2.2. Structure and results of work by corporate governance bodies

The governing bodies have a three-tier structure and consist of the General Shareholders’ Meeting, the Board of Directors, the Collective Executive Body (Management Board) and the Sole Executive Body (Chief Executive Officer).

The Board of Directors has the broadest functions and plays a key role in management of the Company. The Board of Directors is supported in its work by the Audit Committee and the Appointment and Remuneration Committee.

Structure of corporate governance at Unipro PJSC

General Shareholders’ Meeting

The General Shareholders’ Meeting is the highest governance body of Unipro PJSC. The competences of the General Shareholders’ Meeting, as described in the Federal Law "On Joint-Stock Companies" and the Company Articles of Association, include:

• approval of annual reports and annual accounting statements;
• election of the Board of Directors and the Revision Commission, as well as termination of their powers;
• appointment of an external auditor;
• making resolutions on the payment of dividends.

The procedure for convening, preparing and holding General Shareholders’ Meetings is governed by the Regulation on the General Shareholders’ Meeting of Unipro PJSC.

An extraordinary General Shareholders’ Meeting of Unipro PJSC was held on 7 December 2018 in the form of absentee voting, at which shareholders decided to pay dividends for the first nine months of 2017.

Board of Directors

A competent and efficient Board of Directors, capable of making unbiased independent judgements and decisions in the best interests of the Company and its shareholders is a key element of the Company’s corporate governance system.

The Board of Directors carries out strategic management of the Company’s business, approves priority development areas, and ensures enforcement and protection of the rights and legitimate interests of shareholders. The Board of Directors defines the Company’s vision, mission and strategy.

The powers of the Board of Directors are set out in the Company’s Articles of Association, and are clearly differentiated from those of the Company’s executive bodies, which oversee the day-to-day operations of the Company.

The appointment of efficient executive bodies and their supervision is a key responsibility of the Board of Directors. The Board of Directors regularly monitors the performance of executive bodies by reviewing reports on the implementation of strategic plans and business plans and by maintaining an effective incentive system.

The Board of Directors approves the internal control and risk management policy, and ensures the functioning of risk management and internal control systems.

The Board of Directors works to improve the Company’s corporate governance system and practices, and ensures the timely disclosure of full and accurate information about the Company's activities.

The activities of the Board of Directors are governed by the Regulations on the Board of Directors of Unipro PJSC.

Membership of the Board of Directors

The Company’s Articles of Association state that the Board of Directors of Unipro PJSC has nine members. Members of the Board of Directors are elected annually by the General Shareholders’ Meeting by cumulative voting.

The established number of members of the Board of Directors optimally suits the current goals and objectives of the Company, as well as industry practice, and ensures the necessary balance of competences between the members of the Board of Directors. The Board of Directors is also well balanced in terms of independence. The current Board of Directors includes three independent directors, meeting the requirements established by the listing rules of the Moscow Stock Exchange and the Code of the Bank of Russia.

The membership of the Board of Directors is structured in a way that ensures a balance of professionalism, knowledge and experience enabling proper performance of their duties by the members of the Board of Directors.

Key requirements when appointing the Board of Directors include:

• specific qualifications, experience, knowledge, business skills and business reputation of candidates;
• election of at east three independent directors to the Board of Directors;
• limitation of the number of executive directors (no more than a quarter of Board members;
• candidates should have no conflicts of interest.

The composition of the Board of Directors was changed in 2018. At the annual General Shareholders' Meeting on 14 June 2018, Uwe Fip was elected to the Board of Directors of Unipro PJSC and Christopher Jost Delbrück left the Board of Directors. This alteration of Board membership helped to bring a fresh perspective on matters reviewed at meetings of the Board and its committees.

The membership of the Board of Directors as of the end of the reference period was elected by the Annual General Shareholders' Meeting on 14 June 2018.

Members of the Board of Directors as of 31 December 2018

Independent directors included in the Board of Directors

The institution of independent directors is an important part of the corporate governance system of Unipro PJSC.

Independent directors make an important contribution to the successful functioning of the Board of Directors, especially as regards design of the Company's development strategy and risk management. They also protect the interests of shareholders and investors.

Since 2018, being an important step forward for corporate governance, the Company has instituted a practice of preliminary meetings with independent directors for discussion of key issues to be submitted for consideration by the Board of Directors.

