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Presented by: VTB Bank, Custody

August 13, 2020 Issue No. 2020/31

Market News

MSCI includes securities in MSCI Index from September 2020 On August 13, 2020 it was reported that internet company Yandex’s securities would be included in the MSCI Russia Index starting from September 1. BCS Global Markets said Yandex’s securities received a significant weight, as of August 11, of 8.1% in the MSCI Russia Index and 0.27% in the MSCI Emerging Markets Index, by ensuring an inflow of passive assets to Yandex of USD 893 mln. The MSCI Russia Index also comprises securities of the country’s major mobile operator MTS.

Central bank sells RUB 3.1 bln of foreign currency on market on August 13, 2020 On August 13, 2020 it was stated that Russia’s central bank sold RUB 3.1 bln of foreign currency on the domestic market with settlements on August 12. On March 9, the regulator decided to suspend purchases of foreign currency under the budget rule for 30 days in order to raise predictability of activities of monetary authorities and to reduce the volatility of financial markets in the conditions of significant global oil price changes. On March 10, the authority decided to start preemptive sales of foreign currency in order to support the financial stability, as the Finance Ministry would be able to start selling foreign currency from the National Wealth Fund only in April. The central bank started selling additional currency from the National Wealth Fund to close the Sberbank sale deal on March 19. The amount of planned currency sales from August 7 through September 4 is RUB 64.9 bln split into the equivalent of RUB 3.1 bln per day.

Legislation

Cyprus says reaches agreement on taxation deal with Russia On August 10, 2020 Constantinos Petrides, Cypriot Finance Minister, stated that Russia and Cyprus agreed on amendments to an agreement on avoidance of double taxation. According to a statement of Russia’s Finance Ministry, Cyprus agreed to raise the tax on interest and dividends in the framework of the agreement with Russia to 15%. Deputy Finance Minister Alexei Sazanov said that a draft protocol was initialed. The protocol will be ratified until the end of 2020 and come into force from January 1, 2021. The Russian ministry earlier said it had started the procedure to cancel the agreement on avoidance of double taxation with Cyprus. The official also said that the Finance Ministry expects additional tax collection to the Russian budget from the agreement at RUB 130–150 bln annually. Russia plans to complete negotiations with Luxembourg and Malta in a month, asking for the same conditions as Cyprus. The ministry also said that Russia soon expects to receive a response from the Netherlands regarding a recently sent letter on proposals to revise an agreement on avoidance of double taxation. Russian President Vladimir Putin suggested in March imposing a 15% tax on dividend yield withdrawn to accounts in foreign jurisdictions, which would require adjustments in agreements on avoidance of double taxation with other countries. Russia will cancel such deals unilaterally if agreements on the matter with other countries are not reached.

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Company News

Mosenergo may sell 3.9% stake in WGC-2 On August 7, 2020 Denis Voronchikhin, head of the investor relations department at Russian power utility Mosenergo, said that the company was considering selling a 3.9% stake in Wholesale Generating Company- 2 (WGC-2). Mosenergo and WGC-2 conducted a swap of treasury shares in August 2019, the deal cost WGC-2 RUB 319 mln, and Mosenergo’s cost was RUB 2.1 bln. WGC-2 transferred some 4.3 bln shares, while Mosenergo transferred around 140 mln shares.

Rosneft buys back 2.8 mln securities for USD 14 mln on August 3–7, 2020 On August 10, 2020 it was announced that Russian oil major bought back 2,801,251 shares and global depositary receipts (GDRs) for USD 13.5 mln on August 3–7. The company bought 2,140,930 common shares and 660,321 GDRs. The weighted average price stood at USD 4.83 apiece. Since the launch of the USD 2 bln buyback program on March 23, the company bought back 44.661 mln securities for USD 195.4 mln.

Deputy PM Chernyshenko, VTB head Kostin join ’s board On August 10, 2020 it was reported that the shareholders of Russian state-controlled telecom operator Rostelecom elected at an annual meeting on August 7 in absentia a new board of directors of 11 people, including newcomers Deputy Prime Minister Dmitry Chernyshenko and VTB Bank President Andrei Kostin. The board was also joined for the first time by insurer Chairman Anton Ustinov and Sirius Educational Center Director Yelena Shmelyova. Former Digital Development Ministers Nikolai Nikiforov and Konstantin Noskov were not on the board.

