Corporate governance, board of directors and management structure

Company’s shares are included in the B-quotation list on the MICEX. Listed companies should permanently comply with MICEX requirements concerning corporate governance, Mostotrest complies all necessary requirements (Appendix R). Comparing Company’s corporate governance performance with listing rules of foreign stock exchanges (NYSE and LSE) we should notice that Company complies not all requirements, but most of them (Appendix R). Despite the formally compliance with the listing requirements to corporate governance we should notice some limitations in Company’s corporate governance performance.

The Board of Directors (BoD), chaired by Georgiy Koryashkin, sets the strategic objectives for the Company and ensures that the necessary resources are in place to enable these objectives to be met. The Board of Directors consists of 11 members, 2 of whom are Mostotrest’s senior managers, 3 are representatives of NPV Engineering, 3 are affiliated with Blagosostoyanie Pension Fund (Russian Railway), 1 is a representative of the Investor Protection Association and 2 are independent (Appendix P).

Formally Company has 2 independent directors (Arnout Dirk Lugtmeijer and Mikhail Noskov) from 11 members of the BoD. There are some concerns among Russian investors about Mikhail Noskov’s independence. These doubts arise because of Mr. Noskov’s current position of Deputy of CFO at Severgroup and his participation as a member on the Board of Directors at OJSC Severstal. These companies belong to Alexey Mordashov, the former co-owner of N-Trans Group. Despite concerns we admit Mikhail Noskov’s independence because he meets all requirements to be an independent member according to the Company’s Corporate code of conduct. We believe that positions he hold in mentioned companies don’t affect the independence of his decisions about Company’s development.

The presence of CEO and Deputy of CEO on the BoD (Vladimir Vlasov and Leonid Dobrovsky) guarantees the match between strategic and daily tasks of the Company.

In 2012 the BoD of the Company has entered the representative of the Investor Protection Association (Alexander Shevchuk), the company specializing in the protection and promotion of the interests of institutional investors in Russia. This fact may have a positive impact on the Company’s corporate governance, especially in strengthening the interests of minority shareholders.

Management team, led by CEO Vladimir Vlasov, is responsible for the day-to-day operations. Company has sole executive body, presented by the CEO, and has no collegial body (Appendix Q) in its management structure. Companies which shares are included in the B-quotation list on the MICEX don’t have to establish collegial management body (unlike companies which shares are included in A-quotation list). However collegial executive body may have positive impact on Mostotrest’s corporate governance and future development considering Company’s wide diversification of business structure and product portfolio. Now the functions of the collegial management body are partially performed by 12 deputies of the CEO, who cover different specific business function (all of them have long-term relevant experience in the industry).