Assessment of Corporate Governance Quality

External assessment of corporate governance quality

The Company received the National Corporate Governance Rating (NCGR®) for the first time in 2024. The Russian Institute of Directors assessed JSC FPC's corporate governance system for 2023 and gave the Company a rating of 6++ ‘Good Corporate Governance Practice’.

In February 2025, based on the Company's 2024 results, the Russian Institute of Directors confirmed JSC FPC's corporate governance rating of 6++.

In accordance with the NCGR scale, the Company follows a number of key recommendations of the Russian Corporate Governance Code and sustainability standards.

JSC FPC has acceptable stakeholder risks related to the quality of corporate governance and sustainability management. Experts noted both positive changes in corporate governance practices over the reporting period and constraining factors. Attention is drawn to the fact that the impact on the rating is related to the continuity of the achieved practices in the future. In building the Company's corporate governance system, symmetry in the development of practices in the Shareholders’ Rights, Information Disclosure, as well as Sustainable Development and ESG components is required. (For more details on the press release, visit the website of the Russian Institute of Directors.)

In the period between the assignment and confirmation of the rating, the following changes took place in JSC FPC's corporate governance practices:

• The number of independent directors on the Board of Directors was increased from two to three and makes up one third of its numerical composition.
• The Audit and Risks Committee was chaired by an independent director, and the share of Board members in this Committee was increased.
• The share of Board members in the Human Resources, Remuneration and Corporate Governance Committee was increased; the Committee was chaired by an independent director, an expert in ESG practice development.
• The Board of Directors of JSC FPC addressed the matter of approving the succession pool for the position of the sole executive body of JSC FPC.
• At an in‑person meeting, the Board of Directors considered the report on compliance with JSC FPC's Information Policy for 2023, and discussed the need to update the Policy.
• The results of the self‑assessment of the performance of the Board of Directors, members of the Board of Directors, Chairman of the Board of Directors, Corporate Secretary and committees under the Board of Directors for the 2023–2024 corporate year were reviewed at an in‑person meeting.

• The Board of Directors of JSC FPC decided to join Russian Railways Holding's Sustainable Development Policy.
• The Board of Directors approved performance KPIs, including the indicator related to ensuring effective corporate governance practices.
• JSC FPC's Annual Report for 2023 discloses information on the remuneration structure of the audit organisation and the main results of the Board of Directors' performance assessment.

In the reporting year, changes were made to JSC FPC's internal documents as part of the development of corporate governance practices.

The revised Regulations on the Board of Directors of JSC FPC enshrined:

• The possibility of regular advanced vocational training by members of JSC FPC's Board of Directors at the Company's expense within the limits of the approved budget
• The Company's obligation to provide a member of the Board of Directors with information they request, including information on controlled companies
• The possibility of electronic voting at meetings of the Board of Directors
• Remote attendance at meetings, as well as the possibility of drawing up minutes in the form of an electronic document signed by an enhanced qualified electronic signature of the Chairman of the Board of Directors and the Corporate Secretary
• The current practice of employing electronic devices to post meeting materials for the Board of Directors on a network resource
• Regular assessment of the performance of the Board of Directors and its committees, as well as the possibility of evaluating the performance of the Corporate Secretary

The Regulations on the Human Resources, Remuneration and Corporate Governance Committee of JSC FPC's Board of DirectorsApproved by the resolution of the Board of Directors of JSC FPC, Minutes No. 5 dated 12 November 2024. was amended to complement the Committee's competence with:

• Sustainability and ESG functionality, which includes:
  • Preliminary approval of internal documents related to sustainable development
  • Preparation of recommendations to the Board of Directors on defining the Company's sustainable development activities, reviewing reports on the achievement of such goals, as well as developing functional KPIs in terms of sustainable development and integrating them into the management incentive system
• Responsibilities for building a training and professional development programme for members of the Board of Directors
• Functions to formulate recommendations on performance appraisal of the Corporate Secretary, reviewing their reports, the amount of their remuneration and bonus principles
• The ability to interact on behalf of the Board of Directors with an independent expert organisation during the external evaluation of the Board of Directors and Board Committees of JSC FPC
• Functions aligned with the recommendations of the Russian Corporate Governance Code

Internal assessment of the level of corporate governance

Assessment of corporate governance conducted by the Internal Audit Department

In 2024, JSC FPC's Internal Audit Department conducted the quality assessment of the Company's corporate governance practices for the 2022–2023 corporate year. The results of the assessment confirmed its predominant compliance of the corporate governance practice with the established regulatory requirements, including a number of recommendations of the Bank of Russia Corporate Governance Code applicable to the Company's operations. Certain areas continued to show positive progress in improving the quality of corporate governance, while maintaining encouraging trends. There is still a lower score in the Disclosure of Information area due to the restrictions in place and the measures taken to minimise sanctions risks. Some shortcomings were noted in the area of ensuring shareholders’ rights and the efficiency of relations with stakeholders, such as holding a meeting of the Audit and Risk Committee and a meeting of the Human Resources, Remuneration and Corporate Governance Committee in absentia, which resulted in a lower score.

The Company's Internal Audit Department prepared recommendations for further improvement of corporate governance practices and highlighted the areas for development of corporate governance by JSC FPC's subsidiaries.

The compliance of the Company's corporate governance practice has remained at 90% for the last three years.

Self‑assessment of corporate governance quality (compliance with the recommendations of the Bank of Russia Corporate Governance Code)

In the reporting year, progress was maintained in terms of the Company's full compliance with the principles of the Corporate Governance Code recommended by the Bank of Russia. This is attributable to an increase in the share of independent directors on the Board and improvement of the Board of Directors’ practices, namely, consideration of the results of the self‑assessment of the Board of Directors’ performance at an in‑person meeting. The indicator of fully complied principles is also improved on the back of a changed approach to the assessment of two criteria – previously the practice was assessed as ‘Not complied with’ if the criterion was not applicable to the Company's activities.

Improvement of corporate governance

In the reporting year, JSC FPC improved its corporate governance system in three main areas:

• Introduction of digital technologies into the organisation of the work of the Board of Directors and relevant committees
• Development of ESG principles at strategic level and involvement of the Board of Directors in managing the Company's sustainable development
• Upgrade of the corporate governance rating

The following results were achieved in the mentioned areas:

• The regulatory framework for the Board of Directors' use of digital technology was improved.
• The technology has still being introduced that enables Board of Directors members to vote electronically, maintain a personal calendar of company events, track their own productivity, and communicate via chat with the Corporate Secretary and other Board members.
• The Regulations on the Human Resources, Remuneration and Corporate Governance Committee were amended to include new competences of the Committee members in the field of sustainable development.
• The Company launched the process of identifying risks related to climate change.
• The Company started disclosing information on environmental and natural‑climate risks in JSC FPC's issuer reports.
• Regulatory documents were amended in accordance with recommendations received following an external assessment of corporate governance practices conducted by the Russian Institute of Directors.