Rosneft sell 7.7% of Sakhalin Energy Company to RusHydro for RUB 1 bln On August 12, 2020 Russian oil major Rosneft closed a sale off of a 7.68% stake in Sakhalin Energy Company to hydropower giant RusHydro for RUB 1 bln. In July, RusHydro’s board of directors approved the purchase to raise the stake in Sakhalin Energy Company to 34.62% from 26.94%.

Gazprom’s board approves sale of shares in Bulgaria’s Overgas Inc On August 13, 2020 the board of directors of Russian gas giant has approved the sale of 50% that its subsidiary Gazprom Export owns in Bulgarian company Overgas Inc. The company will sell a 0.49% stake in Overgas Inc for EUR 151,900 and Gazprom Export will sell a 49.51% stake in the company for EUR 15.348 mln. According to unofficial information that appeared in 2015, that Overgas Holding will become the only owner of Overgas Inc after the sale.

Delo Group says consolidates 100% in TransContainer On August 13, 2020 Russian of businessman Sergei Shishkaryov has consolidated a 100% interest in railway container operator TransContainer after a buyout. Group of companies Delo has completed consolidation of 100% in the largest Russian container operator Transcontainer by buying 0.358955% of shares from minority shareholders. The price of one share was RUB 8679.52. Delo Group bought a 50% plus two shares stake in TransContainer from in 2019. After that the group made a mandatory buyout offer to the minorities of the company, and the minorities, including Yenisei Capital of tycoons Alexander Abramov and Roman Abramovich and Russia’s second largest bank VTB, submitted a 49.641% stake for the buyback, for which Delo paid RUB 59.9 bln.

Dividends/coupons VTB management to recommend paying 10% of IFRS net profit in 2019 dividends On August 7, 2020 Dmitry Pyanov, top manager at Russia’s second-biggest lender VTB Bank, said that the bank’s management would recommend paying 10% of the International Financial Reporting Standards (IFRS) net profit, or RUB 20.12 bln, in dividends for 2019. An annual general meeting of shareholders will take place at the end of September, and the supervisory board will meet in August to set the meeting of shareholders’ agenda. On August 5, the government said that it had set VTB’s dividends for 2019 at 10% of the IFRS net profit. Pyanov also said that VTB would pay to the state RUB 6.3 bln of special-purpose dividends, which would then be transferred to Promsvyazbank as security for the assets send to the bank. The government has created a bank to handle defense order contracts in the conditions of Western sanctions on the basis of Promsvyazbank, which was bailed out by the central bank in 2017–2018. Pyanov also said that VTB Bank may pay 50% of the IFRS net profit in dividends for 2020.

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UWC shareholders approve paying no dividends for 2019 On August 7, 2020 shareholders of Russian rail car producer United Wagon Company (UWC) approved paying no dividends for 2019. The company attained a net loss of RUB 14.458 bln under Russian Accounting Standards (RAS) in 2019. UWC paid no dividends for 2015–2018 either. Bank Trust owns 27.8% in the company, Otkritie Financial Corporation Bank 24.3%, Emil Pirumov 15%, Safmar Financial Investments 10.4%, Uralvagonzavod 9.3%, other investors 0.9%, the rest is free float.

Unipro confirms plans to pay RUB 7 bln in dividends in December 2020 On August 11, 2020 Russian power producer confirmed its plans to pay RUB 7 bln in dividends in December. In 2021 and 2022, dividends will be paid in line with the company’s policy. For the entire 2019, the company paid RUB 14 bln in dividends, including RUB 7 bln of dividends for January–September, and RUB 7 bln of final dividends. Deputy CEO Ulf Backmeyer said that Unipro would extend into 2024 its present dividend policy that envisages paying around RUB 20 bln annually.

Please be advised that the information presented in this newsletter is based on the following sources: National Settlement Depository (NSD); Clearstream Banking; Euroclear Bank; PRIME-TASS information agency; “Kommersant”, "Rossiyskaya Gazeta”, “Izvestiya, "Vedomosti”, “The Times“ newspapers, and others.

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