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Corporate Governance

Corporate Governance

Last reviewed on 27 September 2018
This Corporate Governance Statement (“CGS”) has been prepared by the Chairman of the Volga Gas plc (the “Company”) in accordance with the recommendations of the QCA Corporate Governance Code 2018 (the “Code”). The CGS explains how the 10 Principles of the QCA Code are applied by the Company and where it departs from the QCA Code an explanation of the reasons for doing so is provided.


Role of the Chairman and application of the QCA Code


The Chairman is responsible for dealing with the strategic direction and long-term strategy of the Company, including managing board appointments/removals, delegation of Board’s powers, agreeing membership and terms of reference of board committees and task forces, and addressing matters referred to the board by the board committees.
In ensuring good governance Volga Gas has adopted the Quoted Companies Alliance Corporate Governance Code 2018 and applies the ten principles of the QCA Code as set out in this statement.

 QCA Code RecommendationApplication by the Company
1.

Principle 1

Establish a strategy and business model which promote long-term value for shareholders
• The board must be able to express a shared view of the company’s purpose, business model and strategy.
• It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term.
• It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

• Volga Gas is a production focused upstream oil and gas business, operating in the Volgograd and Saratov regions. The strategy is to maximize the cash generating capability of its resources to provide returns to shareholders through both dividends and value appreciation.
• The Company is planning to invest and develop its operating business to deliver long-term, sustainable growth, thus insuring value generation for our shareholders.
• Delivery of the strategy necessitates sound technical and operational planning and execution and risk management.
• Further details of the company’s strategy may be found on the following section of the website: www.volgagas.com/about-us
• Further details of the company’s values and principles can be found here: https://www.volgagas.com/corporate-responsibility/corporate-social-responsibility

2.

Principle 2

Seek to understand and meet shareholder needs and expectations
• Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.
• The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

• The company’s policy on investor relations is set out on page 19 of the 2017 Annual Report and Accounts.
• The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The directors believe that Volga Gas has a successful and well-established programmed which facilitates shareholder engagement. Significant developments are disseminated through the Regulatory Information Service (RIS) and timely updates of the Company’s website. The Board views the AGM as an effective forum for communication between the Company and its shareholders and encourages their participation in its agenda.
• In addition to compliance with the requirement to disseminate all information on a timely basis, the company issues monthly reports on production and provides regular operational updates on the RNS.
• The company retains a financial public relations adviser and an investor relations consultant, whose contact details are reproduced on each RNS announcement and are available here: www.volgagas.com/investors/shareholder-information
• The Company encourages all shareholders to attend its Annual General Meeting where they can meet and question the Directors and express ideas or concerns. The Directors undertake presentations and roadshows to institutional investors as appropriate and periodically participate in recorded interviews that are available to view on the corporate website.

3.

Principle 3

Take into account wider stakeholder and social responsibilities and their implications for long-term success
• Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.
• Where matters that relate to the company’s impact on society, the communities within which it operates, or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.
• Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

• The company recognises that the successful execution of its business model requires well-functioning relationships with governments, regulatory authorities, local communities, contractors and customers. Details of the company’s policy and statements of business principles and ethics may be found here: https://www.volgagas.com/corporate-responsibility/corporate-social-responsibility The Company also maintains a regular dialogue with its external stakeholders particularly its agents and business partners around the world which help drive business development. The Company works closely with its advisors to ensure it operates in conformity of its listing regulations as well as the social, legal, religious and cultural requirements of the countries in which it operates. The Company also maintains a regular dialogue with its external stakeholders particularly its agents and business partners around the world which help drive business development. The Company works closely with its advisors to ensure it operates in conformity of its listing regulations as well as the social, legal, religious and cultural requirements of the countries in which it operates.
• Management of health, safety and environmental risks is paramount. Details of the company’s policies may be found here: www.volgagas.com/corporate-responsibility/health,-safety-environment

4.

Principle 4

Embed effective risk management, considering both opportunities and threats, throughout the organization
• The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.
• Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

• The Company’s risk profile and risk management strategies are detailed in its 2017 Annual Report on pages 13 and 14, which can be found by following the link below:
https://www.volgagas.com/media/260418/VGAS%20Annual%20Report%202017.pdf

5.

Principle 5

Maintain the board as a well-functioning, balanced team led by the chair
• The board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.
• The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.
• The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a board judgement.
• The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.
• Directors must commit the time necessary to fulfill their roles.

• Of the seven Board members, the following are considered to be independent: Ronald Freeman, Vladimir Koshcheev and Stephen Ogden. The biographies of the members of the board can be found following the link below: https://www.volgagas.com/about-us/board-senior-management/board-of-directors
• All directors are expected to devote the necessary time commitments required by their position and are expected to attend at least 4 board meetings each year. The Company will report annually on the number of Board and Committee meetings held during the year and the attendance record of individual Directors.
• The Board is expected to meet at least every three months. The record of Board meetings and attendances are included in each Annual Report.

6.

