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10. Corporate governance

10. Corporate
governance

MTS OJSC Corporate Governance Structure in 2010

Individual Executive Body of the Company: the President

General Shareholders Meeting

Collective Executive Body: the Management board

Board of Directors

Financial and usiness oversight bodies

T

hanks to the Company's existing highly effective system of corporate governance, MTS is able not only to balance the interests of shareholders and management, but also to effect cooperation between them based on trust and a high culture of business relationships and ethical norms, which clearly illustrates the Company's impeccable business reputation in business circles.

The principal features of corporate governance for MTS are:

  • full protection of the rights and interests of shareholders;
  • transparency (disclosure) of relevant financial information and information on the Company's activities;
  • ability to monitor the activities of the Company's Management Board;
  • independence of the Board of Directors in defining the Company's strategy and approving business plans and important business decisions;
  • centralization of decision-making on key issues relating to the Company's activities.

The Company aspires to meet international standards of corporate governance. We comply with the Code of Ethics and Code of Corporate Conduct which set out a number of important principles aimed at both directors and executives of the Company (detailed information on compliance with the Code of Corporate Conduct is set out in Annex 1). MTS fully complies with statutory requirements regarding prescribed procedures for major and related-party transactions (detailed information on compliance with transaction approval procedures is set out in Annex 2).

The Company has corporate bylaws governing the activities of management and control bodies. You can get familiarized with these provisions at http://www.mtsgsm.com/information/corporate_governance/statutes/ .

MTS OJSC follows a common corporate policy towards its subsidiaries and affiliated companies, and other entities where the Company is participant, founder or member. All related-party transactions were made on arm's length basis.

The Company constantly strives to improve our corporate governance, drawing on the experience of other companies, following recent legislative changes and progressive standards in this area, and adjusting our corporate governance system accordingly. To improve our corporate governance system, during the reporting year we approved amendments to the Charter of MTS OJSC and Regulations of MTS OJSC General Shareholders Meeting. The necessity of approval of these documents, as amended, was caused by changes in the Law "On Joint-Stock Companies".

The approved documents provide greater protection for the Company's shareholders, investors, and partners, fostering team spirit and a desire to work and achieve substantial results.

MTS OJSC discloses information in the form of Annual Report, quarterly reports, lists of affiliated entities, material facts affecting the business, data that can have a material effect on the value of securities.

To ensure information transparency, the Company adopted the Regulations of Information Policy that are placed on MTS OJSC site at: http://www.mtsgsm.com/information/corporate_governance/statutes/policy_statement/.

Standard & Poor's* Corporate Governance Score*

Standard & Poor’s

April 04, 2011 MTS OJSC is assigned the highest corporate governance score (GAMMA) in CIS countries.

Current GAMMA scores of GAMMA 7 were also assigned to the Brazilian banks Santander Brazil SA and Banco Bradesco SA.

There are no higher corporate governance scores to date.

* The international rating company Standard & Poor's, whose activity is based on the principles of honesty, objectivity and innovation, has been one of the global leaders in risk analysis for already 150 years. In 1998, Standard & Poor's began to develop criteria and methods for assessing corporate governance practices and since 2002 started to conduct an independent interactive analysis of companies' and banks' corporate governance system.

** GAMMA is an abbreviation from the English words Governance, Accountability, Management Metrics and Analysis.

MTS OJSC Corporate Governance Structure in 2010

MTS OJSC Corporate Governance Structure in 2010

The highest management body of the Company is the General Shareholders Meeting.

he Board of Directors carries out overall management of the Company's activity and determines the Company's development strategy.

The management bodies of the Company, i.e. the Management Board (collective executive body) and the President (individual executive body), are responsible for daily management of the Company.

In compliance with the requirements of the Russian law, the independent Auditor and the Auditing Commission exercise control over the Company's financing and operating activities of the Company.

General Shareholders Meeting

The Company's shareholders of the Company participate in the management of the Company through decision-making at general shareholders meetings. Shareholders can considerably influence the business via voting rights. In particular, the powers of the general shareholders meeting include the power to elect the Company's management and control bodies, approve major and related-party transactions, pay (declare) dividends and consider several other important issues

The Annual General Shareholders Meeting (June 24, 2010) and an Extraordinary General Shareholders Meeting (December 23, 2010) were held during 2010. Shareholders' meeting minutes are posted at: http://www.company.mts.ru/ir/control/shareholders_meetings/resolution/. Materials for shareholders meetings are posted at: http://www.mtsgsm.com/information/corporate_governance/shareholders/.

The Annual General Shareholders Meeting on June 24, 2010 considered the following issues:

  • Approval of MTS OJSC Annual Report, MTS OJSC Annual Financial Statements, including MTS OJSC Profit & Loss Report, distribution of MTS OJSC profit and losses based on FY 2009 results (including the payment of dividends);
  • Election of members of MTS OJSC Board of Directors;
  • Election of members of MTS OJSC Auditing Commission;
  • Approval of MTS OJSC auditor;
  • Approval of MTS OJSC Charter, as amended;
  • Approval of the Regulations of MTS OJSC General Shareholders Meeting, as amended.

The Extraordinary General Shareholders Meeting on December 23, 2010 considered the following issues:

  • Reorganization of MTS OJSC through the takeover of COMSTAR-United TeleSystems Open Joint Stock Company, United TeleSystems Closed Joint Stock Company, Capital Closed Joint Stock Company, Communications Operator Closed Joint Stock Company, Mobile TeleSystems Closed Joint Stock Company, COMSTAR-Direct Closed Joint Stock Company by MTS OJSC;
  • Reorganization of MTS OJSC through the takeover of Dagtelecom Closed Joint Stock Company, and approval of the Takeover Agreement;
  • Reorganization of MTS OJSC through the takeover of Eurotel Open Joint Stock Company, and approval of the Takeover Agreement;
  • Increasing the charter capital of MTS OJSC through the placement of additional shares;
  • Amendments and additions to the Charter of MTS OJSC.

Board of Directors

MTS OJSC Board of Directors is a key element of the Company's corporate governance system. The Board of Directors represents the interests of shareholders and is responsible for the rise in business value by organizing efficient management. The Board of Directors carries out overall management of the Company's activity, except for addressing issues within the purview of the General Shareholders Meeting.

The main objectives of the Board of Directors are:

  • development and analysis of the corporate-wide strategy and control over its implementation;
  • ensuring that the activities of the Company's executive bodies and top executives are controlled and assessed;
  • increasing the Company's capitalization, strengthening its market positions, achieving and retaining the Company's competitive advantage;
  • maintaining a good financial standing, increasing income and profitability;
  • protection of rights and legitimate interests of the Company's shareholders.

Members of the Board of Directors of the Company are elected by the General Shareholders Meeting for a term lasting until the next Annual General Shareholders Meeting. The members of the Board of Directors are elected by cumulative voting at a General Shareholders Meeting.

Resolutions of the Company's Board of Directors are adopted by majority of votes of directors present at the meeting, save as otherwise provided for by the Charter and law. Each member of the Board of Directors has only one vote in decision-making at the Board of Directors meeting.

A meeting of the Board of Directors is convened by the Chairman of the Board of Directors, at his/her own discretion, or at the request of a member of the Company's Board of Directors or Auditing Commission, the auditor, the President of the Company and other persons specified in the Federal Law "On Joint-Stock Companies" and the Company's Charter.

The Chairman of the Board of Directors organizes and manages the Board of Directors' activities in accordance with the approved meetings schedule.

A notification of the meeting, together with attached materials, is sent to each member of the Board of Directors at least 10 calendar days prior the meeting.

An unscheduled meeting is called within 15 days following the request of conducting such meeting.

Members of the Board of Directors

MTS OJSC Board of Directors consists of nine (9) members.

The Company is interested that the Board of Directors includes at least three independent directors, according to global corporate governance standards and provisions of the Company's corporate bylaws. Director independence criteria are set forth in the Regulations of MTS OJSC Board of Directors (you can find these regulations at: http://www.mtsgsm.com/information/corporate_governance/statutes/board_of_directors/) and are in line with the best global corporate governance practice.

Currently, three independent directors are members of the Board of Directors. The presence of independent directors allows to ensure a reasonable balance between all stakeholders: the Company itself, its shareholders and other stakeholders.

The Board of Directors was elected at the Annual General Meeting of Shareholders of MTS OJSC held on June 24, 2010, with a term commencing upon election and lasting through 2010.


Ēīģģåš Šīķ

Chairman of the Board of Directors

Ron Sommer

Born in 1949.

