BOARD OF DIRECTORS

The Board of Directors is responsible for the overall management of the activities of the Company, with the exception of resolving issues referring to the efficiency of the General Meeting of Shareholders.

The Board of Directors of the Company is responsible for the strategic management of the Company and determines the basic principles and approaches of risk management and internal management systems of the Company. In order to perform these functions, the Charter of the Company assigns the following powers to the Board of Directors:

• To determine the priorities of the Company’s activity; to approve (change) the long-term strategic development plans (strategy) of the Company and its subsidiaries, including and not limited to marketing strategy, brand development and operational strategy (the creation, management and development of trademarks of the Company and its subsidiaries); to approve reports on the implementation of the Company’s strategy and the strategy of its subsidiaries, as well as to determine the format and frequency of submission of such reports;
• To approve the risk management and internal management systems of the Company, to approve the Company’s policies pertaining to risk management and internal management systems and to approve the Company’s risk matrix.

In the reporting year, the Board of Directors Strategy and Digital Transformation Committee was formed and carried out its work.

The Board of Directors also performed other duties as specified by the Federal Law of December 26, 1995, No. 208-FZ on Joint-Stock Companies and the Company’s Charter.

One of the most important functions of the Board of Directors of the Company is the formation of effective executive bodies and ensuring effective control over their activities. In order to perform this function, the Charter of the Company assigns the following powers to the Board of Directors:

• Election of the sole executive body and early termination of their powers, approval of the terms of the agreement concluded by the Company with the sole executive body of the Company, including the conditions for early termination of their powers, approval of the amount of their salary, the size and payment of bonuses, compensation and benefits provided; determination of the person authorized to sign the agreement (supplementary agreement to the agreement, agreement on termination of the agreement) with the sole executive body of the Company; granting consent for the CEO to combine positions in the management bodies of other organizations, as well as other paid positions in other organizations;
• Submitting a proposal to the General Meeting of Shareholders on transferring the powers of the sole executive body to a managing organization or a manager, approving such a managing organization (manager) and defining the terms of an agreement concluded by the Company with them;
• Making a decision on whether to create a collegial executive body (Management Board);
• Election of members of the Management Board and early termination of their powers, making a decision about payment of remuneration to members of the Management Board and/or compensation for expenses related to the performance of their duties, determining the amount to be paid as remuneration to members of the Management Board and/or the amount of compensation for expenses related to the performance of their duties and providing consent for members of the Management Board to hold positions in the management bodies of other organizations;
• Control over how the Company’s executive bodies carry out the decisions made by the Company’s Board of Directors and the Company’s General Meeting of Shareholders.

Members of the Board of Directors are elected annually by the Annual General Meeting of Shareholders in the manner prescribed by the Charter of the Company, the Regulations on the Company’s General Meeting of Shareholders and the Company’s Regulations on the Board of Directors. By decision of the General Meeting of Shareholders, the powers of all members of the Board of Directors may be terminated early. In this case, the powers of the newly elected members of the Board of Directors are valid from the moment of their election by the General Meeting until the moment of election (re-election) at the next Annual General Meeting of the new configuration of the Company’s Board of Directors.

In accordance with the Company’s Charter, the Board of Directors is elected with at least seven members. The number of members of the Board of Directors is determined by a decision of the General Meeting of Shareholders.

In the reporting year, the Company had a 14-member Board of Directors.

On December 28, 2020, an Extraordinary General Meeting of Shareholders of the Company determined the number of members of the Board of Directors to be nine people. The number of members of the Board of Directors determined by this resolution should be applied when forming the Board of Directors at General Meetings of Shareholders of PJSC M.video following this extraordinary General Meeting of Shareholders of PJSC M.video whose agenda includes the issue of electing members of the Board Directors of PJSC M.video.

The procedure and timing for convening and holding meetings of the Board of Directors, the decision-making process, the rights and obligations of the members of the Board of Directors and other matters related to the activities of the Board of Directors are governed by the legislation of the Russian Federation, the Company’s Charter and the Regulations on the Board of Directors of the Company.

The directors and officers of M.Video–Eldorado Group are covered by liability insurance.

Orientation program for new members of the Board of Directors

The Company has an established program of orientation events for newly elected members of the Board of Directors.