The independence of directors and candidates to the Board of Directors in the reporting year was assessed in accordance with the new, more stringent requirements of the Listing Rules of the Moscow Exchange, which have been applicable for assessing the independence of members of company boards since October 2017.

Independent directors serving on the Board of Directors of Unipro PJSC in 2018 were as follows:

• Anna Belova;
• Oleg Vyugin;
• Alexey Germanovich.

Meetings of the Board of Directors in 2018

Information on remuneration and compensation paid to members of the Board of Directors

Under the Articles of Association of Unipro PJSC, remuneration and/or compensation payable to the members of the Board of Directors fall within the competence of the General Shareholders’ Meeting.

The Appointment and Remuneration Committee designs the Company's policy on remuneration to members of the Board of Directors, and carries out periodic review and oversight of its implementation.

The current remuneration system is set out in the Regulations on the Board of Directors of Unipro PJSC and corresponds in general to best corporate governance practices, meeting principles of transparency and accountability, and taking account of the role of each member of the Board of Directors in the Company’s business. The Regulation contains an exhaustive list of all payments made to members of the Board of Directors, and the terms on which they were made.

The Board of Directors remuneration system comprises fixed (quarterly) and variable (annual) parts. The fixed part depends on how actively members participated in the work of the Board of Directors. The variable part is linked to the Company’s financial performance in order to encourage commitment of Board members to the Company’s business, and make them interested in achieving best-possible financial results.

The Regulation calls for reimbursement to Board members of all expenses incurred by them in performance of their obligations as members of the Board of Directors.

Remuneration is only paid to those Board members who do not hold paid positions, and are not members of the Management Board of the Company and its affiliates.

Remuneration to members of the Board of Directors of Unipro PJSC, RUB thousand

Type of remuneration	2016	2017	2018
Quarterly remuneration	8,684	5,093	5,320
Annual remuneration (for the previous year)	11,773	12,364	11,472
Compensation of expenses	360	120	1,115
Total for Unipro PJSC	20,817	17,578	17,907

Committees of the Board of Directors

The committees are consultative and advisory bodies of the Board of Directors of Unipro PJSC.

Optimising resolutions by the Board of Directors, more detailed preliminary consideration of key issues and preparation of relevant recommendations were the responsibility of two committees in 2018:

• Audit Committee;
• Appointment and Remuneration Committee.

The committees are fully accountable in their work to the Board of Directors.

The committees are set up taking account of recommendations of the Code of Corporate Governance of the Bank of Russia, as well as the professional experience and knowledge of Board members in the relevant field, which enables them to carry out their tasks efficiently.

Under the Moscow Exchange Listing Rules, the Audit Committee and the Appointment and Remuneration Committee can only include independent directors. This helps to ensure that the recommendations of the Committee are objective and well-grounded.

Audit Committee

The Audit Committee was established on 30 November 2006 in order to improve the efficiency and quality of work by the Board of Directors through the preliminary consideration and design of recommendations in the following areas:

• evaluation of candidates for the role of Company auditor;
• assessment of the Auditor's reports;
• monitoring and ensuring the completeness, accuracy, and reliability of the Company's financial statements;
• monitoring the reliability and efficiency of the risk management and internal control system;
• ensuring independence and impartiality of internal and external audit functions;
• monitoring the efficiency of the system for notification of any potential unethical practices by Company employees (including misuse of insider or confidential information) and by third parties, as well as any other violations by the Company, and monitoring the implementation of measures by Company managers as part of such system;
• performing any other functions assigned by the Board of Directors.

The Committee acts by virtue of the Articles of Association and the Regulation on the Audit Committee of the Board of Directors of Unipro PJSC. The Regulation takes into account all the requirements set out by the new Moscow Exchange Listing Rules for the inclusion and maintenance of an issuer’s shares in the first level quotation list at the Exchange.

Membership of the Audit Committee in 2018

Period	Number of members of the Committee	Members’ names
1 January 2018 — 31 December 2018	3	Alexey Germanovich, Chairman of the Committee Anna Belova Oleg Vyugin

The Audit Committee held seven meetings in 2018, of which three were in the form of joint presence.