In 1980 Mr. Sommer joined the Sony Group as Managing Director of its German subsidiary, in 1986 he became Chairman of the Management Board of Sony Deutschland; in 1990 Mr. Sommer was appointed Director and Chief Operating Officer of Sony Corporation in the USA. In 1993 he joined Sony Europe in the same function.

From May 1995 to July 2002, Mr. Sommer was Chairman of the Management Board of Deutsche Telekom AG. In 2003 Mr. Sommer was elected Chairman of the International Advisory Board at AFK Sistema OJSC.

In 2005 Mr. Sommer joined the Board of Directors of AFK Sistema OJSC as independent director, and also performed duties of Chairman of the Committee for Investor Relations. In 2009 Mr. Sommer was appointed the First Vice President of AFK Sistema OJSC, Head of the Telecommunication Assets Business Unit.

Mr. Sommer conducts vigorous activity in the corporate governance being a member of the Board of Directors of the Tata Consultancy Services, Munich Reinsurance, SISTEMA SHYAM TELESERVICES Limited and other companies, and also member of the International Advisory Council of Blackstone Group.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Alexey Nikolaevich Buyanov

Deputy Chairman of the Board of Directors

Alexey Nikolaevich Buyanov

Born in 1969.

Mr. Buyanov graduated from the Moscow Physical-Technical Institute (MFTI).

From 1992 to 1994, he was an intern investigator with the Institute for Problems in Mechanics (IPM) of the Russian Academy of Sciences. He started work at AFK Sistema OJSC in 1994, and from 1994–1995 held various positions in Sistema's Property Complex. In 1995 he was appointed head of department at Sistema-Invest and later Vice President of Sistema-Invest.

In 1997 he was appointed First Vice President of Sistema-Invest. From 1998 to 2002, he served as Vice President of MTS OJSC. In July 2002 he was appointed Vice President of AFK Sistema OJSC to run the department for financial restructuring. Currently, he is Senior Vice President of AFK Sistema OJSC, heading the financial and investment complex.

Mr. Buyanov is a member of the Board of Directors of Sistema Holdings Ltd., ECU GEST HOLDING S.A. and a number of Russian companies.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Anton Vladimirovich Abugov

Member of the Board of Directors

Anton Vladimirovich Abugov

Born in 1976.

ĪMr. Abugov graduated from the Academy of National Economy under the Government of the Russian Federation.

In 1995 he was involved in developing the infrastructure and a regulatory framework for the stock market in Russia. Between 1995 and 2002 Mr. Abugov was Director of Corporate Finance at United Financial Group, seeing through a number of major fundraising, strategic consultancy, and merger and acquisition projects in various industries in Russia and Eastern Europe.

In 1999 he was an advisor to RAO UES of Russia. From 2003 to 2006, he was in charge of the Corporate Finance Department at AKB Rosbank. Currently he has been serving as Sistema's First Vice President and Head of Strategy and Development.

Mr. Abugov is a member of the Board of Directors of NK Russneft OJSC, Bashneft OJSC and other companies.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Charles Dunstone

Member of the Board of Directors

Charles Dunstone

Non-executive Independent Director of MTS OJSC

Born in 1964.

Mr. Dunstone graduated from the Liverpool University.

Since March 2010, he has served as the Chairman of the Board of Directors of TalkTalk and Carphone Warehouse.

He co-foundered Carphone Warehouse ā 1989 and served as the CEO of the company until 2010.

He founded TalkTalk in 2003 and served as the CEO of the Company until 2010.

rd of Directors of Best Buy Europe Distributions Limited, The Daily Mail and General Trust, Clareville Capital Partners LLP, Independent Media Distribution PLC and some other companies. He previously served on the Board of Directors of Halifax Bank of Scotland.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Sergey Alexeevich Drozdov

Member of the Board of Directors

Sergey Alexeevich Drozdov

Born in 1970.

Mr. Drozdov graduated from the S. Ordzhonikidze State Academy of Management in Economics in 1993. Cand, sc. (Economics).

From 1994 to 1995, Mr. Drozdov headed the financial innovations and marketing department at the City of Moscow's Property Fund. He has been working at Sistema since 1995. He was the executive director of the department of development and investments from 1995 to 1998, and from 1998 to 2002 served as Vice President, Acting President, and First Vice President of Sistema-Invest OJSC. Mr. Drozdov became head of the Corporation's department of corporate property in April 2002. He was appointed Acting First Vice President of Sistema on May 15, 2002, and First Vice President of Sistema in September 2002. In April 2005 he became Senior Vice President and Chief of the property complex.

Mr. Drozdov is a member of the Board of Directors of Sviyazinvest OJSC, Bashneft OJSC, NK Russneft OJSC and other Russian companies.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Tatiana Vladimirovna Yevtoushenkova

Member of the Board of Directors

Tatiana Vladimirovna Yevtoushenkova

Born in 1976.

Ms Yevtoushenkova graduated from the Finance Academy under the Government of the Russian Federation.

From 2007 to 2008, she was Advisor to the President of MTS OJSC. Ms. Yevtuoshenkova joined the Company in October 2002. Prior to that, from December 1999, she was the Director of the Investments Department at Sistema Telecom.

From 2002 to 2007, Ms. Yevtoushenkova was MTS OJSC Vice President of Strategy and Development.

Since 2008 she has been an advisor to the President of Sberbank of Russia OJSC.

The member of the Board of Directors held 136,968 common registered shares of MTS OJSC during the reporting period.


Stanley Miller

Member of the Board of Directors

Stanley Miller

Non-executive Independent Director of MTS OJSC

Born in 1958.

Mr. Miller received a degree in law and administration from the University of South Africa and a degree in human resources management from the Institute of Administration and Commerce in Cape Town, South Africa. He has also completed several business management programs, including the Proteus Leadership program at the London Business School.

From 1998 to 2010, he served in a number of top leadership positions at KPN (the Netherlands), including the CEO of KPN Mobile International, the CEO and Chairman of the Supervisory Board of E-Plus, the CEO and the Chairman of the Board of Directors of BASE in Belgium. From 1991 to 1997, Mr. Miller headed operating and corporate governance at NetHold Group companies, including he served as the CEO of Telepiu, Italy. Prior to that, he served as the CEO of Electronic Media Network in South Africa and the Netherlands.

Mr. Miller is a member of the Board of Directors of AINMT (AB) Sweden, KPN Royal NV, E-Plus GMBH Germany, Arrow Creak investments 75 (PTY) LTD South Africa.

Previously, he was a member of the Board of Directors of Royal KPN, Hutchison 3G UK Ltd, IP Global Net NV and VESTA Technologies.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Paul James Ostling

Member of the Board of Directors

Paul James Ostling

Non-executive Independent Director of MTS OJSC

Born in 1948.

Mr. Ostling holds a law degree from the Fordham University School of Law and a B.S. in Mathematics and Philosophy from Fordham University. He has 30 years of managerial experience.

From 2003 to 2007 he was the Chief Operating Officer (COO) of Ernst & Young. Prior to that he held a number of other management positions at Ernst & Young: Global Executive Partner from 1994 to 2003, Vice Chairman and National Director of Human Resources from 1985 to 1994, and associate and assistant general counsel from 1977 to 1985.

From 2004 to 2008, Mr. Ostling was the Chairman of the Audit Commission of United Services Organization. From 2003 to 2007, he was a board member of Transatlantic Business Dialogue (TABD), and co-chairman of the Ukrainian Advisory Council with responsibility for foreign investments. Mr. Ostling is also the Chairman of the Business Council for International Understanding (BCIU).

rom 2007 to 2009, Mr. Ostling was the CEO of KUNGUR Oilfield Equipment & Services.

Since 2007 Mr. Ostling has been Deputy Chairman of the Board of Directors of Cool nrg. PTY, members of the Board of Directors of Promsviyazbank OJSC, and since 2011member of the Board of Directors of the Moscow Airport Domodedovo.

The member of the Board of Directors held no shares of MTS OJSC during the reporting year.


Mikhail Valeryevich Shamolin

Member of the Board of Directors

Mikhail Valeryevich Shamolin

Born in 1970.

Mr. Shamolin graduated from Moscow Automobile and Road Institute in 1992. In 1993 he got the second degree from the Russian Academy of Government Service under the President of the Russian Federation. From 1996 to 1997, he studied at Wharton Business School, where he completed finance and management course for top managers.

Prior to joining MTS, Mr. Shamolin served at Interpipe Corp. in Ukraine as Managing Director of the Ferroalloys Division. From 1998 to 2004, he was employed with the international consulting company McKinsey&Co.

