Appendix No. 3. Information on observance of principles and recommendations of the Corporate Governance Code

2. The Company ensures an available means of communication with the Company, such as “hot line”, email or Internet forum enabling shareholders to express their opinion and file questions related to the agenda while preparing for General Meeting conduct. These actions were undertaken by the Company on the eve of every General Meeting conducted during the report period

2. The notice about Meeting conduct specifies a place of its conduct and documents necessary to be admitted inside.
3. Shareholders were given access to information about people suggesting items on the agenda and people proposing candidates for Company’s Board of Directors and the Audit Commission

2. Position of the Board of Directors (including special opinions registered in the minutes) for every issue on the agenda of General Meetings conducted during the reporting period was included within materials to the General Shareholders Meeting.
3. The Company provided shareholders entitled to it with an access to a list of persons entitled to participate in the General Meeting, from the date of its receipt by the Company, in all cases of conduct of the General Meetings in the reporting period

2. In the reporting period the Company did not refuse to accept suggestions to the agenda or candidates to Company’s bodies because of misprints and other insignificant drawbacks in a shareholder’s proposal

2. In case Company dividend policy uses indices of Company reporting to assess dividends, the relevant provisions of the dividend policy take into account consolidated indices of financial reporting

This principle was previously represented in Corporate Management Code recommended by Bank of Russia (hereinafter – CMC), therefore, Company is guided by the Charter that provides for a reliable protection of dividend rights held by owners of common and privileged Company shares (subitems 6.2, 6.5 Cl. 6 of Company’s Charter).
Pursuant to norms of Company’s Charter shareholders-owners of privileged shares shall be entitled to receive dividends together with shareholders owning Company’s common shares.
Should Company be liquidated by shareholders, owners of ordinary shares are entitled to obtain part of its property.
In addition, shareholders owning privileged shares are entitled to receive the value paid upon liquidation of the Company (liquidation value) on privileged shares in the amount of 100% of the nominal value of preferred shares in a manner specified by the Federal Law “On Joint Stock Companies”.
These provisions of the Charter are sufficient to protect rights of shareholders owning ordinary and privileged shares of the Company.
Should transaction condition change, Company shall take steps to develop control mechanisms in its internal documents that will ensure timely identification and approval of transactions with persons affiliated (linked) to significant shareholders by persons affiliated (linked) to significant shareholders (by persons entitled to dispose votes attributable to voting shares), in cases where the law does not formally recognize such transactions as transaction of interest.

2. The Board of Directors considered the report (reports) of the sole executive body and members of the collegial executive body on performance of Company’s strategy

2. The Board of Directors assessed a system of risk management and internal control in the Company during the reporting period

2. During the reporting period the Board of Directors considered issues related to the specified policy (policies)

2. The Company established a system of identification of transactions related to a conflict of interests and a system of measures aimed at settlement of such conflicts

2. The Company determined people responsible for implementation of information policy

2. The annual report contains information about the main results of work of the Board of Directors conducted in the reporting period

2. In the reporting period the Board of Directors (or its Nomination Committee) assessed candidates to the Board of Directors in terms of their possession of the required experience, knowledge and business reputation, absence of a conflict of interests etc.

2. During the reporting period the Board of Directors (or its Nomination Committee) at least once considered independence of current members of the Board of Directors specified by the Company in the annual report as independent directors.
3. The Company developed procedures determining the required actions to be taken by a member of the Board of Directors in case he/she ceases to be independent, including obligation for timely notification of the Board of Directors thereabout

Within the report period during preparation of the Annual General Meeting of Company Shareholders candidates, not being independent directors, were nominated.
However, Company strives to observe recommendations of Corporate Management Code to the extent of independency of Board of Directors members.
Therewith, management shall regularly interact with representatives of shareholders (including interaction through meetings and negotiations) in order to form balanced content of Board of Directors that includes at least 1/3 of independent directors.
Company ensures presentation for consideration of Company board of Directors on an issue of recognition of separate members of Company Board of Directors as independent thought formally these members do not meet independency criteria, taking into account quality of their work, qualification and voting for agenda issues of Board of Directors members.
However, Company’s management cannot influence content of Company Board of Directors, including issue on inclusion of a bigger number of independent directors, because candidates to members of Company Board of Directors are nominated by shareholders.
Should Company shareholders nominate a sufficient number of independent directors during preparation to General Meeting of Shareholders, such recommendation shall be observed by Company

