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Presented by: VTB Bank, Custody

June 25, 2020 Issue No. 2020/24

Market News

Central bank to improve, expand deposit insurance system On June 18, 2020 Alexei Lobanov, Director of the banking regulation department at the central bank, stated that the bank planned to improve Russia’s deposit insurance system, including its expansion to legal entities. Director of the central bank’s current banking supervision department Bogdan Shablya said that banks should form reserves before the regulator finishes softening its policy.

Government sends amended Russia’s economic recovery plan to president On June 19, 2020 an amended draft of a national economic recovery plan was sent to Russian President . The document amendments were made after meetings chaired by the president, meetings with experts and entrepreneurs. Prime Minister Mikhail Mishustin presented the plan for economic recovery to the president at the beginning of June, the president ordered to adjust it.

Organizer says cancels Eastern Economic Forum in 2020 On June 19, 2020 Roscongress, the organizer of the Eastern Economic Forum, stated that Russia would hold the next forum in September 2021 and it would not take place in 2020. According to a decision of the committee for organization of the Eastern Economic Forum, it will be canceled in 2020. The sixth Eastern Economic Forum will take place in September 2021.

Russian central bank says to auction 7-day deposits on June 23, 2020 On June 22, 2020 Russia’s central bank said that it would hold an auction for 7-day deposits on June 23 with a maximum annual rate of 4.5%. The money will be placed on June 24 and returned on June 30. The authority resumed deposit auctions in August 2016 after an 18-month break amid a liquidity inflow to the banking sector.

Russian ruble falls 62.84 kopecks to RUB 69.47 per USD 1 for June 26, 2020 On June 25, 2020 it was announced that the official rate of the Russian ruble for June 26 fell 62.84 kopecks against the U.S. dollar to RUB 69.4660. The ruble decreased 29.99 kopecks against the euro to RUB 78.0589. The value of the dual-currency basket comprising USD 0.55 and EUR 0.45 rose 48.06 kopecks to RUB 73.3328.

Company News

Grudinin to resign as CEO of Ilyushin Aviation on June 19, 2020 On June 18, 2020 it was reported that Yuri Grudinin would leave the position of CEO of Ilyushin Aviation Complex, part of Russia’s United Aircraft Corporation (UAC), on June 19.

Gazprom transfers 9.99% in from Cyprus to domestic unit On June 18, 2020 it was stated that Capital closed a deal to acquire a 9.99% stake in gas producer Novatek from another unit of gas giant Gazprom, Gazfin Cyprus Limited, for RUB 320.798 bln. Gazprom said earlier it would provide an interest-free loan to Gazprom Capital to finance the deal.

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Guryevs' company sells 0.003% in PhosAgro for $156,878 On June 19, 2020 it was announced that Chlodwig Enterprises Limited, a company affiliated with the owners of Russian fertilizer producer PhosAgro, the Guryevs family, sold shares and global depositary receipts (GDR) accounting for a 0.003% stake in the company for USD 156,878. The shares of Chlodwig Enterprises Limited and Adorabella Limited were transferred to trust funds, whose beneficiaries are Deputy Chairman of the Board of Directors of PhosAgro Andrei Guryev and his family members. As a result, the stake of the Guryevs family in PhosAgro amounted to 48.52% and the free float is 30.5%.

Bank Rossiya to bail out Genbank merged with Sobinbank On June 19, 2020 the central bank said that Russia’s Bank Rossiya would bail out Crimea’s Genbank after the latter’s merger with the current investor Sobinbank. In August 2017, the regulator introduced an interim administration at Genbank to increase its financial stability. Genbank and Sobinbank planned to have a balanced rise in the portfolio of small and medium business and retail lending in Crimea, as well as creation of a securities portfolio that will be used to repay of Genbank’s debt to the Deposit Insurance Agency (DIA) and to form capital.

Rosneft buys back 1 mln securities for USD 5.3 mln on June 15–19, 2020 On June 22, 2020 it was reported that Russian oil major bought back over 1 mln shares and global depositary receipts (GDRs) for USD 5.3 mln on June 15–19. The company bought 220,000 common shares and 781,053 GDRs. The weighted average price stood at USD 5.29 apiece. Since the launch of the USD 2 bln buyback program on March 23, the company bought back 36.720 mln securities for USD 156.1 mln.