Mr. Shamolin was invited to join MTS OJSC in July 2005 as Vice President of Sales and Customer Service. On August 15, 2006 he was transferred to the position of Vice President and Director of MTS Russia Business Unit. On May 29, 2008 he was appointed President and CEO of the Company.

The powers of MTS OJSC M.V. Shamolin were terminated early by resolution of MTS OJSC Board of Director on March 04, 2011.

Since March 10, 2011, Mr. Shamolin has been serving as President of AFK Sistema OJSC.

Mr. Shamolin is a member of the Board of Directors of SISTEMA SHYAM TELESERVICES LIMITED, International Cell Holding LTD, MTS UKRAINE PrJSC and other companies.

The member of the Board of Directors held 174,890 common registered shares of MTS OJSC during the reporting period.

Members of the Company's Board of Directors prior to the Annual General Meeting of Shareholders in 2010

  • Ron Sommer (Chairman), b. 1949
  • Alexey Nikolaevich Buyanov (Deputy Chairman), b. 1969
  • Anton Vladimirovich Abugov, b. 1976
  • Mohanbir Gyani, b. 1951
  • Sergey Alexeevich Drozdov, b. 1970
  • Tatiana Vladimirovna Yevtoushenkova, b. 1976
  • Daniel Crawford, b. 1939
  • Paul Ostling, b. 1948
  • Mikhail Valerievich Shamolin, b. 1970.

The changes in the composition of the Board of Directors of MTS OJSC were related to compliance with the requirement of Federal Law No. 208-FZ of December 26, 1995, "On Joint-Stock Companies" of mandatory election of a company's board of directors at its annual general meeting of shareholders.

During the past 2010, the Board of Directors held 20 meetings. In preparing and making decisions, MTS OJSC Board of Directors strived to take into account the interests of shareholders, the Company's employees, creditors, local communities and other interest groups of society.

Directors' attendance at Board meetings in 2010

Director Meetings in praesentia /td> Meetings in absentia
Ron Sommer1 9 11
Alexey Nikolaevich Buyanov1 9 11
Anton Vladimirovich Abugov1 8 11
Mohanbir Singh Gyani2 3 8
Sergey Alexeevich Drozdov1 9 11
Tatiana Vladimirovna Yevtoushenkova1 9 11
Daniel Crawford2 3 8
Paul Ostling1 9 11
Mikhail Valerievich Shamolin1 9 11
Charles Dunstone1 6 4
Miller Stanley1 6 4

1 Joined the Board of Directors elected at the Annual General Shareholders Meeting on June 24, 2010

2 Did not join the Board of Directors elected at the Annual General Shareholders Meeting on June 24, 2010

Secretary of the Board of Directors

The main objective of the Secretary of MTS OJSC Board of Directors is to ensure that the Company's management bodies comply with the requirements of law and the Company's bylaws guarantying that the rights and interests of its shareholders are exercised.

The normative basis for the Secretary of MTS OJSC Board of Directors to perform his functions is, in addition to the Charter, the Regulations of MTS OJSC Board of Directors approved at the Annual General Meeting of MTS OJSC Shareholders on June 25, 2009.

Since 2006 the powers of the Secretary of MTS OJSC Board of Directors have been performed by Maxim Alexandrovich Kalinin, the Director of Corporate Governance.

In 2010, MTS Director of Corporate Governance Maxim Kalinin was the winner of the National Award "Director of the Year" * in the category "Director of Corporate Governance — Corporate Secretary".

Maxim Kalinin

“The improvement of corporate governance is a strategic goal for the Russian market today, taking into consideration that the establishment of this most important function of investors’ cooperation with corporations began just a little more than ten years ago. We are very thankful that the expert community highly appreciated existing MTS corporate governance standards, the expertise of our team and the corporate governance improvement strategy being implemented by our Company”, said Maxim Kalinin, the Director of Corporate Governance.

*About the Award. The National Award "Director of the Year" is a public award for achievements in corporate governance. The award was established by the Association of Independent Directors under the auspices of PwC. It has been organized each year since 2006. Since 2009 the partner of the National Award "Director of the Year" is the Russian Union of Industrialists and Entrepreneurs (RUIE).

Main issues considered by the Board of Directors in 2010

  1. Approval of participants of the Long-term Incentive Program for MTS OJSC Employees;
  2. Amendments to MTS OJSC Charter;
  3. Approval of candidates for the positions of top managers reporting directly to MTS OJSC President;
  4. Working out MTS OJSC' position as for the participation of MTS OJSC representatives in the vote and voting on issues on the agenda of meetings of MTS OJSC subsidiaries' and affiliates' governing bodies;
  5. Report on implementation of MTS Group Corporate Responsibility Strategy based on 2009 results;
  6. MTS OJSC' participation in other organizations;
  7. Approval of transactions with a value in excess of USD 100 million;
  8. Updating MTS OJSC Board of Directors' schedule for 2010;
  9. Changes in number of members and composition of MTS OJSC Management Board;
  10. Dissolution of the Ad-hoc Committee of MTS OJSC Board of Directors;
  11. Amendments to the Employment Contract concluded with MTS OJSC President (Approval of MTS OJSC President's KPIs and individual tasks for 2010);
  12. Introduction of changes into MTS brand positioning;
  13. Approval of the standard version of Regulations of MTS OJSC Macro Region Branch and the Regulations of MTS OJSC Branch in Ryazan;
  14. Amendments to the Employment Contract concluded with MTS OJSC President (Approval of MTS OJSC President's KPIs and individual tasks for 2009);
  15. Report on the implementation of MTS Group Budget and CAPEX Program for 2009, and current forecast of implementation of the Budget for 2010 (including the report on CDI and ADR);
  16. Entering adjustments to MTS OJSC Budget for 2010;
  17. Audit Committee's report on the activities of MTS OJSC internal control and audit divisions, including the report on the efficiency of the risk management system at MTS OJSC in 2009;
  18. Report on the implementation of MTS Group Corporate Social Responsibility Strategy based on 2009 results;
  19. Review of shareholders' proposals for the agenda of MTS OJSC Annual General Shareholders Meeting;
  20. Inclusion of shareholders' nominees into the list of candidates to be elected to MTS OJSC Board of Directors and MTS OJSC Audit Commission at MTS OJSC Annual General Shareholders Meeting;
  21. Candidate for MTS OJSC auditor in 2010;
  22. Convocation of MTS OJSC Annual General Shareholders Meeting;
  23. Approval of related-party transactions;
  24. Amendments to the Regulations of MTS OJSC Branches;
  25. Report on the implementation of MTS Group Budget and CAPEX Program for 1Q 2010, and current forecast of implementation of the Budget for 2010;
  26. Report on the risk management at MTS OJSC;
  27. MTS OJSC Strategy;
  28. Preliminary approval of MTS OJSC Annual Report, review of the Annual Financial Statements, the Auditor's and Auditing Commission Reports;
  29. Recommendations of the Board of Directors regarding payment of MTS OJSC dividends;
  30. Materials to be provided to shareholders in preparing the Annual General Meeting of MTS OJSC Shareholders;
  31. Approval of the Regulations of the Remuneration & Nomination Committee of MTS OJSC Board of Directors, as amended;
  32. Election of the Chairman and Deputy Chairman of MTS OJSC Board of Directors;
  33. Appointment of the Secretary of MTS OJSC Board of Directors;
  34. Determination of the status of members of MTS OJSC Board of Directors;
  35. Formation of Committees of MTS OJSC Board of Directors;
  36. Audit Committee's report on the activities of MTS OJSC internal control and audit divisions, including the report on the efficiency of the risk management system at MTS OJSC in 2009.
  37. Network quality status (voice and data) in Moscow/Moscow Region and when roaming abroad;
  38. Approval of MTS OJSC organizational structure in the form of a list of MTS OJSC key structural divisions reporting directly to MTS OJSC President (dissolution of the Technical Development Block, inclusion of the Strategic Partnership Department into the Commercial Block);
  39. Determination of auditor's fee;
  40. Report on the assessment of the performance of MTS OJSC Board of Directors;
  41. Report on the implementation of MTS Group Budget and CAPEX Program for 1H 2010, and current forecast of implementation of the Budget for 2010 (including the report on CDI and ADR);
  42. Audit Committee's report on the activities of MTS OJSC internal control and audit divisions, including the report on the efficiency of the risk management system at MTS OJSC in the first half year of 2010;
  43. Results of assessment of MTS OJSC assets organizational maturity;
  44. Changes in the composition of MTS OJSC Management Board;
  45. Establishment of an ad-hoc committee of MTS OJSC Board of Directors;
  46. MTS OJSC Branches;
  47. MTS OJSC Strategy: results of strategic sessions;
  48. Approval of MTS Group Budget for 2011;
  49. MGTS OJSC Development Strategy;
  50. Analysis of the current procurement management system at MTS OJSC;
  51. Improvement of the trade secret protection process at MTS OJSC;
  52. Approval of nominees for the election to Boards of Directors (Supervisory Boards) of foreign subsidiaries;
  53. Approval of the timetable of MTS OJSC Board of Directors for 2011;
  54. Approval of Indemnification Agreements that are related-party transactions;
  55. MTS OJSC Stock Option Program;
  56. Amendments to the Employment Contract concluded with MTS OJSC President (Approval of MTS OJSC President's KPIs and individual tasks for 2011);
  57. Principles of assessment of MTS OJSC top managers' performance;
  58. Approval of the decision on additional issue of MTS OJSC securities
  59. Approval of MTS OJSC Prospectus;
  60. Approval of related-party transactions.