2. Role, rights and obligations of the Chairman of the Board of Directors (and, if applicable, of the senior independent director) are duly specified in Company’s internal documents

2. According to Company’s internal documents, a member of the Board of Directors shall refrain from voting on any issue in which he/she has a conflict of interests.
3. The Company has a procedure enabling the Board of Directors to get professional advice on issues belonging to its competence at Company’s expense

2. According to Company’s internal documents, members of the Board of Directors shall notify the Board of Directors about their intention to join managerial bodies of other organization (except for Company’s subsidiary and affiliated organizations), as well as about a fact of such appointment

2. The Company has a formal program of introductory activities for newly elected members of the Board of Directors

Item 18.8 of Company Charter determined cases for passing resolutions for major issues of Company activity by a qualified majority from total number of members of Board of Directors.
Item 18.10 of Company Charter determined cases when resolutions of Company Board of Directors were passed by three third of members of Company Board of Directors participating in a meeting.
Moreover, according to an analysis, Company actually complies with the recommendation of the Code, namely, all resolutions (except resolutions with a special resolution making procedure determined by legislation of the Russian Federation) shall be passed by majority of votes of all members of Company Board of Directors.
In 2019 Company at Annual General meeting of Shareholders plans to make amendments to subitem 18.10 of Company’s Charter, pursuant to which resolution for major issues shall be passed at a meeting of Company Board of Directors by majority of votes of all elected members of Company Board of Directors, not dropped out

2. Company internal documents define tasks of the Audit Committee, including tasks specified in recommendation 172 of the Code.
3. At least one member of the Audit Committee, who is an independent director, possesses experience and knowledge in the sphere of preparation, analysis, assessment and audit of accounting (financial) reporting.
4. Meetings of the Audit Committee were held at least once a quarter during the reporting period

Audit Committee consists of 5 people, 2 of them are independent directors. (V. S. Pinkhasik and K. A. Trubitsyn) In its turn PJSC MICEX allows inclusion of persons having a professional experience and competence in the field of audit and finance, to the Committee, that allows these members to effectively implement its functions.
Apart from the independent members of Company Board of Directors, members of Audit Committee include members of Board of Directors who have knowledge and experience in preparation, analysis, evaluation and audit of accounting (financial) statements that can make independent judgments actively participating in the work of the Committee (if necessary, request additional information on the issues considered at the Committee and require management responses to difficult, critical questions, make decisions guided by long-term interests of Company and its shareholders), as well as non-members of Company executive bodies.
The Audit Committee is headed by an independent director, K. A. Trubitsyn. Company strives to form an Audit Committee from independent members of Company Board of Directors. Nevertheless, the implementation of this Codex recommendation is possible only if general number of independent directors for formation of the Committee in the quantitative composition set forth in the Regulations on the Audit Committee is elected at the Annual General Meeting of Shareholders following the results of 2018.
To the extent of observation of criterion No. 3.
One members of the Audit Committee, being an independent director and experienced and qualified in the field of analysis, evaluation and audit of accounting (financial) statement is V. S. Pinkhasik.
Should a sufficient number of independent directors be nominated by Company shareholders in preparation for the General Meeting of Shareholders, the Audit Committee will be formed from independent directors of the Company
To the extent of observation of criterion No. 4 .
In 2018 5 meeting sin presentia of Audit Committees were held 5 (Q1 – 2 meetings, Q2 – 1 meeting, Q3 – 1 meeting, Q4 – 1 meeting).

2. The Chairman of the Remuneration Committee is an independent director who is not the Chairman of the Board of Directors.
3. Company internal documents define tasks of the Remuneration Committee, including tasks specified in recommendation 180 of the Code