Category of matters	Key matters reviewed by the Committee
Accounting (Financial) Reporting	review of IFRS financial results of Unipro PJSC in 2017 review of financial reports of Unipro PJSC prepared under Russian law requirements in 2017 report of the Revision Commission of Unipro PJSC on the Company’s financial and business operations in 2017 review of IFRS financial reports of Unipro PJSC for 3 months, 6 months and 9 months of 2018 preliminary review of inventory and equipment for 2019–2021
External Audit	report of the external auditor on the IFRS financial report of Unipro PJSC for 2017 assessment of the quality of the audit opinion on the accounting statements of Unipro PJSC for the 2017 financial year, prepared under Russian law requirements report of the auditor on its review of interim financial information of Unipro PJSC for 6 months of 2018 report of the external auditor on its inspection of the project for reinstatement of Power Unit No. 3 at Berezovskaya GRES recommendations to the Board of Directors on the external auditor candidature to be proposed to the Annual General Shareholders’ Meeting recommendations to the Management Board on the external auditor for subsidiaries of Unipro PJSC comments by the auditor on financial results for 9 months of 2018
Risk Management	report on risks and risk trends in the Q1 2018 report on risks and opportunities of Unipro PJSC in 9 months of 2018
Corporate Governance	the work report for 2017 by the Audit Committee of the Board of Directors of Unipro PJSC recommendations to the Board of Directors on profit distribution for FY 2017, dividend amounts and payment recommendations to be proposed to the annual General Shareholders' Meeting proposals for key provisions of the Dividend Policy of Unipro PJSC approval of the work plan of the Audit Committee for 2019–2020 recommendations to the General Meeting of Shareholders on the amount of dividends to be paid on shares of Unipro PJSC for 9M 2018 and the date, on which persons entitled to receive dividends are determined FAS case status report by the Head of the Internal Audit Unit on preliminary results in 2018 approval of the work plan for the Internal Audit Department of Unipro PJSC for 2019

Appointment and Remuneration Committee

The Appointment and Remuneration Committee was established on 14 April 2008 and assists the Board of Directors in designing efficient and transparent remuneration practices, HR policy and succession policy, as well as carrying out preliminary review of matters related to HR planning, membership and efficiency of the Board of Directors.

The Committee acts by virtue of the Articles of Association and the Regulation on the Appointment and Remuneration Committee of the Board of Directors of Unipro PJSC. The Regulation takes into account all the requirements set out by the new Listing Rules of the Moscow Exchange for inclusion and maintenance of the shares of an issuer in the first level quotation list.

Membership of the Appointment and Remuneration Committee in 2018

Period	Number of members of the Committee	Members’ names
1 January 2018 — 31 December 2018	3	Anna Belova, Chairman of the Committee Oleg Vyugin Alexey Germanovich

Four meetings of the Appointment and Remuneration Committee were held in 2018 in the form of joint presence.

Category of matters	Key matters reviewed by the Committee
Remuneration and incentives	definition of the terms and conditions of the employment contract with the CEO of Unipro PJSC review of KPI achievement by members of the Management Board in 2017 review of target KPIs in 2018 for members of the Management Board approval of financial performance indicators for calculating annual bonuses to Company employees in 2017, and a proposal to the Board of Directors on this matter the CEO bonus for 2017 and a proposal to the Board of Directors on this matter payment of a bonus under the long-term incentive programme for the period 2014–2018 (Period 2) to Maxim Shirokov (Company CEO) and recommendation to the Board of Directors on this matter recommendations to the CEO regarding bonuses for the Deputy CEO for Finance and Economics and Deputy CEO for Production for 2017 definition of the terms and conditions of employment contracts with the Deputy CEO for Finance and Economics and Deputy CEO for Production
HR policy	recommendations to the Board of Directors on election of the Chairman of the Company’s Board of Directors recommendations to the Board of Directors on election of the Deputy Chairman of the Company’s Board of Directors recommendations on establishment of the Committees of the Board of Directors recommendations to the Board of Directors regarding the Corporate Secretary of Unipro PJSC approval of the holding by Maxim Shirokov (CEO and member of the Management Board of Unipro PJSC) of concurrent positions in the management bodies of other companies
Corporate Governance	the report on work by the Appointment and Remuneration Committee in 2017 assessing performance of the Board of Directors in 2017 review of the work plan of the Appointment and Remuneration Committee in 2018–2019 review of proposals by Company shareholders for the nomination of candidates to the Company’s management and supervision bodies, to be elected at the 2017 Annual General Shareholders' Meeting, and on recommendations to the Board of Directors on this matter

Evaluation of the performance of the Board of Directors and its Committees

In order to maintain the confidence of shareholders and interest of investors in the Company, the Board of Directors shall create a transparent system for the assessment of performance by the Board, in accordance with principles of corporate governance.