Enrique Fernandez was elected to the Board of Directors during the reporting year, having previously served as CEO (sole executive body) of MVM LLC (M.Video–Eldorado Group’s main operating company); he also sat on the Management Board and thus did not need to attend the aforementioned orientation program.

BOARD OF DIRECTORS MEETINGS

Meetings of the Board of Directors were held regularly on a scheduled basis in addition to when it was necessary to make decisions on issues falling within the remit of the Board of Directors. In total, 18 meetings of the Board of Directors were held in the reporting year, of which 14 were in person and four were in the form of absentee voting.

In the reporting year, due to the spread of COVID-19, the Board of Directors switched the format of in-person meetings to using videoconferencing.

In March 2020, at a meeting of the Board of Directors:

• Reports on the results of the work of the committees of the Board of Directors for 2019 were approved;
• A report on the results of the activities of the Company and its subsidiaries for the Q4 2019 and FY 2019 was approved;
• A report on the execution of the budget of the Company and its subsidiaries for 2019 was approved;
• The consolidated financial statements of the Company for 2019, prepared in accordance with International Financial Reporting Standards, were approved;
• The accounting (financial) statements of the Company for 2019, prepared in accordance with Russian accounting standards, were approved;
• The amount to be paid for the services of the Company’s auditor who audited the accounting (financial) statements of the Company for 2019 was increased.

At a second meeting of the Board of Directors in March 2020:

• A report on the work of the head of the Internal Audit Department of the Company for 2019 was approved;
• Maxim Mamonov was appointed head of the Internal Audit Department as of April 9, 2020, and the terms of his employment contract were approved;
• A report on the work of the Corporate Secretary of the Company, the results of a review of his work in 2019 and the amount of the bonus paid to him were approved.

In March 2019, based on proposals received from the Company’s shareholders, the list of candidates for voting in elections to the Board of Directors and the Audit Commission was approved at the Annual General Meeting of Shareholders in 2019.

In May 2020, at a meeting of Board of Directors:

• The number of members of the Management Board was determined to be seven persons from June 7, 2020, with thenew number of members of the Management Board to be decided on June 7, 2020;
• The Annual Report of the Company for 2019 was approved;
• It was decided to convene the Annual General Meeting of Shareholders on June 22, 2020 (the deadline for accepting ballots), in the form of absentee voting, and decisions were made on other issues relating to the preparation, calling and holding of the Annual General Meeting of Shareholders;
• A report on the self-assessment of the activities of the Board of Directors and committees of the Board of Directors was approved.

On June 23, 2020, after the Annual General Meeting of Shareholders, the Board of Directors elected Said Gutseriev as the Chairman of the Board of Directors.

On June 29, 2020, the Board of Directors:

• Elected the Chairman and members of the Audit Committee of the Board of Directors in addition to the Chairman and members of the Remuneration and Nomination Committee of the Board of Directors;
• Approved the amount to be paid for the services of the auditor, Deloitte & Touche CIS, to audit the financial and economic activities of the Company for 2020, including additional services;
• Decided to terminate the employment contract with the head of the Internal Audit Department of the Company, Maxim Mamonov on June 30, 2020.

At a meeting of the Board of Directors on August 20, 2020:

• A decision was made to form the Board of Directors Strategy and Digital Transformation Committee, consisting of five members;
• The members and the Chairman of said committee were elected, and the Regulations on the Board of Directors Strategy and Digital Transformation Committeewere approved.

At a meeting of the Board of Directors on September 18, 2020:

• The powers of the CEO of the Company, Bilan Uzhakhov, were terminated (effective September 30, 2020);
• Alexander Izosimov was elected the CEO for a period of three years (from October 1, 2020, to September 30, 2023), and the terms of his employment contract were approved;
• The number of members of the Management Board of the Company was determined from October 1, 2020, to be eight people. Alexander Izosimov was elected to the Management Board;
• It was decided to terminate the employment contract with Boris Ogarkov, the head of the Company’s Internal Management and Risk Management Department, from September 30, 2020, and to appoint Olga Solodchenkova to said position from October 1, 2020;
• Artem Yanko was appointed to the position of the head of the Internal Audit Department from September 21, 2020.

