategic direction, including review of management reports on progress towards strategic objectives;
• agree the Company's annual budgets and business plans and oversee their implementation;
• oversee the Company's cash and liquidity management policies;
• review and approve the terms of proposed M&A transactions;
• review the terms of borrowings and other financing, and make recommendations on their approval for the Board of Directors;
• review the terms of major transactions and transactions with a cumulative value exceeding US$ 50,000,000, and make recommendations on their approval for the Board of Directors.

In 2015, the following Board Members were elected to the Finance and Strategy Committee:

• Vladimir Y. Streshinsky (Chairman);
• Sergey A. Kulikov;
• Carl Peter Christian Luiga.

In 2015, 11 meetings of the Finance and Strategy Committee were held.

The key actions taken in 2015 were:

• approval of the 2016 budget and business plan;
• review and approval of acquisitions by the Company's subsidiaries, and recommendations on acquisition of new assets;
• review of certain of the Company's related-party transactions, including the approval of loans between the Company and its subsidiaries;
• review of transactions with a cumulative value exceeding US$ 50,000,000, including facility agreements between the Company and banks, and agreements for the supply of telecommunications equipment.

Remuneration and HR Development Committee

The principal responsibilities of the Remuneration and HR Development Committee are to:

• assess the performance of the Company's Board of Directors;
• review and make recommendations on performance targets of the Company, and make recommendations to the Board on bonuses and incentive programmes for the top management team;
• review personnel remuneration strategies and make recommendations to the Board of Directors on employee bonus programmes;
• review HR processes for motivating employees to achieve individual - targets and deliver superior results;
• review specific HR initiatives and projects;
• review regular and ad hoc surveys of employee performance and attitudes.

In 2015, the following Board Members were elected to the Remuneration and HR Development Committee:

• Lord Paul Myners (Chairman);
• Sergey V. Soldatenkov;
• Vladimir Y. Streshinsky.

In 2015, eight meetings of the Remuneration and HR Development Committee were held.

During the year, the Committee considered and recommended for the Board's approval short- and long-term incentive programmes for the Company's management for 2015. In July 2015, the long-term incentive programmes were reviewed and the Board of Directors approved their revised versions.

The Committee also considered:

• results of the employee engagement survey;
• results of the Company's CEO and top management performance assessment;
• the Company's talent development policy based on the organisational climate and corporate performance survey.