For this purpose, the Company’s Board of Directors has approved the Regulation on Assessment of Performance by the Board of Directors of Unipro PJSC. In accordance with the Regulation, the Company conducts an annual comprehensive assessment of performance of the Board of Directors and its Committees, and an individual assessment of performance of directors.

The assessment is carried out in order to:

• obtain detailed information on performance by the Board of Directors and its Committees;
• ensure that membership of the Board of Directors reflects an optimum balance of professional experience, knowledge, skills, and personal qualities;
• develop the Company’s corporate governance system;
• determine the level of efficiency of work by the Board of Directors, its Committees and members, and determine whether their work is meeting the development needs of the Company;
• identify areas, in which performance by the Board of Directors, its Committees and members can be improved, and any factors interfering with efficient performance;
• introduce efficient work methods for the Company’s Board of Directors and its Committees.

In March 2019 a self-assessment of the work of the Board of Directors in 2018–2019 was carried out. The assessment was carried out by a survey (completion of a questionnaire) of the members of the Board of Directors regarding work by the Board during the term of office of its members (from the time of election of Board members in June 2018 until the termination of their powers in June 2019).

The Chairman of the Appointment and Remuneration Committee analysed the forms, which had been completed by the members of the Board, and aggregated the results.

Based on the analysis of the data, the Appointment and Remuneration Committee compiled a report on performance by the Board of Directors and its committees in 2018–2019, and made recommendations for further improvement of work by the Board and its committees.

This report was considered at the meeting of the Board of Directors in the form of joint presence, which was held on 4 April 2019. The assessment, which was carried out, confirmed that the Board of Directors and its committees had performed efficiently in 2018–2019.

Preventing conflicts of interest

Rational and conscientious behaviour by members of the Board of Directors requires that Board resolutions should be based on exhaustive information in the absence of any conflict of interest, treating all shareholders of the Company equally, within the limits of normal business risk.

The Company has put an integrated procedure in place for managing conflicts of interest of members of the Board of Directors, achieving reasonable assurance that conflicts of interest are settled at early stages, and that the interests of the Company and its shareholders are not violated.

In exercising their rights and performing their duties, the members of the Board of Directors of Unipro PJSC shall be guided by the ethical standards adhered to by the Company, including the Code of Corporate Conduct, and shall comply with the Company’s by-laws concerning insider information and restrictions imposed by such by-laws on Board members in their capacity as Company insiders.

No notification was received from members of the Board of Directors concerning conflicts of interest during 2018.

Management Board

The Management Board is a collective executive body supervising the most significant aspects of management of the Company’s business within the powers stipulated by the Articles of Association and the Regulation on the Management Board of Unipro PJSC. The Management Board reports to the Board of Directors and the General Shareholders’ Meeting.

The policy of Unipro PJSC for improvement of corporate governance aims to strengthen the role of the Management Board in day-to-day management, shaping a uniform approach to key areas of the business. Enhancement of the role of the Management Board also reflects more extensive application of the principles of collective managerial decision-making, which mitigate the risk of inefficient managerial decisions.

The key responsibilities of the Management Board are:

• development and submission to the Board of Directors of long-term plans for the Company’s key business activities;
• approval of the Company’s large transactions;
• definition of the Company’s position on critical issues in the business of its subsidiaries;
• provision of social guarantees and benefits to Company employees;
• design of draft resolutions and recommendations to the Board of Directors.

Pursuant to Clause 18.3 of the Articles of Association of the Company, members of the Company’s Management Board are elected by the Board of Directors and number at least three persons. The Board of Directors may decide to appoint more than three members of the Management Board.

There were no changes to membership of the Management Board in 2018.

Members of the Management Board as of 31 December 2018

Meetings of the Management Board in 2018

The Management Board held 47 meetings in 2018 to discuss matters related to all areas of the Company’s business.

