BoD and its committees

HMS Group’s corporate governance practices are designed to ensure that the interests of all its stakeholders are given due consideration. Although the Company is not a subject to any mandatory corporate governance code in its home jurisdiction of Cyprus, nor required to observe the UK Corporate Governance Code, it has implemented various corporate governance measures. These include the appointment of two independent non-executive Directors to its Board of Directors and the establishment of an Audit Committee and a Remuneration Committee. Each of these Committees of the Board of Directors is chaired by an independent, non-executive Director. HMS Group continues to review its corporate governance policies in line with international best practice.

The Board of Directors and Performance

General Overview

The Board of Directors consists of seven (7) members, three (3) of whom are Executive Directors. During the year ending 31 December 2015, new Terms of Reference of the Board of Directors and Managing Director (CEO) were approved by the Board of Directors.

Mr. Nikolai N. Yamburenko

Chairman of the Board of Directors, Non-Executive Director, Chair of the Strategy and Investments Committee

Mr. Yamburenko was appointed as a member of the Board of Directors in October 2010. He has been a non-executive member of the Board of Directors since 10th July, 2014, when he was appointed Chair of the Board of Directors. Mr. Yamburenko previously held the position of Head of the Industrial Pumps Business Unit from 2005. Prior to joining the Group, Mr. Yamburenko was the CEO of HMS Livgidromash, which is now part of the Group. Mr. Yamburenko has more than 30 years of industry experience. He graduated from the faculty of radio electronics of the Moscow Aviation Institute named after S. Ordzhonikidze, where he gained a degree in radio electronics.

Executive Directors

Mr. Artem V. Molchanov

Member of the Board of Directors, Managing Director (CEO)

As one of the founders of the Group, Mr. Molchanov has held various executive positions within HMS Group since its establishment in 1993. Mr. Molchanov became the President of HMS Group in 2008. Mr. Molchanov was appointed as an executive member of the Board of Directors in October 2010. Mr. Molchanov has more than 20 years of industry experience. He graduated from the Plekhanov Russian Academy of Economics (currently Plekhanov Russian University of Economics), where he gained a degree in industrial economics.

Mr. Kirill V. Molchanov

Member of the Board of Directors

As one of the founders of the Group, Mr. Molchanov has held various executive positions within HMS Group since its establishment in 1993. Mr. Molchanov was appointed as an executive member of the Board of Directors in October 2010 and has served as Vice President of HMS Group since 2008. Mr. Molchanov has more than 20 years of industry experience. He graduated from the Bauman Moscow Higher Technical School (currently the Bauman Moscow State Technical University) with a degree in electromechanical engineering. He graduated from the Judge Business School, University of Cambridge with an executive MBA degree.

Mr. Yury N. Skrynnik

Member of the Board of Directors

Mr. Skrynnik was appointed as an executive member of the Board of Directors in October 2010. He is currently the Head of the Compressor Business Unit, a position he has held since its establishment in 2012. Previously Mr. Skrynnik held the position of Director for Strategic Marketing. Prior to joining HMS Group, he served as the Chief Representative of JSC "Sumy Frunze NPO" (Ukraine) in Russia from 1999 to 2008. Mr. Skrynnik worked as Director of the Innovative Technical Subdivision of OOO Machines, Equipment, Technologies, Products and Services from 1992 to 1999. From 1986 to 1988, he served as a scientific research officer at the Moscow Institute of Chemical Machinery (currently the Moscow State University of Environmental Engineering). Mr. Skrynnik has more than 20 years of science and management experience. He graduated from the Sumy branch of the Kharkiv Polytechnic Institute with a degree in mechanical engineering in 1983. He was awarded a PhD in engineering science from the Moscow Institute of Chemical Machinery (currently the Moscow State University of Environmental Engineering) in 1988. Mr. Skrynnik is the author of more than 50 scientific publications and creator of 20 inventions.

Non-executive Directors

Mr. Philippe Delpal

Member of the Board of Directors, Chair of the Audit Committee

Mr. Delpal was appointed as an independent non-executive member of the Board of Directors in December 2010 and is chair of the Audit Committee. He is an Operational Partner for Financial Services in Baring Vostok Capital Partners, one of the largest private equity firm in CIS. He deals with Russian and CIS financial services companies. He also currently serves as a non-executive director of TCS Bank (Russia), Orient Express Bank OJSC (Russia), Europlan Bank, BlackRock Emerging Europe Plc (London), Komercijalna Banka (Serbia) and Beta Epsilon SAS. He has a background both in Russian private equity and in Banking (as former CEO of one of the largest consumer finance player in Russia and CEO of BNP Paribas in Moscow). He brings to the Board financial and investment experience. He graduated from the Telecom Paris University with a degree in IT, Telecoms and Economics. He has been living in Russia since 2004.

Mr. Andreas S. Petrou

Member of the Board of Directors

Mr. Petrou was appointed as a non-executive member of the Board of Directors in June 2010. From 1989 to 1998, Mr. Petrou served as a member of the Board of The Cyprus Tourism Development Public Company Ltd, representing the interests of the Government of the Republic of Cyprus. From 1987 to 1990, Mr. Petrou served as the General Secretary of Cyprus Dairy Organisation. In 1986, Mr. Petrou established his own law firm. He is an honours graduate of the Law School of Democrious University of Thrace. Mr. Petrou has been a member of the Cyprus Bar Association since 1985.

