Driving force

2020

ANNUAL REPORT Annual Report 2020

GRI 102-1, 102-48 – 102-52, 102-54 Contents About the Annual Report

The scope of this annual report includes the companies of GTLK Group, which comprises JSC GTLK and its subsidiaries and associates. Financial statements are published annually. The current report covers the period from January 1, 2020 through December 31, 2020. 1.1. GTLKГТЛК todayсегодня 2 Support of sports and healthy lifestyle 71 A report containing information about GTLK’s activities in the area of sustainable Highlights 4 Observance of Human Rights 71 development in 2019 was published in July 2020. Message from the Chairman of the Board 8 Occupational health and safety 72 This report was prepared using the applicable Message from the CEO 10 Sponsorships and philanthropy 74 Global Reporting Initiative standards (GRI Standards) COVID-19 impact on GTLK business 12 Improvement of transport energy efficiency 76 and the principles of the UN Global Compact. In light of this, the report provides more extensive Procurement activities 78 information on sustainable development and ESG 2. GTLK profile 14 aspects. A list of the used standards is provided GTLK is a driving force 15 5. Corporate governance 80 in the GRI Index on page 228. GTLK in numbers 17 Competence and accountability 81 The main reasons for restatements of information in the report are the development Investments in development of domestic GTLK corporate governance practices 82 and improvement of the corporate reporting transport engineering 20 General shareholders meetings 85 system, and clarification of the scope of indicators Board of directors 86 and historical data. 3. Strategic report 22 Board committees 93 GTLK’s areas of focus 23 Executive management bodies 97 Leasing and operating leasing 24 Corporate secretary 98 International operations 34 System of remuneration for members Transport infrastructure development 36 of the board of directors and management Digital transformation 38 bodies 100 Financial overview 40 Control and audit 102 Strategy and development plans 43 Internal audit 102 Acquisition of VEB-Leasing assets 49 Internal control 102 Risk management and internal control 50 External audit 103 Internal audit commission 104 4. Sustainable development 58 Business ethics and anticorruption Sustainable development goals 60 practices 106 Socioeconomic impact 64 Information for investors 108 Engagement with stakeholders 66 Human resources management 68 6. Financial Results 110 Staff size and composition 68 GRI index 229 Employee engagement and social 233 programs 70 Statement of responsibility Training and professional development 70 Contacts 234 01 02 03 04 05 06

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GRI 102-7 GTLK 01 today

TN RUBLES 1.3 №1 100 % LEASING ON RUSSIAN STATE OWNED PORTFOLIO ­LEASING MARKET¹

Instrument for implementation of government objectives and national projects

Leader of Russian leasing market¹

Owner and operator of crucial leasing fleets of transport equipment

International issuer with high credit ratings

Fast-growing participant of the international leasing market

Efficient and professional team that guarantees top business results

GTLK today GTLK

group’s profile² JSC GTLK

GTLK TODAY HIGHLIGHTS International leasing — Leasing of rail GTLK Global Business transport MESSAGE FROM THE CHAIRMAN OF THE BOARD ТРЛН РУБ. MESSAGE FROM THE CEO COVID-19 IMPACT ON GTLK BUSINESS Development Finance of transport infrastructure

¹ By volume of portfolio and new business. Source: Expert RA rating agency data for 2020. ² Hereinafter — Company.

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Highlights

July. GTLK’s leasing portfolio exceeds 1 trillion rubles.

February. The Russian January. GTLK places September. GTLK launches Transport Ministry is authorized a debut bond issue corporate accelerator to support to exercise the rights of GTLK of 20 billion rubles innovative projects in the transport shareholder. ТОP-5 on the MICEX Stock №1 sector. GTLK BECOMES ONE Exchange. The Company launches GTLK IS RECOGNIZED AS THE LARGEST LEASING June. The first leasing program OF THE TOP FIVE LEASING a program to develop leasing October. GTLK is included in the COMPANIES IN RUSSIA COMPANY IN RUSSIA BY SIZE with government participation July. GTLK enters of SSJ100 airliners with OF PORTFOLIO AND AMOUNT national program “Digital Economy is launched. Asian funding markets. government co-financing. OF NEW BUSINESS of the Russian Federation”.

2009 2011 2013 2015 2017 2019

2006 2010 2012 2014 2016 2018

CJSC Civil Aviation Leasing The line of programs in new The Company launches May. GTLK receives long-term March. Construction begins on the Company is reorganized into segments of the leasing market a leasing program for energy credit ratings from Moody’s and Lavna Coal Terminal in Murmansk. OJSC State Transport Leasing is expanded to rail and May. Subsidiary GTLK Europe efficient transport with Fitch. Company (GTLK), with 100% water transport and aviation is founded in Dublin. government co-financing. November. GTLK Global Business, of shares owned by the federal equipment. July. GTLK successfully places an international platform for government. October. GTLK is assigned a debut issue of Eurobonds. developing non-resource exports, a long-term credit rating is established. by S&P. November. The Company launches a program to develop leasing of Russian helicopters and a project to localize production November. Subsidiary GTLK Asia of L-410 aircraft in Russia. is registered in Hong Kong. 2001 CJSC Civil Aviation Leasing Company is founded

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2020

The Company delivers all vehicles planned for 2020 under the Safe and The Company completes deliveries High Quality Roads national project. under the SSJ100 leasing program with the handover of two aircraft GTLK carries out three projects to airline Red Wings. with Russian Post under the Digital GTLK Asia becomes ACRA affirms GTLK’s credit Economy program. a lessor to Lion Air. Fitch affirms GTLK’s rating at “A+(RU)”. GTLK places its longest Eurobond credit rating at “BB+”. issue, maturing in February 2028. The Russian government approves At the commission of GTLK, GTLK reaches an agreement a roadmap to modernize the construction begins on the first GTLK is included in the list with VEB.RF on joint GTLK named best Eurobond issuer structure of development institutions LNG-fuelled passenger ship of systemic organizations participation in the reform from Russia, the CIS and former CIS under which GTLK will acquire VEB- in Russia, the Chaika. of the Russian economy. of public transport in Perm. countries. Leasing assets.

February April June October December

January March May September November

GTLK becomes the executor Construction of a series GTLK PLACES ITS of measures to update ground of 11 bulk carriers is completed LARGEST EUROBOND public passenger transport at the Krasnoye Sormovo ТОP-5 ISSUE, TOTALING ТОP-15 under the Safe and High Quality shipyard as part of the water GTLK ­BECOMES ONE GTLK JOINS Roads national project. transport leasing program. OF THE WORLD’S TOP-5 THE TOP-15 $600 LESSORS OF REGIONAL RUSSIAN ISSUERS MLN AIRCRAFT

February. GTLK is ranked the largest Russian lessor of aircraft by Cirium.

2021 March. GTLK assets to IFRS grow Events after the to 981 billion rubles in 2020. reporting period

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GRI 102-14 Dear colleagues and partners!

Russia’s transport sector faced transport on preferential terms. The first GTLK invested a total of 1.1 trillion rubles unprecedented challenges in 2020. year of the project’s implementation in Russia’s transport sector in the period from Lockdowns disrupted logistics chains and demonstrated that it is sorely needed 2009 through 2020, raising more than 9 rubles the stable operation of transport, putting and has strong potential. The Company from extra-budgetary sources for ever ruble the market in a difficult position. GTLK, delivered 691 environmentally friendly of government budget resources. as an effective instrument for achieving buses, trolleys and trams to 14 urban These impressive figures indicate that national objectives, made a considerable areas. the Company has potential for further contribution to the sector’s resilience. GTLK, with the support of the Transport growth. In 2020, GTLK was included in the Vitaly Savelyev The Company reduced the debt burden Ministry, continued to implement ten list of systemic organizations of the Russian on customers and provided orders for programs with government co-financing economy, and confirmed its importance Chairman, JSC GTLK Russian equipment manufacturers. in 2020. They included leasing of airplanes as a development institution. I am confident In a situation where private businesses and helicopters, energy efficient transport, that the professionalism of GTLK’s team will postponed investment plans until better vessels, road equipment and digital enable the Company to flourish and continue times, GTLK provided work for domestic assets. The Company participated in two to be an effective instrument for achieving factories. The Company’s operations other national projects in addition to Safe national goals. became a catalyst for economic activity and High Quality Roads. We updated the during the recession. concept and signed the roadmap for the The concerted efforts of the Russian implementation of the Lavna Coal Terminal Message from Transport Ministry and GTLK made project as part of the comprehensive it possible to achieve government plan to modernize and expand backbone objectives for the modernization of the infrastructure. Under the Digital Economy the Chairman public transport fleet despite the pandemic. national project, GTLK signed contracts The Safe and High Quality Roads national with Russian Post for the delivery of the Board project gave the country’s regions of primarily Russian-made equipment an opportunity to update city passenger worth 3 billion rubles.

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GRI 102-14 Dear colleagues and partners!

In 2020, GTLK completed the Long- participation and national projects. Despite mobility issues. Our vehicles are already term Development Program it began the economic slump, GTLK continued on roads in 79 regions of Russia. in 2016. Over the five years of the program, to grow, increasing revenue by 34% Every ruble invested in GTLK programs the Company’s leasing portfolio grew compared to 2019. affects the ultimate price of tickets for sixfold to 1.3 trillion rubles, assets But this does not mean that in these passengers and the cost of freight for quintupled to 981 billion rubles and difficult times we focused exclusively consumers. Modern Russian vehicles are not dividends exceeded 1 billion rubles. on the development of our own business. only greener, but cost half as much to operate, Working with relevant ministries, GTLK GTLK rearranged priorities in its operations reducing costs for transport companies and Evgeny Ditrikh developed a number of new programs and focused on making people’s lives bringing down the price of services. We are with government participation that better and more convenient. Responsible proud that with every year our work becomes Chief Executive Officer, it is successfully implementing. We business practices and willingness to share increasingly important for every resident JSC GTLK expanded our fleet severalfold, to 309 and foster common values are becoming of the country. aircraft, 167 water vessels, 99,000 railcars increasingly important factors of success These achievements are a testament and 13,400 passenger vehicles, pieces in the post-Covid world. The Company to GTLK’s team, whose expertise and high of road equipment and specialized vehicles. upholds the fundamental principles qualifications enable us to maintain our lead The Company became the undisputed of sustainable development, aimed on the market and look to the future with leader on the Russian leasing market, both at creating long-term solutions that take confidence. by leasing portfolio and new business, with into account environmental, economic and a market share of 25%. social aspects. Last year it took all of our accumulated Our work brings tangible, concrete experience to meet the challenges of the results. Last year, one in 16 passengers Message pandemic. Amid difficult circumstance, flew on GTLK aircraft. Air ambulance the Company continued to implement helicopters made about 14,000 flights and from the CEO the objectives set by the Russian saved thousands of lives. GTLK transport government for programs with government connects cities, and makes travel safe and comfortable, including for those with

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COVID-19 impact The coronavirus pandemic was the primary to prevent the infection of employees who remained urban areas (for more details see Government challenge in 2020, as the global economy suffered in the office for business needs, the Company Programs section). on GTLK business its deepest recession in 90 years, shrinking by 4.3% entered into a contract with a medical organization GTLK has maintained strong financial stability compared to 2019. to conduct tests, regularly measure temperatures and a low share of bad debt, amounting to 0.9% The transport sector was among the hardest and check employees for signs of respiratory of the portfolio, well below the market average. hit by Covid-19, as the closure of national borders, illness (for more details see the Human Resources The Company’s operating income in 2020 remained restrictions on the movement of people and goods, Management and Occupational Health and Safety at the 2019 level, while revenue grew by 34% disruptions in logistics chains, and the drop in demand sections). to 81.3 billion rubles (for more details see Financial and purchasing power battered international and GTLK’s highly digitized business processes Overview section). domestic transport services. enabled the Company to work efficiently in the new GTLK confidently weathered a difficult period, These factors also slowed the development of the circumstances. All employees were quickly given which is a testament to the effectiveness of our Russian leasing market. The number of new transactions round-the-clock remote access to GTLK’s internal chosen strategy, calibrated approach to risk fell, while the amount of restructuring increased (for services and information systems (for more details management, and the high professionalism and more details see Market Overview section). see Digitization of Operations section). concerted efforts of our team. Amid the crisis, GTLK worked closely with all Working remotely and associated restrictions stakeholders to resolve common problems and made did not affect the Company’s performance. GTLK an effort to meet clients with a good track record met its target for amount of new business in 2020, halfway. The Company approved almost all applications achieving the best result in the industry. Despite for restructuring due to the genuine hardship caused the disruption of logistics chains, the Company by the pandemic. GTLK reduced the debt burden delivered 16,600 freight cars, 21 aircraft, 27 vessels on transport organizations by 18.1%, which enabled and 1,400 passenger vehicles and pieces of road the Company’s clients to redirect financial flows machinery to customers. and maintain stable operations in difficult economic During the pandemic and lockdown, GTLK circumstances. joined the implementation of the Safe and High At the height of the pandemic, the Company quickly Quality Roads national project, fully completed reorganized its operations, making it possible to combat deliveries for 2020 and started on the 2021 plan for the effects of the coronavirus. The priority was updating passenger transport ahead of schedule. to protect our employees. In March 2020, most of our The Company leased 691 passenger vehicles personnel were transferred to remote work. In order on preferential terms to transport companies in 14

12 13 14 2020 Annual Report 02 GTLK profile TRANSPORT ENGINEERINGTRANSPORT DOMESTIC OF DEVELOPMENT IN INVESTMENTS NUMBERS IN GTLK FORCE ADRIVING IS GTLK GRI is adriving force GTLK today GTLK 01 102-16

government that require industry of the transport of development for strategic segments GTLK effective is an instrument mission GTLK efficiency. operating and engineeringtransport by virtue of enhancing its investment appeal domestic and sector transport the in investments of extrabudgetary attraction to maximize company the enables model GTLK’s business PROGRAMS WITH WITH PROGRAMS profile GTLK 02 ­CO-FINANCING ­GOVERNMENT 10

support. efficiency. pursuing digital the and increasing Company’s transformation operating while engineering transport domestic support and investment, budgetary extra- raise infrastructure, transport efficient develop sector, the support to efforts government facilitates that sector transport Russia’s of development sustainable and management the for policy government of instrument an is GTLK report Strategic 03 MULTIPLIER EFFECT

1:9 INVESTMENT BUDGET BUDGET OF

development Sustainable 04

governance Corporate 05 06 results Financial

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GRI 102-16 GTLK GTLK objectives in numbers

1 3 BN BN RUBLES

Implement government support Support $ for the transport sector domestic transport engineering 3.3 221.1 TOTAL FACE VALUE TOTAL FACE VALUE 1133 OF ­LOCAL FOREIGN OF ­RUBLE BONDS Non-commercial leasing programs Generate and develop demand for the products bn rubles in segments that are important for the of Russia’s transportation engineering sector CURRENCY BONDS AND EUROBONDS development of Russia’s transport sector through consolidated purchases of domestic Invested in transport sector¹ and require government support equipment using non-commercial leasing programs BN RUBLES № ТОP- Execution of transport infrastructure projects Stimulate import substitution and growth of high- using leasing and concession mechanism tech exports 114.3 35 5 INVESTED IN THE RANKING RUSSIAN BY THE GOVERNMENT OF GLOBAL AIRCRAFT EUROBOND IN GTLK CAPITAL¹ LEASING COMPANIES² ISSUER³

2 4

Raise extra-budgetary investment Digital transformation Credit for the development of the transport and increasing ratings¹ sector operating efficiency

Attraction of extra-budgetary investments Digital transformation of the Company with a view through co-financing programs and projects towards improving the efficiency of business utilizing the Company’s authorized capital, funds processes and enhancing management systems from its investment, federal budget subsidies and raised funds Digital transformation of the transport sector through the implementation of key measures for ВA1 ВВ+ A+(RU) creation of the digital economy ecosystem and Implementation of a systemic approach to raising transformation of transport infrastructure investments: use of new financial instruments, expansion of the geography of borrowing, improvement of the Company’s investment appeal Establishment of conditions for the funding and optimization of the cost of financing of digitization projects ¹ As of January 1, 2021. ² Source: Cirium, “Portfolio Tracker: Q4 2020”. ³ Source: Cbonds data for 2020.