Category of matters	Key matters reviewed by the Management Board
Strategy and priority areas of the Company business	adjustment of the Unipro PJSC investment (managerial) programme for 2018 review of the Unipro PJSC investment (managerial) programme for 2019 review of tariff setting by the Company for electrical power (generating capacity), heat production, water treatment and water disposal review of progress in investment projects approval of the investment project for construction of a coal boiler at Berezovskaya GRES approval of the investment project for technical refurbishment of P-67 boiler unit No. 1 with replacement of the convection reheater at Berezovskaya GRES approval of the investment project for installation of coal-fired boilers at the start-up boiler house at Berezovskaya GRES approval of the investment project for installation of a 50 GCal/h coal-fired boiler at the start-up boiler house at Berezovskaya GRES review of the results of market modelling for the long-term scenario of the Unipro Commodity Outlook 2018 (UCO2018) review of modernisation of the unified automated system for financial and economic management at Unipro PJSC approval of decisions to dispose of non-core real estate of Unipro PJSC approval of contracts entered into as part of business operations
Financial and economic activities	approval of factual KPIs of Unipro PJSC for 2017 approval of financial indicators of Forecast 1 for 2018 approval of the Company’s KPIs for 2018 review of Forecast 0 for the achievement of key financial target in 2018–2020 approval of financial indicators of Forecast 2 for 2018–2020 approval of financial indicators of Forecast 3 for 2018 review of the performance forecast for 2018 review of preliminary results for 2019–2021 review of main key financial targets of Unipro PJSC for 2019–2021
Corporate Governance	approval of amendments to the Regulation on the use of vehicles of Unipro PJSC approval of amendments to the Regulation on Emergency Inventory amendments to the Regulation on incentivising contractors to comply with health and safety requirements during reinstatement of Power Unit No. 3 at Berezovskaya GRES approval of the regulations on remuneration to employees of the executive office approval of Corporate Standard No. UBP-P.01 “Policy for anti-crisis management at Unipro PJSC” and Corporate Standard No. UBP–S.2. “Anti-crisis management at Unipro PJSC” review of the preparation schedule for the Annual General Shareholders’ Meeting in 2018 amendments to the organisational structure of the executive apparatus of Unipro PJSC preliminary work on all issues submitted for review by the Board of Directors
Subsidiaries	definition of the position of the Company (the Company’s representatives) regarding agenda items of General Shareholders’ Meetings and meetings of the boards of directors of subsidiaries review of budget performance in 2017 and budget planning for 2018–2020 at E.ON Connecting Energies LLC review of the business results of Siberia AIP LLC and prospects for its further development
Risk Management	review of quarterly corporate risk and probability reports approval of the list of risk owners and risk coordinators review of the Company's insurance programme for 2018 approval of credit limits for the Company’s financial counterparties approval of the limit on foreign currency operations and the approach to determining and estimating (1) the level of FX risk exposure and (2) the amount of FX risk exposure to be compared with the FX operations limit approval of limits on commodity risks a resolution on hedging of currency risks for contracts, in which liabilities are denominated in foreign currency approval of amendments to the Regulation on the Corporate Risk Management System of Unipro PJSC amendments to the Regulation on Market Risk Management of Unipro PJSC
Social investments	approval of the Social Investment Programme of Unipro PJSC for 2018 approval of the amended Regulation on Corporate Support to Company Employees for Improvement of their Housing Situation approval of the material terms of loan agreements with employees of Unipro PJSC branches for improvement of their housing situation
Safety	approval of target funding programmes for initiatives to strengthen fire safety and security in line with the recommendations of the Safe.On audit for Unipro branches in 2018–2021 review of health and safety work in H1 2018 review of fire safety at the Company’s branches Approval of the comprehensive programme to improve fire safety of the boiler section of the main building at Berezovskaya GRES
Procurement	review of quarterly reports on “improper procurements” review of quarterly reports on purchases from “unreliable” suppliers approval of procurement procedures required for main operations

Remuneration and compensation to the Management Board

Remuneration and compensation to Company employees who are members of the Management Board are paid under employment contracts signed with them as full-time employees, the terms and conditions of which are reviewed by the Appointment and Remuneration Committee.

The Regulation on the Management Board does not envisage any special remunerations or compensations to employees who act as members of the Management Board.

In 2018, Company employees who are members of the Management Board received the following payments: salaries — RUB 154,835,000; bonuses and other payments — RUB 516,697,000; total — RUB 671,532,000.

