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 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, including 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

In accordance with the Company’s Articles of Association, one third of the Directors shall retire by rotation and seek re-election at each Annual General Meeting.

During the year ended 31 December 2014 two Directors were not re-elected. The Board of Directors was reduced and now consists of seven (7) members, three (3) of whom are executive Directors. In addition, revised Terms of Reference of the Board of Directors and Managing Director (CEO) were approved by the Board of Directors and a new Chairman of the Board of Directors was appointed.

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 Chairman of the Board of Directors. Mr. Yamburenko previously held the position of Head of the Industrial Pumps Business Unit since 2005. Prior to joining the Group, Mr. Yamburenko was the CEO of Livgidromash (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, where he gained 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 OAO 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 Engineering Ecology). 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 Engineering and Ecology) in 1988. Mr. Skrynnik is the author of more than 50 scientific publications and 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 2014

In 2014, the Board of Directors held five ordinary meetings, all of which occurred in Limassol, Cyprus. During the course of 2014, 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 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 within its remit, including the approval of corporate reports and the Company’s participation in legal proceedings (for further details see Litigation).

The Board of Directors Committees

In 2014 the Board of Directors established a Strategy and Investments Committee. Mr. Nikolay Yamburenko, Mr. Gary Yamamoto, and Mr. Yury Skrynnik were elected as members of the Committee and Mr. Nikolay Yamburenko was appointed as chairman. The Strategy and Investments Committee is responsible for considering, amongst other matters: (i) strategic business combinations, (ii) acquisitions, mergers, dispositions, divestitures and similar strategic transactions involving the Company together with (iii) fundamental investments of the Company.

There are two further Committees of the Board of Directors: the Audit Committee and the Remuneration Committee. A brief description of the main activities of these two Committees in 2014 is set out below.

Audit Committee

In 2014, the revised Terms of Reference of the Audit Committee were approved by the Board of Directors. The Audit Committee is to be made up of at least two members, one of whom is to be an independent non-executive Director. The Committee expects to meet four times each year. Currently, the Audit Committee is chaired by Philippe Delpal; its other member is 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 2014

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).

The Audit Committee also supervised the internal and external audit procedures and the annual tax strategy implementation within the course of the year. The Audit Committee also made recommendations to the Board of Directors with regards to internal control efficiency and the appointment of a new external auditor of Company.

Remuneration Committee

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

Activities in 2014

In 2014, two meetings of the Remuneration Committee were held. The main matters reviewed by the Remuneration Committee were the Group’s Long-Term Incentive Program, the Financial Performance Targets used in the setting of 2014 remuneration and Individual Financial Performance Bonus Targets.

The Remuneration Committee adopted decisions and made recommendations to the Board of Directors with regards to the Group’s CEO Compensation Targets, 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 condensed 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 that review, the Audit Committee gives its recommendations to the Board of Directors regarding the candidacy of the external auditor and the amount of the auditor’s compensation, and advises the Board of Directors on other terms and conditions of the contract with the auditor. In 2014, 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 ended 31 December 2014.

Directors Compensation

The total compensation of the independent Directors, as set out in the Group’s consolidated income statement, was Euro 195,000 for the year ended 31 December 2014.

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