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Financial capital Financial capital 1 Strategic goals 2 Lines of business

103 bn RUB 637 bn RUB Implement government Support domestic transport 114 bn RUB 847 bn RUB support for the transport engineering Capital Borrowed resources Capital Borrowed resources sector Finance leases International Operating leases operations Raise extra-budgetary Digital transformation Productive capital investment for and increasing operating Productive capital the development efficiency of the transport sector Development Digital tn RUB 1.1 770 bn RUB of transport transformation 1.3 tn RUB 981 bn RUB infrastructure Lease portfolio Assets Lease portfolio Assets Fleet, units Fleet, 251 138 102.2 thousand 12.2 thousand units Fleet, 309 167 99.0 thousand 13.4 thousand

Human capital Human capital Created tn RUB Average Average headcount headcount economic GTLK investment End 358 Beginning 378 in transport sector 49 % 51 % 2020 value 1.1 2020 48 % 52 % Men Women Men Women

Environmental capital Environmental capital

Created Contribution to achieving thousand units thousand tonnes 3 4 thousand units thousand tonnes 1.7 12.0 value Sustainable Development Goals 2.9 19.0 Natural gas and of CO2 emissions cut Natural gas and of CO2 emissions cut electric vehicles thanks to GTLK electric vehicles thanks to GTLK delivered NGV fleets Government and society Private investors, delivered NGV fleets bondholders Implementation of government programs Work with reliable borrower in transport sector Growth of capital investment Openness and transparency Social and reputational capital in relations with investors Social and reputational capital Support for Russian ВA1 ВВ+ A+(RU) transport equipment ВA1 ВВ+ A+(RU) manufacturers Customers and partners

Moody’s Fitch ACRA Credit ratings Moody’s Fitch ACRA Credit ratings Contribution to GDP High quality leasing services Tax revenue Reliable equipment № № № Support for business growth № № № 1 33 5 Employees Provision of orders for 1 35 5 By lease Among global Among Russian manufacturers By lease Among global Among Russian portfolio aircraft leasing Eurobond issuers Jobs portfolio aircraft leasing Eurobond issuers on Russian companies (Cbonds ranking) Pay and social benefits on Russian companies (Cbonds ranking) leasing market (Cirium) leasing market (Cirium) (Expert RA) Training and career growth (Expert RA)

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GTLK supports domestic manufacturing by generating demand for Investments the products of Russian companies, increasing their competitiveness, in development of domestic promoting import substitution and providing work for the engineering sector, even in periods of crisis. transport engineering

Support for Support for Support for shipbuilding Support for manufacturing aircraft manufacturing railway engineering of urban passenger transport

Purchases Investment Purchases Investment Purchases Investment Purchases Investment units units units units 224 156.4 bn rubles 94, 489 307.6 bn rubles 116 122.2 bn rubles 6,538 41.7 bn rubles

Development of SSJ100 airliner leasing Development of passenger car leasing Development of water transport leasing LIAZ Komsomolsk-on-Amur Aircraft Plant 358 20.2 114 112.2 1,775 14 46 95.8 NEFAZ Demikhovo Machinebuilding Plant Krasnoye Sormovo Shipyard Development of L-410 aircraft leasing 470 4.9 Ural Civil Aviation Plant 350 19.7 36 33.2 PAZ Tver Carriage Works Oka Shipyard 19 7.4 2,004 4 8 0.5 45 32.7 PC Transport Systems Development of IL-114-300 aircraft leasing Zvezda Shipyard Ilyushin Aviation Complex Development of new generation freight car leasing 109 3,4 5 26.3 VOLGABUS 3 3.9 66,102 198.2 Nevsky Shipyard 426 3.4 Development of helicopter leasing Tikhvin Freight Car Building Plant 6 5.6 KAVZ Other 156 49.3 63,602 191 362 3.1 Uralvagonzavod 22 14.4 Other Kazan Helicopters 2,500 7.2 Development of ferry service to Sakhalin island 1,392 8.9 106 28.5 Amur Shipyard Ulan-Ude Aviation Plant 50 20.8 2 10

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GRI 102-2 GTLK’s areas 03 of focus

GTLK completed its Long-term Development Program in 2020. Over the five years of the program, the Company cemented its position as the absolute leader on the Russian leasing market, increasing its portfolio almost sixfold since 2016 and growing its market share to 25%. The number of programs with government co-financing more than tripled from three to ten.

The Company’s accumulated potential was particularly essential during the Covid-19 pandemic. At a difficult time for the economy, GTLK not % only proved itself as a strategic instrument of the Russian government 25 for implementing state programs and national projects, but also GTLK’S SHARE OF THE MARKET showed it could play a crisis management role, supporting transport organizations. Despite the objective difficulties, in 2020 GTLK continued to pursue the mission of developing the transport sector given to it by its shareholder, the Russian Federation. The Company provided advances for production of new vehicles, provided orders that kept engineering companies working and leased more than 18,000 aircraft, freight cars, vessels and passenger vehicles.

Leasing and operating leases are GTLK’s core busi- GTLK’s activities promote the development of the nesses. Catering to the needs of clients and pursuing country’s transit potential and transport infrastructure, Strategic report government objectives, the Company offers leasing and the modernization and replacement of corporate programs for all segments of the transport sector. fleets with modern, high quality, greener domestically GTLK’S AREAS OF FOCUS GTLK leases airc, water and rail transport, urban public manufactured vehicles, while also helping to preserve and

FINANCIAL OVERVIEW transport, motor vehicles, and specialized machinery create new jobs in the real sector of the Russian economy. and equipment. GTLK attracts extra-budgetary investment to Rus- STRATEGY AND DEVELOPMENT PLANS Through the GTLK Global Business leasing plat- sia’s transport sector using various financing instru- ACQUISITION OF VEB-LEASING ASSETS form, the Company has an active presence on inter- ments. The Company invested 1.133 trillion rubles in the RISK MANAGEMENT AND INTERNAL CONTROL national leasing markets. As an investor and provider transport sector in 2009-2020, of which only 114.3 billion of leased assets, GTLK contributes to the development rubles came from the government. of transport infrastructure. As of December 2020, the Company has raised The Company creates conditions for financing proj- 9 rubles from extra-budgetary sources for every ruble ects to develop and roll out digital technologies. of government funds invested in GTLK’s capital.

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GRI 102-6 The capital-intensive corporate segment Structure of Russian leasing Leasing and Market of the leasing market was hit hardest, market by volume of new as the drop in freight and passenger traffic business in 2020, % overview led companies to suspend plans to update operating leasing and expand their transport fleets. Leasing 21 Trucks decreased by 26% in the railway segment, 20 Cars 15% for aircraft and 36% for marine and river 13 Railway transport vessels. 11 Construction & road machinery However, the amount of new business 7 Marine & river vessels in retail segments grew by 9%, keeping the 5 Aircraft market from suffering a deeper decline. 5 Farm machinery There was growth of 18% in the construction 18 Other equipment segment, 6% in the passenger car segment, 77% in the farm machinery segment, and 57%, 56.7% and 33%, respectively in the Structure of Russian leasing telecommunication, medical and engineering market by portfolio equipment segments. as of January 1, 2021, %

30 Railway transport 17 Aircraft 13 Marine & river vessels GTLK is the leader in air, rail and water Development 10 Trucks of leasing market Cars transport leasing, as well as the leading 8 in 2020 5 Construction & road machinery provider of operating lease services in Russia 4 Real estate 13 Other and the owner of the country’s largest fleet The Covid-19 pandemic had a negative of leased energy efficient vehicles. impact on the leasing industry. The Russian GTLK provides services to large leasing market shrank by 6% in 2020 companies, and small and medium businesses and the volume of new business totaled Segments of Russian leasing market The leasing portfolio grew by 6% in Russia and internationally. In sectors by volume of new business in 2019–2020, to 5.2 trillion rubles as of January 1, 2021.

1.4 trillion rubles, data from Expert RA The growth was driven by an increase tn rubles designated by the government as high-priority, bn RUB 5.2 show. in restructuring of leases and the Total portfolio important or needing support, the Company revaluation of foreign currency contracts of leasing companies 2020 implements subsidized leasing programs with due to the weakening of the ruble. as of January 1, 2021 2019 The drop in transport companies’ government co-financing. revenues led to an increase in troubled debt. Trucks 298 Restructuring of lease payments amounted 305 to 23% of the total lease portfolio, the Central Bank of Russia (CBR) estimated. Growth of the Russian leasing market Cars 282 % Up to 88% of client requests for payment - in 2015–2020 266 6 deferrals were granted. The average share Railway transport 186 of troubled debt in the finance lease portfolio Contraction of leasing market in 2020 Growth yoy, % 252 grew to 10.2% by the end of 2020 from New business, bn RUB 2% at the beginning of the year, according Construction 158 Leasing portfolio, bn RUB & road machinery 134 to CBR data. The growth of troubled assets 48 36 Marine & river vessels 97 on leasing companies’ balance sheets % 20 15 153 led to an increase in provisioning and, + -6 57 -20 Aircraft consequently, a decrease in profitability. 4,900 5,170 69 Growth of telecom 4,300 81 equipment leasing segment 3,450 3,100 3,200 in 2020 1,500 Farm machinery 66 1,095 1,310 1,410 545 742 38

Other 254 2015 2016 2017 2018 2019 2020 273 24 25 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

GTLK’s Aircraft Market outlook № leasing position 1 for 2021 34 % GTLK 22 % Sberbank Leasing GTLK remains the largest leasing company in Russia with a portfolio 20 % VTB-Leasing The gradual recovery of the economy of 1.3 trillion rubles, and increased its share of the market from 22% 3 % Gazprombank Leasing in 2021, given the absence of new shocks, will set the stage for the leasing industry to regain to 25% in 2020. 20 % Other its momentum and develop further. Amid the recovery of economic activity Despite the difficult operating environment during the pandemic and and realization of deferred demand, the a decrease in the amount of transactions, the Company led the market Rail transport leasing market will grow by 12% to about by new business in 2020¹. № leasing 1.6 trillion rubles, Expert RA forecast in its 1 baseline scenario. GTLK is the leader in all of its key market segments — air, rail and water The rail transport leasing segment 30 % GTLK is expected to contract by another 18% amid transport, by both portfolio and new business. In the bus and trolley leasing 19 % VTB-Leasing continued low lease rates for gondola cars 13 % Sberbank Leasing segment, GTLK ranked first by new business. due to their surplus and the weak recovery 8 % Transfin-M of demand for railway transport services. 30 % Other GTLK is the leading leasing company in Russia in the operating lease Aircraft leasing is expected to gradually segment, with 59% of the total portfolio. recover and see a 50% increase in new business due to the low base of 2020 and The dynamic activities of international leasing platform GTLK Global Water transport government support for deliveries of the № Russian SSJ100 airliner. Business gave the Company a place among the TOP-35 global aircraft leasing 1 The water transport market is expected leasing companies.² to grow by 15% on the back of an increase 70 % GTLK in demand for vessels for the development 6 % Sberbank Leasing of offshore fields and the Arctic, as well as the 4 % Mashpromleasing dire need to update the worn-out inland TOP-10 Russian leasing companies TOP-10 Russian leasing companies 20 % Other waterway transport fleet. by portfolio³ as of January 1, 2021, by new business³ as of January 1, 2021, The automobile transport leasing bn RUB bn RUB segment is expected to see 20% growth driven by the need to update obsolete truck and bus fleets, government support programs GTLK 1,286 GTLK 177 and the investment activity of small and Forecast for leasing Sberbank Leasing 817 Sberbank Leasing 138 medium businesses. market segments in 2021, The pessimistic scenario for the leasing VTB-Leasing 602 VTB-Leasing 120 bn RUB and % growth yoy market in 2021 is possible in the event of low vaccination rates, a further weakening of the Gazprombank Leasing 292 Gazprombank Leasing 100 New business in 2020 Forecast for new ruble, and a drop in the annual average Forecast of new business in 2021 business growth 2021 price of Brent crude to below $55 per barrel. Alfa-Leasing 168 Europlan 92 In this case, new business will grow by less

616 Automobiles +20 % than 10% and the market will not exceed Europlan 135 Alfa-Leasing 72 758 1.5 trillion rubles. 186 Siemens Finance 116 Baltic Leasing 65 Rail transport -18 % 153

RESO-Leasing 88 Siemens Finance 58 97 Marine & river vessels +15 % 112 Rosagroleasing 83 RESO-Leasing 56 Aircraft 69 104 +50 % 81 36 Baltic Leasing PSB Leasing Overall 1,410 market 1,576 +12 % ¹ Expert RA ranking of largest leasing companies. 26 ² Cirium ranking as of the end of the fourth quarter of 2020. 27 ³ Source: Expert RA data for 2020. 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

2 Operational overview The leasing portfolio included 678 contracts , Change in structure as of December 31, 2020, including: of leasing portfolio by type of leasing, %3

The main indicators Net leasing 103 noncommercial leasing contracts; Finance lease of GTLK’s operations are portfolio 17 contracts under program for noncommercial leasing Operating lease of ground passenger and marine transport; 44 contracts under the program to develop leasing of SSJ100 100 airliners; 81 Leasing portfolio by sum of obligations 1 net leasing portfolio at the end 110 contracts under helicopter leasing program; 1 or net leasing portfolio (NLP) 68 of 2020 17 contracts under L-410 program; bn RUB 62 The sum of counterparties’ obligations on all 1,292.8 59 61 9 contracts under water transport leasing program; current finance and operating lease agreements, 52 52 50 50 268 commercial leasing contracts; 48 48 and agreements for loans issued to transport GTLK’s net leasing portfolio stood 41 82 operating lease agreements; 39 38 companies, less received payments on these at 1,292.8 billion rubles¹ at the end of 2020, 32 2 contracts for delivery of equipment for transport and agreements as of the end of the reporting period. which was up by 17% from a year earlier. logistics complex; 19 Although the pandemic imposed significant 26 contracts under the Safe and High Quality Roads 0 Leasing portfolio by balance of unrecovered restrictions on the transport sector, the 2012 2013 2014 2015 2016 2017 2018 2019 2020 national project. 2 investment, or outstanding balance of contract Company managed to achieve its target for new value (OBCV) business volume for the year. The net leasing The sum of investment required to purchase portfolio grew on the back of an increase in new GTLK’s leasing portfolio3 is diversified and balanced by key property under current lease agreements and business in the reporting period. An additional Structure of leasing lines of business. In 2020, the share of finance and long-term agreements for loans issued to third parties, factor was the revaluation of leaseholders’ portfolio by type operating leases for aircraft shrank to 34% from 37% less the sum of reimbursed contractual value foreign currency obligations. of transport, %, 20193 and the share of railway transport leasing decreased in received lease/advance payments and sums to 34% from 39%, while the share of water transport grew 39.1 Railway transport accepted in payment on loan agreements, less VAT. to 27% from 19%. 37 Air transport 19.2 Water transport New business (investment in assets) 2.1 Transport infrastructure 3 The amount of investment in assets for finance Commercial leasing accounted for 79.3% of the portfolio. 1.6 Passenger automobile transport and operating leases on which mutual settlements 0.7 Road building equipment to fulfil obligations began in the reporting period, 0.2 Other as well as loans issued to transport companies The program to develop noncommercial leasing of the SSJ100 in the reporting period. GTLK new business and net leasing accounts for a large share of programs being implemented 2 portfolio dynamics, bn RUB with government participation.

NLP Structure of leasing OBCV The weighted average duration of contracts in GTLK’s leasing portfolio by type of transport, New business 1,293 portfolio is 11.3 years. %, 20203

33.5 Railway transport 1,102 34.4 Air transport Overdue debt amounted to 0.88% of leaseholders’ total 27.3 Water transport 927 898 obligations as of December 31, 2020. 2.4 Transport infrastructure 1.8 Passenger automobile transport 679 0.4 Road building equipment 0.2 Other 535 535

341 331 249 219 226 218 196 159 133 140 135 157 1 91 101 According to management reporting data (NLP). 73 57 2 46 28 40 20 According to management reporting data. 3 By OBCV according to management reporting data. 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Structure of leasing Weighted average duration GTLK’s new business totaled portfolio by program, of contracts by balance New business 1 195.8 billion rubles² in 2020, making the 2019 of obligations in GTLK’s NLP, in 2020 195.8 bn RUB years Company the leader on the Russian market 76.4 COMMERCIAL LEASING GTLK’s new business by this indicator.³ Operating leases accounted 16.3 PROGRAMS WITH GOVERNMENT totaled² PARTICIPATION for about 36% of GTLK’s new business, 8.9 SSJ100 8 percentage points less than a year earlier. 4.3 Helicopters 1.4 Dry cargo and high-speed New transactions concluded in 2020 by amount passenger vessels 13.2 of investment, consolidated by group of companies 12.0 12.1 1.1 Ground passenger 11.1 11.3 and marine transport 9.8 10.2 Counterparty Amount, mln RUB Share of new business, % 9.1 0.6 L-410 8.2 1. Novatek 59,070 30.2 7.2 NONCOMMERCIAL PROGRAMS 4.5 Water transport 2. Freight One 20,577 10.5 1.9 Railway transport 3. Rail Garant Group 16,359 8.4 0.1 Road building equipment, 4. RTC Group 14,040 7.2 utility and specialized vehicles 0.6 Automobile transport 5. NefteTransService 10,440 5.3 0.2 Regional aviation 2012 2013 2014 2015 2016 2017 2018 2019 2020 6. Aeroflot Group 9,675 4.9 7. Red Wings 6,649 3.4 8. Paula Group 6,198 3.2 9. Lion Air 6,070 3.1 Structure of leasing Overdue payments 10. GPKK Transport Logistics Center 5,270 2.7 portfolio by program, as share of GTLK’s NLP 11. Alfa 5,115 2.6 1 2020 12. Russian Transport Company (RPK) 3,480 1.8

79.3 COMMERCIAL LEASING 13. Emirates 3,383 1.7 14.6 PROGRAMS WITH GOVERNMENT 14. Piteravto 3,275 1.7 PARTICIPATION 15. Idel Shipping Company 3,000 1.5 7.3 SSJ100 3.5 Helicopters 16. Freight Village Ru Group 2,744 1.4 2.2 Dry cargo and high-speed 2.07 17. Clearlake Shipping 1,759 0.9 passenger vessels 18. ResourceTrans Group 1,369 0.7 0.7 Ground passenger 1.56 and marine transport 19. Ulyanovskelektrotrans 1,363 0.7 1.24 0.6 L-410 20. Sila Avia 1,200 0.6 0.4 Safe and High Quality Roads 0.95 0.88 0.88 21. Other 14,734 7.5 6.1 NONCOMMERCIAL PROGRAMS 3.9 Water transport 0.49 1.3 Railway transport 0.23 0.23 0.05 Road building equipment, utility and specialized vehicles 2012 2013 2014 2015 2016 2017 2018 2019 2020 Noncommercial leasing generated 18% Commercial leasing generated 82% 0.7 Automobile transport of new business in 2020, including: of new business in 2020, including: 0.1 Regional aviation

1. Safe and High Quality Roads 5.5 % Finance lease 47.4 % 2. Dry cargo and high-speed passenger vessels 4.6 % Operating lease 34.6 % 3. SSJ100 3.4 % 4. Automobile transport & road building equipment 2.2 % ¹ By OBCV according to management reporting data. 5. Helicopters 1.7 % ² According to management reporting data as of December 31, 2020. ³ According to Expert RA study. 6. L-410 0.6 %

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

GRI 201-4 Programs Programs Programs with government with government ­ with government co-financing co-financing participation in 2020