Information on remuneration of members of the Board of Directors

The conditions of, and procedure for payment of remuneration to members of the Board of Directors of MTS OJSC are set out in the Regulations of Remunerations and Compensations Payable to the Members of the Board of Directors of MTS OJSC, a document approved by the General Meeting of MTS OJSC Shareholders (you can get familiarized with these Regulations at: http://www.mtsgsm.com/information/corporate_governance/statutes/bod_compensations/ ).

Remunerations for the performance of duties as members of MTS OJSC Board of Directors are payable by the Company to the Board members who are independent directors, as well to those who are neither employed with the Company nor are members of management bodies of the companies being a part of the Group.

In accordance with the Regulations, members of the Board of Directors of MTS OJSC, during their term of office, receive remuneration and are compensated for expenses associated with their duties as members of the Board of Directors. Compensation is paid for actually incurred and documented costs of travel to and from the venue of meetings of the Board of Directors, accommodation expenses, and other documented expenses to a maximum of $200,000 per annum.

Members of the Company's Board of Directors receive remuneration in three forms:

  • Basic remuneration

The basic remuneration is paid in money for the performance of duties as member of the Company's Board of Directors during the corporate year and does not depend on the number of meetings the Director attended.

The basic remuneration of each Director and the Chairman of the Board of Directors is $250,000 and $275,000, respectively, during a corporate year, and may be changed only if so decided by the general shareholders meeting of the Company based on the Company's performance for the reporting year.

If the powers of a Board member are terminated early, and Board members are elected at an extraordinary general shareholders meeting of the Company, the basic remuneration is paid in the amount proportional to the actual term of powers of the Director and determined as a product of the basic remuneration and the amount equal to the ratio of the actual term of powers and the duration of the corporate year that is deemed to be equal to 365 days.

The basic remuneration is paid by the Company quarterly at least with 30 days after the quarter end, on the basis of an office memo that must be provided by the Corporate Secretary of the Company (a person performing the duties of Corporate Secretary), and an extract from the minutes of the general shareholders meeting of the Company regarding the election of members of the Board of Directors. The amount of quarterly remuneration is equal to 1/4 of the basic remuneration, and if the powers of a Board member arise after the beginning of the reporting period, to a part of the quarterly payment pro rata to the actual period of office.

  • Remuneration for performing additional duties

Members of the Board of Directors receive additional remuneration for performing duties associated with work on committees of the Board of Directors:

  • for work on mandatory committees of the Board of Directors: as Committee Chairman — $25,000 per annum, as Committee member — $15,000 per annum (for participation in each of committees);
  • for work in other committees of the Board of Directors: as Committee Chairman — $10,000 per annum, as Committee member — $5,000 per annum (for participation in each of committees);
  • for work on ad hoc committees of the Board of Directors: as Committee Chairman — $25,000 per annum, as Committee member — $20,000 per annum (for participation in each of committees).

The remuneration for performing additional duties is paid by the Company quarterly, in equal installments, at least within 30 days after the quarter end, on the basis of an office memo that must be provided by the Corporate Secretary of the Company (a person performing the duties of Corporate Secretary) and contain the number of Committees of the Board of Directors in which each of Directors participates, and an abstract from the minutes of the Board meeting that reflects the assignment of responsibilities between members of committees of the Board of Directors. In case of early termination of powers, the remuneration is paid in the amount proportional to the actual period of office of the Director during the corporate year.

  • Performance-based annual bonus

Members of the Board of Directors receive a performance-based annual bonus depending on the Company's capitalization value where there is profit under the U.S. GAAP standards.

The amount of the bonus is determined using the following formula:

S = ($175,000 × Ź / P1) × P2,

where: S is the bonus amount;

Ź is the number of completed months between general shareholders' meetings of the Company at which an independent director is reelected, divided into 12 (Ź = 1, if an independent director was not reelected during the corporate year);

Š1 is the weighted average price of one (1) ADR of the Company for 100 days before the date of election of an independent director; and

Š2 is the weighted average price of one (1) ADR of the Company for 100 days before the date of termination of powers of an independent director.

Herewith, the maximum performance-based annual bonus payable to Directors may not exceed $200,000. In case of early termination of powers of a director, the maximum bonus payable to the member of the Board of Directors may not exceed $ 200,000.

The performance-based annual bonus is paid by the Company based on the Regulations and the office memo of the Corporate Secretary approved by the Vice President of Finance and Investments of the Company, at least within 45 days after the date of the annual general shareholders' meeting.

Total amount of remuneration paid to the members of the Board of Directors in 2010: RUB 19,678,813.

Limit of coverage of civil liability of members of the Board of Directors of MTS OJSC under concluded contracts:

Insurance period Responsibility limit (USD)
September 2006 to September 2007 USD 100 million
October 2007 to October 2008 USD 195 million
October 2008 to October 2009 USD 250 million
October 2009 to October 2010 USD 250 million
October 2010 to October 2011 USD 250 million

Assessment of performance of the Board of Directors

In accordance with the best international and Russian corporate governance practices and the provisions of MTS OJSC Code of Corporate Governance, MTS OJSC conducts the assessment of performance of the Board of Directors (hereinafter, "the Assessment") for the second year.

In 2010, the performance of the Board of Directors was assessed based on the existing assessment system using the questionnaire survey method. In the course of questioning, members of the Board of Directors were asked above 30 questions, opinion was given according to a four-point grading scale. The questions dealt mainly with the procedure of work, planning and organization of activities of the Board of Directors and Committees.

Summarizing the results of questionnaires, summary information was prepared containing the results with respect to all analyzed criteria, priority areas were identified that should be improved, and a plan of measures was developed to improve standards and procedures of MTS OJSC Board of Directors and Committees.

Maximum score was received as answers to the following questions:

  • Work of the Corporate Secretary related to organization of work of the Board and its Committees;
  • Effectiveness of the work of Committees of the Board in terms of special opinion on agenda items within their responsibility and preliminary consideration of issues to be submitted to the Board for review;
  • Completeness and quality of information regarding the Company's financial standing provided to the Board;
  • Regularity of reviewing issues related to corporate governance at Board meetings;
  • Frequency, regularity and length of meetings, and proportion between meetings in praesentia and in absentia;
  • Timeliness of preliminary submission of documents for meetings of the Board to prepare for meetings.

The score with respect to the question "Training and career enhancement system for the members of the Board" decreased slightly vs. 2009 results.

The Report on Assessment of the Board of Directors' Performance was approved by the Committee for Corporate Conduct & Ethics of MTS OJSC Board of Directors and MTS OJSC Board of Directors in July 2010.

Committees of the Board of Directors

To improve the performance of the Board of Directors, the previously established committees continued their work, i.e. the Budget Committee, the Audit Committee, the Remuneration & Nomination Committee, the Committee for Corporate Conduct & Ethics and the Strategy Committee.

Besides, due to the necessity of monitoring the transaction related to the acquisition of stake in the charter capital of Sistema Telecommunications, Informatics and Communications LLC, an ad-hoc committee of independent directors of MTS Board of Directors was formed on September 09, 2010 to govern the project for acquiring the stake in the charter capital of Sistema Telecommunications, Informatics and Communications LLC.

In view of the fact that the project for acquiring the controlling interest in COMSTAR-UTS OJSC by MTS OJSC was completed and taking into account the analysis of activities of the Ad-hoc Committee of Independent Directors governing the project for acquiring the stake in COMSTAR-UTS OJSC, on March 17, 2010 MTS Board of Directors decided to abolish the Ad-hoc Committee and terminate the powers of its members.