Company established Committee for Personnel and Remuneration, which includes only one independent director – Trubitsyn K. A.
In addition to independent members of Company Board of Directors, Committee for Personnel and Remuneration includes members of Company Board of Directors who have special knowledge attributed to a competence of the Committee, able to make independent judgments actively participating in the work of the Committee (if necessary, request additional information on issues and require management answers to difficult, critical questions, make decisions guided by the long-term interests of the Company and its shareholders) as well as non-members of the executive bodies of the Company.
Company seeks to form a Personnel and Remuneration Committee from independent members of Company Board of Directors.
Should a sufficient number of independent directors be nominated by shareholders of the Company in preparation for the General Meeting of Shareholders, the Personnel and Remuneration Committee will be formed from independent directors of the Company.
Criterion No. 3 is partially observed.
The tasks of the Committee for Personnel and Remuneration specified in its Regulation approved at the meeting of Company Board of Directors (Minutes No. 143/14 dated July 25, 2014) partially comply with recommendations of Cl. 180 of the Corporate Management Code.
Based on the developed Roadmap for improving an efficiency of corporate management.
Main tasks that are not provided by Regulation on the Committee for Personnel and Remuneration in accordance with Cl. 180 of Corporate Management Code include:
development of recommendations to Board of Directors for determining the amount of remuneration and principles for awarding the corporate secretary, as well as a preliminary assessment of work performed by corporate secretary of the Company and bonus payments proposal.
selection of an independent consultant for issues on remuneration of members of Company executive bodies and other key management employees, and should Company policy provide for a compulsorily holding of competition procedures for selection of competition procedures and implementation of a role to be played by competition committee;
supervision over introduction and implementation of Company’s policy for remuneration and various motivation programs;
Competence of the Committee for Personnel and Remuneration in accordance with the Regulations includes the following issues containing recommendations of Cl. 180 of the Corporate Management Code:
Regular assessment of activities of a person acting as a sole executive body (management company, manager) and members of the collective executive body of the Company and preparing proposals for Board of Directors on the possibility of their reappointment;
Development of principles and criteria for determining the amount of remuneration to be paid to members of Board of Directors, members of collegial executive body and person acting as a sole executive body of the Company, including the management company or manager.
In 2019 Company plans to develop, coordinate and initiate amendments to the Regulation on the Personnel and Remuneration Committee with inclusion of tasks contained of Cl. 180 of the Corporate Management Code.

2. Company internal documents define tasks of the Nomination Committee (or the relevant committee with combined functions), including tasks specified in recommendation 186 of the Code

Company has established the Personnel and Remuneration Committee, which also performs as Committee on Nominations (subitem 4, item 2, clause 2 of the Regulation on committee for Personnel and Remuneration determined criteria for selection of members of candidates to members of Company Board of Directors, members of collegiate executive body, as well as a preliminary assessment of these candidates, etc.).
To the extent of independent directors the information is presented in sub. 2.8.2.
Criterion No. 2 is partially observed 2.
Tasks of the Personnel and Remuneration Committee of Company Board of Directors specified in the Regulation on Committee on Personnel and Remunerations approved at the meeting of Company Board of Directors (Minutes No. 143/14 of 25.07.2014) partially comply with the recommendations of Cl. 186 of Corporate Management Code.
Main tasks that are not provided by Regulations on the Committee for Personnel and Remuneration in accordance with Cl. 186 of Corporate Management Code include:
analysis of professional qualifications and independence of all candidates nominated to Company Board of Directors;
supervision over introduction and implementation of Company’s remuneration policy and various motivation programs;
development of recommendations to Board of Directors for determining the amount of remuneration and principles for awarding the corporate secretary, as well as a preliminary assessment of work performed by corporate secretary of the Company and bonus payments proposal;
preparation of report on the practical implementation of the principles of remuneration policy in regard to members of Board of Directors, members of Company’s executive bodies and other key executives for inclusion in the Company’s annual report and other documents;
control over disclosure of information on policies and practices of remuneration and ownership of Company shares by members of the Board of Directors, as well as members of collegial executive bodies and other key executives in the annual report and on Company’s corporate website on the Internet;
evaluation of content of Company Board of Directors from the point of professional specialization, experience, independence and involvement of its members in the work of Board of Directors, identification of priority areas for strengthening the content of Company Board of Directors;
description of individual responsibilities of the directors and the chairman of Company Board of Directors, including determining the time to be given to issues on Company activities, within and outside the meetings, in the course of planned and unplanned work. This description (separate for a member of the Board of Directors and for its Chairman) must be approved by Company Board of Directors and handed over for examination to each new member of the Board of Directors and its Chairman after their election.
annually conducting a detailed formalized self-assessment procedure or external evaluation of Company Board of Directors and committees of Company Board of Directors from a standpoint of the effectiveness of their work as a whole, as well as individual contribution of members of the Board of Directors to the work of Company Board of Directors and its Committees; Company Board of Directors and its Committees, preparing a report on the results of self-assessment or external evaluation for inclusion in the Company’s annual report;
the formation of an introductory course program for newly elected members of Company Board of Directors, aimed at familiarizing new directors with key assets of the Company, its strategy, business practices adopted in the Company, the organizational structure of the Company and key executives of the Company, as well as the procedures of the Board of Directors of the Company as well as overseeing the practical implementation of the introductory course;
development of a program of training and advanced training for members of Company Board of Directors, taking into account individual needs of its members, as well as overseeing practical implementation of this program;
making recommendations to the Board of Directors of the Company in relation to candidates for the position of the Company’s corporate secretary.
Nevertheless, Committee on Personnel and Remuneration, guided by Art. 186 of Corporate Management Code considered the following issues related to the competence of Nomination Committee in the reporting period:
“On the preliminary assessment of candidates to the Board of Directors of IDGC of Siberia, PJSC (Minutes No. 91 dated 27. 04. 2018)”;
“On recommendations to Board of Directors to determine the status of a member of Company Board of Directors” (Minutes No. 95 of June 15, 2017)
“On preliminary consideration of the report of the Personnel and Remuneration Committee of Company Board of Directors on the work done in the 2017-2018 corporate year” (Minutes No. 93 dated May 31, 2017);
“On recommendations to the Board of Directors of IDGC of Siberia, PJSC on the issue “On consideration of results of self-assessment of the performance of the Board of Directors and Committees of the Board of Directors of IDGC of Siberia, PJSC for the 2017-2018 corporate year” (Minutes No. 98 dated December 7, 2018).
In 2019 Company plans to develop, coordinate and initiate amendments to the Regulation on the Personnel and Remuneration Committee with inclusion of tasks contained of Cl. 180 of the Corporate Management Code.

