MTS’s Corporate Responsibility Principles

MTS’s Code of Business ConductFor more information on the Code of Business Conduct and Ethics see our corporate website. and Ethics (the “Code”) contains key principles and a set of standards and requirements that Company employees follow in their day-to-day operations. The provisions of the Code are based on the applicable Russian laws and generally accepted business ethics principles. Sections of the Code set forth the Company’s responsibility in its relations with employees, customers and society. The Code also sets out procedures for interaction with partners and suppliers, and provisions on the role of management, protection of intellectual property, and dealing with reported breaches of the Code. The Code contains information about all compliance programs within MTS’s Unified Compliance System.

MTS’s Anti-Corruption Program is based on recommendations of regulatory authorities and relevant international organizations, as well as best practice in developing corporate anti-corruption compliance programs. Steps are taken to engage management in the development and implementation of the program (the “Tone from the Top”). To disseminate up-to-date anti-corruption practices, training is provided to employees and members of the management bodies on the principles and standards of compliance with applicable anti-corruption laws in the Russian Federation as well as other jurisdictions. In addition, regular corruption risk assessment is carried out and anti-corruption procedures are implemented. We ensure there is a due diligence process for both legal entities as counterparties and individuals with whom the Company intends to sign a permanent or a temporary employment agreement.

A classroom anti-corruption compliance training course was taken by over 22 thousand MTS Group employees in 2019, and over 52 thousand employees of the Company and its subsidiaries completed the updated Anti-Corruption Laws Compliance e-learning course. An open dialog webinar for employees was held with the Director for Business Ethics and Compliance. Throughout the year, articles and posts on anti-corruption compliance were published in the corporate magazine and in the compliance blog launched on the intranet portal, and anti-corruption posters were displayed as screensavers on corporate desktops and laptops. Every year on October 23, the Company marks the corporate Ethics and Compliance Day. The events of the day, held for the employees of MTS and its subsidiaries in Russia and beyond, include trainings, master classes, compliance contests and webinars. The slogan of the 2019 Ethics and Compliance Day was “Compliance is good, it’s the right thing, and it’s ethical”.

The Company continuously monitors changes in the antitrust legislation, analyzes antitrust practices and risk prevention experience at other companies, improving its control procedures and adapting training and information materials for its employees.

The annual risk review completed in 2019 found no significant changes in the Company’s antitrust risk map. Employee guidance was provided on an ongoing basis, the antitrust compliance manager participated in the business processes that are significantly exposed to antitrust risks, i.e. pricing, contracting, interactions with telecoms operators, etc.

Employee training is an important element of the compliance system. In 2019, the training of employees on antitrust requirements continued, including introduction of a remote training course, which made it possible to expand the training geography and involve more employees compared to previous periods.

As a company whose securities are traded both in Russia and the U.S., MTS places a strong emphasis on maintaining an effective system of protecting insider information. The Company operates a system of measures, procedures and processes aimed at preventing breaches of insider information laws. This framework rests on two core documents, the Insider Information Legislation Compliance Policy and the Regulations on the Principles and Procedures for Preventing Trading on MTS’s Insider Information. These documents establish the procedure for using insider information and access to it, the procedure for maintaining the insider employee list and the list of insider information items, as well as the procedure for submission of information upon requests from the Bank of Russia and the Moscow Exchange.

Since 2014, the Company has run a classroom training program for all of its insider employees. All employees familiarize themselves with the Company’s regulations aimed at preventing breaches of insider information laws.

MTS implements the concept of a diversified holding company that develops diverse services for a single customer base. This strategy calls for increased attention to personal data security. In 2019, the Company further improved its approach to personal data processing as prompted by the ongoing business process transformation, introducing business process-level automated personal data processing control systemsDocuments governing personal data processing: • Federal Law No. 152-FZ dated July 27, 2006 On Personal Data, including amendments requiring that processing of Russian nationals’ personal data be localized in Russia
• Resolution of the Government of the Russian Federation No. 687 dated September 15, 2008 On Approval of the Regulations on the Specifics of Non-Automated Personal Data Processing
• Resolution of the Government of the Russian Federation No. 1119 dated November 1, 2012 On Approval of Requirements for Personal Data Protection when Processing Data in Personal Data IT Systems
• MTS PJSC Personal Data Processing Policy. . A template was introduced enabling legally viable exchange of information with international counterparties. The risks of non-compliance with personal data laws are reflected in the Company’s risk management system and are reviewed on a quarterly basis.

In 2019, 3,576 MTS employees took a remote training course on the Personal Data Processing at MTS According to Federal Law No. 152-FZ.

The procedure for subscribers’ personal data processing is set forth in the terms and conditions of communications services that are an integral part of our service contract The terms and conditions of services and the MTS PJSC Personal Data Processing Policy are available on the Company’s official website.. Where personal data processing involves MTS’s partners, a special confidentiality agreement is signed that requires the partners to perform personal data processing, sets forth the requirements for the processing procedures and ensuring personal data security, and the information security tools required when transferring such data.

To prevent confidential information leaks from the intranet, potential leak channels are monitored. This monitoring process is an integral part of our data protection and data breach detection framework. The Communications Confidentiality and Information Security Department of MTS’s Integrated Safety and Security Center monitors user access to information covered by communications confidentiality policies. When instances of unauthorized access to such information are detected, internal investigations are conducted, with the findings submitted to law enforcement authorities.

To minimize the human factor, posters are displayed in the Company offices explaining the principles of handling personal data and the requirements for their protection with technical means. Screensavers reminding users that confidentiality of personal data must be ensured are displayed on corporate computers. All new employees take a mandatory brief training course on personal data processing, with mandatory testing at the end of the course.

The Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation Financing (AML/CFT/CPF) program at MTS was developed based on the requirements of the applicable laws. The Regional Security Department monitors the subscriber base on a daily basis for any individuals that are on the list of persons designated as terrorists/extremists. Any customer attempt to conduct a high-risk transaction triggers a check against the invalid passport database and the terrorist/extremist list. The Company also monitors on a daily basis contract terminations with account balance refunds and other dubious transactions made by subscribersIn accordance with the Federal Financial Monitoring Service’s Order No. 103 dated May 8, 2009 On Approval of Recommendations for Developing Criteria for Detecting and Identifying Signs of Unusual Transactions...

In 2019, the Company approved the new version of its Anti-Money Laundering and Combating the Financing of Terrorism Policy. Checking candidates and employees against the terrorist/extremist list has also been automated.

Health and Safety Management System For more information on the system see the Our Employees section.

The Company operates a two-tier health and safety management system focused on creating a safe working environment, prevention of occupational injuries and employee workplace safety training. The annual health and safety budget has been on an upward trend as the Company’s headcount grows.

MTS fully supports the globally recognized approach to observing human rights and seeks to guarantee and protect human rights through the continuous improvement of its feedback system. In 2019, the Company continued to develop its Human Rights at the Workplace compliance program in accordance with the recommendations from the self-assessment under ISO 26000:2010, Guidance on social responsibility, and the business process-level compliance risk assessment outcomes from an audit conducted by an external consultancy. In addition to generating risk maps, recommendations were also developed under the program on improving the control environment. The human rights compliance risk management system is part of MTS Group’s integrated risk management, with the relevant risks reviewed on a regular basis. A Business and Human Rights webinar was organized for Company employees.

The Company operates a Single Hotline for employees to get professional advice from relevant functions. Employees can use the Single Hotline to resolve issues related to compliance with the Code of Business Conduct and Ethics and to organizational conflicts, report abuse of office and breaches of the Anti-Corruption Laws Compliance Policy or the Conflict of Interest Management Policy. When contacting the Single Hotline, employees may choose not to provide their e-mail for feedback. The Company protects all employees using the hotline against all forms of retaliation or discrimination. In 2019, 74 reports were received on the Single Hotline regarding employee rights at the workplace. All reports were handled in a business-as-usual manner.

In 2019, work continued in the Inclusivity and Creating an Inclusive Environment for People with Disabilities area. Audits of several MTS’s Moscow offices and retail storesRussian Telephone Company JSC. were conducted (including surrounding grounds) to assess their accessibility for people with various types of disabilities and reduced mobility. The Understanding Disability and Communicating with People with Disabilities webinar was produced. The Human Rights at the Workplace section was created on the intranet portal. The mandatory supplier’s questionnaire was updated to include questions related to human rights.

The Company operates a two-tier health and safety management system focused on creating a safe working environment, prevention of occupational injuries and employee workplace safety training. The annual health and safety budget has been on an upward trend as the Company’s headcount grows.

EnvironmentFor more information on this aspect see the Environment section of this Report.

In its activities, MTS strives not only to have a minimal impact on the environment but also to reduce this impact to the best of its ability. In achieving this objective, the Company is guided by Russian environmental laws and principles of responsible business conduct, and strives to enhance the environmental culture among its employees and partners and to implement services based on advanced technologies.

As part of our efforts to promote the Environment compliance program, regular mandatory trainings for branch managers and environmental safety officers were conducted in 2019. A total of 27 facilities with adverse environmental impact were registered across nine branches. A new paper waste storage system was introduced in offices following the enactment of new separate waste collection requirements. Environmental protection and safety experts analyzed all categories of the Company’s products/works/services specified in the Procurement Policy to determine their impact on environmental protection and safety.

As a company that sees innovation as a key to success, MTS treats intellectual property as a most valuable asset. MTS protects its intellectual property and respects the intellectual property of other market participants. To this end, MTS PJSC Code of Corporate Conduct and Business Ethics has been supplemented with the Protection of Intellectual Property section.

The Company has approved the Policy on Managing Intangible Assets at MTS PJSC and its Subsidiaries, which sets out the principles for managing, recording and auditing intellectual property, and describes the principles, components and operating procedures of MTS Group’s intellectual property risk management system.

To drive risk management, we have included intellectual property (IP) clauses facilitating IP risk prevention in all internal documents regulating IP-related business processes. Risks are registered in a dedicated automated system and reviewed annually starting from 2019.

To enable effective management of MTS Group’s intellectual property, a dedicated division, Intellectual Property Management Group, has been set up within Corporate and Legal. The team includes experts with the status of a patent attorney.

MTS Group employees are provided with regular training in the rules of handling intellectual property. The Intellectual Property section launched on the intranet portal allows every employee to learn about the rules of handling intellectual property and about applicable regulations, as well as to view recordings of employee trainings.

In 2019, the Corporate and Legal Block was awarded by the legal community in the Best Legal Departments national contest for effective intellectual property management.

MTS Group has an approved Integrated Risk Management Policy. Integrated risk management is aimed at providing reasonable assurance that the Company will achieve its strategic objectives and that MTS Group’s risks are kept within the levels acceptable to the Company management. Risk management at MTS Group complies with the generally accepted conceptual framework of risk managementEnterprise Risk Management – Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).. Our risk register is updated on a quarterly basis.

Risk management is integrated into the policy development, strategic, budget, investment, business planning and change management processes, as well as purchasing procedures.

The most significant risk factors that are related to CSR priority areas and could potentially affect MTS PJSC’s performance are listed below