Principle 6

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
• The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.
• The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.
• As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

• The details of each director may be found on the following page of the website: https://www.volgagas.com/about-us/board-senior-management/board-of-directors#
• The Directors who have been appointed to the Company have been chosen because of the range of skills and experience they offer, and which are appropriate for the strategy and objectives for the company. In appointing new Directors, the Board has agreed that appointments will be made by the Nominations Committee.

7.

Principle 7

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
• The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.
• The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.
• It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.

Evaluation of the performance of Directors, the Board and its committees is undertaken as follows:
• The Executive Directors are evaluated by the Non-Executive Directors in informal sessions. The goal of the Board evaluation process is to identify and address opportunities for improving the performance of the board and to solicit honest, genuine and constructive feedback.
• The Chairman is evaluated by the other Non-Executive Directors taking into account the views of the Executive Directors. The Board considers the evaluation process is best carried out internally at the Company’s current size, however the Board will keep this under review and may consider independent external evaluation reviews if the necessity arises in the future.
• The evaluation process is focused on the improvement of Board performance, through open and constructive dialogue and the development and implementation of action plans. The Board will report on its evaluation and actions in its Annual Report.
• Succession planning is considered by the Board as a whole. The Board will annually review and make recommendations relating to talent management and succession planning for Board and the managing director.
• The Committees are evaluated by the Non-Executive Directors along with the Chief Executive
• The Board as a whole evaluates its own performance by consolidating and discussing the reviews set out above.

8.

Principle 8

Promote a corporate culture that is based on ethical values and behaviours
• The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.
• The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.
• The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.
• The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

• It is the Board’s view that the Company’s corporate culture is consistent with its objectives, strategy and business model and a good example of this is how Principle 3 of the QCA Code (Wider Stakeholder and Social Responsibilities) has been adopted by the Company. The Board has the means to determine that ethical values and behaviours are recognised and respected via the management team.
• Details of the corporate culture and ethical values are to be found on http://www.volgagas.com/corporate-responsibility/corporate-social-responsibility
• The Code of Business Conduct and the Statement of Ethics are available via links on the same page.

9.

Principle 9

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
• The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
- size and complexity; and
- capacity, appetite and tolerance for risk.
• The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

• The Chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. The Chairman with the assistance of the Chief Executive Officer sets the Board’s agenda and ensures that adequate time is available for discussion of all agenda items, in particular strategic issues.
• The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors in particular and ensuring constructive relations between Executive and Non-Executive Directors. The Chairman is also responsible for ensuring that the directors receive accurate, timely and clear information.
• The Chief Executive Officer (CEO) is responsible for running the business and implementing the decisions and policies of the Board. The CEO is also responsible for ensuring the Company’s communication with shareholders is timely, informative and accurate with due regard to commercial sensitivity and regulatory requirements.
• The Chief Financial Officer (CFO) is responsible for the Company’s finances. Currently, the CFO is not part of the Board. • The Non-Executive Directors are appointed not only to provide independent oversight and constructive challenge to the Executive Directors but also chosen to provide strategic advice and guidance.
• All directors are able to allocate sufficient time to the Company to discharge their duties. There is a formal, rigorous and transparent procedure for the appointment of new directors to the Board. The search for Board candidates is conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.
• The details of the structure of the board and the roles of identified members and Board Committees are available on https://www.volgagas.com/corporate-responsibility/corporate-governance

10.

Principle 10

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
• A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.
• In particular, appropriate communication and reporting structures should exist between the board and all constituent parts of its shareholder base. This will assist:
- the communication of shareholders’ views to the board; and
- the shareholders’ understanding of the unique circumstances and constraints faced by the company.
• It should be clear where these communication practices are described (annual report or website).

• The Board attaches great importance to providing shareholders with clear and transparent information on the Group's activities, strategy and financial position. Details of all shareholder communications are provided on the Group's website. The Board holds meetings with larger shareholders and regards the annual general meeting as a good opportunity to communicate directly with all shareholders.
• Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory system and displayed on the Company’s website with suitable explanations of any actions undertaken as a result of any significant votes against resolutions.
• Details of the work of the board committees may be found on the following pages:
• Audit https://www.volgagas.com/corporate-responsibility/corporate-governance/audit-committee
• Remuneration https://www.volgagas.com/corporate-responsibility/corporate-governance/remuneration-committee
• Nominations: https://www.volgagas.com/corporate-responsibility/corporate-governance/nomination-committee
• Historical annual reports and other governance-related material, including notices of all general meetings over the last five years are located on
o https://www.volgagas.com/investors/company-reports-presentations
o https://www.volgagas.com/investors/shareholder-documents

Other

Consider relationship agreement where there is a dominant shareholder.

There is a relationship agreement between Volga Gas plc and Baring Vostok. The terms of this agreement, which have not been varied, are set out on page 164 in the Volga Gas Admission Document
https://www.volgagas.com/media/22128/VGAS-Admission-Document.pdf