CEO

The Chief Executive Officer (CEO) is the Company’s sole executive body. The CEO is responsible for the Company’s daily operations as described in the Articles of Association and in resolutions of the General Shareholders’ Meeting, the Board of Directors and the Management Board.

The CEO reports to the General Shareholders’ Meeting and the Board of Directors. The CEO is elected by the Board of Directors by a majority of votes of those present at the Board meeting.

Maxim Shirokov was appointed to the position of CEO by the Resolution of the Board of Directors dated 16 July 2012 and took office on 17 July 2012.

Remuneration and compensation to the CEO

Remuneration and compensation payable to the CEO, including financial incentives, are described in the employment contract with the CEO, and the terms and conditions of such contract are approved by the Board of Directors of the Company. No other remunerations were paid to the CEO except those described in the employment contract. The amount of remuneration and compensation paid to the CEO in the reference period is included in the amount of remuneration and compensation paid to the Management Board.

Corporate Secretary

The key duties of the Corporate Secretary are: ensuring proper interaction with the Company’s shareholders; coordinating actions by the Company to defend the rights and interests of shareholders, and supporting efficient operations by the Board of Directors.

The Corporate Secretary may also act as the Secretary of the General Shareholders’ Meeting and as the Secretary of committees of the Board of Directors, provided that such functions are stipulated by resolutions of the Board of Directors or by the Regulations on Committees of the Board of Directors.

The Corporate Secretary is functionally subordinated and reports to the Board of Directors, and is administratively subordinated to the CEO.

No conflicts of interest in the work of the Corporate Secretary were identified in 2018.

The working procedures of the Corporate Secretary are governed by the Regulation on the Corporate Secretary.

By the Resolution of the Board of Directors dated 31 August 2017, Elena Gabdulkhayeva, the Company’s Director for Corporate Management, Legal and Property Issues, was appointed to the position of the Corporate Secretary of Unipro PJSC, and she was re-elected to the same position by the Board of Directors on 18 December 2017^*.

Control and audit

Unipro PJSC has a system for the control of financial and business operations, which consists of local regulatory documents, existing practices and procedures, and methodology. The key participants of the system are as follows:

• Revision Commission;
• Audit Committee of the Board of Directors of Unipro PJSC^*;
• Internal Audit Department;
• External Auditor.

Revision Commission

The Revision Commission of Unipro PJSC is a permanent elected body that oversees the financial and business operations of the Company, in accordance with the Articles of Association and the Regulations on the Audit Commission.

The Revision Commission is elected by the General Shareholders’ Meeting for the period until the next Annual General Shareholders’ Meeting.

If the Revision Commission is elected by an Extraordinary Shareholders’ Meeting, members of the Revision Commission are deemed to be elected for the period until the Annual General Shareholders’ Meeting.

The Revision Commission continuously supervises the Company’s financial and operating activities, its standalone divisions, officers, managerial bodies and structural units. The powers and operating procedures of the Revision Commission are described in the Regulation on the Revision Commission.

The Revision Commission was elected with four members by the Annual General Shareholders' Meeting of the Company on 14 June 2018.

In 2018, the Revision Commission focused on the following aspects of the Company’s business:

• key production, financial and economic indicators;
• audit of progress in main investment projects;
• analysis of performance by the Company’s stocks;
• fixed assets inventory;
• acceptance of completed works under contractor agreements.

In 2018 the Revision Commission held three meetings and carried out a scheduled audit of the Company’s financial and business activities. No unscheduled audits of the Company’s financial and business activities were carried out.

According to Clause 12.2 of the Regulation on the Revision Commission, no remuneration is provided to members of the Revision Commission for their work in that capacity. In 2018 no remuneration was paid to members of the Audit Committee.

Internal Audit Department

The function of internal audit at Unipro PJSC is assigned to the Internal Audit Department and is carried out in accordance with the Regulation on the Internal Audit Department.

The Internal Audit Department helps to achieve the Company's objectives in the most efficient and economically sound way, by using a systematic and consistent approach to assess and improve the effectiveness of risk management, internal control and corporate governance systems.

In order to ensure independence and objectivity, the Internal Audit Department reports to the Board of Directors, and is administratively subordinated to the CEO. The Internal Audit Department is led by a manager appointed by an order of the CEO of Unipro PJSC, based on the proposal of the Board of Directors. The Head of the Internal Audit Department is a member of the Revision Commission.