The meeting of MTS OJSC Board of Directors, where the composition of committees of the Board of Directors was determined, was held on June 24, 2010. This composition of committees will be effective after the election through 2010.

Composition of Committees of MTS OJSC Board of Directors

Composition of Committees of MTS OJSC Board of Directors before the Annual General Shareholders' Meeting in 2010:

  • Budget Committee: A.N. Buyanov (Chairman), M.S. Gyani, T.V. Yevtoushenkova, R. Sommer
  • Audit Committee: P.J. Ostling (Chairman), M.S. Gyani, D.E. Crawford
  • Remuneration & Nomination Committee: P.J. Ostling (Chairman), M.S. Gyani, D.E. Crawford
  • Committee for Corporate Conduct and Ethics: M.S. Gyani (Chairman), S.A. Drozdov, T.V. Yevtoushenkova, M.V. Shamolin
  • Strategy Committee: R. Sommer (Chairman), M.S. Gyani, A.V. Abugov, T.V. Yevtoushenkova, M. Hecker, M.V. Shamolin

Terms of reference of the Committees and their activities during the reporting year

Budget Committee

The Budget Committee is an auxiliary body of MTS OJSC Board of Directors to develop recommendations to the Board of Directors in reviewing issues related to preparation, approval and adjustment of MTS budgets, long-term business plans and investment plans, and overseeing their implementation.

During the reporting period the Committee reviewed and made decisions on such issues as:

  • MTS debt management;
  • Additional investment into 3G;
  • Impact of the resistance against MegaFon in struggling for leadership in Russia on MTS budget;
  • MTS debt portfolio restructuring;
  • MTS loan portfolio management in 4Q 2010;
  • MTS OJSC Draft Budget for 2011;
  • and other.

Audit Committee

The main function of the Audit Committee is to monitor accounting and the preparation and auditing of financial reports of MTS OJSC and its subsidiearies.

During the reporting period the Committee met several times and made decisions on such important issues as:

  • Discussion of the draft report on MTS OJSC financial and operating results in Q4 2009 and 2009;
  • Discussion of the review from Deloitte in Q4 2009 and 2009;
  • Selection of auditor to carry out audit in 2010;
  • Discussion and approval of the Internal Audit Strategy for 2010;
  • Review and approval of the results of the assessment of risk management and internal control systems in 2009 ;
  • Discussion and pre-approval of the Annual Report on Form 20-F
  • and other.

Remuneration & Nomination Committee

The main function of the Remuneration & Nomination Committee is to prepare recommendation for MTS OJSC Board of Directors regarding the Company's priorities relating to the development and implementation of human resources policy and development strategy in human resources and remuneration.

During the reporting period the Committee reviewed and made decisions on such issues as:

  • Approval of MTS OJSC President's KPIs and individual objectives for 2010;
  • Approval of the candidate for the director of the Internal Audit Department;
  • Discussing the HR Strategy and key HR initiatives for 2010;
  • Implementation of KPIs and approval of the amount of the President's annual bonus for 2009;
  • Implementation of KPIs and approval of the amount of the annual bonus payable to MTS top managers (members of the Management Board and top executives (excluding the President) reporting directly to the President;
  • pre-approval of candidates nominated for the Company's Board of Directors and Auditing Commission;
  • and other.

Committee for Corporate Conduct & Ethics

The main function of the Committee for Corporate Conduct and Ethics is to prepare recommendations to the Board of Directors regarding priority areas of activity of the Company in developing and implementing corporate conduct (governance) and ethics standards, and also to prepare recommendations regarding the Company's development strategy in the area of corporate conduct (governance) and ethics.

During the reporting period no substantial breaches of corporate conduct rules or ethics were identified in the operation of the MTS Common Hotline.

During the reporting period the Committee met several times and made decisions on such important issues as:

  • Review of the Report on Evaluation of Performance of MTS OJSC Board of Directors;
  • Review of reports on MTS OJSC representatives' activities in boards of directors of MTS OJSC subsidiaries and affiliated companies.

Strategy Committee

The main function of the Strategy Committee is the strategic development of the Company and formulating recommendations on other priority areas of the Company's development.

During the reporting period the Committee held one meeting and made decisions on the issue:

  • Report on the implementation of MTS OJSC key functional strategies in 2009 (marketing strategy, sales and customer care strategy);
  • Brief report on M&A activities;
  • Report on the customer churn and CDI research results vs. competitors;
  • and other.

Ad Hoc Committee of Independent Directors for the project for acquisition of 100% stake in Sistema Telecom LLC

The main function of the Ad Hoc Committee of Independent Directors for the project of acquisition of 100% stake in Sistema Telecom LLC is to oversee the conditions for settlement of the transaction involving the acquisition of stock in Sistema Telecom LLC.

During the reporting period the Committee reviewed and made decisions on such issues as:

  • Appointment of advisors for the transaction;
  • Appointment of advisors for the transaction;
  • Proposed transaction structure;
  • Proposed transaction timeline;
  • Information on the project implementation status;
  • Information on the ownership to trademarks;
  • Information on the results of negotiations;
  • and other.

Individual Executive Body of the Company: the President

In accordance with MTS OJSC Charter, the President of the Company is invested with full authority for day-to-day management of the Company's activities and addressing relevant issues that are not within the purview of the Company's General Shareholders Meeting, Board of Directors and Management Board. The goal of MTS OJSC President is to ensure MTS OJSC profitability, competitive advantage and good standing, as well as shareholder rights and social protection of the Company's employees. The President represents the point of view of Executive Bodies at meetings of the Board of Directors and General Shareholders Meetings. The President heads the Management Board of the Company and organizes its work. The President of the Company is elected by majority of votes of elected members of the Board of Directors. Herewith, the votes of directors who left the Board are not taken into account. The President of the Company reports to the General Shareholders Meeting and the Board of Directors of the Company.

The Regulations of MTS OJSC President were approved by the Annual General Meeting of MTS OJSC Shareholders on June 23, 2006 (you can get familiarized with these Regulations at: http://www.mtsgsm.com/information/corporate_governance/statutes/ceo/).

During 2010, the functions of the Individual Executive Body (President) of MTS OJSC were performed by Mikhail Valerievich Shamolin. The powers of the President M.V. Shamolin were terminated early on March 04, 2011 by resolution of the Board of Directors.

M.V. Shamolin was appointed to serve as the President of AFK Sistema OJSC since March 10, 2011.


Mikhail Valeryevich Shamolin

President of MTS OJSC until 04.03.2011

Mikhail Valeryevich Shamolin

Mr. Shamolin was elected by resolution of the Board of Directors of May 29, 2008 (Minutes No. 120) to serve as MTS OJSC President from May 29, 2008 for a period of three years.

Born in 1970.

Mr. Shamolin graduated from Moscow Automobile and Road Institute in 1992. In 1993 he got the second degree from the Russian Academy of Government Service under the President of the Russian Federation. From 1996 to 1997, he studied at Wharton Business School, where he completed finance and management course for top managers.

Prior to joining MTS, Mr. Shamolin served at Interpipe Corp. in Ukraine as Managing Director of the Ferroalloys Division. From 1998 to 2004, he was employed with the international consulting company McKinsey&Co.

Mr. Shamolin was invited to join MTS OJSC in July 2005 as Vice President of Sales and Customer Service. On August 15, 2006 he was transferred to the position of Vice President and Director of MTS Russia Business Unit. On May 29, 2008 he was appointed President and CEO of the Company.

The powers of MTS OJSC M.V. Shamolin were terminated early by resolution of MTS OJSC Board of Director on March 04, 2011.

Since March 10, 2011, Mr. Shamolin serves as President of AFK Sistema OJSC.

Mr. Shamolin is a member of the Board of Directors of SISTEMA SHYAM TELESERVICES LIMITED, International Cell Holding LTD, MTS UKRAINE PrJSC and other companies.

He held 174,890 common registered shares of MTS OJSC during the reporting period.


Andrey Anatolyevich Dubovskov

President of MTS OJSC from 05.03.2011

Andrey Anatolyevich Dubovskov

Mr. Dubovskov was elected by resolution of the Board of Directors of March 04, 2011 (Minutes No. 177) to serve as MTS OJSC President from March 05, 2011 for a period of three years.

Born in 1966.

Mr. Dubovskov graduated from the S.A. Gerasimov All-Union State Institute of Cinematography (VGIK) in 1993.