GTLK is an effective instrument for the GTLK effectively leverages budget funds Actually invested Planned GTLK Purchases Leased under program investment under under under program development of strategically important segments to implement major government projects Budget funds as of Dec 31, 2020 program program as of Dec 31, 2020 of the transport sector that require state support. to develop the transport sector. The Company The Company extensively uses noncommercial received 17.1 billion rubles of budget investment Safe & High 20 bn rubles 10.7 bn rubles 33 bn rubles Over 2,000 units leasing mechanisms to update passenger in 2020 to acquire Il-114-300 aircraft and 691 units Quality Roads in 2020–2024 in 2020 in 2020–2024 in 2020–2024 and freight transport fleets. The optimal Mi-8, Ansat and Mi-38 helicopters, as well national project use of government investment and the as to develop leasing of civilian watercraft. Company’s ability to raise funds from extra- In 2020, GTLK received federal budget funds¹ Passenger budgetary sources make it possible to accelerate in the amount of: 4.9 bn rubles 10.8 bn rubles⁴ 11.1 bn rubles 924 units 918 units transport in 2015 in 2015–2020 the development of key sectors of the economy. leasing Working with the Russian Transport Ministry, Industry and Trade Ministry and Digital 5.54 bn rubles in 2016–2017: Development Ministry, GTLK is implementing ten 3.9 bn RUB 8.14 bn RUB 10 bn rubles Under 3.56 bn rubles in 2016 10 bn rubles 2 units Ferry leasing in 2016–2018 construction programs with government co-financing. to acquire three to acquire 36 helicopters 1.98 bn rubles in 2017 Il-114-300 aircraft in 2022–2023 built by Russian in 2023 built by Ilyushin Helicopters (26 Mi-8, 8 Ansat Aviation Complex and 2 Mi-38) Dry cargo, 16.0 bn rubles in 2018–2021: 5.9 bn rubles in 2018 17 bn rubles passenger & dredging 25.1 bn rubles 27 units 11 units GTLK programs: GTLK is also being provided with federal 5.1 bn rubles in 2020 in 2019–2020 vessels 5.0 bn rubles in 2021 budget funds in the amount of 5.09 billion rubles ‹ Stimulate and support demand for the products in 2020 and 5 billion rubles in 2021 to acquire 14 45.8 bn rubles in 2015–2019: 30 bn rubles in 2015 of Russia’s transport engineering sector; civilian watercraft in 2020–2024.² 95.8 bn rubles 4 bn rubles in 2016 95.8 bn rubles 46 units 46 units SSJ100 leasing in 2015–2020 In addition, GTLK received subsidies in the 9.8 bn rubles in 2018 ‹ Accelerate the growth of capital investment amount of 5.88 billion rubles to reimburse lost 2 bn rubles in 2019 in the transport sector; revenue from granting discounts of up to 60% 4.2 bn rubles in 2016–2019: to a leaseholder on leases for ground public 1 bn rubles in 2016 7.4 bn rubles L-410 leasing 7.7 bn rubles 19 units 14 units ‹ Improve the quality and safety of transport passenger transport under the Safe and High 2 bn rubles in 2017 in 2016–2020 services; Quality Roads national project.³ 1.2 bn rubles in 2019

‹ Preserve and create jobs at domestic 3.9 bn rubles Under 3.9 bn rubles in 2020 4.3 bn rubles 3 units engineering enterprises. Il-114-300 leasing in 2020 construction

26 bn rubles in 2016–2020: 3.8 bn rubles in 2016 Helicopter 49.3 bn rubles 7.3 bn rubles in 2017 61.4 bn rubles 156 units 102 units leasing 5.0 bn rubles in 2018 in 2016–2020 1.7 bn rubles in 2019 8.1 bn rubles in 2020

At least 3 bn rubles 2.954 bn rubles⁴ 10.3 bn rubles 10 projects — Digital assets leasing in 2019 in 2020 in 2020–2024 ¹ Under Russian Government Resolution No. 1798, dated December ³ Under Russian Government Resolution No. 867, dated June 17, 2020, 24, 2019, “On providing federal budget subsidies to Public Joint-stock “On approving rules for providing subsidies to Public Joint-stock Company State Transport Leasing Company in 2019 to make capital Company State Transport Leasing Company, Salekhard, Yamalo- investments in the purchase of domestically produced aircraft”. Nenets Autonomous District, to reimburse losses in revenue from Leasing of domestic ² Under Russian Government Resolution No. 1825, dated December granting a leaseholder discounts on lease contracts for ground public 10 bn rubles 29.9 bn rubles road equipment & 29.9 bn rubles5 7,632 units 5 7,632 units 25, 2019, “On providing federal budget subsidies to Public Joint-stock passenger transport”. in 2009 in 2009–2020 Company State Transport Leasing Company in 2019 and 2021 to make ⁴ By cost of leased assets. automobile transport capital investments in the purchase of civilian water transport vessels”. ⁵ The program does not specify a target.

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GTLK Global Business Structure International aircraft fleet of leaseholders by country3

operations AIRBUS² Development 12 12 12 6 2 A321 A320 A319 A220-300 A330 % of GTLK Global Business 6 Norway GTLK’s international operations are aimed at developing BOEING exports of financial and leasing services and promoting exports of Russian high-tech products. The Company created GTLK 1 6 1 15 1 Global Business in order to effectively operate on international 747-83QF 777-300ER 737-500 737 NextGen 777-200LR markets. This leasing platform includes the subsidiaries GTLK % % % 6 65 Russia Europe Designated Activity Company (established in 2012 BOMBARDIER 10 in Ireland), GTLK Asia Limited (established in September 2018 UK 2 1 % in Hong Kong) and GTLK Middle East (established in October 6 Latvia 2018 in UAE). The priorities of the international leasing CL600 CRJ200 LR 71 platform’s operations are consistent with the objectives of the International Cooperation and Exports national project and the Strategy to Develop Service Exports to 2025.¹ % 2 Azerbaijan Exporting financial and leasing services through GTLK Global % 2 Malta % Business involves: GTLK Global Business 2 Turkey % % water transport fleet 3 83 Cyprus ‹ raising financing on the international market under % % 3 Qatar guarantees from parent company JSC GTLK in order 2 Jordan to provide leasing services on the international market; DRY CARGO PASSENGER BARGES % VESSELS VESSELS 3 UAE % ‹ a portion of GTLK Global Business profits from providing 20 4 2 6 Liberia financial (leasing) services on the international market are % 3 Indonesia paid as dividends to parent company JSC GTLK, which pays SPECIAL-PURPOSE CRANE TUGBOATS dividends; VESSELS VESSELS

‹ including dividends from international operations 3 2 3 in accordance with the consolidated IFRS financial

statement, to the budget of the Russian Federation. OIL TANKERS 1 35 16 10 AIRCRAFT LESSEES LESSEES OF WATER

IN 11 COUNTRIES TRANSPORT IN 4 COUNTRIES 100 % Hong Kong 100 %

GTLK Global Business structure Ireland UAE 1 Russian Government Order No. 1797, dated August 14, 2019, “On approval of the Strategy to Develop Service Exports to 2025”. ² Additionally, GTLK Middle East in partnership with joint venture Aurum Leasing Limited has leased an Airbus A350 aircraft. 3 Percentages might not add up to 100 due to rounding. 34 35 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Transport Lavna coal infrastructure terminal project development

The first stage of work on arranging the grading and of the Yekaterinburg Transport and Logistics Hub, which levelling of the site has been completed. The next steps call for: is a component of the federal backbone network in the Ural ‹ Updating the concession agreement and business plan; Federal District. Yuzhnouralsky TLC receives and stores ‹ Signing a contract with a general contractor for the container freight, provides customs clearance, processing, construction of terminal facilities. secure storage and cross docking services, and arranges for There are plans to increase the effectiveness of the return shipment of empty containers. investment project by diversifying the terminal’s services. Yuzhnouralsky TLC opened in 2015 to develop transport Taking into account the general global trend toward corridors between Asia and Europe, create a free trade zone decarbonisation, we are considering the possibility and serve freight traffic along the route from Urumqi, China of handling mineral fertilizer, iron ore and other cargo through Dostyk, Kazakhstan to Formachevo and onward in addition to coal. through Russia’s network of logistics hubs, railway border The Lavna Coal Terminal and the necessary railway crossings and seaports. GTLK takes an active part in the deve­lop­ The Lavna Coal Terminal at the seaport of Murmansk is part of the Transport System infrastructure are scheduled to go into operation at the end The TLC has 18 permanent facilities, including a Class A ment of Russia’s transport infrastructure both Development program¹ as pertains to the of 2023. The full utilization of the complex will increase the coal warehouse complex of 82,000 square meters that can store as an investor and a vendor of leased assets. Comprehensive Development of Transport Hubs, handling capacity of Russian ports by 18 million tonnes per year. more than 100,000 tonnes of palletized freight, a container GTLK’s operations in this area are aimed at the as well as the Russian Seaports federal project The use of the latest technologies at the terminal will terminal with an area of over 170,000 square meters that make it possible to minimize its environmental impact. can handle 2.5 million tonnes of container freight, an energy fulfilment of principal goals of the Russian in the Comprehensive Plan for the Modernisation and Expansion of Trunk Infrastructure up to 2024. The The project will also have a whole range of positive economic center, utilities, and automobile and railway infrastructure. Federation’s Transport Strategy to Create development of the Murmansk Transport Hub will impacts, including growth of federal and regional tax revenue, The terminal sits on 180 hectares bordered a Unified Transport Area Based on Efficient increase the use of the transit and resource potential the attraction of extra-budgetary investment and an increase on one side by the development zone of the South Ural Infrastructure and the Comprehensive Plan of Murmansk Region and adjoining waters. in export earnings from the port’s operations. The terminal will Railway’s Formachevo Station and on the other by the M-36 create new jobs in Murmansk Region and help drive the social federal highway, which makes it possible to quickly deliver for Modernization and Expansion of Trunk The project, which GTLK began working on in 2016, includes the construction and and economic development of the region as a whole. Lavna will freight by truck to Chelyabinsk and other large cities in the Ural Transport Infrastructure up to 2024. reconstruction of port infrastructure on the western also make an important contribution to achieving the strategic Federal District. shore of Kola Bay, and the construction of a modern objective of rerouting the cargo of Russian exporters from Baltic GTLK has established the subsidiary Yuzhnouralsky Dry port terminal with the latest equipment and the Lavna ports to domestic port facilities. Port LLC to operate the Yuzhnouralsky TLC. The company Terminal Station private railway. has arranged to work with the leading freight rail operators GTLK played a key role in structuring the in Russia and Kazakhstan. project and the signing of Russia’s first ever port Yuzhnouralsky transport In the period to 2025, there are plans to further develop concession. The Company brought a pool of strategic logistics complex the Yuzhnouralsky TLC’s terminal and warehouse operations. investors into the project in 2019 and, working with The development of capacity as a backbone terminal for Gazprombank, ensured the timely financial closing As part of efforts to establish a backbone network stationing the empty containers of Chinese rail operators will of the concession. of multimodal transport and logistics hubs under the help increase annual freight handling to 2.5 million tonnes. The project has received a favorable opinion from Comprehensive Plan for the Modernisation and Expansion Yuzhnouralsky TLC will be able to consolidate freight traffic Russian state expert review office Glavgosexpertiza of Trunk Infrastructure up to 2024, GTLK is developing passing through Belarus, Kazakhstan and Russia. for the construction of the terminal and private rail the Yuzhnouralsky Transport Logistics Complex (TLC) Increasing transit freight traffic between China and the line, and for the summary cost estimate. A contract at Formachevo Station on the South Ural Railway, 80 km south European Union through Russia will lend new momentum to the has been signed for the procurement of the main of Chelyabinsk. development of domestic and international commercial ties, process equipment, and the equipment has been Yuzhnouralsky TLC has been included in the Transport make it possible to significantly increase the country’s transit manufactured and is ready for delivery. and Logistics Centers federal project as a satellite potential and boost exports of transport services.

¹ Russian Government Resolution No. 1596, dated December 20, 2017, “On approval of the ‘Transport System Development’ government program of the Russian Federation”. 36 37 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Digital Digitization Participation transformation of operations in the development of the digital economy

The Company achieved all set goals for automating Transitioning to the digital economy is one of the top core business operations in 2020, as it: priorities facing Russia. In order to successfully make this transition it is necessary to stimulate the widespread ‹ Deployed a budgeting management system as part use of information and communications technologies and of the integrated System for Automation of Leasing equipment. Backbone data networks and powerful data Activities; processing centers, digital management systems and customer premises equipment enable specialists to control ‹ Developed a business process management system the most complex processes, while allowing users to feel that prepares and analyzes transactions; comfortable in the information environment. GTLK established the Digital Asset Management ‹ Commercially launched an electronic archiving Directorate in 2019. As part of the Digital Economy national system — leasing file on core activities; program, the Company received 3 billion rubles from the GTLK adopted an information technology The nature of efforts to digitize the business in 2020 was to a large extent determined government to develop subsidized leasing of digital assets. development strategy back in 2017, so when by the Covid-19 pandemic. In March 2020, ‹ Is testing a mobile app for acceptance and transfer The amount of leasing transactions is expected to exceed 10 the Covid-19 pandemic began the Company GTLK employees were transferred to remote of vehicles; billion rubles by 2024, with financing provided by budgetary was organizationally and technically ready work in line with the lockdown¹ imposed by the and extra-budgetary sources. ‹ Rolled out an automated system for financial reporting GTLK signed three subsidized leasing contracts to move business processes into a digital authorities and the state of high alert introduced at the Company. We quickly ensured the according to IFRS principles based on 1C:Enterprise with Russian Post in 2020 for the delivery of server, environment and handle day-to-day tasks. smooth operation of IT infrastructure in the new software; telecommunication and weight measuring equipment worth GTLK went completely online in just a week operating circumstances, obtained expanded 2.95 billion rubles. The share of domestic equipment in the and not a single business process suffered. sets of licenses from suppliers and rolled out ‹ Developed a risk management system based projects was 78%.³ on internal audit, control and risk assessment The deal enabled the Company to achieve 66% of the 2020 The Company is involved in the Russian additional servers and services. All of the Company’s professionals received round-the- automation software; target for investment in projects to roll out cross-cutting Transport Ministry’s work on developing clock remote access to internal information digital technologies and platform solutions primarily based a digital transformation strategy for the sector resources. ‹ Beta launched a purchasing management system; on domestic technology. in general and plans to play a role in future While tackling urgent problems caused Working with Russian Post confirmed the viability ‹ Is developing a data mart for tax monitoring; of mechanisms to stimulate demand for and increase the digital initiatives. Starting with its internal by the pandemic, the Company also continued planned modernization of its infrastructure. competitiveness of domestic equipment and was a positive digital transformation, GTLK will become By the end of 2020, GTLK had established ‹ Updated the GTLK corporate portal based on the signal to market participants. an active participant in the digitization of the a platform to develop technology services Russian 1C-Bitrix platform.² Interest in GTLK’s subsidized leasing program from whole transport sector. based on domestic software. The Company also other companies will enable Russian technology companies upgraded its infrastructure monitoring system to significantly expand the market for their products, while in order to more quickly respond to incidents also meeting the Russian economy’s need for comprehensive and replaced network equipment for access digital solutions and software. to the local computer network. ¹ Period of nonworking days introduced by Russian presidential decrees No. 206, dated March 25, 2020, “On the announcement of nonworking days in the Russian Federation”, and No. 239, dated April 2, 2020, “On measures to ensure the sanitary and epidemiological welfare of the population in the Russian Federation in connection with the spread of the novel coronavirus (Covid-19)”, as well as the Moscow mayor’s Order No. 56-UM, dated May 7, 2020, “On amending orders of the Mayor of Moscow No. 40-UM, dated April 4, 2020, and No. 43-UM, dated April 11, 2020.” ² In line with Russian government directives No. 10068p-P13, dated December 6, 2018. ³ The figure is in line with Deputy Prime Minister Dmitry Chernyshenko’s order No. DCh-p10-13419, dated October 23, 2020, and the goals of the Digital Technologies federal project of the Digital Economy program.