In its work the Internal Audit Department takes account of international professional standards for internal audit and the Code of Ethics for Internal Auditors, adopted by the Institute of Internal Auditors, and is guided by the Company's internal audit regulations.

Audit procedures are based on the annual audit plan, which was prepared for 2018 using a risk-based approach to identify key areas for audit, taking account of the requests and recommendations of management and shareholders.

The audit plan for 2018 was 100% completed; the staff of the Internal Audit Department conducted 12 audits and investigations in the following functional areas: procurement, manufacturing, IT, health and safety, finance. A significant share of the audit procedures was carried out in respect of the project for the reinstatement of Power Unit No. 3 at Berezovskaya GRES.

The staff of the Internal Audit Department systematically monitor and control the implementation of measures to prevent, correct or eliminate shortcomings that are identified by audit work, based on recommendations made by the auditors.

In 2018 the staff of the Internal Audit Department pursued further professional development and training. Management competences were enhanced by the obtaining of a NEBOSH certificate, which confirms adequate knowledge for self-auditing in the field of health, safety, security and environment (HSSE). The staff of the Department have been trained towards and continue to prepare for CIA (Certified Internal Auditor) and CFE (Certified Fraud Examiner) professional certifications.

The work plan for the Internal Audit Department of Unipro PJSC for 2019 includes the following tasks:

• audit of the purchase of non-production services and management of contracts;
• audit of supervisory control and data acquisition (SCADA);
• audit of repair and maintenance processes at Yaivinskaya GRES;
• audit of the occupational health, safety and environment management system, including safeguarding of the health of personnel;
• audit of industrial safety at the construction site for reinstatement of Power Unit No. 3 at Berezovskaya GRES;
• analysis of practices in the management and implementation of new business initiatives at Unipro PJSC;
• analysis of readiness for the modernisation programme;
• audit of measures taken in response to analysis of the causes of the fire in Power Unit No. 3 at Berezovskaya GRES;
• audit of work on preparation of financial statements at Unipro PJSC;
• audit of tangible assets accounting.

The Company has developed feedback channels for issues related to violations or inconsistencies in the preparation of financial statements or in operation of the internal control system. Any employee may refer these issues to the Internal Audit Department and the Audit Committee of the Board of Directors.

External Auditor

Unipro PJSC engages an external auditor each year to ensure independent and objective evaluation of the quality of the Company’s financial (accounting) reports prepared to Russian and international standards.

On 14 June 2018, the Annual General Shareholders’ Meeting approved PricewaterhouseCoopers Audit JSC as the Company’s external auditor.

In 2018 the auditor completed the following tasks:

• audit of Unipro’s RAS financial statements for the period from 1 January to 31 December 2018, inclusively;
• preparation of the auditor’s opinion on Unipro’s RAS financial statements for 2018;
• review of Unipro’s interim IFRS financial statements prepared for 6 months ending on 30 June 2018;
• preparation of the auditor’s opinion on the review of Unipro’s interim IFRS financial statements prepared for 6 months ending on 30 June 2018;
• review of special financial statements for 3 and 6 months ending on 31 March and 30 June 2017, respectively, prepared according to the instructions of Uniper Group and the accounting policy of Uniper Group for the preparation of special financial statements;
• preparation of an auditor’s opinion on the review of the special financial statements;
• audit of IFRS consolidated financial statements of the Company for the year ending on 31 December 2018;
• preparation of an audit report on the financial status of the Company as of 31 December 2018, and on its business results and cash flow for the reporting year in accordance with IFRS;
• audit of the Company’s special financial information for the reference period ending on 31 December 2018, prepared according to the instructions of Uniper SE Group and the accounting policy of Uniper SE Group for the preparation of financial statements;
• report on compliance with the instructions of Uniper SE Group and Uniper SE Group accounting policy in preparation of the Company's special financial information.

The amount of remuneration payable to the auditor is set by the Board of Directors. The resolution of the Board of Directors called for the following remuneration to be paid to the external auditor in 2018:

• RUB 3,500,000 (net of VAT) for the audit of accounting statements for the reporting year ending on 31 December 2018, prepared according to Russian law;
• RUB 21,500,000 (net of VAT) for the provision of audit services with regard to the Company’s financial statements for the reporting year ending on 31 December 2018, drafted in accordance with IFRS.