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SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly

Presented by: VTB Bank, Custody

March 5, 2020 Issue No. 2020/08

Company News

Polyus to become Exchange’s blue chip instead of On February 28, 2020 it was reported that the planned to include the ordinary shares of Russian gold producer in its Blue Chip index instead of the shares of steelmaker Severstal on March 20. The depository receipts of multi-industry holding En+ Group will be replaced with its shares, and the shares together with the depository receipts of payment system operator Qiwi will be considered to be added to the MOEX Index and the RTS Index. Other changes to the indices include addition of depository receipts of real estate developer Etalon Group and exclusion of Seligdar from the Broad Market Index, inclusion of ordinary shares of fertilizer producer Acron and Pharmacy Chain 36.6 in the SMID Index, and exclusion of ordinary shares of oil company RussNeft and oil and gas pipe producer TMK from the Oil and Gas Index. The committee also recommended that the Moscow Exchange launch a new sectorial index for the Russian real estate industry.

Mail.ru’s board of directors approves listing on Moscow Exchange On March 2, 2020 the board of directors of Russian Internet company Mail.ru Group approved a listing of global depositary receipts (GDRs) on the Moscow Exchange. The plan is for Mail.ru Group’s GDRs to begin trading in Moscow by July. There will not be any secondary issuance accompanying the listing.

Russian antitrust clears Fortum to buy stake in On March 2, 2020 it was announced that Russia’s Federal Antimonopoly Service cleared ’s Fortum to acquire a 20.5% stake in Germany’s Uniper. In November 2019, the Russian government’s commission for foreign investment control cleared Fortum to buy a 20.5% stake in Uniper with a suspensive condition. The deal required the committee’s clearance because of a channel of Russia’s , part of Uniper, which has a strategic status. The condition envisages that Uniper does not manage Unipro until changes are made to the Russian legislation. Fortum said earlier that it had agreed with the funds Elliott and Knight Vinke to buy more than 20.5% in Uniper for EUR 2.3 bln, with Fortum’s stake in the company rising to more than 70.5%.

Novatek buys back 1.336 mln common shares on February 24–28, 2020 On March 2, 2020 it was stated that Russian independent gas producer bought back 1.336 mln common shares, including in the form of global depositary receipts (GDRs), on the open market on February 24–28. Based on the price of USD 155.94 of the company’s GDRs on the London , Novatek could have spent around USD 20.84 mln on the buyback. Novatek’s board of directors approved USD 600 mln buyback program in June 2012 and prolonged it several times. In May 2019, the program was extended until June 7, 2020.

VimpelCom owners confirm powers of 4 directors, including Johnsen On March 2, 2020 it was stated that shareholders of Russian mobile operator VimpelCom, working under brand Beeline, confirmed powers of 4 board of directors members, including its Chairman Kjell Morten Johnsen. Yogesh Malik, chief technology officer of VEON, VimpelCom’s sole owner, quit the board. The board was joined by VEON co-CEOs Sergi Herrero and Kaan Terzioglu.

Gazprom Neft appoints Kolobkov as deputy CEO for GR On March 2, 2020 it was reported that Russian oil producer Neft established a position of deputy CEO for cooperation with the government and appointed former Sports Minister Pavel Kolobkov.

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Sistema extends buyback program till December 31, 2020 On March 2, 2020 it was reported that Russian multi-industry holding prolonged a buyback program until December 31. The RUB 3 bln buyback program was launched in September 2019.

Deputy CEO Davydova may replace Chirakhov as CEO On March 3, 2020 it was stated that the board of directors of Russian children goods retailer Detsky Mir would discuss an early termination of powers of the company’s CEO Vladimir Chirakhov at a meeting on March 10. The board will also consider appointing Maria Davydova, deputy CEO for commercial operations, as the company’s CEO from April for three years. Chirakhov, who decided to resign from the post of the company’s CEO on his own will, could be elected as chairman of the board of directors in April. Davydova said that as the new CEO she will continue to implement all previously announced strategic initiatives of Detsky Mir in the direction of developing an effective omnichannel business model and entering new markets.

Bank Zenit owners approve merger with two subsidiary banks On March 3, 2020 it was stated that shareholders of Russia’s Bank Zenit approved merger of two subsidiary banks – Spiritbank and Bank Zenit – with the parent bank. Bank Zenit launched integration of subsidiary banks in September 2018 in the framework of its strategy, and has already absorbed Devon- Kredit and Lipetskkombank.

