CORPORATE GOVERNANCE 126 | 127 Board of Directors

The Board acts pursuant to the laws of the • approval of budget implementation expiry6. It was resolved that the new Russian Federation, the Charter of Russian reports for 2019, approval and Board would comprise 14 directors, and Railways1 and the Regulation on the Board adjustment of budgets for 2020, new Board members were elected. of Directors of Russian Railways2. 2021–2022; • approval of material transactions; Directors who left the Board: The key objective of the Board of • dividend payouts; • ; Directors is to pursue a policy that • participation in and withdrawal from • Grigory Berezkin; supports the Company’s robust growth, other legal entities. • Arkady Dvorkovich; improves the sustainability of its • ; operations, and increases profitability. Furthermore, the Board of Directors • ; The Board also determines the Company’s regularly reviewed procurement reports • Mikhail Rasstrigin. business priorities, approves its long-term for 2019 and 2020, reports on the disposal plans and core programmes, including the of non-core assets, as well as reports on Newly elected directors: budget and the investment programme, the allocation of funds for charity and • ; and defines general principles of and sponsorship activities. • ; approaches to risk management in the • Alexey Sazanov; Company. In 2020, Russian Railways implemented • Irek Fayzullin; an action plan to improve the efficiency of • Sergey Frank; In line with international corporate the Board of Directors3. In particular, the • . governance practices, independent following documents were developed and directors have been elected to the approved by the Board: Andrey Belousov was elected Chairman of Board of Directors of Russian Railways • Onboarding Procedure for Newly Russian Railways’ Board of Directors7. since 2008. Elected Members of the Board of Directors;4 In September 2020, when the sole The Board of Directors supervises the • Procedure for the Preparation shareholder was making the decisions Company’s corporate governance and Submission of Materials and that fall within the competence of the practices. Pursuant to the Company’s Information to Russian Railways’ Board Annual General Meeting of Shareholders, Charter and the recommendations of the of Directors and the Committees of the the number and composition of the Corporate Governance Code, the Board Board of Directors.5 Board of Directors did not change. As at of Directors plays a key role in decision- 31 December 2020, Russian Railways’ making with respect to the Company’s The Board of Directors also approved Board of Directors comprised 14 members. controlled entities. the Regulation on Internal Audit, which provides for the functional In 2020, the Board determined the subordination of the Head of Internal voting position of the Company (its Audit to the Board of Directors. The Board representatives) at meetings of the approved the candidate for the Head governance bodies of its controlled of Internal Audit and the terms of their entities on the following matters: remuneration. • approval of the agenda for general meetings of shareholders; In 2020, the composition of the Board of • election of members of the boards of Directors underwent a number of changes. directors and chairmen of the boards of In March 2020, Russian Railways’ sole directors; shareholder decided to terminate the • election of audit commissions; powers of the Board of Directors before

1 Approved by Resolution No. 585 of the Russian Government dated 18 September 2003. 2 Approved by Order No. 265-r of the Russian Government dated 25 February 2004. 3 Approved by the Company’s Board of Directors, Minutes No. 1 dated 24 July 2019. 4 Minutes No. 19 dated 24 July 2020. 5 Minutes No. 4 dated 21 December 2020. 6 Order No. 552-r of the Russian Government dated 6 March 2020. 7 Resolution of the Board of Directors dated 25 March 2020, Minutes No. 14. ANNUAL REPORT − 2020 RUSSIAN RAILWAYS