Mr. Duvobskov headed MTS Ukraine Business Unit from January 2008. He joined MTS Ukraine Business Unit as the First Deputy Director General in December 2007. From 2006 to 2007, he was Director of MTS Ural Macro Region, from 2004 to 2006 served as Director of MTS OJSC branch in Nizhny Novgorod. From 2002 to 2004, he headed one of Tele2 Group companies in Nizhny Novgorod.

Mr. Dubovskov has a wealth of experience in working for Russian and foreign telecommunications companies. From 1993 onwards, he occupied a number of management positions in such companies as Millicom International Cellular S.A., Millicom International Cellular B.V., Regionalnaya Sotovaya Svyaz LLC and CJSC 800 as well as other companies in Moscow, Alma-Ata, Nizhny Novgorod, Perm and Kiev.

He held 15,620 registered common shares of MTS OJSC during the reporting period.

Collective Executive Body: the Management board

The implementation of the selected strategy and specific resolutions of the Board of Directors is delegated to the President (Individual Executive Body) and the Management Board (Collective Executive Body) that are responsible for the fulfillment of resolutions of the Board of Directors within their terms of reference.

The President (Chairman of the Management Board) and the Management Board act on the basis of the Federal Law "On Joint-Stock Companies", MTS OJSC Charter and Regulations of MTS OJSC Management Board that were approved by the Annual General Meeting of MTS OJSC Shareholders on June 15, 2009 (you can get familiarized with these Regulations at http://www.mtsgsm.com/information/corporate_governance/statutes/executive_board/).

Number of members and composition of the Management Board is approved by the Board of Directors at the suggestion of the President of the Company for a period determined by the Board of Directors of the Company in establishing the Management Board. The term of office of the Management Board may not exceed the term of office of the current President of the Company. Members of the Management Board may be elected an unlimited number of times.

The Management Board carries out its activities by means of meetings and resolutions.

Meetings of the Management Board are held on a planned basis. Meetings of the Management Board are convened by the Chairman of the Management Board, or on request of any member of the Management Board, Board of Directors, Auditing Commission or the auditor of the Company. A resolution of the Company's Management Board, within its purview, may be adopted via absentee voting (questioning).

MTS OJSC Management Board held 34 meetings during the past 2010.

Members of the Management Board were elected by resolution of the Board of Directors (Minutes of 120 dated May 29, 2008).

Members of the Management Board as of December 31, 2010


Mikhail Valeryevich Shamolin

Chairman of the Management Board

Mikhail Valeryevich Shamolin

Born in 1970.

Mr. Shamolin graduated from Moscow Automobile and Road Institute in 1992. In 1993 he got the second degree from the Russian Academy of Government Service under the President of the Russian Federation. From 1996 to 1997, he studied at Wharton Business School, where he completed finance and management course for top managers.

Prior to joining MTS, Mr. Shamolin served at Interpipe Corp. in Ukraine as Managing Director of the Ferroalloys Division. From 1998 to 2004, he was employed with the international consulting company McKinsey&Co.

Mr. Shamolin was invited to join MTS OJSC in July 2005 as Vice President of Sales and Customer Service. On August 15, 2006 he was transferred to the position of Vice President and Director of MTS Russia Business Unit. On May 29, 2008 he was appointed President and CEO of the Company.

The powers of MTS OJSC M.V. Shamolin were terminated early by resolution of MTS OJSC Board of Director on March 04, 2011.

Since March 10, 2011, Mr. Shamolin serves as President of AFK Sistema OJSC.

Mr. Shamolin is a member of the Board of Directors of SISTEMA SHYAM TELESERVICES LIMITED, International Cell Holding LTD, MTS UKRAINE PrJSC and other companies.

The member of the Management Board held 174,890 common registered shares of MTS OJSC during the reporting period.


Pavel Dmitrievich Belik

Pavel Dmitrievich Belik

Born in 1966.

Mr. Belik graduated from the KGB's Orel Higher Military Command Communications School in 1987 specializing in the operation of radio-relay and tropospheric communication systems.

He served in the government communication forces from 1987 to 1992. From 1992 to 2004, he served in military counter-intelligence units and the Internal Security Directorate of the Russian Federal Security Service (FSB).

He graduated in law from the FSB Academy in 1999.

Mr. Belik joined MTS in February 2005 as Director of Security for the Moscow Macro Region. He was Vice President of Security of MTS OJSC from October 3, 2005 to March 2011.

The member of the Management Board held 13,916 registered common shares of MTS OJSC during the reporting year.


Mikhail Yurievich Gerchuk

Mikhail Yurievich Gerchuk

Born in 1972.

Mr. Gerchuk graduated from the M.V. Lomonosov Moscow State University in economic geography in 1994, and received an MBA from the INSEAD Business School in 1999.

He started his career at the advertising agency BBDO. From 1995 to 1997, he served as Brand Manager at MARS Inc. From 1997 to 1998, he was employed with Pepsi-Cola in the position of Category Marketing Manager. From 1999 to 2002, he worked as an Associate at Booz Allen Hamilton in London with a responsibility for marketing and strategy projects. From 2003, prior to joining MTS OJSC, Mr. Gerchuk was employed with Vodafone, first in the position of Vodafone Group Senior Global Marketing Manager and, thereafter, as Chief Commercial Officer at Vodafone Malta.

Mr. Gerchuk joined MTS OJSC in 2007 as the Marketing Director of the Corporate Center.

Since 2008 he has been the MTS OJSC Vice President and Chief Commercial Officer.

Mr. Gerchul is a member of management bodies of MTS UKRAINE PrJSC, Russian Telephone Company CJSC, International Cell Holding Ltd., etc.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


Andrey Anatolyevich Dubovskov

Andrey Anatolyevich Dubovskov

Born in 1966.

Mr. Dubovskov graduated from the S.A. Gerasimov All-Union State Institute of Cinematography (VGIK) in 1993.

Mr. Duvobskov headed MTS Ukraine Business Unit from January 2008. He joined the MTS Ukraine Business Unit as the First Deputy Director General in December 2007. From 2006 to 2007, he was Director of MTS Ural Macro Region, from 2004 to 2006 served as Director of MTS OJSC branch in Nizhny Novgorod. From 2002 to 2004, he headed one of Tele2 Group companies in Nizhny Novgorod.

Until March 2011 he was CEO of PrJSC «MTS UKRAINE».

On March 5, 2011 - President of MTS OJSC.

Mr. Dubovskov has a wealth of experience in working for Russian and foreign telecommunications companies. From 1993 onwards, he occupied a number of management positions in such companies as Millicom International Cellular S.A., Millicom International Cellular B.V., Regionalnaya Sotovaya Svyaz LLC and CJSC 800 as well as other companies in Moscow, Alma-Ata, Nizhny Novgorod, Perm and Kiev.

The member of the Management Board held 15,620 registered common shares of MTS OJSC during the reporting period.


Ruslan Sultanovich Ibragimov

Ruslan Sultanovich Ibragimov

Born in 1963.

Mr. Ibragimov graduated in law from the Moscow State University in 1986, where he continued to post-graduate studies. Cand. Cs. (Law).

Mr. Ibragimov joined MTS OJSC in 2006 as Director of the Legal Department, and in February 2007 was appointed to the position of Director for Legal Matters. In February 2007 he headed the Legal Block.

Prior to joining MTS OJSC, he worked at the Moscow college of lawyers Ibragimov, Kagan, and Partners. From 1997 to 2002 he held the post of directing partner, Deputy General Director-Head of Tax and Legal Consultation at Top-Audit. From 1992 to 1996 he headed legal services in several commercial banks. He is a member of the Board of the Non-profit Organization Russian Corporate Counsel Association (RCCA), member of the Non-profit Organization Supporting Competition and Non-profit Organization Supporting Competition in CIS Countries.

Mr. Ibragimov is a member of management bodies of COMSTAR-Regions CJSC.

The member of the Management Board held 19,824 registered common shares of MTS OJSC during the reporting period.


Alexey Valeryevich Kornya

Alexey Valeryevich Kornya

Born in 1975.

Mr. Kornya graduated from the Saint Petersburg State University of Economics and Finance in 1998.

Mr. Kornya joined MTS OJSC in July 2004 as the Chief Financial Officer of MTS OJSC Ural Macro Region. In October 2004 he occupied the position of Director of the Financial Planning and Analysis Department, the Financial Block, MTS Group CC, in March 2007 he was appointed Director of Controlling, the Finance and Investment Block.

Since August 2008, he has headed the Finance and Investment Block. He served as MTS OJSC Deputy Vice President of Finance and Investment, Acting Vice President of Finance and Investment.

He has been Vice president of Finance and Investment since 2010.