Sistema boosts stake in Sintez to 46.5%, makes buyout offer On March 4, 2020 it was announced that Russian multi-industry holding Sistema increased a stake in Kurgan-based pharmaceutical company Sintez to 46.5% from 30% via its affiliate Sinocom Investments. Sistema made a mandatory buyout offer to Sintez and offered a price of RUB 62,156.53 per common share and RUB 5,269.07 per preferred share.

VEON co-CEO Terzioglu chairs VimpelCom’s board of directors On March 4, 2020 it was reported that Amsterdam-based holding VEON’s co-CEO Kaan Terzioglu chaired the board of directors of its unit, Russian mobile operator VimpelCom. The current membership of the board of directors of VimpelCom was elected at an extraordinary general meeting of shareholders on March 2. According to earlier statements, Terzioglu oversees VimpelCom, while a new general director is being searched to replace Vasyl Latsanych, who will resign from the company’s top position at the end of June. Latsanych will act as an advisor for the next six months.

NYSE-traded EPAM has no plans to start listing in Moscow, elsewhere On March 4, 2020 it was stated that U.S. IT company EPAM, whose shares trade on the New York Stock Exchange (NYSE), did not plan a secondary listing on the Moscow Exchange or on any other floor. EPAM held an initial public offering in 2012 and has become the first company-developer with Belarusian roots to enter the NYSE. The firm was co-founded by Arkady Dobkin, ethnic Belarussian.

FESCO says Sakharov to replace Isurin as CEO from March 6, 2020 On March 5, 2020 it was stated that Russia’s Far-Eastern Shipping Company’s (FESCO) CEO Alexander Isurin would leave the company and would be replaced by Maxim Sakharov, current vice president for finances, from March 6. Leonid Zvyagintsev, head of the corporate financing department, will be appointed as vice president for finances. Kommersant business daily reported earlier that Isurin could become the new CEO of container shipping company TransContainer. Delo Group, the owner of 50% plus two shares in TransContainer, said later it plans to introduce some new people to TransContainer’s top management, including Isurin, but did not specify the position.

Government nominates Oreshkin to board of directors On March 5, 2020 it was reported that the Russian government nominated presidential aide Maxim Oreshkin to oil major Rosneft’s board of directors to replace First Deputy Prime Minister Andrei Belousov. Energy Minister Alexander Novak and CEO were also nominated to Rosneft’s board as Russia’s representatives. Nord Stream 2 AG CEO Mattias Warnig, Moscow’s Higher School of Economics (HSE) professor Oleg Vyugin, Marcuard Holding Limited CEO Hans-Joerg Rudloff, and former German Chancellor Gerhard Schroeder were nominated to Rosneft’s board as independent directors.

Government nominates Finance Minister Siluanov to Sberbank supervisory board On March 5, 2020 it was stated that the Russian government nominated Finance Minister Anton Siluanov to the supervisory board of top bank Sberbank. In February, the Finance Ministry said that the central bank would sell its controlling stake in Sberbank to the ministry for about RUB 2.5 tln using money of the National Wealth Fund.

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Dividends/coupons Sberbank management to propose 2019 dividends at 50% of IFRS profit On February 27, 2020 German Gref, CEO of Russia’s biggest lender Sberbank, said that the bank’s management would recommend the supervisory board to raise dividends for 2019 to 50% of net profit calculated under International Financial Reporting Standards (IFRS). Under the current dividend policy, Sberbank’s dividends will amount to 50% of IFRS net profit once capital adequacy level reaches 12.5%. Gref also said he hoped that a compromise in the dividend issue would be found between shareholders and the bank after the change of the major shareholder. The Finance Ministry and the central bank recently agreed on a plan to transfer control in Sberbank to the government.

Inter RAO sees 2019 dividends at 25% of IFRS net profit On February 28, 2020 Yevgeny Miroshnichenko, a member of the management board of Russian power holding Inter RAO, said that the company expected that its dividends for 2019 would amount to 25% of net profit calculated under International Financial Reporting Standards (IFRS) in line with its current dividend policy. For 2018, Inter RAO paid RUB 17.92 bln, or 25% of IFRS net profit, in dividends.

Detsky Mir may pay RUB 4.1 bln in dividends for 2019 On March 2, 2020 Vladimir Chirakhov, CEO of Russian children goods retailer Detsky Mir, stated that the company planned to pay RUB 4.1 bln in dividends for 2019. Multi-industry holding Sistema holds 33.4% in Detsky Mir, while the Russia– Investment Fund has 9%.