Participation of the Board of Directors in sustainable development management

Sustainable development management is provides for a number of investment The Board of Directors regularly reviews an essential part of the Board’s activities. projects to improve the lives of Russian reports on the implementation of the Within its scope of authority, the Board of residents, create a comfortable and safe Charity and Sponsorship Policy, the Directors reviews and approves the basic environment for life and development Group’s Comprehensive Innovative internal documents and monitors their of tourism (the Ultra High-Speed Development Programme, and the implementation. Railway Lines project, infrastructure Consolidated Programme to Improve development projects at Central and Operational Efficiency. In 2020, the Board In 2020, the Board adopted the following St Petersburg transport hubs); also reviewed a report on the progress resolutions on social and environmental • resolved to donate social, educational, against the Conceptual Framework for the matters: sports and cultural facilities to Reform of the Russian Railways Preschool • approved the Group’s Comprehensive municipal and regional public law and School Education for 2017–2020. Innovative Development Programme entities. until 2025, which includes, among other things, the achievement of Amid the COVID-19 pandemic, Russian 2025 KPIs for energy efficiency, safety Railways’ Board of Directors supported and reduction of greenhouse gas the executive bodies’ proposals aimed emissions; at mitigating the damage from the • approved a RUB 370 bn perpetual restrictions introduced in the spring bond programme, with the first in and summer of 2020. Russian Railways issue of green bonds placed in refused to limit working hours for its September 2020; staff, safeguarding a stable working • approved Russian Railways’ investment environment and decent working programme for 2021–2023, which conditions.

Role of the Board of Directors in overseeing the achievement of the UN Sustainable Development Goals

UN Sustainable Development Goals The role of the Board of Directors

In 2017, the Board of Directors approved the Conceptual Framework for the Reform of Healthcare Facilities of Russian Railways (resolution dated 11 September 2017, Minutes No. 9).

The Conceptual Framework for the Reform of the Russian Railways Preschool and School Education for 2017–2020 is in place (resolution dated 11 September 2017, Minutes No. 9).

In 2019, Russian Railways’ Long-Term Development Programme until 2025 was approved in order to achieve the national goals and strategic objectives of the Russian Federation. The financial plan and investment programme for 2021–2023 approved by the Board of Directors on 29 December 2020 (Minutes No. 5) provide more details on the Long-Term Development Programme. CORPORATE GOVERNANCE 128 | 129

UN Sustainable Development Goals The role of the Board of Directors

The investment programme for 2021–2023 approved by the Board of Directors on 29 December 2020 (Minutes No. 5) aims at developing and upgrading the railway infrastructure of the Russian Federation, including in major metropolitan areas.

The Board of Directors approved the Consolidated Programme to Improve Operational Efficiency and Optimise Costs in 2019–2025 (resolution dated 28 June 2019, Minutes No. 20). Programme implementation reports are reviewed on a quarterly basis.

The Board of Directors approved the Group’s Comprehensive Innovative Development Programme until 2025 (resolution dated 26 February 2020, Minutes No. 13), which contains a set of measures (including KPIs) aimed at improving energy efficiency and reducing greenhouse gas emissions. Programme implementation reports are reviewed annually.

Composition of the Board of Directors as Meetings of the at 31 December 2020 Board of Directors in 2020 Representatives of the Russian Independent directors: Federation: • Christian Kern; • Andrey Belousov; • Sergey Nedoroslev; In 2020, the Board of Directors of • Oleg Belozerov; • Sergey Stepashin. Russian Railways held 17 meetings, • Yevgeny Ditrikh; including 2 meetings held in person and • Kirill Dmitriev; Members of the Board of Directors hold 15 conducted in the form of absentee • Andrey Ivanov; no stakes in the charter capital of Russian voting. The Board of Directors considered • Maxim Reshetnikov; Railways. 132 matters focusing on a variety of the • Alexander Ryazanov; Company’s business areas. • Alexey Sazanov; • Irek Fayzullin; • Sergey Frank; • Dmitry Chernyshenko.

Brief biographies of the Board members are available on the Company’s website at ANNUAL REPORT − 2020 RUSSIAN RAILWAYS

Report on the performance of the Board of Directors and material resolutions adopted in 2020