On October 5, 2020 , the Board of Directors made a decision to convene, on its own initiative, an Extraordinary General Meeting of Shareholders of the Company in the form of absentee voting as of November 9, 2020 (the deadline for accepting ballots), with the following agenda:

1. Payment (declaration) of dividends;
2. Approval of a new version of the Charter of PJSC M.video;
3. Approval of a new version of the Regulations on the General Meeting of Shareholders of PJSC M.video;
4. Approval of a new version of the Regulations on the Board of Directors of PJSC M.video;
5. Approval of a new version of the Regulations on the Management Board of PJSC M.video;
6. Approval of a new version of the Regulations on the Sole Executive Body (CEO) of PJSC M.video;
7. Approval of a new version of the Regulations on the Audit Commission of PJSC M.video.

At this meeting, the Board of Directors also made decisions on other issues related to the preparation, calling and holding of an Extraordinary General Meeting of Shareholders of the Company, and also recommended to the General Meeting of Shareholders:

1. To pay dividends in the amount of RUB 30.00 per ordinary share of PJSC M.video from the retained net profit at the end of 2019;
2. To pay dividends on shares of PJSC M.video in cash;
3. To approve November 20, 2020, as the record date;
4. Determine that the payment of dividends is carried out in the following terms from the record:
   • within 10 working days to a nominee holder and a trustee who is a professional participant in the securities market, who is registered in the register of shareholders;
   • within 25 working days to other persons registered in the register of shareholders.

Also, the Board of Directors recommended that the General Meeting of Shareholders approve:

• A new version of the PJSC M.video Charter;
• A new version of the Regulations on the General Meeting of Shareholders of PJSC M.video;
• A new version of the Regulations on the Board of Directors of PJSC M.video;
• A new version of the Regulations on the Management Board of PJSC M.video;
• A new version of the Regulations on the Sole Executive Body (CEO) of PJSC M.video;
• A new version of the Regulations on the Audit Commission of PJSC M.video.

At a Board of Directors meeting on November 23, 2020:

• The powers of Alexander Tynkovan, a member of the Company’s Management Board, were terminated;
• The number of members of the Management Board was determined (seven);
• A decision was made to convene, on the initiative of the Board of Directors, an Extraordinary General Meeting of Shareholders of the Company in the form of absentee voting on December 28, 2020 (the deadline for accepting ballots), with the agenda item of determining the number of members of the Board of Directors of PJSC M.video;
• Decisions were made on other issues related to the preparation, convocation and holding of an Extraordinary General Meeting of Shareholders.

On December 10, 2020, the Board of Directors made a decision to approve the strategy of the Company and the Group companies.

At a meeting on December 21, 2020, the Board of Directors:

• Approved the budget and plan for the activities and development of the Company and its subsidiaries for the 2021 calendar year;
• Approved the risk matrix of the Company and its subsidiaries;
• Approved the internal audit plan for the 2021 calendar year;
• Approved a new version of the Regulations on the the Board of Directors Strategy and Digital Transformation Committee.

Also during the reporting year, the Board of Directors made decisions as part of the preliminary approval of actions and decisions of the CEO and/or the Company’s representatives at meetings of shareholders (participants) of the subsidiaries and other entities, where the Company acts as shareholder (participant), and when making decisions as the sole shareholder (participant).

In the reporting year, the Board of Directors paid special attention to measures taken by management in the framework of a difficult global pandemic.

At the above meetings, decisions were made on other issues on the agenda.

A full list of issues considered by the Board of Directors in 2020 is given in the Annexes to this Annual Report.

PERFORMANCE EVALUATION OF BOARDS AND DIRECTORS

The report on the self-assessment of the activities of the Board of Directors and its committees was approved by the Board of Directors on May 14, 2020.

Evaluation period:

The work of the Board of Directors for the 2018–2019 corporate year was analyzed and evaluated.

Criteria for evaluation:

The members of the Board of Directors assessed the statements given in the column "Criteria and indicators" on a five-point scale. Assigning the maximum score reflected full compliance with the statement; the minimum, noncompliance with the evaluated criterion.

Also, the members of the Board of Directors were offered open questions about the current state of affairs in the Company; they were given an opportunity to reflect on ways to optimize the role and performance of duties of the Board of Directors in order to improve its performance.