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Financial overview

Assets

The Covid-19 pandemic and related restrictive measures The Company’s assets totaled 981.299 GTLK key financial led to a drop in transport segments of the economy, which billion rubles as of December 31, 2020, indicators also affected GTLK’s operations in the reporting year. up by 211.254 billion rubles or 27% from However, despite the adverse economic environment, the December 31, 2019. The strong growth of assets Company is maintaining operating efficiency and controlling was driven by the development of the operating operating expenses. lease segments, as well as the growth of net 2013 2014 2015 2016 2017 2018 2019 2020 Change (2020/2019) GTLK’s revenue totaled 81.339 billion rubles in 2020, investment in leasing. which is 20.669 billion rubles or 34% more than in 2019. The The 11% increase in equity capital in the year, strong growth of revenue in the reporting period was driven from 103.028 billion rubles to 114.090 billion Assets, 82,217 97,086 185,203 232,097 340,585 521,496 770,045 981,299 211,254 27 % by the development of our core finance and operating lease rubles as of December 31, 2020, further mln RUB businesses. expanded GTLK’s borrowing potential and The Company’s operating income increased by 311 prospects for development. million rubles or 3% year-on-year to 12.513 billion rubles. Net investment Provisions for anticipated credit losses made in 2020 totaled in leasing, 53,345 55,600 42,350 70,891 135,916 225,637 246,507 290,373 43,866 18 % 981.3 mln RUB 4.791 billion rubles, compared to 5.839 billion rubles in 2019. 2 GTLK’s comprehensive net income decreased to 316 million GTLK Assets , 770.0 rubles in 2020 from 1.660 billion rubles in 2019. bn RUB Assets leased The capital/assets ratio is 11.63%, which attests to the under operating 13,513 28,755 83,915 88,140 134,371 175,828 344,906 413,917 69,011 20 % 521.5 leases, mln RUB Company’s adequate financial stability. 340.6 232.1 185.2 Net profit (loss), 82.2 97.1 128 265 39 205 (3,835) 607 1,977 (124) (2,101) (106) % mln RUB 2013 2014 2015 2016 2017 2018 2019 2020

The Company prepared its consolidated financial statements GTLK’s for 2020 in accordance with International Financial Reporting revenue totaled 1 in 2020 GTLK Revenue , Capital adequacy Standards (hereinafter, IFRS). An audit conducted by FBK 81,339 mln RUB bn RUB (capital/assets), % LLC confirmed that these financial statements are a faithful the Company’s representation of GTLK Group’s financial position according operating 81.3 24.9 income 24.5 to IFRS in all material respects. 12,513 mln RUB 60.7 GTLK’s 19.2 comprehensive net 46.9 16.6 income in 2020 316 mln RUB 13.4 12.5 29.8 11.6 22.1 10.8 16.7 10.6 7.5 ¹ Revenue calculated as the sum of interest income from finance lease transactions, operating lease income and other interest income 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 (according to IFRS). ² According to IFRS data. 40 41 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Liquidity Strategy and and debt burden development plans

The structure of GTLK’s funding breaks Structure down into 12% capital, 48% ruble and foreign of GTLK funding, currency bonds, 35% loans and 5% lease 2020, % obligations. 48 Issued bonds GTLK’s total loan obligations 35 Credit and loans stood at 846.933 billion rubles 12 Capital as of December 31, 2020, including: 5 Lease obligations

‹ 382.273 billion rubles on bank loans and credit, including lease obligations (of which The Company’s debt portfolio by duration 93.400 billion rubles was denominated breaks down into 14% debt with duration in USD and 32.902 billion rubles was of less than one year, 55% debt with duration denominated in euros); of one to five years, and 31% debt with duration Strategy and development of more than five years. ‹ 464.660 billion rubles on bonds plans (including 241.654 billion rubles denominated in USD¹). Structure of debt 4 portfolio by duration , GTLK’s main strategic planning document GTLK successfully executed initiatives in the 2020, % is the Long-term Development Program, which following priority areas of business in line with 14 Under 1 year defines the Company’s mission, vision and the LDP: GTLK Group's 55 1 to 5 years goals, the priority areas of its business for the ‹ Implementation of noncommercial leasing cost of funding2, % 31 Over 5 years long term, main market segments, as well programs and projects with government as a number of strategic initiatives aimed co-financing, including measures to develop at realizing the Company’s goals. leasing of domestically manufactured The weighted average cost of funding, before 9.2 9.1 9.0 The Long-term Development Program (LDP) aircraft – the SSJ100, L-410 and helicopters; 8.7 8.1 breakdown by currency, dropped to 6.5% in 2020 7.2 that the Company’s Board of Directors approved leasing of energy efficient urban passenger 6.6 6.5 from 6.6% in 2019. for 2016-2020 was completed in 2020. Over the transport; leasing of road building machinery course of its implementation, the Company and utility and specialized vehicles; leasing achieved impressive results: of automobile-railway ferries; leasing ‹ GTLK’s portfolio grew almost sixfold; of domestic water transport; and leasing 2013 2014 2015 2016 2017 2018 2019 2020 ‹ Investment in the transport sector increased of rolling stock for commuter train services; by 6.5 times; ‹ Implementation of programs in commercial ‹ The number of programs with government segments, including the development The Company’s debt portfolio by currency co-financing rose from 3 to 10; of international leasing of aircraft and water breaks down into 57% denominated in Russian ‹ GTLK won leading positions on the leasing transport, and leasing of freight cars; rubles, 40% in U.S. dollars and 4% in euros. market by volume of new business and ‹ Development of transport infrastructure. Forex obligations on bank credit and loans 1 In ruble equivalent at Central Bank of Russia rate as of December 31, 2020. leasing portfolio and in its main segments, made up less than 12% or 99.876 billion rubles 2 Cost of funding is the ratio of interest expenses in the period to the with the Company’s market share growing of GTLK debt.¹ average value of liabilities on which interest is accrued. 3 Debt portfolio is the sum of bank credit and loans, lease obligations and from 9% to 25%; issued bonds to IFRS. ‹ The Company’s assets increased by 5.3 times; 4 Analysis of the sum of received loans and lease obligations (by expected maturity dates), according to IFRS for 2020. ‹ GTLK paid 1.1 billion rubles in dividends into the budget of the Russian Federation. 42 43 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Results of GTLK Long-term % Indicator Target 2020 Actual 2020 Development Program for 2016–2020 KPI achievement in 2020 achievement

Return on equity (ROE), % 0.1 0.3 300

Net profit (IFRS), mln RUB 150 350 233

Jan 1, 2016 Dec 31, 2020 Operating margin, % 1.3 1.4 108 Number of programs with government co-financing The following indicators were included Budget investment efficiency ratio, per ruble of federal budget funds 6 8.5 142 in the Company’s key performance indicators 3 10 (KPI) for 2020: No more Nonperforming lease portfolio (share of overdue lease and loan payments), % than 2.5 0.9 100 Budget investment multiplier effect ‹ Return on equity (ROE); New business volume, bn RUB 153.2 195.8 128 1:3 1:9 ‹ Net profit (IFRS); ‹ Operating margin; Investment in transport sector, bn RUB¹ Leasing portfolio to IFRS, bn RUB 848 851 100 ‹ Budget investment efficiency ratio; ‹ Nonperforming lease portfolio (share Overall fulfillment of noncommercial leasing programs and projects with government 100 109 109 173 1,132.5 participation, %. Including: of overdue lease and loan payments); Leasing portfolio, bn RUB Implementation of noncommercial leasing program for ground passenger and water ‹ New business volume; transport, units (cumulative total) 923 923 100 ‹ Leasing portfolio to IFRS; 219 1,292.8 ‹ Overall fulfillment of noncommercial leasing Implementation of measures to develop leasing of L-410 aircraft, units 3 3 100 Aircraft, units programs and projects with government participation, including: Implementation of measures to develop leasing of helicopters, units 50 50 100 56 309 Implementation of water transport leasing program, units (cumulative total) 8 11 138 — Implementation of noncommercial leasing Water transport, units program for ground passenger and water Overall fulfillment of Russian government directives, %. Including: 100 80 80 23 167 transport; — Implementation of measures to develop Reduction of (per unit) operating expenses, % 2 3.2 160 Railcars, ‘000 units leasing of L-410 aircraft; — Implementation of measures to develop Productivity growth, % At least 5 –54 — 18.6 99 leasing of helicopters; Automobile transport, specialized vehicles, ‘000 units — Implementation of water transport leasing Annual purchases from small and medium businesses, % At least 20 67.9 100 program.

Fleet² 8.6 13.4 Share of purchases of Russian software and associated services, % At least 75 91.1 100 ‹ Overall fulfillment of directives of the Russian government, including: Market share — Reduction of (per unit) operating expenses; % % — Productivity growth; 9 25 — Annual purchases from small and medium businesses; GTLK achieved all KPI in 2020 with the exception of “Productivity growth”, calculated as the Assets, bn RUB — Share of purchases of Russian software and ratio of added value to number of employees. associated services. During the economic crisis triggered by the pandemic, GTLK supported transport companies, reducing the debt burden on counterparties by restructuring current contracts and 185.2 981.3 deferring payments. This resulted in an 80% decline in operating profit (before taxes) in 2020. The Company also increased provisions that hedge against the risk of deteriorating payment discipline among counterparties. At the same time, during the pandemic GTLK made every effort Capital, bn RUB to preserve jobs without reducing salaries set by employment contracts. Combined with the other mentioned factors, this led to a significant drop of 47% in added value in 2020 compared to 2019. 45.4 ¹ At annual average currency exchange rates. 114.1 ² Contracted units. 44 45 01 02 03 04 05 06

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Outlook for development

The Company’s Board of Directors In 2021–2025, GTLK will continue to pursue its GTLK Group’s development in line with Socioeconomic impact of Long-term mission as an instrument for the implementation the LDP’s baseline scenario will enable Development Program for 2021–2025 tentatively approved the draft of Long- of government policy for the management and sus- the Company to: term Development Program of 2021–2025 tainable development of Russia’s transport sector. in April 2021. The core principles of the new program: ‹ Maintain leading positions on the Russian leasing market by leasing portfolio; The program factors in GTLK’s role The LDP will contribute to the achievement GTLK is a universal instrument of state support in achieving the national development goals 1 of government objectives, strategic plans and Concentration of instruments to support ‹ Build a balanced and stable portfolio national goals. for the period to 2030. transport leasing at GTLK, and participation (to IFRS) across the key market segments: The Program’s core projects will facilitate the in the implementation of national projects, air, water and rail transport, road-building development of the transport sector as a whole with corresponding development of in-house machinery, utility and specialized vehicles, and will set the stage for long-term innovative competencies. and automobile and electric transport; growth and attracting extra-budgetary investment, including international, to develop individual Diversification of GTLK’s business ‹ Reduce risks by developing operating leases 2 segments of the sector. Maintaining growth in GTLK’s core leasing in the railway and aviation segments; The Program’s implementation will help sectors, development in more capital-intensive drive strong growth of capital investment markets of transport and transport infrastructure ‹ Develop new areas of business: natural gas in Russia’s transport sector (by 17% in the baseline and expansion into new lines of business. vehicles, dredging fleet, bunkering fleet, scenario and 29% in the optimistic scenario passenger water transport, digital services, over the period of 2020–2024 compared to 2019) Increasing capital investment in transport sector development of innovation and development 3 and attract extra-budgetary investment. This, Maintaining the principle of no losses of transport and logistics infrastructure; in turn, will help accelerate the growth of capital in noncommercial leasing programs, and investment and increase it to 25% of GDP. sustaining the level of capital needed to maximize ‹ Develop competencies in fleet management, Noncommercial leasing programs will attraction of extra-budgetary funds. including with the use of digital provide long-term orders for domestic transport technologies; engineering companies as well as set the stage Digital transformation 4 for localization of component manufacturing with Digital transformation and transition ‹ Develop international leasing platform GTLK a view to mass production of domestic transport to an innovative model of development at GTLK, Global Business; equipment. participation in transport sector digitization The support for domestic machine- projects. ‹ Diversify the Company’s business building enterprises that lies at the heart of the by customer base and geography; noncommercial leasing programs will, in turn, Development of GTLK Global Business platform 5 facilitate import substitution of foreign equipment Strengthening the Company’s positions ‹ Diversify sources of financing; and help generate and develop demand for on the international leasing and financing market Russian machinery and equipment. For example, with the development of GTLK Global Business, ‹ Improve operating performance; GTLK plans to support the rollout of new types participation in projects to develop exports of high- of domestic aircraft, the Il-114-300 and MC-21 tech Russian products and exports of financial ‹ Digital transformation of GTLK; airliners, through leasing programs with (leasing) services. government co-financing, including as part of the ‹ Improve financial performance. optimistic scenario.

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The expansion and modernization of transport In addition to its direct impact, the Program The modernization of the structure of Russia’s ­ fleets, and the replacement of the worn-out and will have indirect impacts, including Acquisition development institutions will involve, among other things, obsolete productive assets of Russian passenger ones that are consistent with the goals of GTLK acquiring some of the assets of VEB-Leasing in 2021. carriers will increase the efficiency, affordability, national projects: of VEB-Leasing The reform of development institutions is being carried out quality, as well as the safety of passenger services. under a decision the Russian government made in 2020.¹ The average efficiency of budget expenditures assets The assets being acquired from VEB-Leasing are in GTLK leasing programs, defined as the ratio primarily involved in air transport. GTLK expects to acquire of federal budget funds provided for a program Safe and High Quality Roads; them at a market price, taking into account leaseholders’ to the tax revenue generated in production One of the more important developments in 2020 obligations. Under the roadmap for the reform, the of transport equipment, exceeds 100%. In 2021- composition and status of the VEB-Leasing assets will was the Russian government’s decision to reform the 2025, GTLK will invest more than 14 rubles in the Digital Economy of Russia; be audited. Independent international consultants did transport sector from extra-budgetary sources for country’s development institutions. The reorganization an expert assessment of the structure of the deals and every ruble of budget funds it receives. is intended to eliminate redundancies on the market and their legal, tax and sanctions risks. The expenditure side Productivity and Employment Support; calls for GTLK to acquire some of the assets of VEB-Leasing. of measures to transfer the VEB-Leasing assets to GTLK will

be determined based on the results of the assessment. This will enable the government to optimize support for These measures are largely technical in nature. International Cooperation and Exports; the transport sector and synergize competencies. The GTLK will ensure the execution of measures They will be included in current operations and will not affect of national projects in which it plays a direct emergence of a single center for making decisions and GTLK’s business model. role: Environment; implementing government aircraft leasing programs will The transfer of the assets is scheduled for completion in June 2021. further reduce costs. Update ground passenger public transport in urban areas as part of the Safe and High Quality Roads Comprehensive Plan for the Modernisation The appraisal of the VEB-Leasing assets has been

national project; and Expansion of Trunk Infrastructure. completed. Contracts on their acquisition are expected

to be signed in the middle of the year. The deal will further CONSOLIDATION SYNERGIES IN OF TRANSPORT GTLK + COMPETENCIES, reinforce the Company’s leading positions and strengthen its SECTOR DE- Complete construction of the Lavna Coal VEB-Leasing EXPERIENCE, VELOPMENT business. EXPERTISE Terminal as part of the Comprehensive Plan INSTRUMENTS for the Modernisation and Expansion of Trunk Infrastructure; GTLK’s activities under the Program will contribute to the achievement of OPTIMIZED, MORE EFFICIENT the following national development goals ELIMINATION OF ECONOMIES ­MANAGEMENT of the Russian Federation: REDUNDANCIES OF SCALE Implement a subsidized leasing program for digital OF DEVELOPMENT assets as part of the Digital Economy of Russia Roadmap for transfer INSTITUTIONS

of VEB-Leasing assets to GTLK Effects of VEB-Leasing assets transfer GTLK to national program.

Comfortable and safe living environment;

Decent, productive jobs and successful Approve how Determine amount and Develop and approve Prepare proposals Make corporate entrepreneurship; to merge GTLK and means of compensation KPI for 2021 for list of assets decisions necessary

VEB-Leasing for possible GTLK involved in the merger to complete the deal expenses stemming Digital transformation. from the deal

Determine amount Conduct audit Opinion of consultants Make preliminary Sign contracts of possible expenses of VEB-Leasing on structure of deal, decision on the means on acquisition of the associated with transfer risks, evaluation and terms of the asset assets assets of rights to VEB-Leasing of financial model and acquisition assets, and amount and financial consequences timeframe for resolving of deal funding relations

1 Russian Government Order No. 3710-r, dated December 31, 2020. 48 49 01 02 03 04 05 06

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GRI 102-30 Risk management General information Goals Principles and internal control on comprehensive risk management & internal and objectives of CRM&IC control system of CRM&IC

The aim of the CRM&IC system is to provide reasonable ADAPTABILITY assurance that the Company’s goals will be achieved at every level of management. The set goals must be clear, measurable and consistent with the Company’s mission, INTEGRATION development strategy and approved level of risk appetite. There must be timelines for their achievement and people responsible for controlling this process. AWARENESS The principle objectives of CRM&IC are to: ‹ provide reasonable assurance that the Company’s goals CONTINUITY OF RISK MANAGEMENT will be achieved; AND INTERNAL CONTROL PROCESSES ‹ ensure the efficiency and effectiveness GTLK’s risk management and internal GTLK has an effective, comprehensive risk management and internal control (CRM&IC) of the Company’s financial and business activities and control system seeks to anticipate all risks FUNCTIONALITY system that is consistent with corporate economical use of resources; that could have a negative impact on the governance best practices and was developed ‹ identify risks and manage these risks; ‹ ensure the accuracy and timeliness of financial, Company’s business. This approach enables in compliance with current regulations and COHESION/COMPREHENSIVENESS statistical, management and other reporting; GTLK to plan and implement measures in good standards, including the: ‹ ‹ Corporate Governance Code¹; protect the Company’s assets; time to minimize risks, as well as effectively ‹ ‹ Methodology guidelines of the Federal monitor compliance with legislation, as well as the ACTIVE INVOLVEMENT OF MANAGEMENT control the achievement of set goals at all Property Agency, 2015; Company’s internal policies, regulations and procedures; ‹ prevent and combat any form and manifestation of fraud levels of management within the Company. ‹ COSO ERM international standard for and corruption. Risk management and internal control work enterprise risk management, COSO Internal OPTIMALITY Control; at the Company is carried out according ‹ GOST R ISO 31000-2010 Risk Management – In order to meet these objectives, the Company to approved internal regulations, and meets Principles and Guidelines, among others. has established a Risk Management Directorate that PROPORTIONALITY Russian and international standards in this is responsible for analysing and assessing risks and developing measures to respond to them, as well field. The CRM&IC system is in effect at every level of management, ongoing and built into business as for coordinating interdepartmental cooperation on issues INTOLERANCE FOR FRAUD AND CORRUPTION processes in order to ensure the achievement concerning risk management and internal control. of the Company’s goals and objectives. The The directorate acts independently and reports to the CEO Risk Management and Internal Control Policy and Board of Directors. is approved by the Board of Directors. The risk oriented approach that is prescribed by GTLK’s Leasing Policy is factored into the decision making process. Information about key risks is regularly presented for consideration to the Board of Directors. Risk management is applied to all groups of risks associated with GTLK’s business, at every level of management throughout the Company’s geographical presence.

¹ Approved by Central Bank of Russia Letter No. 06-52/2463, dated April 10, 2014, “On the Corporate Governance Code”. 50 51 01 02 03 04 05 06

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Participants in risk Stages of risk Levels of risk management and internal management and internal and risk response control processes control processes procedures

The process of risk management and internal control Reports on internal audits are submitted to the concerned GOAL SETTING is built into the Company’s business processes and parties according to the standards approved by the Board AUDIT COMMITTEE BOARD INTERNAL AUDIT provides for a differentiated approach to responding of Directors; OF THE BOARD OF DIRECTORS COMMISSION to risks depending on their level: ‹ An external evaluation of the maturity of the comprehensive OF DIRECTORS DETERMINING RISK APPETITE risk management and internal control system is done at least once every three years.