In 2020, as part of its key tasks and • resolved to terminate and appoint • prepared recommendations for the responsibilities, Russian Railways’ Board members of Russian Railways’ Company’s Annual General Meeting of Directors: Management Board; of Shareholders on the approval of an • approved the Non-Core Assets • authorised members of Russian auditor for Russian Railways for 2020 Disposal Plan for 2020; Railways’ Management Board to hold and approved the auditor fees; • approved the Standard for Assessing positions in the governance bodies of • prepared recommendations for the the Implementation of the Long-Term other entities; Company’s Annual General Meeting Development Programme and KPI • decided on the price and terms for of Shareholders on the maximum Achievement; the placement of additional Russian dividend amount, payment procedure • approved the Regulation on Internal Railways shares, and approved the for the 2019 dividends, and distribution Audit; prospectus of perpetual bonds; of net profit for 2019; • approved the Onboarding Procedure • resolved to withdraw from RRC-2, • prepared recommendations for the for Newly Elected Members of the RZD-ZDOROVIE, Vologda RRS, BET, Company’s Annual General Meeting Board of Directors; TransWoodService, and EKZA; of Shareholders on the remuneration • approved the Procedure for the • resolved to participate in Federal payable to members of the Board of Preparation and Submission of Passenger Company and Innovative Directors and the Audit Commission Materials and Information to the Board Engineering Centre as a founder, as based on their performance in the of Directors and the Committees of the well as in RRC-1 and Yakutia Railways; 2019–2020 corporate year. Board of Directors; • pre-approved Russian Railways’ • approved the Regulation on the Quality Annual Report for 2019 and Management System at Russian prepared recommendations for the Railways; Company’s Annual General Meeting • approved Russian Railways’ financial of Shareholders on the approval of the plan and investment programme report; for 2021 and the planning horizon • pre-approved and prepared extending to 2022 and 2023; recommendations for the Company’s • approved the report on the Annual General Meeting of implementation of Comprehensive Shareholders on the approval of the Innovative Development Programme of Russian Railways’ annual RAS financial the Russian Railways Group until 2020 (accounting) statements for 2019 in 2019; (including the income statement);

Remuneration of the Board of Directors

In 2020, the Annual General Meeting According to the Regulation on Remuneration of a member of the of Shareholders of Russian Railways Remuneration and Compensation Company’s Board of Directors consists of adopted a resolution to pay remuneration Paid to Members of Russian Railways’ the basic and additional components. The to the Company’s directors for the Board of Directors2, remuneration and basic component is calculated depending 2019–2020 corporate year in the compensation are calculated and paid to on the participation of directors in amount recommended by the Board of members of the Board of Directors for the Board meetings. The maximum basic Directors1 and in the manner prescribed corporate year and proportionally to the remuneration for a member of the Board by the Regulation on Remuneration time during which they were performing is RUB 4,000,000. and Compensation Paid to Members of their functions for a fee. Russian Railways’ Board of Directors.

1 Resolution of Russian Railways’ Board of Directors dated 29 September 2020, Minutes No. 23. 2 Approved by resolution of Russian Railways’ Board of Directors dated 26 June 2018, Minutes No. 25. Developed in accordance with the Federal Law on Joint Stock Companies, other laws and regulations of the Russian Federation, recommendations of the Federal Agency for State Property Management and the Corporate Governance Code, as well as the Regulation on the Board of Directors of Russian Railways. CORPORATE GOVERNANCE 130 | 131

For taking on additional responsibilities, attending (producing a written opinion for) Compensation Paid to Members of Board members are paid additional at least 75% of the in-person committee Russian Railways’ Board of Directors does remuneration calculated as the basic meetings held over the course of the not apply to directors who are members of portion of remuneration multiplied by the corporate year. the executive bodies of Russian Railways following ratios: or who are restricted or prohibited by • 3.5 – for the functions performed by If a member of the Board of Directors Russian laws from receiving any payments the Chairman of the Board (excluding performs the functions of a member and/ from commercial organisations. individuals who perform the functions or the chairman of a Board committee of the Chairman of the Board of on several committees, additional In the reporting year, the Annual General Directors in their absence); remuneration is paid for the functions Meeting of Shareholders of Russian • 1.5 – for the functions performed by the performed on each committee. Additional Railways resolved to allocate a total chairman of a Board committee; remuneration is calculated and paid of RUB 45.37 m in remuneration to • 0.5 – for the functions of a member of a for the period of actual performance of members of the Russian Railways Board Board committee. additional functions. of Directors.