Prior to joining MTS OJSC, Mr. Kornya was employed at Severo-Zapadny Telecom OJSC in Saint Petersburg, Petrazavodsk. Prior to that, he served as auditor at the Audit Department of PricewaterhouseCoopers CJSC in Saint Petersburg.

Mr. Kornya is member of management bodies of Mobile TeleSystems JLLC, MTS UKRAINE PrJSC, International Cell Holding Ltd., etc.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


Sergey Borisovich Nikonov

Sergey Borisovich Nikonov

Born in 1960.

Mr. Nikonov graduated from the Military Institute of the USSR Ministry of Defense as a military interpreter in 1987.

Mr. Nikonov joined MTS OJSC in July 2006 to serve as Vice President of HR and Administrative Issues.

In October 2005 he became Deputy General Director of Power Machines OJSC responsible for human resources and administration.

From 2003 to 2005 he served as the Deputy General Director of ROSNO, where he headed human resources, administration, and internal control.

He worked with the Federal Tax Police Service from 1992 to 2002. He began his career in 1987 with state security agencies.

The member of the Management Board held 19,982 registered common shares of MTS OJSC during the reporting period.


ĻAlexander Valeryevich Popovsky

Alexander Valeryevich Popovsky

Born in 1977.

Mr. Popovsky graduated with a degree in computing machinery, systems and networks (system engineer) from the Vyatka State Technological University in 1999, where he continued to post-graduate studies (systems analysis). In 2005 he got an academic degree Cand. Sc. at the Moscow Aeronautical Institute, and participated in the program of Executive MBA London Business School.

From 1999 to 2001 he served as manager of the telecommunication network transmission section of KirovElectrosviaz JC. In April 2001 he joined MTS OJSC as the Director of MTS OJSC Branch in Kirov. In July 2004 he became the Director of MTS OJSC Branch Volga Region-Northwest. In June 2007 he was appointed to the office of Director of MTS OJSC Macro Region South.

In 2008 he was appointed to serve as Director of MTS Russia Business Unit.

Since March 2011, he has been Vice President, Director of MTS Russia Business Unit.

Mr. Popovsky is a member of management bodies of MGTS OJSC, Intellect Telecom OJSC, MULTIREGION CJSC, etc.

The member of the Management Board held 20,717 registered common shares of MTS OJSC during the reporting period.


Oleg Yuryevich Raspopov

Oleg Yuryevich Raspopov

Born in 1966.

Mr. Raspopov graduated in law from the Academy of the RF Ministry of Taxation in 2003, and graduated in economics from the Academy of Finance under the Government of the RF in 2006.

He has been the Vice President, Director of MTS-Foreign Subsidiaries Business Unit since January 2008.

Mr. Raspopov joined MTS OJSC in June 2006 as Director of the External Resources Management Department. In March 2007 he was appointed acting Vice President, Director of MTS-Foreign Subsidiaries Business Unit.

Prior to joining MTS OJSC, in November 2004 he headed Insurance Broker-Energozashchita OJSC that was established by him. From 2002 to 2004 he occupied the position of assistant of the Chief Financial Officer of RAO UES of Russia OJSC.

From 2001 to 2002 served as lawyer at Gaspromenergoservice CJSC.

Mr. Raspopov is a member of management bodies of International Cell Holding Ltd, Mobile TeleSystems JLLC, FI Uzdunrobita LLC, etc.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


Andrey Borisovich Terebenin

Andrey Borisovich Terebenin

Born in 1962.

Mr. Terebenin graduated from MGIMO (Moscow State Institute of International Relations) of the RF Foreign Ministry in international economic relations.

He has been the MTS OJSC Vice President of Corporate Communications since 2006.

In 1999 he became a partner in the communications agency Treugolnik Porter Novelli, and from 2003 prior to coming to MTS held the position of General Director and partner at the communications holding company R.I.M. Porter Novelli. He held management posts at Ekonomicheskaya Gazeta, Dun & Bradstreet CIS, and AIG Russia.

Until November 2010 Member of the Board owned the common registered shares of MTS OJSC in the amount of 29,735 common shares.


Andrey Eduardovich Ushatsky

Andrey Eduardovich Ushatsky

Born in 1974.

Mr. Ushatsky graduated from the Moscow Power Engineering Institute in 1997. From 2002 to 2004 completed an MBA program for managers at the Academy of National Economy of the Government of the Russian Federation.

Še joined MTS OJSC in 1996, first in the position of a specialist of the Macrowave Link Service and, thereafter, he headed the Network Operation Service and the Network Operation Department and served as Deputy Director of the MTS Russia Business Unit.

Mr. Ushatsky was appointed MTS OJSC Vice President and Chief Technology Officer in April 2009.

Mr. Ushatsky is a member of management bodies of MGTS OJSC, MTS UKRAINE PrJSC, etc.

The member of the Management Board held 14,000 registered common shares of MTS OJSC during the reporting period.


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Michael Hecker

Born in 1970.

Mr. Hecker is a graduate in administration and international politics from Pierre Mendez France University of Grenoble (France) and a graduate in law and modern history from Goettingen University (Germany), where he also earned a PhD in the history of constitutional law.

He joined MTS OJSC in May 2006 as the Director of Strategic Projects.

Since 2008 he has been the MTS OJSC Vice President of Strategy, M&A and Corporate Development.

Prior to joining MTS OJSC, Mr. Hecker worked at A.T. Kearney Europe, where he was involved in strategy, marketing, and finance projects for telecommunications companies and consumer-goods manufacturers. Prior to that he served as a junior associate lawyer in Berlin and Brandenburg (Germany).

Mr. Hecker is a member of management bodies of MTS UKRAINE PrJSC, MULTIREGION CJSC, etc.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


Frederic Vanoosthuyze

Frederic Vanoosthuyze

Born in 1973 in Belgium.

Mr. Vanoosthuyze graduated from Institut Superieur Industriel Liegeois (Belgium) in 1995 with an Engineering degree in Electronics and Communications, and from University of Mons (Belgium) with and Engineering degree in Computer Science and management. He also received and Executive Master degree in IT governance at the Solvay Business School.

He joined MTS OJSC in February 2010 as Vice President for Information Technology.

Mr. Vanoosthuyze started his career at Siemens Atea (Belgium), then he was employed with Alcatel Bell (Belgium) and KPN Group Belgium NV/SA Orange/BASE (Belgium). He served at Millicom International Cellular SA (Luxemburg) as Millicom Group Chief IT Officer from 2006.

Mr. Vanoosthuyze is a member of management bodies of MTS UKRAINE PrJSC.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


Victor Valerianovich Stankevich

Victor Valerianovich Stankevich

Born in 1958.

Mr. Stankevich graduated from the Moscow Aviation Institute (MAI) in 1981, the All-Russian Academy of External Trade with a degree in International Economic Relations in 1989, and the Financial Academy under the Government of the Russian Federation with a degree in Economics and Finance in 2002.

In June 2006, he joined MTS as Director of the Control Department, from June 2007 he was Director of Control and External Resources Management at MTS Group, and from February 2010 – Director of the Procurement Block at MTS Group; since 2011 he has been Director of Control.

Prior to joining MTS, Mr. Stankevich headed a laboratory and was Deputy Director of the Center of Problems of Automation of Electronic Circuit Design under the Russian Academy of Sciences. In June 1996, he joined the insurance company ROSNO as Head of Treasury, and was appointed to serve as Deputy CFO at ROSNO in 2000 and Deputy CEO at ROSNO in October 2003.

Mr. Stankevich is member of management bodies of MGTS OJSC and Barash Communications Technologies, Inc.

The member of the Management Board held no shares of MTS OJSC during the reporting year.


The following persons ceased to be members of the Management Board between January 01 and December 31, 2010, by resolution of the Board of Directors:

  • Valery Victorovich Shorzhin (the resolution of the Board of Directors was adopted on September 09, 2010)

Members of the Management Board as of March 15, 2011 (date of election of new members of the Management Board)

The following persons have been members of MTS OJSC Management Board since March 15, 2011:

  • Frederic Vanoosthuyze;
  • Mikhail Yurievich Gerchuk;
  • Andrey Anatolievich Dubovskov (Chairman);
  • Ruslan Sultanovich Ibragimov;
  • Alexey Valerievich Kornya;
  • Sergey Borisovich Nikonov;
  • Alexander Valeryevich Popovsky;
  • Oleg Yuryevich Raspopov;
  • Andrey Borisovich Terebenin;
  • Andrey Eduardovich Ushatsky;
  • Michael Hecker;
  • Valery Victorovich Shorzhin.