Mr. Gary S. Yamamoto

Member of the Board of Directors, Chair of the Remuneration Committee

Mr. Yamamoto was appointed as an independent non-executive member of the Board of Directors and chair of the Remuneration Committee in December 2010. Prior to joining the Group, he served as Chief Executive Officer at Borets International during 2009. Mr. Yamamoto has served as the President of Yamamoto Consulting since 2008. He served as a member of the Board of Directors at Radius Servis from 2007 until 2008. Prior to this, Mr. Yamamoto enjoyed a 20-year career with Schlumberger Limited and, from 2003 to 2008, served as Vice President of Schlumberger Russia. Mr. Yamamoto has more than 20 years of management experience. He graduated from the University of California, Berkeley, with a degree in engineering in 1988. Mr. Yamamoto is a member of the Society of Petroleum Engineers and the Independent Directors Association.

Principal Activities of the Board of Directors in 2015

The Board of Directors held four ordinary meetings in 2015, all of which occurred in Limassol, Cyprus. During the course of the year, the Board of Directors continued working on the development of the Company’s mid-term and long-term financial and business strategy, including investment plans, M&A activities, budgeting, long-term incentive plan for the management of the Company, and general corporate development.

Throughout the year, the Board of Directors focused on the improvement of the Company’s internal control and risk management systems.

At its meetings the Board of Directors reviewed other issues connected with the activities of the Company that are within its remit, including the approval of corporate reports.

The Board of Directors Committees

There are three Committees of the Board of Directors: the Audit Committee, the Remuneration Committee, and the Strategy and Investments Committee. A brief description of the main activities of these Committees in 2015 is set out below.

Audit Committee

General Overview

The Audit Committee comprises two independent Directors and is expected to meet three to four times per year. Currently, the Audit Committee is chaired by Mr. Philippe Delpal; the other member is Mr. Gary S. Yamamoto.

The Audit Committee is responsible for considering, amongst other matters: (i) the integrity of the Group’s financial statements, including its annual and interim financial statements; (ii) the effectiveness of the Group’s internal controls and risk management systems; (iii) auditors’ reports on the Group; and (iv) the terms of appointment and remuneration of the auditors of the Group.

The Audit Committee supervises and monitors, and advises the Board of Directors on, risk management and control systems and the implementation of codes of conduct. The Audit Committee also supervises the submission by the Group of financial information and a number of other audit-related issues and assesses the efficiency of work of the Chairman of the Board of Directors.

Activities in 2015

In 2014, two meetings of the Audit Committee were held. The main issues the Audit Committee oversaw in 2014 were the preliminary review of IFRS financial statements (including goodwill impairment at the end of 2014) and internal control and risk management (including the audit plan).

Three meetings of the Audit Committee were held in 2015. The main issues that the Audit Committee oversaw during the year were the preliminary review of IFRS financial statements (including goodwill impairment at the end of 2015) and internal control and risk management (including the audit plan). The Audit Committee also supervised the internal and external audit procedures, and the implementation of the annual tax strategy within the course of the year. The Audit Committee also made recommendations to the Board of Directors with regards to internal control efficiency and interim dividend distribution.

Remuneration Committee

General Overview

The Remuneration Committee comprises three Directors and is expected to meet at least once per year. Currently, the Remuneration Committee is chaired by Mr. Gary S. Yamamoto; its other members are Mr. Nikolay Yamburenko and Mr. Philippe Delpal. The Remuneration Committee is responsible for, amongst other matters, determining and reviewing the Group’s remuneration policies. The remuneration of independent Directors is a matter for the Chair of the Board of Directors and the Executive Directors. No Director or manager may be involved in any decisions regarding their own remuneration.

Activities in 2015

Three meetings of the Remuneration Committee were held in 2015. The main matters reviewed by the Remuneration Committee were the terms of the CEO’s contract and the Group’s Long-Term Incentive Program. Ernst & Young were engaged to develop the Long-Term Incentive Program in line with international best practice. The Remuneration Committee adopted decisions and made recommendations to the Board of Directors regarding the CEO’s contract and the Long-Term Incentive Program, in accordance with international best practice.

External Audit of Financial Statements

Every year the Company/Group appoints an external auditor who is responsible for the auditing and inspection of the consolidated financial statements of the Company/Group in compliance with IFRS. The external auditor also prepares reviews of the consolidated interim financial information of the Company/Group in compliance with IFRS requirements. The external auditor of the Company/Group is selected from leading audit firms after a thorough review of their respective proposals. Following the review, the Audit Committee gives its recommendations to the Board of Directors regarding the candidacy of the external auditor and the level of the auditor’s compensation, and advises the Board of Directors on other terms and conditions of the contract with the auditor. In 2015, based on the recommendation of the Audit Committee, the Board of Directors selected Deloitte (Cyprus) to conduct the audit of the financial statements of the Company/Group for the year ending 31 December 2014, and Deloitte remains in the office for the 2015 audit.

Strategy and Investments Committee

General Overview

The Strategy and Investments Committee comprises three directors, one of whom is independent. The Committee is expected to meet at least once each year. Currently, the Strategy and Investments Committee is chaired by Mr. Nikolay Yamburenko and the other members are Mr. Gary Yamamoto and Mr. Yury Skrynnik.

The Strategy and Investments Committee is responsible for considering, amongst other matters: (i) strategic business combinations; (ii) acquisitions, mergers, disposals and similar strategic transactions involving the Company; and (iii) fundamental investments of the Company.

Activities in 2015

One meeting of the Strategy and Investments Committee was held in 2015. The main matter reviewed by the Committee was the Group Strategy up to 2020.

Director’s Compensation

Total compensation of the Chairman of the Board was Euro 270,115 for the year ended 31 December 2015. Total compensation of the independent Directors, as set out in the Group’s consolidated statement of profit or loss and other comprehensive income, was Euro 225,000 for the year ended 31 December 2015.

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