IDENTIFYING RISKS The methodology for internal diagnostics of the risk MANAGERS AND Risk appetite RISK management system is approved by order of the CEO. The EMPLOYEES OF THE CEO MANAGEMENT COMPANY’S report on the results of internal diagnostics is reviewed DIRECTORATE The level of risk appetite is stipulated in the Risk BUSINESS UNITS ASSESSING AND ANALYZING RISKS by the CEO and Board of Directors at least once a year. Management Strategy and approved by the Board of Directors. The Risk Management Directorate analyzes DEVELOPING AND EXECUTING the approved risk appetite for consistency with the MEASURES TO MANAGE RISK Company’s goals and strategy at least once a year, and if INTERNAL INTERNAL necessary prepares recommendations to change the risk Improving the CRM&IC system CONTROL SERVICE AUDIT SERVICE DEVELOPING AND IMPLEMENTING appetite level and submits them for approval by the CEO CONTROL PROCEDURES and the Audit Committee, and confirmation by the Board In 2019, KPMG conducted an independent external of Directors. The procedures for preparing and approving the evaluation of the risk management system’s maturity and its ASSESSING INTERNAL CONTROL risk appetite are set out in the Risk Management and Internal compliance with COSO (ERM, IC); ISO 31000; the Methodology Control Policy approved by the Board of Directors. Guidelines of the Federal Property Agency; and the Corporate Governance Code of the Central Bank of Russia. MONITORING RISKS The evaluation showed that the risk management system corresponds to the Integrated+ maturity level (4.5 points out Assessment of CRM&IC of possible 5). In light of the evaluation results, the Company MAINTAINING A DATABASE OF REALIZED RISKS system’s effectiveness developed the Program for Enhancing the Quality of the Comprehensive Risk Management and Internal Control System, which was approved by the CEO and is now being INTERNAL DIAGNOSTICS (SELF-EVALUATION) The procedures for assessing the effectiveness of the AND ASSESSING EFFECTIVENESS OF CRM&IC SYSTEM implemented. CRM&IC system are set out in the Risk Management and A self-assessment of the risk management system was Internal Control Policy approved by the Board of Directors. done in 2020 that also showed that the system corresponds PREPARATION AND SUBMISSION OF REPORTS The effectiveness of the system is assessed in the to the Integrated+ maturity level (4.5 points out of possible 5). following ways: Risk management and internal control processes were ‹ The Risk Management Directorate performs internal completely automated in 2020. Risk identification and diagnostics (self-evaluation) of the risk management assessment, planning and execution of control procedures system and presents the results to the CEO and Board and measures to manage risks, compilation and monitoring of Directors; of risk registers and risk matrices and the control procedures ‹ The managers and employees of the Company’s business of all business units are carried out using specialized units perform self- evaluation of internal control; software. ‹ The Internal Audit Service assesses the effectiveness of the internal control and risk management system.

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Key and significant risks Key risks Significant risks GRI 419-1

The comprehensive risk management and Key risks include risks attributable Significant risks are risks that have an impact on the Fraud and corruption risks internal control system provides a forecast to external factors and affect strategic decision achievement of the Company’s goals but lie within the These risks are due to the following main factors: making, including on issues such as the CEO’s control and are taken into account when making an employee’s desire for personal gain, criminals infiltrating for all risks that have an impact on the amount of investment in the sector, types operating decisions. Significant risks are attributable to both staff, and dealings with dummy or fly-by-night firms. achievement of the Company’s targets, of acquired assets, and the terms of concluded external and internal factors and are subject to regular ensures the planning of measures to minimize transactions. The following principle risk factors monitoring and control. Significant risks include the Compliance risks these risks and monitors the achievement are emphasized in the process of analyzing following types of risk: Compliance risks, including as regards AML/CFT issues, key risks: reduction of government support are caused by the following main factors: changes to current of set goals. Risk management and internal measures for transport operators, the cyclical Property risks laws and regulations, passage of new laws, conflicts in legal control are carried out in line with the nature of demand for transportation services, Property risks are due to factors such regulation, inconsistent judicial practices, imposition Company’s internal regulations. the volatility of the freight base/passenger as an underdeveloped after-sales service system, poor of economic sanctions and restrictions against Russia, and In its operations, GTLK highlights key and traffic, changes in market lease rates, rising fuel quality components, late maintenance and repairs, poor shortcomings in internal control procedures for compliance prices, changes in the cost of vehicles and their quality servicing, dependence on foreign spare parts with Russian and international laws. significant groups of risks. components, uncertainty regarding the timing and components, rising asset prices and dependence The Company carefully monitors compliance with and volume of vehicle retirement, maturity on subsidies. social and economic legislation. GTLK Group organizations of infrastructure/after-sales service, mechanical did not receive any confirmed court orders for significant failures of leased assets, and fluctuations Credit risks fines for noncompliance with laws and regulations in 2020, in exchange rates and the cost of financing. Credit risks are caused by the following main factors: or any nonfinancial penalties in the form of a suspension deterioration of financial condition, low financial stability of operations. of counterparty, insufficient price per flight hour to cover operating costs, high dependence on subsidies, regional budget deficits, and reduction of subsidies for leaseholders.

Liquidity, currency and interest risks These risks are due to the following main factors: fluctuations in the key interest rate, changes in funding costs, exchange rate fluctuations, volatility of demand for bonds, imbalances between maturity and repayment schedules and lease payment schedules, and sanctions.

Risk of nonfulfillment of programs with government co-financing This risk and measures to minimize it are assessed individually for each program.

Risk of inaccurate reporting This risk is caused by the following main factors: late preparation and submission of documents/information needed for recognition in accounts, inaccurate data in source accounting documents, incorrect classification of accounting items, and incorrect calculation of aggregated figures in the automated system.

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The Company implements the Risk management following measures to minimize LIQUIDITY, CURRENCY AND INTEREST RISKS RISK OF INACCURATE REPORTING and internal control and control risks: Stage of entering into transaction — Regular identification, assessment, documentation, minimization measures — Assessment of currency risk and control of risks associated with misrepresentation of the — Assessment of interest risk Company’s financial, tax and other reporting — Assessment of liquidity risk — Conducting independent audits and reviews — Conducting annual audit of consolidated financial statements and accounts CREDIT RISK PROPERTY RISK Transaction support and completion — Use of automatic control of manual data entry and incorrect — Regular control of limits for forex exposure to IFRS and RAS for calculation of aggregated indicators Stage of entering into transaction Stage of entering into transaction each currency — Automation of control procedures — Application of stop factors system — Assessment of property risks when entering into transaction, — Control of compliance with interest risk limits (lag coefficient) — Application of counterparty rating system control of compliance with property risk limits approved by Board — Regular control of the Company’s payment position — Assessment of counterparty risks of Directors — Control of compliance with loan covenants, their forecasting — Maintaining credit ratings — Cumulative risk assessment of transaction — Diversification of property portfolio structure with view FRAUD AND CORRUPTION RISKS to approved risk limits — Monitoring capital market, reducing cost of borrowing — Controlling timely investment of funds in transactions Transaction support and completion — Monitoring technical condition of property at transfer/acceptance — Control of compliance with limits for investing temporarily — Verification of information about counterparties, transactions, — Monitoring financial condition, operating performance and of leased asset available cash leased assets by Security Directorate payment discipline of leaseholders — Use of currency and interest risk hedging instruments – timely — Engagement of third parties to obtain additional information — Regular monitoring of industry risks for timely identification Transaction support and completion execution of transactions with derivatives about transactions and counterparties of negative changes for leaseholders in sector — Monitoring the technical condition of leased assets, including — Automation of management reporting to IFRS, developing — Implementing measures to search for counterparties and lost — Implementation of measures to minimize overdue receivables compliance with maintenance and repair schedules forecast models property, including by engaging collection agencies; organizing — Provisioning for possible losses in accordance with IFRS 9 — Control over accumulation and use of maintenance reserves for — Automation of liquidity management, payment schedule, treasury cooperation with court bailiffs and law enforcement agencies — Automation of control procedures for overdue receivables aircraft leases. Control of availability of bank guarantees to secure operations in order to find property on lease contracts payment of maintenance reserves — Establishing and maintaining necessary liquidity buffer — When assessing potential employees, verifying the authenticity — Diversification of operators, compilation of pool of potential — Regular appraisal and monitoring of leased assets’ market value of presented documents and other information characterizing leaseholders — Monitoring restoration of assets not in working condition, control the candidate; implementing measures to detect criminal and — Automation of management of directories used to regularly over maintenance corruption risks; and verifying the candidate’s business reputation monitor counterparty risks — Improvement of insurance terms RISK OF NONFULFILLMENT OF PROGRAMS — Regular monitoring of changes in risk level for transactions using — Working with manufacturers on organizing after-sales service WITH GOVERNMENT CO-FINANCING key risk indicators — Preventative quality control of asset operation; if necessary, — Regular control of Leasing Policy limits Stage of entering into transaction early termination of lease and transfer of assets to another — Cooperation with government authorities on allocation — Control of manufacturers’ compliance with approved standards COMPLIANCE RISKS (INCLUDING AML/CFT COMPLIANCE)¹ leaseholder of subsidies, participation in approval of amount of subsidies for — Regular control of execution of purchase-sale contracts, — Implementation of control procedures for return, seizure, storage Russian regions production and delivery deadlines, construction schedules — Regular monitoring of laws and regulations and draft laws and and subsequent sale of leased assets — Control over proper use of resources regulations that touch on the Company’s activities — Automation of system for monitoring movement, technical — Regular monitoring to ensure that business processes and condition and market value of aircraft the Company’s internal regulations comply with legislation; — Automation of asset management process at all stages development and control of the effectiveness of measures to reduce of transaction lifecycle (acceptance, transfer, operation, return/ Transaction support and completion compliance risks seizure, storage) — Annual confirmation and control of execution of scheduled plan — Monitoring and analysis of legal precedents and relevant judicial — Regular monitoring of property risk level using key risk for implementing policy measures of Long-term Development practices indicators Program — Participating in the development of industry regulations, and — Regular monitoring of achievement of program indicators as per policy documents that determine the government’s strategy for the approved financial models development of the transport sector and related sectors — Control over proper use of funds received as contributions — Monitoring for the imposition of new sanctions, expansion to capital of sanctions lists, timely development of response measures — Cooperation with government authorities on amendments — Regular updating and control of compliance with internal policies to programs (if necessary) and procedures that ensure compliance with Federal Law No. 115- FZ, dated August 7, 2001² — Automation of control procedures aimed at compliance with Federal Law No. 115-FZ, 30 dated August 7, 2001 ¹ Including Combat Money Laundering and Financing of Terrorism issues. ² Federal Law No. 115-FZ, dated August 7, 2001, “On combatting legalization (laundering) of criminal proceeds and financing of terrorism”.

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The success and performance of a modern business 04 depends on its sustainability — its ability to meet global social, environmental and economic challenges. Sustainable development is economic progress that meets the needs of today without jeopardizing the welfare of future generations.

As a strategic instrument for the development of Russia’s transport sector, GTLK is committed to responsible business practices and the principles of sustainable development, engaging all stakeholders — employees, customers, suppliers, investors, financial institutions, regulators and shareholders.

In its role as the largest leasing company in Russia with systemic importance for the national economy, GTLK implements nationally vital projects in the transport sector and is responsible for the development of the domestic engineering sector. The Company recognizes its impact on the environment, society and the economy, and analyzes and takes into account the risks associated with this influence when making strategic decisions. While pursuing strong financial performance, GTLK also takes responsibility for contributing to the welfare of local communities, improving Russians’ quality of life and reducing negative environmental impact.

SUSTAINABLE DEVELOPMENT GOALS The Company recognizes the importance of all 17 sustainable development goals (SDG) set SOCIOECONOMIC IMPACT by the UN General Assembly in 2015 and shares the principles of the UN Global Compact. In line Sustainable development ENGAGEMENT WITH STAKEHOLDERS with best practices, GTLK has chosen 12 priority goals that best fit its business profile and

HUMAN RESOURCES MANAGEMENT is striving daily to achieve them while implementing leasing programs in the transport sector.

OCCUPATIONAL HEALTH AND SAFETY

SPONSORSHIPS AND PHILANTHROPY

IMPROVEMENT OF TRANSPORT ENERGY EFFICIENCY

PROCUREMENT ACTIVITIES

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GRI 102-11

Promote sustained, inclusive Sustainable End poverty Achieve gender and sustainable economic growth, in all of its forms equality and empower full and productive employment development everywhere all women and girls and decent work for all goals GTLK’s — Provision of equal opportunity for GTLK’s — Implementation of subsidized leasing contribution professional and personal growth contribution programs to develop sectors that need state to achieving to achieving goal — Maintenance of equitable system goal support In its operations, GTLK adheres of performance review and remuneration — Providing employment in decent working to the precautionary approach adopted End hunger, achieve food security and conditions Gender breakdown — Increasing efficiency and productivity at the UN Conference on Environment and improved nutrition, and promote sustainable agriculture of JSC GTLK senior Men Women Development in 1992. This principle states management: Key results Noncommercial leasing programs with % % government co-financing are a key area that where there are threats of serious or 2019 Key results 100 0 irreversible damage, lack of full scientific of GTLK’s work. These programs achieve socially important national objectives certainty shall not be used as a reason % % Ensure healthy 2020 83.3 16.7 to develop the transport sector. The number for postponing cost-effective measures lives and promote of such programs rose by 25% to 10 in 2020, to prevent environmental degradation. well-being for all and investment under them grew 25% at all ages to 237.81 bn RUB

In its approach to environmental GTLK’s — Development of air ambulance services Ensure availability performance, in addition to complying contribution by leasing helicopters with medical modules to achieving and sustainable management with current legislation, GTLK adheres goal — Sponsorship of athletic organizations of water and sanitation for all — Organization of sporting events for to the best practices of companies employees in the financial and leasing sectors. The — Compensation of employees for health precautionary approach is one of the basic and fitness costs (sports, fitness activities, tenets in the Company’s strategic planning etc.) as part of benefits package Ensure access Build resilient infrastructure, — Establishment of safe working conditions to affordable, reliable, promote inclusive and sustainable in all areas. It determines the risk control sustainable and modern industrialization, and foster mechanism for preventing risk events Key results Number of helicopters with medical modules energy for all innovation or mitigating them if they are beyond the leased under air ambulance program rose GTLK’s — Increasing energy efficiency in transport with 6% to 71. Investment in program grew 4% GTLK’s — Financing of projects to build transport Company’s control. contribution NGV and electric vehicle leasing programs contribution infrastructure in Russia (Lavna Terminal, to 23.8 bn RUB to achieving to achieving goal — In developing new programs, GTLK gives goal Yuzhnouralsky TLC) preference to projects to develop low-carbon — Support for introduction of innovative transport technologies in transport and other sectors — The Company encourages acquisition of such (digital assets leasing program) vehicles by offering attractive leasing terms Ensure inclusive and equitable Key results In 2020 the Company signed contracts Key results Number of energy efficient vehicles delivered quality education and promote to lease hardware and software suites to clients under NGV and electric vehicle lifelong learning opportunities for all totaling 2.95 bn RUB leasing program rose 51% to 989 in 2020. GTLK’s Provision of in-house and external training Investment in vehicle production rose 93% contribution opportunities for employees to 29.35 bn RUB to achieving goal

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Protect, restore and promote sustainable use • XV Transtec International Transport Corridors Reduce income Ensure sustainable of terrestrial ecosystems, sustainably manage Forum inequality within consumption forests, combat desertification, and halt and • HeliRussia International Helicopter Industry and among and production reverse land degradation and halt biodiversity loss Exhibition countries patterns • X Logistics in the Arctic International GTLK’s — Support for senior citizens (targeted Conference contribution financial support for WWII veterans and • Autonet-2020 International Forum to achieving goal home front workers for Victory Day) • PRO//Motion.1520 International Transport and Promote peaceful and inclusive — Support for people with special needs Take urgent action Logistics Forum societies for sustainable development, through leasing passenger vehicles to combat climate • XIV Transport of Russia International Forum provide access to justice for all and build (electric buses) equipped with systems change and and Exhibition as part of Transweek-2020 effective, accountable and inclusive for the mobility-impaired its impacts • Transport Services Market International institutions at all levels Conference GTLK’s Reduction of CO2 emissions through low- Key results GTLK’s efforts to update passenger GTLK’s — Participation in the process of improving contribution carbon vehicle leasing programs transport presume that automakers will to achieving contribution regulation of leasing market GTLK supplies equipment to companies to achieving use innovative solutions and fresh ideas. goal — Combatting corruption, money laundering in developing countries through the GTLK Global The transport and cars leased by GTLK since goal All the public transport acquired in 2020 Key results and financing of terrorism platform, and thus advances the mechanisms has a low-floor area so people with the start of the programs’ implementation, of the Global Partnership for Sustainable disabilities or other mobility impairments have reduced the volume of CO2 emissions Development. Ten vessels and aircraft worth can ride in comfort to the atmosphere by 19 thousand tons, 22.1 bn RUB were delivered to Qatar, Jordan, which is 57% more than in 2019 Liberia, Indonesia and UAE as of December 31, 2020, up 67% and 79%, respectively, from a year earlier.