Remunerations and compensations payable to the members of the Management Board

The Company concludes a contract with each member of the Management Board providing for additional employment terms, the procedure for determining the amount of remuneration, conditions for the compensation for expenses related to the performance of Management Board member's duties, and procedure for contract termination. On behalf of the Company, the contract is signed by the Chairman of the Board of Directors of the Company or a person duly authorized by the Board of Directors. The Board of Directors may terminate the contract with the member of the Management Board of the Company at any time. The terms and conditions of the contract are approved by the Board of Directors of the Company.

Total remuneration paid to the members of the Management Board in 2010: RUB 351,532,129.29.

Financial and usiness oversight bodies

The financial and business oversight bodies of MTS OJSC are structured as follows:

MTS OJSC Auditing Commission

On June 24, 2010, the Annual General Meeting of MTS OJSC Shareholders elected the following persons as members of the Auditing Commission:

1. Vasily Vasilyevich Platoshin, citizen of the Russian Federation, b. 1965, Chief Accountant, Director of Accounting and Reporting Department, Financial Functional Division, AFK Sistema OJSC;

2. Artem Yevgenyevich Popov, citizen of the Russian Federation, b. 1979, Executive Director of Financial Planning and Budget Department, Financial Function Division, AFK Sistema OJSC.

3. Dmitry Yevgenievich Frolov, citizen of the Russian Federation, b. 1971, Director of Internal Control and Audit Division, AFK Sistema OJSC.

The Auditing Commission is independent from officers of the Company's management bodies and reports solely to the General Meeting of Shareholders of the Company.

Based on the results of its work, the Auditing Commission presented its findings on the financial statements of MTS OJSC for 2010. According to the Auditing Commission, the audit provided a reasonable basis to express the opinion that the financial and business operations of MTS OJSC during the reporting year were in all material respects carried out in accordance with current legislation, and that this Report and the annual financial statements of MTS OJSC for 2010 fairly present the Company's financial condition as at December 31, 2010, and the results of its financial and business operations for the period from January 1 through December 31, 2010.

Auditor of MTS OJSC

On June 24, 2010, the Annual General Meeting of Shareholders of MTS OJSC approved as the Company's auditor ZAO Deloitte & Touche CIS (location: 5 Lesnaya St., Moscow, Russian Federation 125047, main state registration number (OGRN) 1027700425444, Certificate of Membership in the Non-Profit Partnership Auditor Chamber of Russia No. 3026 of May 20, 2009.

Deloitte CIS is one of the leading auditing and advisory firms that provides auditing, tax, consulting and corporate finance services using the experience of approximately 3 000 employees in 15 offices in 10 countries of the region. Deloitte CIS is a part of the international association of firms Deloitte Touche Tohmatsu Limited that is one of the global leaders in the provision of professional services, with about 17,000 employees in more than 140 countries of the world.

Deloitte has received international recognition and numerous awards for its high quality of service and unique corporate culture.

In 2010 the Company was the winner of the SPEAR'S Russia Managements Awards (in Russian private banking sector) in the nomination Tax Adviser of the Year the second year running.

According to an independent research study conducted by the publication International Tax Review in 2009, Deloitte CIS received the Company of Year Award in tax consulting in Russia. In 2009 World Tax rankings released by The International Tax Review, one of the most authoritative publications in the global tax field, 47 Deloitte tax practices, of 52 jurisdictions examined, were ranked at the highest levels. Deloitte CIS was rated number 1 Financial Advisor to the Russian Mid-Market M&A sector in 2008 by the international information and analytical agency Mergermarket.

The work performed by the Auditor:

  • Audit of MTS' 2010 Annual Financial Statements prepared under Russian accounting standards;
  • Integrated audit of MTS Group' and subsidiaries' 2010 Consolidated Financial Statements prepared under US GAAP and as required by the Sarbanes-Oxley Act.

The Auditor's fee is approved by MTS OJSC Board of Directors and was, based on 2010 results, RUB 93,000,000, exclusive of the value added tax and on-costs.

Internal Audit Department of MTS OJSC

The Internal Audit Department of MTS OJSC was created in September 2003, and is an independent unit of the Company within the MTS Group's Corporate Center. The Department operates in accordance with its Regulations. Today the Department consists of a head of the department, deputy head of the department, a financial and business operations analysis section, and an operational audit and coordination section, and employees at the Company's macro-regional branches.

The Internal Control Department performs the following functions:

  • provides guarantees of the fair presentation of information, compliance with requirements and verification of effectiveness through reviews, internal audits, diagnostic studies, and releases: regularly, as needed, or in the form of ad hoc audit projects;
  • participates in investigations, transactions, and various operations of the Company, and in projects of other units of the Company: as needed or in the form of ad hoc projects/assignments;
  • provides advice and recommendations, including explanations on selected issues, assists in finding solutions and improvements, educating employees in matters under review: as necessary, in the course of reviews, or in the form of ad hoc advisory and educational projects.

The Internal Audit Department reports directly to the President of MTS OJSC and functionally to the Audit Committee of the Board of Directors of MTS OJSC.

Control Department of MTS OJSC

The Control Department was created in June 2006, and is an independent unit of MTS OJSC within the MTS Group's Corporate Center. The Department operates in accordance with its Regulations. The Department consists of a head of the department, a deputy head of the department, a financial and business operations review section, and administrative control section, and a performance assessment section.

The Control Department performs the following functions:

  • monitoring and analyzing the results of financial and business operations of the units of MTS OJSC;
  • monitoring compliance with fiscal discipline at MTS OJSC and monitoring the implementation of decisions of its management bodies, including its collective management bodies;
  • verifying that internal documents and decisions of the management bodies of MTS OJSC are consistent with the Company's financial and business interests;
  • monitoring that the Company's agreements with third parties are consistent with MTS' financial and business interests;
  • monitoring the preparation and implementation of operational and design plans;
  • monitoring the implementation of internal regulations and business processes;
  • monitoring the effectiveness and transparency of the system of governance at MTS OJSC, including identifying abuses by executive bodies and officers of MTS OJSC;
  • monitoring compliance with instructions of the President of MTS OJSC;
  • conducting independent investigations at the request of the President or collective management bodies of the Company;
  • conducting independent investigations in the event of conflicts between different units of the Company;
  • preparing opinions on violations brought before the disciplinary commission of MTS OJSC.

The Control Department reports directly to the Director of Fraud (Security Block).

Internal Control Systems Department of MTS OJSC

The Internal Control Systems Department was created in 2006, and is an independent unit of MTS OJSC within the MTS Group's Corporate Center, Finance and Investment Block. The Department operates in accordance with its Regulations. The Department consists of a head of the department, a development and support section, and certification and testing section.

The Internal Control Systems Department performs the following functions:

  • developing effective internal control systems at MTS Group;
  • supporting internal control systems;
  • testing and certifying internal control systems at MTS Group.

The Internal Control Systems Department reports directly to MTS Vice President of Finance and Investments and is accountable to the Audit Committee of MTS OJSC Board of Directors.

Audit Committee of MTS OJSC Board of Directors

The Audit Committee of the Board of Directors of MTS OJSC was created in October 2003. It is an advisory body of the Board of Directors that ensures that the Board of Directors is provided with objective information on a number of issues.

The Committee shall consist of at least two members. Members of the Committee may be only members of the Board of Directors. The Audit Committee operates in accordance with its Regulations approved by MTS OJSC Board of Directors.

The main duties of the Audit Committee are:

  • overseeing the work of the management of MTS OJSC, evaluating its effectiveness, and providing information to the Board of Directors, and formulating relevant recommendations, in the following areas:
    - risk management and internal control systems;
    - financial accounting and preparation of the Company's reports and evaluation of their fair presentation;
    - compliance with requirements applicable to the activities of MTS OJSC;
    - efficiency of implementation of goals and objectives by the Board of Directors.
  • overseeing and coordinating activities and plans and evaluating the performance of the internal audit service of MTS OJSC;
  • appointing and determining the qualifications, level of remuneration, and independence of the external auditor; evaluating the quality of services provided by the auditor; reviewing opinions and results of the work of external auditors; providing preliminary approval and confirmation of auditors' services in accordance with applicable requirements of regulators; and formulating relevant recommendations for the Board of Directors and management team;
  • providing effective coordination of information exchange between external and internal auditors, maintaining proper independence of auditors, and assisting in addressing factors that diminish their independence;
  • providing effective coordination of information exchange between external and internal auditors, maintaining proper independence of auditors, and assisting in addressing factors that diminish their independence;
  • advising employees of MTS OJSC on accounting, internal controls, and auditing, including whistle-blower initiatives.