Ministry, Rosseti mull consolidation of TNS Energo On June 23, 2020 it was stated that the Energy Ministry and power grid holding Rosseti were studying two options of consolidating assets of power seller TNS Energo as part of solving the problem of its growing debts to Rosseti. Under one of the scenarios, TNS Energo’s shares will be purchased by Yantarenergosbyt, a unit of Rosseti. The second option encompasses joint participation of VTB Bank and Rosseti: in this case, VTB Bank will become the majority shareholder of TNS Energo by boosting its stake to 50% minus one share from 19.9%, while Rosseti will become the owner of 19.9%. A source familiar with the talks said the current market value of TNS Energo was negative, thus the purchase could be made for a token sum if the deal takes place. TNS Energo’s CEO Sergei Afanasyev stated that the company was holding debt restructuring talks with Rosseti. The overdue debt to the holding amounts to around RUB 23 bln.

Sovcomflot CEO Tonkovidov reelected as Novoship board chairman On June 23, 2020 it was announced that CEO of Russian shipping company Sovcomflot Igor Tonkovidov was reelected as the board of director’s chairman in subsidiary Novorossiysk Shipping Company (Novoship). Tonkovidov was appointed as Sovcomflot’s CEO in September 2019.

Polyus says owners approve placement of 2.33% of new shares On June 23, 2020 shareholders of Russian gold producer approved placing 3.13 mln additional shares, or 2.33% of the charter capital. The shares will be sold under a private subscription in favor of affiliate Polyus Krasnoyarsk. Polyus said earlier that some of the issue would be allocated to raising a stake in the Sukhoi Log field operator joint venture and to the return of Polyus's stake borrowed from Polyus Krasnoyarsk.

Lukoil's board appoints First Deputy CEO Maganov as chairman On June 23, 2020 the board of directors of Russian oil producer appointed First Vice President Ravil Maganov as the chairman. Former Chairman Valery Graifer died aged 90 in April.

Moscow Exchange to start Petropavlovsk share trading on June 15, 2020 On June 23, 2020 the Exchange said that the shares of Russian metals producer Petropavlovsk would start to be traded on the bourse on June 25. Petropavlovsk will be listed as tier-1 securities, the face value is GBP 0.01 British pounds and the number of shares to be traded issue is RUB 3.31 bln.

Yandex doubles public offering to USD 400 mln, price set at USD 49.25 On June 25, 2020 it was stated that Russian Internet company was publicly offering 8.1 mln newly issued Class A shares at a price of USD 49.25 per share, which means the volume of the offering was raised to USD 400 mln from USD 200 mln. The investors in the concurrent private placement are VTB Capital, the investment business arm of VTB Group, a Russian bank and global provider of financial services; Ervington Investments Ltd., a company whose ultimate beneficiary is Roman Abramovich; and Treliscope Ltd., a company whose ultimate beneficiaries are Alexander Abramov and Alexander Frolov.

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Global Ports CEO Vladimir Bychkov to resign from July 15, 2020 On June 25, 2020 it was announced that Vladimir Bychkov, CEO of Russian stevedore company Global Ports, would resign from July 15. A representative of the company stated that Bychkov decided to leave due to personal reasons.

Dividends/coupons Obuv Rossii owners approve paying no dividends for 2019 On June 19, 2020 shareholders of Russian shoe retailer Obuv Rossii approved paying no dividends for 2019. For 2018, the company paid RUB 2.36 per share in dividends. CEO Anton Titov holds 50% in the company.

Enel Russia owners approve paying RUB 3 bln in 2019 dividends On June 19, 2020 it was reported that shareholders of power producer Enel Russia approved paying RUB 0.085 per share from undistributed profit of the previous years, or a total of RUB 3 bln, in dividends for 2019. The company paid 14.1471 kopecks per share, or a total of RUB 5 bln, in dividends for 2018. Italy’s Enel S.p.A. holds 56.43% in Enel Russia.

Credit Bank of Moscow owners approve paying no dividends for 2019 On June 19, 2020 it was announced that shareholders of the approved paying no dividends for 2019. For 2018, the bank paid 11 kopecks per share in dividends.

MGTS holders decide against paying dividends for 2019 On June 19, 2020 shareholders of Moscow City Telephone Company (MGTS), a fixed line unit of mobile operator MTS, decided not to pay dividends for 2019. The board of directors earlier recommended against paying dividends as macroeconomic and industry factors were hit by the coronavirus pandemic. MGTS paid RUB 22.091 bln in total in dividends for 2018, or RUB 232 per ordinary and preferred share.

PhosAgro owners approve paying RUB 10 bln in January–March 2020 dividends On June 19, 2020 shareholders of Russian fertilizer producer PhosAgro approved paying RUB 78 per share, or a total of RUB 10.101 bln, in dividends for January–March. The record date for dividends is July 6. Former Senator Andrei Guryev and members of his family hold 48.52% in PhosAgro, Vladimir Litvinenko owns 20.98%, and free-float is 30.5%.