Strengthen the means Make cities and human Conserve and sustainably of implementation and revitalize settlements inclusive, use the oceans, seas the Global Partnership safe, resilient, and marine resources for Sustainable Development and sustainable for sustainable development GTLK’s — Cooperation with national and GTLK’s Making transport safer and greener with GTLK’s Implementation of projects to build greener contribution contribution contribution international associations, participation programs to update transport fleets, ships that run on LNG to achieving GRI 102-13 to achieving to achieving in international business events (forums, including urban public transport goal goal goal conferences) For GTLK, using natural gas as fuel is not GTLK is actively involved in industry Key results — Leasing to transport companies Key results The Company is actively involved in updating limited to wheeled transport. The Company associations, and Russian and international in developing countries urban public transport, including as part is implementing projects to lease water organizations in order to tackle important of the Safe and High Quality Roads national transport that runs on LNG. This helps GRI 102-12 issues, promote its best practices and share project. The reliability, convenience, to achieve the goal of conservation and experience on relevant subjects. The Company Key results GTLK is actively involved in industry affordability and environmental-friendliness sustainable use of oceans, seas and marine is a member of the following organizations: associations, and Russian and international of GTLK’s passenger fleet have a direct resources for sustainable development. organizations in order to tackle important impact on city residents’ quality of life. As of December 31, 2020, GTLK’s portfolio • Transport Company Union of Russia issues, promote its best practices and Leaseholders received 6,538 vehicles of green vessels grew 14% to eight and • United Leasing Association share experience on relevant subjects. as of December 31, 2020, 22% more than investment totaled 39 bn RUB • NP Leasing Union The Company is a member of the following a year earlier. Investment in updating motor • Russian Union of Industrialists organizations: fleets and creating a sustainable transport and Entrepreneurs • Expanded meeting of the General Council system grew 58% to 42 bn RUB • National Gas Vehicle Association of the Eurasian Peoples Assembly • III International Congress “Hydraulic Engineering Structures and Dredging”

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Socioeconomic Program Transport equipment Socioeconomic impact and machinery impact delivered

GTLK’s leasing programs have a positive SSJ100 leasing Old foreign aircraft replaced with mln passengers 46 modern Russian-built airliners > carried since 2016 impact on the economic and social aspects 46 7.5 of other sectors of the Russian economy. The Company makes a substantial Air Total GTLK helicopters made about 24.5 thousand contribution to increasing the efficiency, Helicopter leasing 71 ambulance 102 operating 14 flights in 2020, including 14 thousand air affordability, quality and safety fleet fleet thousand ambulance flights of passenger transport services, and the growth of freight traffic by expanding and L-410 leasing Manufacturing of L-410 delivered to Air service to remote parts of the country updating transport fleets. aircraft localized in Russia 24 regional airlines where using large aircraft is impossible in 2017 or not cost effective

Fleet is sufficient to maintain and repair over Road-building machinery pieces of specialized > and utility vehicle leasing 7 machinery and vehicles 13 13 thousand km of roads thousand leased thousand

Modernization passenger vehicles vehicles equipped of urban ground passenger 6.5 delivered 1.65 for mobility-impaired people transport thousand thousand The overwhelming majority of GTLK’s leasing programs generate demand for the products GTLK’s green fleet cuts CO2 emissions natural gas vehicles leased of Russian companies, increase their Program to increase 2.4 by 19 by 19¹ thousand and saves fuel costs: fueling buses competitiveness and facilitate further import energy efficiency thousand thousand with natural gas costs 1.5 bn RUB less annually¹ substitution in the transport sector. in transport

Investment in manufacturing of equipment Orders placed for have already mln tonnes of cargo shipped on inland and and machinery helps create new jobs in the Water transport > leasing construction 70 been delivered 8 international waterways in 2020 transport sector, and retain and attract highly of 116 vessels to leaseholders skilled workers in the aviation, shipbuilding, railway and automotive segments of the transport engineering sector. And a substantial Leasing of new One in three new numbers New generation freight cars increase average portion of the resources allocated for leasing generation freight generation freight cars of cars traffic speed and require 10 times fewer current programs flows back into Russia’s budget in the are from GTLK’s fleet 61.8 cars in Russia thousand uncoupling repairs. Their freight turnover is two form of tax revenue. times greater, operating margin is up to 60% higher and lifecycle cost is two thirds lower than ¹ Compared to equivalent number of diesel vehicles. traditional freight cars

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GRI 102-40, 102-42, 102-43 GTLK is interested in maintaining long-term, stable, GTLK builds relations with its employees on principles Engagement SHAREHOLDER mutually beneficial relationships with customers. of long-term collaboration, respect and consistent The Company’s viability as a commercial entity aimed fulfillment of mutual obligations. with stakeholders at earning and increasing profit depends on customer Employee engagement includes keeping employees up to date on issues concerning the Company’s activities, GTLK’s shareholder is the Transport Ministry of the engagement. development and management decisions through the Russian Federation, which makes strategic decisions about The Company seeks to retain current and acquire new corporate portal, in-house email, briefings, seminars, the Company’s development and controls the activities customers, and uses various methods to attract customers conferences, reports, and appearances by management of its management in accordance with Russian law, the and regularly analyzes customers’ requests, complaints Responsible business practices are an integral part at corporate events and in the media. Charter and other internal documents of the Company. and feedback with a view to reputation management. of GTLK’s work. The Company actively cooperates with The Company has developed a feedback service for GTLK informs the shareholder about the results of its Engagement with business partners is aimed stakeholders and discloses material information about all staff on it corporate portal called “Ask the CEO,” which activities so the shareholder can make future decisions at clarifying dealings with partners, commercial aspects of its activities in a timely fashion. allows any employee to submit a question or proposal for regarding the strategy for the Company’s development. agreements, the rollout of joint products and sharing Regular open communication with stakeholders of experience. Intensive networking enables the Company review to the chief executive and receive a response. enables GTLK to take into account the expectations to improve the quality of its products, expand the scope of partners and increase the efficiency of its business. of its activities and position itself as an active player on the GTLK actively engages with its shareholder, investors, INVESTORS market. customers, employees, business partners, the public THE PUBLIC AND MEDIA and government agencies. Stakeholders are identified and screened based on an assessment of their impact on GTLK’s current operations and strategic development. GTLK is the first Russian leasing company to enter GOVERNMENT AGENCIES AND LOCAL COMMUNITIES The public has a significant influence on other target In the course of preparing this report, GTLK assessed Western and Asian financial markets and successfully raise audiences of the Company. This audience also includes the the degree of mutual influence between stakeholders financing for specific projects. GRI 415-1 media, which are the main instrument for communicating and the Company, and identified key organizations and Investors make decisions about investing in the information about the Company to all target audiences. parties. Company’s securities. This group includes development GTLK is committed to building and maintaining strong The media influence the Company’s image and GTLK engaged a communication company in 2020 institutions, commercial banks, investment and official relations with government agencies in accordance reputation. GTLK therefore enforces high ethical standards to conduct a reputation audit that included interviews brokerage companies, asset management companies, with Russian law. in relations with mass media outlets and does not allow and surveys of principle stakeholders in order to identify nongovernmental pension funds, insurance companies and In its relations with regional government agencies and dissemination of false information, concealment and/ and assess significant issues in the sphere of mutual other categories of investors, including individuals, who operations in the corresponding regions, GTLK observes or distortion of facts in its public activities or other public interests. hold and/or are considering acquiring the Company’s issue- the law and the interests of local communities. grade securities. GTLK is not involved in political activities and does relations events. GTLK informs investors about its plans and the results not finance political organizations, and does not make Engagement with the media helps to foster a positive of its activities in order to provide the objective information any attempts to unlawfully influence the decisions image and strong reputation for the Company in the eye needed to make balanced decisions regarding the of government agencies or their representatives and senior of the public. The media are an important intermediary Company’s securities. officials. between the Company and the public. The Company Engagement with government agencies is aimed prepares public materials for dissemination in the media, at strengthening the Company’s reputation as a tool holds press events, and stays in constant contact with journalists. The Company uses the Internet to provide CUSTOMERS AND BUSINESS PARTNERS of government policy for managing and developing Russia’s transport sector. Company representatives initiate information about its activities to the broadest possible and participate in various events, including meetings, audience as quickly as possible. roundtables, seminars and presentations in order All contacts with the media are handled by the division GTLK builds relations with customers and partners to convey the Company’s position to government agencies responsible for public relations. Public appearances in the on the principles of responsible partnership and due and to receive recommendations from them. media and at events involving the media can be made diligence, both at the stage of establishing contractual by GTLK executives or representatives authorized by them. relations and in the course of further cooperation. The conveyance of information or documents to the media The Company’s main customers are transport, logistics by unauthorized persons is a violation of corporate ethics. and construction companies, municipal transport and EMPLOYEES utility companies, regional government agencies, Russian and foreign airlines, and railway and marine transport operators, among others. The Company’s business partners are Russian and The efficiency of the Company’s operations depends foreign manufacturers and vendors of air, water and railway directly on the performance of its employees. This group transport, automobiles and other equipment; and insurance includes all Company employees, including employees companies, banks and other financial institutions. of separate divisions. 66 67 01 02 03 04 05 06

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GRI 102-8 GRI 401-1, 401-3 Staff size Gender breakdown New employees Human resources of JSC GTLK staff and staff turnover, % as of December 31, 2020, % and composition 51 Women (38 people) management 52 Women 49 Men (37 people) 48 Men number of employees hired in reporting period of employees have people % a post-secondary 75 98 education turnover % 13.9 rate

JSC GTLK staff structure Parental leave by category as of

December 31, 2020, % Women Men 2.6 Senior management Total number of employees with right 13.4 Middle management to leave 30 37 23.2 Line management A professional, cohesive team GTLK Group had an average of 639 60.8 Professional staff Total number of employees 22 0 employees in 2020, 18% more than the average who took leave is GTLK’s main asset, so when the Covid-19 of 542 in 2019. The Group’s staff headcount Total number of employees 5 0 pandemic began in 2020 keeping our people at the end of 2020 was 693, up by 10.7% from who returned to work at end of leave healthy became our number one priority. 626 a year earlier. Continued to work 12 months JSC GTLK had an average of 378 employees 5 0 In a matter of days GTLK provided after returning from leave in 2020 and 415 as of December 31, 2020, up employees with everything they needed by respectively 5.6% and 6% from 358 and 391 Hired employees Percentage who returned to work in 2020 100 % 0 to work remotely. All employees switched a year earlier. The increase was due to the need by age group, % Retention of employees who took 100 % 0 to remote work in March 2020, and to strengthen competencies in certain areas leave of the business and to fill existing vacancies. subsequently about 50% continued to work 21.3 up to 29 years (16 people) from home. Despite the restrictions, we 66.7 30 to 49 years (50 people) 12 50 and over (9 people) created the most comfortable conditions possible at the office for all level of personnel. The Company’s professionals maximized the possibilities offered by remote work. GTLK made significant changes in human resources Their commitment and initiative enabled the management in the reporting year due to the Covid-19 Company to continue to grow in 2020. The productive work of a team of professionals pandemic. The Company introduced remote work in March Even amid the pandemic, GTLK hired new is the foundation of the Company’s sustainable Age breakdown 2020 in order to protect its employees from the spread of the novel virus. In Q2-Q4 2020, some employees continued development. The high level of expertise of JSC GTLK staff employees, and despite the slump in the to work remotely, with 30-40% of the Company’s professionals and potential of its employees are among as of December 31, 2020, % sector the Company indexed salaries and working from home. In line with the recommendations GTLK’s corporate values. The Company 11.3 up to29 years implemented employee development plans of the Russian authorities and public health authority is committed to the professional development 43.4 30 to 39 years Rospotrebnadzor, work in offices was transformed. In order by moving training online. of its employees and continuously improving its 28 40 to 49 years to prevent the spread of Covid-19, the Company implemented management practices. 17.3 50 and over new forms of interaction and workflow management.

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Employee Training Support Observance engagement and and professional of sports and of Human social programs development healthy lifestyle Rights

GRI 404-1 – 404-3 GRI 201-3 GRI 406-1, 407-1, 408-1, 409-1, 412-1, 412-3

GTLK’s incentive system includes GTLK’s training and professional GTLK shares the values of sports and The Company respects individual rights and freedoms, guaranteed remuneration (the official salary), development system is aimed at continuously healthy lifestyles. Regular sporting events provides equal opportunity and does not tolerate and bonus remuneration. GTLK is constantly improving and maintaining employees’ for employees are an important part of the discrimination in the workplace. working on improving the effectiveness of its qualifications, and extends to all areas of the Company’s corporate culture. GTLK holds GTLK’s commitment to respecting human rights employee motivation system in order to ensure business and all categories of employees. an annual competition in which employees is confirmed by its careful legal evaluation of transactions that staff are committed to achieving the best Outside and in-house training is planned and compete in various types of sports, including and the ongoing work of in-house lawyers, including results. The Company annually monitors conducted annually to give employees the volleyball and badminton. The Company is also on advising employees on any legal issues. salaries on the labor market so it can recruit opportunity to acquire the latest knowledge a sponsor of national sports federations. Employment contracts and contracts for internships and retain qualified employees. In 2020, the and skills. In 2020, 68 employees, or 18% of the Providing safe working conditions and in which GTLK is a party always include provisions on human Company indexed employee pay due to rising average total, underwent external training helping to keep employees healthy are key rights. Other agreements and contracts entered into by the consumer prices for goods and services in line programs to upgrade their qualifications, social objectives for the Company. To this Company undergo mandatory legal evaluation, including with Russian labor laws. attended short-term seminars in order to obtain end, the Company includes compensation on the matter of observing human rights. In order to enhance the social security qualifications needed to work under changes for expenses on health-related activities, GTLK has adopted internal regulations that guarantee of employees, the Company’s HR policy expands to Russian law, and developed their professional such as sports and fitness, in its benefits employees and third parties respect for human rights. on the list of benefits and compensation skills based on the results of personnel package. Such compensation decreased Special reviews of counterparties on the matter of respect stipulated by the law. The corporate benefits evaluations done in 2019-2020. by 44% to 900 thousand rubles in 2020 from for human rights are not conducted. package includes voluntary health insurance, The Covid-19 pandemic had a significant 1.6 million rubles in 2019, in proportion to the In line with the Corporate Code of Ethics and the compensation for employees’ expenditures impact on the Company’s employee training decline in traffic at fitness clubs caused by the Corporate Code of Conduct, the Company prohibits any on sports activities, financial support plans in 2020, as learning organizations pandemic. statements or actions that foster or condone the creation to employees in various circumstances and cancelled or rescheduled courses and training of a hostile work environment, as well as discrimination other benefits. The Company also recognizes programs, and switched some programs of employees on the basis of ethnicity, religion, gender, its best employees with corporate awards to an online format. age, length of service or any other grounds. No incidents and nominates employees for government Increasing productivity is a key priority of discrimination were reported at GTLK in the reporting awards for their personal achievements, active for the Company. Pursuant to this objective, period. involvement in the Company’s activities and employee evaluations were conducted in 2020 GTLK provides equal opportunity for employment and personal contribution to the development in line with the approved plan, encompassing is striving to ensure gender balance within the Company. of Russia’s transport sector. 36% of the average headcount, and plans In 2020, 52% of our employees were women, and the share were prepared to develop and improve of women in senior management positions grew to 16.7%, employees’ performance. Evaluations enable while the share of men dropped to 83.3% from 100% a year the Company to manage the qualifications of its earlier. staff by determining what competencies need The Corporate Code of Conduct gives GTLK employees to be cultivated and prepare relevant programs the right to collective bargaining and the right to enter into to develop employees’ skills and motivate them collective agreements through their representatives. The to excellence. Company is not aware of any suppliers who might violate the human right to free association. GTLK business units do not employ child or forced labor. The Company is not aware of any suppliers with a significant risk of using child or forced labor.

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Occupational Measures to prevent health and safety the spread of Covid-19

GTLK’s occupational health and safety (OHS) policy ensures: Covid-19 radically changed how people work at all companies, Measures to reduce Covid-19 ‹ Priority for preserving the life and health of employees in the course of their including GTLK. Changes in workplace practices also led risks at JSC GTLK in 2020 work; to changes in the area of OHS. GTLK approved new protocols¹ ‹ Compliance of working conditions with labor protection standards; for working amid the ongoing pandemic in June 2020, and ‹ Implementation of measures to prevent workplace accidents and work-related implemented the following measures: Number of PCR samples taken illness; ‹ Continuous improvement of the occupational health and safety management 1. The work schedule of each employee was determined based 648 system; on the business needs and planned work of their business ‹ Commitment to providing safe working conditions. unit taking into account requirements and recommendations Masks and respirators purchased and issued to employees for employers to prevent the spread of the coronavirus in the workplace. Social distancing was implemented with at least 79,150 The OHS policy includes company OHS goals that are achieved by implementing 1.5 meters between workstations. procedures set out in the “Regulation on the OHS management system Sanitizer purchased and used (liters) at JSC GTLK”. These procedures include: 2. Special OHS orientations were held for employees to inform ‹ Training employees in OHS based on the specifics of the Company’s activities; them about the specifics of Covid-19 and how to prevent the 200 ‹ Organizing and conducting special audits of working conditions; spread of the virus. Irradiator-recirculators purchased ‹ Identifying hazards that are a threat to the life and health of employees; and installed in offices ‹ Organizing monitoring of employee health; 3. Employees were provided with ample supplies of single-use ‹ Informing employees about working conditions; masks (based on the length of the working day and replacement 52 ‹ Providing employees with personal protective equipment and cleansing agents. of masks at least once every three hours), as well as disinfecting wipes, disinfectants and hand sanitizers.

4. Preventative disinfection of offices and common spaces was arranged. Key OHS indicators 2019 2020 5. A contract was signed with a medical organization to provide External electrical safety rules training and knowledge assessment, persons 1 9 a range of services, including Covid-19 testing of employees; surveying and monitoring employees for signs of respiratory illness; conducting temperature checks in the course of the day Internal OHS and workplace first aid training and knowledge assessment, persons 273 15 ¹ Order No. 114, dated June 11, 2020, signed in order to maintain the and maintaining a log of recorded temperatures of company stable operation of JSC GTLK, in line with Point 3 of the Moscow professionals. mayor’s June 8, 2020 Order No. 68-UM “On the stages of lifting Work-related injuries, persons 0 0 restrictions imposed in connection with the introduction of the state of high alert”; and Appendix No. 6 to the Moscow mayor’s March 5, 2020 Order No. 12-UM “On the introduction of a state of high alert”; as well as taking into account the “Recommendations for organizing the work of Workplaces with harmful or hazardous working conditions 0 0 businesses amid the ongoing risks of the spread of Covid-19” issued by federal public health agency Rospotrebnadzor.