Based on results of the self-assessment of work performed by Board of Directors and Committees of Company Board of Directors for 2017-2018 corporate year, it can be concluded that number and specialization of existing committees under the Board of Directors are optimal in terms of performing their functions of supporting the work of the Board on all key issues of competence and changes not required.
However, in 2019 Company plans to consider an inclusion of the competence of the Committee for Strategy, Development, Investments and Reform with Company Board of Directors to consider issues related to implementation of innovation activities to the Company

2. Company internal documents (policies) contain provisions subject to which people not included within the Audit Committee, Nomination Committee and Remuneration Committee may attend meetings of these committees only at the invitation of the relevant committee

Information on observation of criterion No. 1 is presented in subitem 2.8.1, 2.8.2.
Criterion No. 2 is observed

2. Results of self-assessment or exterior assessment of the Board of Directors made in the reporting period were considered at the meeting in presentia of the Board of Directors

In accordance with cl. 2.9.2 of the Code work of Board of Directors, Committees and members of Board of Directors shall be evaluated regularly, at least once a year. In order to hold an independent evaluation of work performed by Board of Directors it is recommended to periodically, at least once in three years, to engage an external organization (consultant).
At the meeting of Company Board of Directors, Methodology for evaluating the work of the Board of Directors and Committees of the Board of Directors of IDGC of Siberia, PJSC was approved (Minutes dated 25.05.2018 No. 282/18).
In 2018 self-assessment of the performance by Board of Directors and Committees of the Board of Directors was held for the 2017-2018 corporate year.
Results of self-assessment were reviewed at the meeting of the Personnel and Remuneration Committee on 07.12.2018 (Minutes dated December 7, 2017 No. 98) and the meeting of the Board of Directors on 28.12.2018 (Minutes dated December 28, 2017 No. 306/18).
In accordance with the sub. 1.1. Methodology for evaluating the work of Board of Directors and Committees of Board of Directors of PJSC IDGC of Siberia evaluation of the activities performed by Board of Directors and Committees of Company Board of Directors is carried out once every three years (if necessary) by an independent external organization (consultant) engaged on a competitive basis.
In 2020 Company plans to involve an external organization (consultant) when evaluating the work of Board of Directors and Committees of the Company Board of Directors for 2019-2020 corporate year

2. Company website in the Internet and its annual report contain biographical information about the Corporate Secretary with the same details as about members of the Board of Directors and Company’s executive management

The Company does not use forms of short-term motivation and additional material encouragement in relation to members of the Board of Directors

2. During the last evaluation of the system of remuneration of members of Company’s executive bodies and other key managerial officers, the Board of Directors (the Remuneration Committee) made sure that the Company efficiently correlates fixed and variable parts of remuneration.
3. The Company provides for a procedure securing return of premium payments illegally received by members of Company’s executive bodies and other key managerial officers to the Company