The extent to which compliance was effectively adhered to for each criterion in the questionnaire was determined according to the following rules:

• If the overall score for the criterion was more than 4.5 points inclusive (excellent effective), then this signifies that the approach is in line with best practice, for most of the assessed parameters;
• If the overall score for the criterion ranged from 3.5 points inclusive to 4.5 points (good effective), then this signifies that the approach as a whole corresponds to good practices, but some aspects of it require adjustment and can be improved;
• If the overall score for the criterion ranged from 2.5 points inclusive to 3.5 points (satisfactory ineffective), then this signifies that most aspects of the approach do not correspond to good practice and require adjustment;
• If the overall score for the criterion was less than 2.5 points (critical), then urgent intervention and significant changes are required.

The final results of the evaluation:

The overall performance of the Board of Directors and its committees was assessed as "good/effective" (from 3.5 points inclusive to 4.5 points).

Key recommendations based on the results of the evaluation:

1. To change the number of Board members to between 9 and 11 inclusive;
2. To increase the number of committees of the Board of Directors by creating a Strategy and Digital Transformation Committee, specifically with the involvement of external experts, not exclusively members of the Board of Directors.

   The main recommendations implemented by the Company during the reporting year were:

3. The number of members on the Board of Directors for PJSC M.video was determined to be nine at the Extraordinary General Meeting of Shareholders of the Company on December 28, 2020. Nine members were to be elected to the Board of Directors at the Company’s next Meeting of Shareholders.
4. The Board of Directors Strategy and Digital Transformation Committee was formed.

MEMBERS OF THE BOARD OF DIRECTORS

In the reporting year, the composition of the Company’s Board of Directors underwent the following changes: Mikail Gutseriev left the Board of Directors and Enrique Fernandez joined.

INDEPENDENT EVALUATION OF THE PERFORMANCE OF THE BOARD OF DIRECTORS

We at PJSC M.video are dedicated to optimizing activities that benefit our shareholders, investors and all other interested parties. To this end, we never cease our efforts to improve the performance of the Board of Directors (BoD). Pursuant to the Corporate Governance Code of the Bank of Russia (2014) and the Corporate Governance Code of the United Kingdom, the Company issues regular performance reviews of the BoD and its committees.

In 2020, an independent external evaluation of the Company’s BoD was conducted by KPMG. Regarding the BoD’s activities in 2018–2020, the independent consultant reviewed the following:

• the composition and structure of the Board of Directors and its committees;
• the organizational efficiency of the operations of the BoD, its committees and the activities of the Chairman of the Board;
• the implementation by the BoD of its primary functions, as well as those of its committees.

The independent external evaluation included a questionnaire filled out by the directors and an analysis of internal Company documents related to the activities of the Board of Directors and its committees. A special analysis was carried out to ensure that the operations of PJSC M.video’s BoD were fully in compliance with international codes and guidelines for corporate governance.

The findings of the independent consultant were that the BoD and its committees were both professional and highly efficient. The share accorded to foreign directors on the Board is comparable to global standards and ensures wide-ranging opinions and expertise. Other strengths singled out in the evaluation were the high rate of attendance at the meetings of the BoD, the efficiency of operations carried out by the Board and the key role of the Chairman.

The BoD’s committees are involved in all of the Board's core operations. In line with best corporate governance practices, the Audit Committee and the Remuneration and Nomination Committee are composed entirely of independent directors.

The independent consultant gave high marks for the degree of implementation of the key functions of the BoD and its committees. The Company’s BoD considers a wide range of issues, focusing in particular on matters deemed strategically important by the holding company. These include the management of the Group’s companies, consideration and approval of major transactions and related-party transactions, as well as performance results and reporting, including financial, and the provision of an independent external audit. In 2020, the BoD also oversaw changes to operations required by the COVID-19 pandemic.

In response to the evaluation, and to further improve the functioning of the Board of Directors, a list of fundamental areas for development was drawn up, including reducing the number of members serving on the Board of Directors, increasing the share of independent directors and ensuring gender balance, as well as strengthening the expertise of members of the Board of Directors in key areas for the Company. These areas for development will be factored into our plan for streamlining and enhancing operations by the Board of Directors in 2021.

The independent consultant separately noted the impressive willingness of each member of the Board of Directors to engage in the evaluation process by providing active feedback and a focus on results.

INFORMATION ABOUT THE BOARD MEMBERS during the reporting year

COMMITTEE WORK

Board of Directors Committees in 2020

The Board of Directors committees were created to facilitate the work of the Board of Directors and resolve issues that fall within the Board's remit.