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Sponsorships Sponsorship Philanthropy Sponsorship and philanthropy activities and charitable activities

The social mission of GTLK is defined GTLK’s sponsorship policy is aimed at improving the The goal of GTLK’s charitable activities Promotion of sports Company’s image and promoting its business. is to promote the Company’s image as a socially by the corporate Policy for Providing and physical culture Priority is given to projects related to the responsible organization. Sponsorship, Support, and Charitable Aid Company’s field of operations: transport, leasing, that was approved in 2016. This document finance and the economy. The objectives of charitable activities are to: sets out its main principles and approaches ‹ Help strengthen regional economies; Sponsorship support includes: ‹ Provide social support for individuals; to philanthropy. ‹ Participation as a sponsor or a partner ‹ Support a positive social climate in relation GTLK’s sponsorship and charitable in industry-related transport or finance events to the Company’s local operations; Support activities are aimed at supporting culture, such as exhibitions, forums, conferences and ‹ Assist the efforts of healthy lifestyle for veterans science and education, at promoting roundtable discussions; promotion; and retirees ‹ Participation as a sponsor or partner in cultural ‹ Help hold events in the areas of education, scientific and technological progress and and public events aimed at developing and science, sport, culture and personal spiritual a healthy lifestyle. In line with its corporate promoting Russia’s transport sector; development; policy, the Company also provides ‹ Participation as a sponsor or a partner ‹ Contribute to strengthening peace, friendship charitable aid to disadvantaged groups in socially important events held by public post and goodwill among ethnic groups, and Financial assistance secondary educational institutions specializing preventing social, ethnic and religious of the population. to people in need in transport or finance. conflicts; ‹ Protect the environment and wildlife; ‹ Protect buildings and sites of historical, cultural or conservational significance.

Support of cultural and spiritual heritage sites GTLK allocated 229 million rubles for sponsorships and charitable activities in 2020 229 mln RUB

Support for innovation

Support for industry events

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Improvement GTLK purchases of energy efficient of transport automobile transport and urban electric transport as of December 31, 2020 energy efficiency

Improving people’s welfare and quality of life GTLK's energy efficient transport leasing Moscow Region St. Petersburg is a central national objective. The implementation programs are not limited to wheeled transport. 2 units 769 units 15 mln RUB 5,167.9 mln RUB of Russian government policy to transition The Company has commissioned the construction to a model of environmentally sustainable of five vessels that run on liquefied natural Yamalo-Nenets Autonomous District Tula Region Vologda Region Komi Republic development in the transport sector will reduce gas (LNG), including two Aframax tankers, the 2 units 50 units 17 units 60 units the sector’s long-term negative impact on the passenger vessel Chaika-LNG and two passenger 17.3 mln RUB 344.4 mln RUB 204 mln RUB 339.9 mln RUB environment and public health. cruise ships. There are also legally binding 1 agreements for the construction of three more Energy efficiency in transport will be improved Aframax tankers. Investment in construction Sevastopol Lipetsk Region Chuvash Republic 493 units 32 units 2 units by tightening fuel consumption standards and of environmentally-friendly water transport will 20 5,109.7 mln RUB 384 mln RUB 2.4 mln RUB encouraging the use of greener vehicles. exceed 39 billion rubles. GTLK’s contribution to this government policy With its programs to improve energy 18 is to implement programs to update transport efficiency in transport, GTLK is contributing to the 24 23 fleets with energy efficient vehicles. achievement of the national goal of creating Crimea 397 units 14 17 Tatarstan GTLK invested more than 29.3 billion rubles a comfortable and safe environment for people. 4,323.8 mln RUB 73 units in the development of energy efficient transport The modernization of transport fleets and 16 9 910.1 mln RUB in 2013-2020, leasing more than 2.9 thousand new increasing the appeal of public transport also 12 Perm Region 25 vehicles. advance the UN’s Sustainable Development Goals Belgorod Region 7 95 units 10 Since last year, the Company has also been by helping to ensure access to affordable, reliable, 65 units 13 1,299.4 mln RUB 2 3 mln RUB supplying energy efficient vehicles under the Safe sustainable and modern energy; reduce inequality; 783.5 5 11 Sverdlovsk Region 6 and High Quality Roads national project. GTLK has make cities and human settlements inclusive, safe, 108 units delivered 691 green vehicles to 14 urban areas, resilient and sustainable; combat climate change 4 1,350.4 mln RUB Voronezh Region 15 investing 10.7 billion rubles. and its impacts; and conserve and sustainably use 82 units Vehicle fleets are being updated using the oceans, seas and marine resources. 998.3 mln RUB Kemerovo Region 25 units innovative solutions and the latest technologies 21 in the automotive industry. All buses acquired 22 317.4 mln RUB in 2020 accommodate the needs of people with 8 Volgograd Region Ulyanovsk Region Chelyabinsk Region impaired mobility, and are equipped with digital 7 units 59 units 45 units payment systems and new systems to monitor mln RUB mln RUB mln RUB

420 1,539.7 176.3 driver fatigue (tachographs), which help reduce 19 traffic accidents and improve compliance with Nizhny Novgorod Region Udmurtia Omsk Region work-rest schedules. 29.3 bn RUB 2.9 thousand units 84 units 16 units 173 units 1,008 mln RUB 752 mln RUB 1,291.7 mln RUB Modern, high-tech vehicles provided by GTLK GTLK invested more than leasing more are now helping to reduce harmful emissions and 29.3 billion rubles in the than 2.9 thousand new vehicles noise pollution in 25 regions of Russia. development of energy efficient Ivanovo Region Samara Region Orenburg Region transport in 2013–2020 31 units 230 units 30 units 639.5 mln RUB 1,828.8 mln RUB 124 mln RUB

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GRI 102-9, 102-10, 204-1 Procurement JSC GTLK activities key purchasing indicators

Efficiency and effectiveness In accordance with Part 2, Article 2 of Law of government procurements No. 223-FZ, the Regulation on Purchasing 2019 2020 of Goods, Work and Services for the Needs Total regulated purchases, mln RUB 248,579 141,185 GTLK conducts its purchasing activities of JSC GTLK (hereinafter, Regulation in compliance with Russian Federal Law No. 223-FZ on Purchasing) governs the Company’s purchasing Share of competitive purchases (by value), % 59.9 42.08 of July 18, 2011 (hereinafter, Law No. 223-FZ), with activities and sets out requirements for them, due consideration of the principles of transparency, including the rules for preparing and making Share of single source purchases (by value), % 39.99 57.86 equality, fairness, and proper and cost-effective purchases by the competitive and noncompetitive Share of noncompetitive purchases involving competition among participants (by value), % 0.12 0.06 use of resources, without discrimination, methods, the procedure and conditions for their unwarranted restrictions on competition, or use, the procedure for entering into and executing Share of electronic purchases (by value), % 59.77 42.14 restrictions on access to participation in purchases contracts, and other related provisions. through the setting of unmeasurable requirements The Regulation on Purchasing, approved Savings on purchases involving competition (competitive and noncompetitive), % 15.98 9.35 for participants. by JSC GTLK’s Board of Directors, allows for Share of purchases from SME, % 59.39 67.87 GTLK is focused on responsibly managing its both competitive and noncompetitive methods supply chain in order to ensure a cost-effective of purchasing. Competitive methods include Of which purchases only open to SME, % 45.39 45.34 purchasing process and reduce its financial and tenders, auctions, requests for quotation or nonfinancial risks. The Company endeavors requests for proposal. Noncompetitive methods to work with reliable and responsible suppliers. include reverse auctions, collecting commercial offers and price offers, pre-qualification, and single source and unregulated procurement. However, reverse auctions, collecting commercial offers and price offers and pre-qualification are still methods of purchasing that imply competition among GTLK purchases procurement participants. by area of activity, % Under Article 3.6 of Law No. 223-FZ and taking Support for small and medium into account the specifics of the Company’s core 72 Operating activities business, the Regulation on Purchasing sets out businesses as suppliers of 26 Financial activities an exhaustive list of instances for single source goods and services for transport 2 Other procurements. In its purchasing activities, JSC GTLK observes infrastructure the principles of transparency and disclosure regarding the procurement process. A substantial JSC GTLK must make a certain amount of purchases The Company’s purchases from SME in 2020 amounted share of JSC GTLK purchasing procedures are done annually from small and medium enterprises (SME) as per to 67.87% of total purchases in 2020, and purchases from electronically. Russian government Resolution No. 1352 of December 11, SME in tenders and other procurement methods specified In connection with the provision of federal ¹ Russian Federal Law No. 223-FZ, dated July 18, 2011, “On purchases 2014. For 2020, this amount was set at no less than 20% by the Regulation on Purchasing that were open only to SME of goods, work and services by certain types of legal entities”. budget subsidies in 2019-2020 for the acquisition ² Russian Federal Law No. 44-FZ, dated April 5, 2013, “On the contract of the total annual value of awarded procurement contracts. reached 45.34% of total purchases, which far exceeds the of air and water transport, tenders totaling 55.663 system in the area of purchasing goods, work and services for meeting In addition, for 2020 the total annual value of contracts target set by Russian government Resolution No. 1352. state and municipal requirements”. billion rubles for the delivery of these aircraft and ³ Russian government Resolution No. 1352, dated December 11, 2014, awarded to SME in procurements open only to SME The share of the Company’s annual purchases from SME vessels were completed in 2020 in accordance with “On the specifics of small and medium enterprises’ participation in was set at no less than 18% of the overall annual value increased by 8.48 percentage points compared to 2019. procurements of goods, work and services by certain types of legal the requirements of Law No. 44-FZ. entities”. of procurement contracts awarded.

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Competence 05 and accountability

The Company is effectively governed thanks to the strong competencies and accountability of employees in all services at all levels, transparency, ethical operating principles, a clear structure of goals, processes and procedures, and a seamless system of control.

GTLK has a Corporate Code of Ethics that defines its corporate values and outlines the main rules of business conduct aimed at increasing the Company’s profitability, performance and efficiency.

GTLK CORPORATE GOVERNANCE PRACTICES

GENERAL SHAREHOLDERS MEETINGS

Corporate governance BOARD OF DIRECTORS

BOARD COMMITTEES

EXECUTIVE MANAGEMENT BODIES

CORPORATE SECRETARY 14 76 BOARD MEETINGS ISSUES CONSIDERED REMUNERATION HELD IN 2020 BY BOARD IN 2020 BUSINESS ETHICS AND ANTICORRUPTION PRACTICES

INFORMATION FOR INVESTORS

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

GRI 102-18 GTLK corporate JSC GTLK corporate governance practices governance system

The Company’s corporate governance system ‹ Regulation on the Strategic Planning is built on the foundation of Russian law and the Committee of the Board of Directors SHAREHOLDER – Russian Federation (through Transport Ministry of Russia) principles of the Corporate Governance Code of JSC GTLK Highest management body recommended by the Bank of Russia¹ (hereinafter, Corporate Governance Code). ‹ Regulation on the Nomination and The Corporate Governance Code is a set of rules Remuneration Committee of the Board Internal Audit aimed at protecting the rights of shareholders and of Directors of JSC GTLK Audit Committee Commission Chief Executive Officer Board of Directors investors, and improving the quality and increasing Individual executive body Collegial management body the transparency of corporate governance. Although ‹ Regulation on the Corporate Secretary Nomination & Remuneration the provisions of the Corporate Governance Code of JSC GTLK Committee are not mandatory, the Company makes a point Strategic Planning of adhering to the main principles set out in the ‹ Regulation on the Internal Audit Internal Audit Service Corporate Secretary document. Commission of JSC GTLK Committee The Company continuously monitors compliance and ensures the fulfillment of corporate governance ‹ Regulation on Remuneration and Election Functional subordination requirements, observance of which is required for Compensation of Members of Internal Audit Accountability Administrative subordination GTLK bonds to be included in the Level 1 listing Commission of JSC GTLK under the Listing Rules of the Moscow Exchange. ‹ Regulation on the Organization of the The particulars of corporate governance, specific CEO’s Communication Activities on the All shares in JSC GTLK (hereinafter, also GTLK, Corporate Governance Code. The universal methodol- procedures, principles and practices adopted by the Interdepartmental Portal for Management the Company) are owned by the Russian government. ogy will be extended to existing entities that are part Company are laid out in the following internal of State Property The authority to exercise the rights of shareholder for GTLK of GTLK Group, as well as to newly created and acquired documents of JSC GTLK, which are available on the shares owned by the federal government on behalf of the companies. Company’s website²: Russian Federation has been given to the Transport Ministry JSC GTLK plans to carry out a project to improve the ‹ Charter of JSC GTLK, approved by order of Russia. effectiveness of corporate governance intended to im- of the Transport Ministry of Russia, dated The Russian government and the prime minister of Russia prove the preparation and increase the transparency (No. DZ-225-r, registered on December 31, or, at his direction, deputy prime minister of Russia determine of management decisions. 2020, current edition) the position of GTLK’s shareholder on issues concerning nom- JSC GTLK plans to build a corporate management ination of candidates for election to management bodies and structure that maximizes the potential of controlling ‹ Regulation on the Board of Directors the Internal Audit Commission, and voting at general meetings nonresidents of the Russian Federation, taking into of JSC GTLK of shareholders on issues regarding their formation, and ap- account tax implications and the specifics of local proves directives to representatives of the Russian Federation legislation. ‹ Regulation on Remuneration of Members of the on the Board of Directors for voting at board meetings on the As of January 2021, GTLK Group includes 96 com- Board of Directors of JSC GTLK issue of electing (re-electing) the Chairman of the Board panies, both residents and nonresidents of the Russian of Directors. Federation, that play specific roles in the development ‹ Regulation on the Audit Committee of the Board Compliance with corporate governance Although the Company is wholly controlled by and of the group’s business projects. of Directors of JSC GTLK best practices completely subject to the will of a single shareholder, In order to develop transport infrastructure and in- Optimizing GTLK’s corporate governance JSC GTLK’s corporate governance system is based on the vestment in securities, special-purpose companies have system in accordance with the Corporate standards and principles recommended by the Corporate been established that facilitate JSC GTLK’s participation Governance Code, which are aimed at securing the rights in and/or management of the corresponding business ¹ Bank of Russia Letter № 06-52/2463, dated April 10, 2014, “On Corporate Governance Code is one of the core measures Governance”. aimed at implementing the Company’s long- of shareholders and investors. projects. ² https://www.gtlk.ru/information_disclosure/ In the forecast period, the Company plans to develop ³ Transport Ministry of Russia order No. DZ-225-r, dated November 20, term development program. 2020, “On decisions of the extraordinary meeting of shareholders of an effective, universal methodology for corporate gover- JSC GTLK in 2020”. nance based on the accumulated experience of applying the

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

GRI 102-24 Compliance with the principles General shareholders and recommendations of the Corporate meetings Governance Code

The Company complies with the 7 The level of remuneration paid by the In compliance with Russian legislation and the GTLK 7, 2020; May 14, 2020; November 19, 2020 and November 20, recommendations of the Corporate Governance Company is sufficient to attract, motivate and Charter, the Company annually holds an Annual General 2020), at which decisions were made on issues such as: Code, specifically: retain individuals with the competencies and Meeting of Shareholders (AGM) no earlier than two months — Approval of the annual report qualifications that the Company requires. after and no later than six months after the end of the — Approval of the annual financial statements financial year. — Distribution of net profit 1 Shareholders are given equal and fair 8 The system of remuneration for the — Setting date of record for persons eligible to receive opportunity to participate in the Company’s profit Company’s CEO and other key management Main goals and duties of AGM dividends, and schedule for dividend payments by receiving dividends: personnel links remuneration to the — Size of Board of Directors — The Company has an approved Regulation Company’s results and their personal contribution GOAL: — Election of Board of Directors on Dividend Policy; to the achievement of these results. Strategic management of the Company’s business. — Election of Internal Audit Commission — The text of the Regulation on Dividend Policy DUTIES: — Confirmation of auditor is posted on GTLK’s official website and the website 9 The Company has a separate structural division — Make decisions on distribution of profit — Payment of remuneration and compensation to members of the distributor of information on the securities responsible for internal audit that is subordinate — Make decisions on payment of dividends of Board of Directors market. to the Board of Directors. The role of this division — Determine the size and elect members of the Board — Payment of remuneration to members of Internal Audit is consistent with the recommendations of the of Directors Commission 2 The Board of Directors determines the Corporate Governance Code. The Company has — Elect Internal Audit Commission — Amendments to the Company’s Charter Company’s main long-term strategic goals approved a Regulation on Internal Audit. — Make decisions on payment of remuneration to members — Approval of the new edition of the Company’s Charter and key business targets, and is responsible of the Board of Directors and Internal Audit Commission — Approval of the Regulation on Payment of Remuneration for strategic management of the Company; 10 The Company discloses information — Confirm the auditor of the Company and Compensation to Members of the Board of Directors determines the main principles and approaches as required by law on its official website — Approve the Company’s annual reports and annual — Increasing the Company’s charter capital to organizing the Company’s risk management and (http://www.gtlk.ru/) and the official website of the financial statements — Approval of conditions for increasing the internal control practices; oversees the activities distributor of information on the securities market — Other Company’s charter capital of executive management bodies; determines the (http://www.e-disclosure.ru/portal/company. — Termination of the authority of the Company’s CEO (Sergei Company’s policy on remuneration of members aspx?id=31532). The AGM agenda must include issues specified by Federal Khramagin), and election of the Company’s CEO (Mikhail of the Board and executive bodies; and carries out Law No. 208-FZ, dated December 26, 1995. The AGM can Poluboyarinov) other key duties. also consider other issues that fall within its authority under — Early termination of the authority of members of the Russian legislation and the Charter. Company’s Board of Directors and election of a new Board 3 Independent directors make up at least An Extraordinary General Meeting (EGM) can be held of Directors one third of the elected members of the Board on the initiative of the Board of Directors, or at the request — Termination of the authority of the Company’s CEO of Directors. of the Internal Audit Commission or the Company’s auditor. (Mikhail Poluboyarinov), and election of the Company’s CEO For the period that all voting shares in the Company (Evgeny Ditrikh) 4 Independent directors fully meet the are owned by the federal government, decisions — Participation in the Leasing Union Noncommercial independence criteria recommended by the on issues that fall under the authority of the General Partnership for Development of Leasing Corporate Governance Code. Meeting of Shareholders (GMS) are made solely by the — Participation in the Russian Union of Industrialists and ¹ In 2020, JSC GTLK held its AGM on September 30, as AGMs were held on dates set by boards of directors but no earlier than two months after and Company’s only shareholder and are formalized in writing. Entrepreneurs 5 The Board of Directors has an Audit no later than nine months after the end of the reporting year, in accordance The provisions of the Federal Law “On Joint-stock with Federal Law No. 115-FZ, dated April 7, 2020 (edition of July 31, 2020), Commission that is chaired by an independent “On amendments to certain legislative acts of the Russian Federation Companies” regarding the timeframe for holding the AGM director. as regards standardization of the content of annual reports of state apply. corporations (companies), public non-profit organizations, and as regards establishing the particulars of regulation of corporate relations in 2020 The authority of the GMS of JSC GTLK is exercised by the 6 A Corporate Secretary ensures effective and the suspension of provisions of certain legislative acts of the Russian Transport Ministry of Russia, and decisions made by the GMS Federation”. current relations with shareholders and ² Federal Law No. 208-FZ, dated December 26, 1995, “ On Joint-stock are formalized by a ministry act. Companies”. coordination of the Company’s efforts to protect the In 2020, the Company held the AGM, on September 30, For details about the decisions of JSC GTLK’s sole shareholder, see the ³ In accordance with Russian government Resolution No. 93, dated rights and interests of shareholders, and supports February 4, 2009, “On Exercising the Rights of Shareholder of Open Joint- 2020, and nine EGMs (on January 23, 2020; February 18, Information Disclosure/Material Facts section on the Company’s website (https://www.gtlk.ru/information_disclosure/). the efficient work of the Board of Directors. stock Company State Transport Leasing Company on Behalf of the Russian 2020; March 10, 2020; March 19, 2020; March 23, 2020; May Federation”. 84 85 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