Additional remuneration for participation A Board member may waive their in the work of the Board committees is remuneration in full or in part. The paid subject to the director personally Regulation on Remuneration and

Committees of the Board of Directors

For the purposes of preliminary Strategic Planning Committee • monitoring the progress on priority consideration of the most important investment projects, including matters and preparation of relevant The Strategic Planning Committee implementation efficiency indicators; recommendations, Russian Railways’ develops recommendations for the Board • issuing and placing the Company’s Board of Directors has the following of Directors on the following matters: securities; committees in place: • determining the priority areas of the • Russian Railways’ dividend policy; • Strategic Planning Committee; Company’s activities; • participation of Russian Railways in • Audit and Risk Committee; • determining the priority areas of other organisations (including direct • Personnel and Remuneration investment and laying out the key and indirect acquisition and disposal of Committee; principles of the investment policy; stakes, and encumbering shares); • Digital Transformation and Innovation • defining the strategic goals of • reorganisation and liquidation of the Committee. Russian Railways and its subsidiaries Company or its controlled entities; and affiliates, monitoring the • innovative development of the The committees are elected by Russian implementation of their respective Company and its subsidiaries and Railways’ Board of Directors and act in strategies, and preparing affiliates; accordance with the regulations on the recommendations for the Board of • approving long-term plans and core committees approved by the Company’s Directors to revise the development programmes, including the annual Board of Directors.1 strategy of Russian Railways and its budget and investment programme. subsidiaries and affiliates;

1 The Regulation on the Strategic Planning Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8) and amended by resolution of the Board of Directors of 19 November 2020 (Minutes No. 1). The Regulation on the Audit and Risk Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8). The Regulation on the Personnel and Remuneration Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8). The Regulation on the Digital Transformation and Innovation Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 30 May 2019 (Minutes No. 17) and amended by resolution of the Board of Directors of 19 November 2020 (Minutes No. 1) ANNUAL REPORT − 2020 RUSSIAN RAILWAYS

Members of the Strategic Planning Committee (as at 31 December 2020)

Maxim Reshetnikov Chairman of the Committee, director Yevgeny Ditrikh director Kirill Dmitriev director Andrey Ivanov director Christian Kern independent director Sergey Nedoroslev independent director Alexander Ryazanov director Alexey Sazanov director Sergey Frank director

Order No. 552-r of the Russian Audit and Risk Committee • preparing recommendations for the Government dated 6 March 2020 Board of Directors on determining the approved a new Board of Directors The Audit and Risk Committee develops Company’s position when evaluating of Russian Railways. By resolution of recommendations for the Board of assets (property, shares, etc.) before the Board of Directors dated 25 March Directors on the following matters: potential transactions; 2020 (Minutes No. 14), the Committee’s • Russian Railways’ accounting • working with the Audit Commission; membership was changed. (financial) statements; • analysing proposals and developing • risk management, internal control recommendations for the Board of The following persons take part in the and corporate governance, including Directors on the approval of long- work of the Committee as permanent control over the reliability and term plans and core programmes of invitees with the right to provide advice on efficiency of the risk management subsidiaries and affiliates, as well agenda items: and internal control system and the as their annual budgets included in • Grigory Berezkin, Chairman of the corporate governance system; a list annually approved by Russian Board of Directors, ESN; • reviewing transactions that fall Railways’ Board of Directors, and the • Alexey Brischuk, Aide to the First within the competence of the Board corresponding budget reports. of the Russian of Directors in order to identify Federation; potential interested- or related-party In 2020, the membership of the Audit and • Dmitry Filatov, Aide to the First transactions; Risk Committee changed twice: Deputy Prime Minister of the Russian • conducting internal and external • Irek Fayzullin and Andrey Ivanov joined Federation; audits, including ensuring the the Committee upon resolution of the • Vadim Mikhailov, First Deputy CEO, independence and impartiality of Board of Directors dated 25 March Russian Railways; the internal audit function, as well 2020 (Minutes No. 14); • Alexander Plutnik, Deputy CEO, as verifying the independence and • existing members were elected by Russian Railways; impartiality of Russian Railways’ resolution of the Board of Directors • Andrey Zhemchugov, Corporate external auditors and establishing dated 19 November 2020 (Minutes Secretary, Russian Railways. whether they have any conflicts of No. 1). interest; In 2020, the Committee held seven • combating misconduct by the meetings.1 Company’s employees or third parties;

Members of the Audit and Risk Committee (as at 31 December 2020)

Sergey Stepashin Chairman of the Committee, independent director Sergey Nedoroslev independent director Andrey Ivanov director Irek Fayzullin director