2. The program of long-term motivation of members of Company’s executive bodies and other key managerial officers implies that a right to dispose of shares and other financial instruments used in such program arises only in three years after their provision. Whereby, the right for their disposal is conditioned by achievement of particular indicators of Company’s activity

However, a number of the Company’s free float (ree – float) is less than 4%. Use of this tool, as well as motivation programs tied to growth of capitalization, will be ineffective, because the smaller the number of shares in circulation and the higher the volumes, the greater the price movements can be.
In order to reduce the impact of changes in price of shares, Company entered into two agreements with market makers.
This measure will make it possible to consider the possibility of implementing a program of long-term motivation of members of the executive bodies and other key managers of the company using the Company’s shares.
In 2019-2020 Company plans to develop, coordinate and initiate the approval by Company Board of Directors of a long-term motivation program for members of executive bodies and other key managers of the company using the company’s shares

2. The Company organized an available means of informing the Board of Directors or the Audit Committee within the Board of Directors about facts of breach of legislation, internal procedures and Company’s code of ethics

2. The Company uses general approaches to internal control and risk management

2. The Board of Directors (or one of its committees) considered issues related to compliance of the Company with its information policy at least once in the reporting period

At a meeting of Company Board of Directors Regulation on the information policy, developed taking into account the recommendations of the Code, was approved (the Minutes No. 273/18 on 30.03.2018).
Criterion No. 2 is not observed.
In accordance with the sub. 10.4. Regulation on Company’s information policy, sole executive body (General Director) annually, not later than 90 days after the end of a reporting year, submits to Board of Directors a report on compliance with the Company’s Information Policy.
In 2019 Company plans to implement measures to include in a work plan of Board of Directors an issue related to Company’s compliance with its information policy

2. The Company discloses information about composition of executive bodies and the Board of Directors, independence of members of the Board and their membership in committees of the Board of Directors (subject to definition of the Code).
3. If there is a person controlling the Company, the Company publishes a memorandum of the controlling person in regard to plans of such person related to corporate governance in the Company

Information on the fact that controlling shareholder has a special memorandum regarding plans for corporate governance in PJSC IDGC of Siberia is missing.
Procedure for the interaction of a controlling person with the Company is determined by the document – the Procedure for interaction of PJSC “Russian Grids” with business entities whose shares are owned by the Company. This document is published on the website of the person controlling IDGC of Siberia.
Subject to the receipt of this document by Company, it will be published in accordance with the recommendations of the Corporate Management Code

2. In case Company securities are circulated at foreign organized markets, significant information shall be disclosed synchronously and equivalently in the Russian Federation and at such markets during the reporting period.
3. In case foreign shareholders own a significant number of Company’s shares, information shall be disclosed not only in the Russian language but also in one of the most widely spread foreign languages during the reporting period

2. The Company discloses complete information about structure of Company’s capital in accordance with Recommendation 290 of the Code in the annual report and on Company’s website in the Internet

2. Company annual report contains information about environmental and social aspects of Company activity

2. In cases defined by Company’s information policy, shareholders were warned about confidential nature of information and undertook to preserve its confidentiality

2. According to Company Charter, significant corporate actions include at least: reorganization of the Company, acquisition of 30 and more % of Company voting shares (merger), making significant transactions by the Company, increase or decrease of Company authorized capital, and listing or delisting of Company shares

2. Company Charter sets lower minimal criteria for inclusion of Company transactions within significant corporate actions as compared to those defined by Law due to specificities of Company activity

2. Company internal documents provide a procedure for engagement of an independent appraiser for assessment of cost of purchase and repurchase of Company shares.
3. Company internal documents contain an extended list of grounds due to which members of Company Board of Directors and other persons defined by Law are recognized interested in Company transactions

Company internal documents do not provide for an expanded list of grounds on which members of Board of Directors and other persons provided for by law are deemed to be interested in the Company’s transactions.
In accordance with the established corporate governance practice, persons interested in the transaction are recognized as such in accordance with requirements of the Federal Law “On Joint-Stock Companies”.
In addition, all key executives of the Company are members of the collegial executive body and may be recognized as interested parties in the execution of transactions in accordance with the requirements of the Federal Law “On Joint Stock Companies”.
Therewith, Company plans to consider the possibility of expanding the list of grounds on which members of the Board of Directors and other persons provided for by law are deemed interested in the company’s transactions