Sibur board recommends paying RUB 34.3 bln in total dividends for 2019 On March 3, 2020 the board of directors of Russian petrochemical holding Sibur recommended paying RUB 34.333 bln in total dividends for 2019. The amount includes RUB 16.7 bln paid by Sibur in dividends for January–June. Taking into account dividends paid for the six months of 2019 in the amount of RUB 16.7 bln, the company will pay dividends in the amount of RUB 8.06 per common share, which amounts to RUB 17.5 bln. The shareholders will consider the recommendation at an annual general meeting on April 2. , co-owner of independent gas producer Novatek, controls 48.5% in Sibur. Tycoon owns 17% in Sibur, acting and former top managers of the company own 14.5% in total, while China’s Sinopec and the Silk Road Fund own 10% each.

Rostelecom to resume paying interim dividends in 2020 On March 3, 2020 Mikhail Oseyevsky, President of Russian state-controlled telecom operator , stated that the company planned to resume payment of dividends twice a year in 2020. The top manager said in November 2019 that Rostelecom would not pay interim dividends for January–September 2019 because of the need to invest much in consolidation of mobile operator Tele2. Oseyevsky also said that the management board would recommend the board of directors approve dividends on results of 2019 at RUB 5 per ordinary share. Chief Financial Officer Sergei Anokhin said that payments would total RUB 17 bln in view of a higher number of shares following an issue. According to the dividend policy, Rostelecom will pay at least 75% of free cash flow in dividends for 2018–2020 and at least RUB 5 per ordinary share.

Polymetal may pay USD 0.42 per share in final dividends for 2019 On March 4, 2020 the board of directors of Russian gold producer recommended paying USD 0.42 per share, or around USD 197 mln, in final dividends for 2019. The payment will account for 50% of the company’s adjusted net profit for July–December calculated under International Financial Reporting Standards (IFRS). Total dividends for 2019 will thus amount to USD 0.82 per share, or around USD 385 mln. ICT Group of tycoon Alexander Nesis owns about 27% in Polymetal, while PPF Group NV of Petr Kellner holds 13%, and tycoon and his family owns 10%. More than 50% in Polymetal is free-float.

Eurobonds / DRs may place yuan Eurobonds On March 3, 2020 Alexander Kaznacheyev, Deputy CEO of Russia’s Credit Bank of Moscow, stated that the bank was considering placing Eurobonds nominated in Chinese yuan. He also said that the Russian economy did not need a large amount of Chinese yuan currently, but if the bank wants to issue yuan bonds, the amount of the issue should be large, while demand for it and the cost should be understandable.

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Belarus’s Eurotorg to place Eurobonds in euros on Moscow Exchange On March 3, 2020 it was announced that Belarusian food retailer Eurotorg plans to place euro-denominated Eurobonds on the Moscow Exchange in the coming weeks. In 2019, Eurotorg placed RUB 10 bln of bonds on the Moscow Exchange.

STLC to place USD 600 mln 7-year Eurobonds at 4.65% On March 3, 2020 a financial source said that Russia’s State Transport Leasing Company (STLC) would place USD 600 mln of 7-year Eurobonds at 4.65% annually. Demand for the Eurobonds exceeded USD 1.1 bln. The initial yield guidance for the securities was 4.75–5% annually. The company held a road show of the Eurobonds on Monday in London. Citi, , J.P. Morgan, Renaissance Capital, Sova Capital, Sovcombank, and VTB Capital act as the organizers.

EuroChem denies delay of Eurobonds, to offer by mid-May On March 5, 2020 it was reported that Russian fertilizer producer EuroChem planned to offer Eurobonds before mid-May. A financial source said earlier that EuroChem postponed the placement indefinitely due to market uncertainty.

Russian Railways starts collecting bids for franc Eurobonds On March 5, 2020 a banking source said that Russian Railways opened a bidding book for 6-year green Swiss franc-denominated Eurobonds. The yield guidance amounts to 0.873–0.973%. The company planned to hold meetings with investors in Zurich to discuss a possible placement of franc-denominated from February 27 and meetings in Moscow and London to discuss a placement of green ruble-denominated Eurobonds from March 2. In 2019, Russian Railways placed debut EUR 500 mln 8-year green Eurobonds with a coupon of 2.2%.

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 Moscow Times“ newspapers, and others.

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