1 For the list of items considered see the Appendix. CORPORATE GOVERNANCE 132 | 133

The following persons take part in the • authorising the Chairman or members • selecting an independent consultant work of the Committee as permanent of the Management Board to hold to advise on the remuneration of invitees with the right to provide advice on positions in the governance bodies of members of the Company’s executive agenda items: other entities; bodies and other key executives. • Dmitry Filatov, Aide to the First • determining the remuneration and Deputy Prime Minister of the Russian compensation to be paid to members Order No. 552-r of the Russian Federation; of the Audit Commission; Government dated 6 March 2020 • Anatoly Chabunin, Deputy CEO, • determining the remuneration and approved a new Board of Directors Director for Internal Control and Audit, compensation to be paid to members of Russian Railways. By resolution of Russian Railways; of the Board of Directors; the Board of Directors dated 25 March • Sergey Burkov, independent expert; • determining the voting position of 2020 (Minutes No. 14), the Committee’s • Andrey Zhemchugov, Corporate Russian Railways (its representatives) membership was changed. Secretary, Russian Railways. on matters regarding the number or election of directors or early In 2020, the Committee held twelve termination of their office, or the meetings, including two in the form of appointment or dismissal of heads absentee voting.1 of governance bodies or members of supervisory bodies to be resolved upon by the general meetings of Personnel and Remuneration shareholders and boards of directors Committee of the respective subsidiaries and affiliates included in the list annually The Personnel and Remuneration approved by Russian Railways’ Board Committee develops recommendations of Directors; for the Board of Directors on the following • developing and reviewing Russian key matters: Railways’ remuneration policy in • determining the Management Board respect of the Company’s directors, membership (except for the CEO, members of its executive bodies, and Chairman of the Management Board); other key executives;

Members of the Personnel and Remuneration Committee (as at 31 December 2020)

Sergey Nedoroslev Chairman of the Committee, independent director Alexander Ryazanov director Sergey Frank director

The following persons take part in the • Alexey Brischuk, Aide to the First work of the Committee as permanent Deputy Prime Minister of the Russian invitees with the right to provide advice on Federation; agenda items: • Andrey Zhemchugov, Corporate • Dmitry Shakhanov, Deputy CEO, Secretary, Russian Railways. Russian Railways; • Vladimir Gaponko, Director for In 2020, the Committee held seven Operational Efficiency – Head of the meetings.2 Department of Economics, Russian Railways;

1 For the list of items considered see the Appendix. 2 For the list of items considered see the Appendix. ANNUAL REPORT − 2020 RUSSIAN RAILWAYS

Digital Transformation and • defining the policy and evaluating Order No. 552-r of the Russian Innovation Committee the effectiveness of Russian Railways Government dated 6 March 2020 and its controlled entities as regards approved a new Board of Directors The Digital Transformation and Innovation information security and the reliability of Russian Railways. By resolution of Committee develops recommendations of information systems; the Board of Directors dated 25 March for the Board of Directors on the following • considering the budget, investment 2020 (Minutes No. 14), the Committee’s key matters: programme priorities, and key membership was changed. • determining the priority areas for investment projects of Russian digital transformation and innovative Railways and its controlled entities development of Russian Railways and as regards digital transformation, its controlled entities; information technology and innovative • control over the implementation of development, as well as control over digital transformation and innovative their execution and implementation; development strategies and the • control over the implementation of the development of recommendations for import substitution policy as regards their revision; information technology and software.

Members of the Digital Transformation and Innovation Committee (as at 31 December 2020)

Dmitry Chernyshenko Chairman of the Committee, director Kirill Dmitriev director Christian Kern independent director Sergey Nedoroslev independent director

The following persons take part in the • Dmitry Shcherbinin, Deputy Head of work of the Committee as permanent the Office of the First Deputy Prime invitees with the right to provide advice Minister of the Russian Federation. on agenda items: • Sergey Kobzev, Chief Engineer and In 2020, the Committee held two Deputy CEO, Russian Railways; meetings.1 • Yevgeny Charkin, Deputy CEO, Russian Railways;

1 For the list of items considered see the Appendix.