GAZ Group says to pay no 2019 dividends per ordinary share, RUB 5.13 per preferred share On June 22, 2020 shareholders of Russian carmaker GAZ Group approved paying no dividends per ordinary share and paying RUB 5.13 per preferred share in final dividends for 2019. The company paid RUB 3.92 per preferred share in dividends for 2018, RUB 4.39 per preferred share in final dividends for 2017, RUB 1.58 per preferred share in dividends for 2016, RUB 1.34 per preferred share in dividends for 2015, and RUB 1.2 per preferred share in dividends for 2014. Tycoon Oleg Deripaska controls GAZ Group through Russian Machines.

Irkutskenergo shareholders approve paying no dividends for 2019 On June 23, 2020 shareholders of Russian power producer Irkutskenergo approved paying no dividends for 2019 and leaving RUB 12.528 bln net profit undistributed. The company did not pay dividends for 2017 and 2018 as well. Irkutskenergo is part of metals and energy company En+ Group.

M.Video shareholders decide against dividends for 2019 On June 23, 2020 it was reported that shareholders of Russian electronics retailer M.Video approved paying no final dividends for 2019. M.Video paid RUB 6 bln, or RUB 33.37 per share, in dividends for January– September 2019. Safmar of Mikhail Gutseriyev owns 73.5% in M.Video through Cyprus-based Ericaria Holdings Ltd. Germany's Media-Saturn-Holding owns 15%.

Transneft to decide on 2019 dividends after government directive On June 23, 2020 it was stated that Russian oil pipeline monopoly would make a decision on dividends for 2019 after getting a government directive.

Quadra owners approve paying no dividends for 2019 On June 23, 2020 shareholders of Russia’s Quadra Power Generation approved paying no dividends for 2019. Quadra paid dividends only for preferred shares for 2010 and 2011. After 2012, the company paid no dividends. The company is controlled by tycoon Mikhail Prokhorov’s Onexim Group.

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Lukoil says to pay RUB 350 per share in final dividends for 2019 On June 23, 2020 shareholders of Russian oil major Lukoil approved a decision to pay RUB 350 per share, or a total of RUB 242.5 bln, in final dividends for 2019. Taking into account the interim dividend payment in 2019, the total payout for 2019 stands at RUB 542 per share or almost RUB 380 bln in total. For 2018, the company paid total dividends of RUB 250 per share.

Bashneft holders approve RUB 107.81 per share in dividends for 2019 On June 25, 2020 shareholders of Russian oil company Bashneft have approved payment of RUB 107.81 per common and class A preferred share in dividends for 2019, or a total of RUB 19.151 bln. The dividends on common shares will amount to RUB 15.939 bln, and on the class A preferred share to RUB 3.211 bln. The company paid a total of RUB 28.2 bln in dividends for 2018, which accounted for 29% of the 2018 International Financial Reporting Standards (IFRS) net profit.

Eurobonds / DRs Mail.ru Group applies to for GDR listing On June 22, 202o it was stated that internet company Mail.ru Group applied to the Moscow Exchange for a local listing of its global depositary receipts (GDRs). Mail.ru Group expects its GDRs to start trading on the exchange in the coming weeks upon approval of the listing documents and admission to the trading by the exchange. Investment company VTB Capital said in a research that Mail.ru Group’s Moscow-listed GDRs might be included in the MSCI Russia index with a 1% weight during the November review, which is to be announced on November 10 and become effective after the November 30 close. In order for the stock to be included, it needs to trade more than USD 1.5 mln a day in Moscow in July–September. The stock price, assuming other prices remaining intact, needs to be above USD 18 per GDR during the cutoff period in the second half of October. Mail.ru Group’s GDRs closed at USD 18.70 on June 19 on the London Stock Exchange.

Gazprom to sell USD 1 bln of 7-year Eurobonds On June 23, 2020 a financial source said that Russian gas giant Gazprom plans to place USD 1 bln of 7- year Eurobonds at a yield of 3% annually. The initial coupon guidance was set at 3.250–3.375% annually. Gazprombank, J.P. Morgan, Banca IMI, Natixis, and VTB Capital will act as organizers of the placement.

MTS says fully repays USD 750 mln Eurobonds On June 23, 2020 it was reported that major Russian mobile operator MTS fully repaid the USD 750 mln 10- year Eurobonds issued in 2010. At maturity, the total loan participation notes outstanding amounted to USD 300.9 mln, with the remainder of USD 449.1 mln having earlier been repurchased during 2014–2018 through a tender process as well as on the open market. The U.S. dollar-denominated Eurobond was originally issued in June 2010 via MTS International Funding Ltd. with a maturity of 10 years and coupon of 8.625%. Bank of America Merrill Lynch, Credit Suisse, and The Royal Bank of Scotland served as organizers.

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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