GRI 102-22 GRI 102-23 Board of directors Main goals and duties of Board of Directors

The Board of Directors, GTLK’s collegial GOAL: Strategic management of the Company’s business, management body, establishes the with the exception of issues reserved to the main points of reference for the exclusive jurisdiction of the GMS. Vitaly Savelyev Innokenty Alafinov Evgeny Ditrikh Company’s business for the long DUTIES: — Approve the Company’s business plan, long- term, assesses and approves the Chairman, independent director Board member since 2019 Board member since 2020³ term development program and strategy with the Company’s key performance indicators (as of September 30, 2020). aim of increasing profit and competitiveness Board member since 2020 and main business goals, and approves the — Ensure the Company’s financial stability Company’s business plan and long-term — Set out priorities for the Company’s business Year of birth: 1954. Year of birth: 1976. Year of birth: 1973. development program. — Formulate dividend policy — Formulate policy for issuing securities of the Education: Education: Education: Company Kalinin Leningrad Polytechnic Institute, Plekhanov Russian University Moscow State Engineering Physics Institute (renamed National Research University — Exercise control over execution of decisions Faculty of Mechanical Engineering, of Economics, degree in Finance and Credit Compliance with corporate governance graduated in 1977 with qualification MEPHI in 2009), graduated in 1996 with made by the GMS best practices of Mechanical Engineer; Work experience: degree in Applied Mathematics; Higher School of Privatization and Business, The composition of the Board of Directors Palmiro Togliatti Leningrad Engineering 2013-2014 – Aide to the Finance Minister and Economics Institute, graduated in 1986 of the Russian Federation graduated in 1999 with degree in Legal is balanced, including in terms of the members’ The Board of Directors has eight members¹: four 2014-2018 – First Deputy CEO of state Studies qualifications, experience, knowledge and nonexecutive directors, one executive director and Work experience: company Russian Highways business acumen, and enjoys the confidence three independent directors. 2009–2020 — CEO, Aeroflot Russian 2018-2020 – First Deputy Transport Work experience: of the Company’s shareholder. The Board of Directors includes a sufficient Airlines Minister of the Russian Federation 2012-2015 — Deputy Director, Industry The size of the Board of Directors makes number of independent directors, who make up 2020-present — Transport Minister and Infrastructure Department of the it possible to organize the Board’s activities at least a third of the elected members of the of Russia Participation in management bodies Government of Russia more efficiently, including the ability to form Board. of other organizations: July-Oct 2015 — Director, Federal Transport Board committees. Participation in management bodies Until December 2020 — Chairman Oversight Service The Board of Directors includes a sufficient of other organizations: of the supervisory boards of the Moscow 2015-2018 — First Deputy Transport number of independent directors, who make up Member of the boards of directors Transport Hub Directorate and the Minister of Russia 2018-2020 — Transport Minister of Russia at least a third of the elected members of the of Aeroflot and Pobeda Airlines LLC St. Petersburg and Leningrad Region Transport System Development Directorate 2020-present — CEO, JSC GTLK Board. Participation in management bodies of other organizations: Board members’ Until Nov 2020 — Chairman of the length of service Composition board of Aeroflot; member of the boards on Board of Directors of Board of Directors of Aeroflot, JSC Glonass and Russian Railways; Until May 2020 — member 1 7–8 years 4 Nonexecutive directors of the supervisory board of the Analytical 1 5–6 years 3 Independent directors Center of the Government of Russia 2 3–4 years 1 Executive director 2 1–2 years 2 less than 1 year ¹ As of September 30, 2020. ² As of December 31, 2020. ³ Evgeny Ditrikh served as a member of the Board Board of Directors of JSC GTLK previously, from June 30, 2016 through June 30, 2017; from June 30, 2017 to June 29, 2018; and from May 14, 2020 Directors² to September 30, 2020. 86 87 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Changes in the composition of the Board of Directors

In the course of 2020, M.A. Akimov, A.I. Boginsky, Y.M. Medvedev and L.R. Nisenboym left the Board Oleg Bocharov Vadim Mikhailov Mikhail Poluboyarinov Valery Okulov Sergei Khramagin of directors.

Board member since 2017 Independent director Board member since 2020 Independent director Board member since 2013 Board member since 2020 Board member since 2018 There have not been any changes in the composition of the Board Year of birth: 1968. Year of birth: 1969. Year of birth: 1966. Year of birth: 1952. Year of birth: 1965. of Directors in 2021. Education: Education: Education: Education: Education: — Moscow State Aviation Institute State Academy of Finance, 1986-1992, Moscow Finance Institute, graduated Academy of Civil Aviation in Leningrad, — St. Petersburg State University, major (Technical University); degree in Finance and Credit in 1988 with degree in Finance and Credit; qualification of Engineer-Navigator in Political Economy; — Russian Presidential Academy Plekhanov Academy of Economics — Herzen State Pedagogical University of National Economy and Public Work experience: Graduate School, 1998, PhD in Economics Work experience: of Russia (formerly Herzen Leningrad Administration 2009- present — Member of the 2009-2017 – Deputy Transport Minister Pedagogical Institute, renamed in 1991), management board of Russian Railways Work experience: of the Russian Federation Graduate School, major in Political Work experience: (RZD) 2012-2020 — Member of the management 2018-present – Advisor on civil aviation Economy; 2009-2014 – Member of the Moscow City 2009-2017 — Senior Vice President, board, VEB.RF to the President of United Aircraft — Russian Presidential Academy Duma Russian Railways 2012-2020 — First Deputy Chairman, Corporation of National Economy and Public 2014-2017 – Director of the Science, 2017- present — First Deputy CEO, Russian VEB.RF Administration, major in National Economy Industrial Policy and Entrepreneurship Railways March-Nov 2020 — CEO, JSC GTLK Participation in management bodies Department of the City of Moscow Nov 2020-present — CEO, Aeroflot Russian of other organizations: Work experience: 2015-2017 — CEO of Fund for Development Participation in management bodies Airlines Chairman of the boards of RApart Services 2007-2012 – CEO, Raznoimport Holding LLC of Venture Capital Investment of other organizations: LLC and RATA LLC; 2012-2020 – CEO, JSC GTLK in the Research and Technology Sector Chairman of the boards of JSC IERT, JSC Participation in management bodies Member of the boards of Ilyushin Finance 2020-present — Advisor to CEO of Moscow RZD-Invest and JSC RZD Infrastructure of other organizations: Co. and PJSC Irkut Corporation; of JSC GTLK 2017-present – Deputy Industry and Trade Projects; Chairman of the board Deputy Chairman of the board of China- Minister of the Russian Federation Member of the board of JSC NPF of Pobeda Airports LLC; Russia Commercial Aircraft International Participation in management bodies Blagosostoyanie; Member of the boards of CJSC Leader Corporation Co., Ltd. (CRAIC); of other organizations: Participation in management bodies Member of the supervisory board (until June 2020), Aeroflot and Eximbank Until February 2020, member of the board Until September 2020, director, member of other organizations: of Gefco S.A. of Russia; of Sukhoi Civil Aircraft Company of the boards of GTLK Middle East, Aurum Member of the boards of directors of the Until Nov 2020 — Director, member Leasing Limited, GTLK Asia Limited; Skolkovo Foundation, JSC RPC Istok, JSC of board of GTLK Middle East, Until September 2020, member of the board United Engine Corporation, JSC Tactical GTLK Asia Limited, Aurum Leasing of NRBank JSC; Missiles Corporation and PJSC United Limited; Member of the board of JSC Yamal Airlines Aircraft Corporation; Member of supervisory board Member of the supervisory boards of JSC DOM.RF. of the Aviation Registry of the Russian Federation, National Research Center Zhukovsky Institute, and the National Research University of Electronic Technology (MIET)

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Number of in-person Voting of Board members on agenda items — The rules for investing budget funds received by JSC GTLK Board of Directors & in-absentia Board at Board meetings in 2020 for acquisition of assets for subsequent leasing, and work in 2020 meetings held reinvestment of income earned from investing these budget Agenda items on which the Board of Directors 76/76 funds voted in favor by a majority of votes — Updated KPI for 2020 In-person meetings Agenda items on which Board members — A new version of the methodology for calculating the In-absentia meetings voted against the decision, but it was passed by 11 1/76 indicator “Reduction of (per unit) operating expenses” a majority of votes — Individual KPI for the CEO for 2021 and indicators for 9 Meetings of the Board of Directors are held 8 Agenda items on which Board members reduction of bonuses of senior management for 2021 according to the Board’s approved schedule 7 7 7 abstained from voting, but the decision was passed 10/76 — The Board’s schedule for the first half of 2021 and as needed. The Chairman of the Board by a majority of votes — An action plan for the internal audit of the Company for can decide to hold an unscheduled meeting 3 3 2020-2021 of the Board. The main issues considered by the Board of Directors — The budget for the internal audit of the Company for 2021. in 2020 included the following: The Board also considered and approved: 2017 2018 2019 2020 — Issues concerning medium-term and current planning, including approval of the budget for general — Reports on the risk management system Compliance with corporate governance and administrative expenses, the Company’s business plan — Reports on the execution of Board instructions best practices and KPI — Reports on internal audit activities The Chairman of the Board takes the nec- — Issues concerning the Company’s strategic development, — Reports on the Company’s financial results. essary steps to provide the information needed Number of issues considered at Board including approval of new strategic documents and policies to make decisions on issues on the agenda On a quarterly basis, the Board considered: meetings — Monitoring the execution of Board decisions, including to members of the Board in a timely manner. consideration of annual and interim results of the — Unaudited reports on the Company’s operations All members of the Board of Directors have Company’s operations. — Reports on financial and operating results, based equal access to the Company’s documents and 120 125 on financial statements to RAS and IFRS information. 76 At meetings in 2020, the Board considered approval of: — Reports on purchasing activities. The Company’s internal documents set out 99 — JSC GTLK’s business plan for 2021, JSC GTLK’s budget the procedure for preparing and conducting for general and administrative expenses for 2021 and The Board made the following recommendations Board meetings, ensuring that members of the JSC GTLK’s KPI for 2021 to the shareholder: Board can properly prepare for them. — The terms of an additional agreement to the employment — On approval of the annual report The most important issues are decided 2017 2018 2019 2020 contract with the Company’s CEO — On approval of annual financial statements, including the at Board meetings held in person. — A new version of the Regulation on Purchasing of Goods, report on the Company’s financial results Work and Services for the Needs of JSC GTLK — On payment of remuneration to members of the — Standards for assessing the implementation of JSC GTLK’s Company’s Board of Directors Number of in-person and in-absentia long-term development strategy and achievement of KPI, — On payment of remuneration to members of the Internal Board meetings held The Board of Directors held 14 meetings and the terms of reference for provision of services to assess Audit Commission in 2020 (three in person and 11 in absentia), the implementation of JSC GTLK’s long-term development — On the amount of dividends on shares for 2019 and the at which it considered 76 issues, including strategy and achievement of KPI in 2019 procedure for their payment 2015 2016 2017 2018 2019 2020 in accordance with the Board’s schedule. — A decision on an additional issue of shares — On distribution of the Company’s profit and loss for 2019. In-person 8 8 9 7 7 3 by the Company meetings — A document containing the conditions of the Company’s share placement Issues 108 107 112 84 56 22 considered — Protocol for increasing the Company’s investment and operating efficiency and reducing its costs, and a program In-absentia 3 9 3 8 7 11 to increase the Company’s operating efficiency and reduce its meetings costs for 2020 Issues 12 25 8 41 43 54 — A new version of the Company’s Leasing Policy considered — An action plan for the internal audit of the Company for 2020 Total 11 17 12 15 14 14 — The budget for the internal audit of the Company for 2020 meetings — GTLK Group’s risk management and internal control policy — The Series 002R exchange-traded bond program and Issues 120 132 120 125 99 76 considered approval of a prospectus for the Company’s securities

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Digitization Directors and Officers of the Board’s work Liability Insurance Board Main terms of D&O liability insurance policy committees

GTLK’s Board of Directors uses the GTLK has had Directors and Officers Liability 1 Insurance coverage Board committees – the Audit Committee, BoardMaps board meeting management Insurance (D&O) for several years already. This Provided for unwitting errors or omissions Strategic Planning Committee and system, which ensures board meetings are held insurance covers potential damages as a result by board directors at any time in the past and with the highest level of information security. of losses incurred by the Company or third Nomination and Remuneration during the period of insurance coverage. parties due to the actions of board directors Committee – have been formed to help the BoardMaps features: in carrying out their management activities. 2 Category of insurance coverage Company’s Board of Directors make sound — Ad hoc issues can be added to the system Having a D&O liability insurance policy 1) Coverage A provides for reimbursement and effective decisions. with any attendant data (materials, draft protects the economic interests and rights of losses of board directors arising as a result decisions, participants, presenters, context) and of shareholders and the Company. of lawsuits filed against board directors. The main responsibility of the committees draft decisions on these issues can be proposed. 2) Coverage B provides for reimbursement is to preliminarily study issues that fall within the — Issues are combined and put on the of JSC GTLK losses arising as a result of lawsuits mandate of the Board of Directors in their area agenda of the next meeting at which they will originally filed against board directors of expertise and prepare recommendations for be considered. (in connection with the Company reimbursing such the Board. — The meeting planner makes it possible losses/expenses of board directors). Committees are formed and operate to indicate the participants, select a time 3) Coverage C provides for reimbursement in accordance with the regulations on committees and place for holding the meeting and other of JSC GTLK losses arising as a result of lawsuits approved by the Board of Directors. parameters. on securities, including bonds, filed against the — In the course of meetings, board members Company. consider issues submitted for discussion and vote on draft decisions. Compliance with corporate governance 3 Jurisdictional limit — The system stores a history of issues, best practices Worldwide including materials, decisions and voting The Board’s Audit Committee is chaired results. by an independent director. 4 Insurance coverage — BoardMaps can be used through a browser 3,000,000,000 rubles or iPad app that supports offline use. 5 Insurance premium Audit Committee Given the coronavirus pandemic in 2020, 11,940,000 rubles the Board of Directors held all in-person of the Board of Directors meetings by video conferencing. The Board held 6 Insurance period 14 meetings in 2020, including three in person. From January 1, 2020 to February 1, 2021 Start of continuous coverage — January 1, 2018 The committee has three members¹: ‹ Committee Chairman V.V. Mikhailov (Independent Director), First Deputy CEO of Russian Railways, member of the Board of Directors ‹ V.M. Okulov (Independent Director), Advisor on Civilian Aviation to the CEO of United Aircraft Corporation, member of the Board of Directors ‹ A.V. Kholopov, Deputy Department Director, Transport Ministry of Russia

¹ As of December 31, 2020.

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Breakdown of issues Breakdown of issues Main goals and duties considered by Audit Committee Main goals and duties considered by Nomination of Audit Committee in 2020 of Nomination and & Remuneration Committee in 2020 15 Corporate governance Remuneration Committee 11 Internal control & audit 6 Achievement of KPI & operational 7 Financial statements goals 1 Committee organizational issues GOAL: 2 Remuneration of members 1 External audit of management & control bodies GOAL: Prepare recommendations for the Board of Directors and 2 HR issues & composition of Board of Assist the Board of Directors in the effective the shareholder (shareholders) on issues concerning staff planning (succession planning), the professional composition Directors execution of its duties and protect the interests 1 Improvement of corporate governance and performance of the Board, and the establishment of shareholders as regards control over the system & practices of effective and transparent remuneration practices. Company’s financial and business activities. 1 Committee organizational issues

DUTIES: DUTIES: — Monitor the effectiveness of the internal — Evaluate the performance of members control system, risk management and corporate of the Company’s Board of Directors and set priorities for governance practices strengthening the composition of the Board — Monitor accuracy of financial reporting Nomination and — Plan appointments to the Company, including to executive Strategic Planning — Monitor compliance with laws and management bodies, and make recommendations to the regulations, and measures to combat unethical Remuneration Committee Board on candidates for the position of Corporate Secretary Committee of the Board practices by Company employees and third of the Board of Directors and members of the Management Board of Directors parties — Develop and monitor the implementation of the — Monitor effectiveness of internal audit Company’s policy for remuneration of members of the Board practices The committee has three members¹: of Directors, the Internal Audit Commission and Board The committee has five members¹: — Monitor external audit and its quality. ‹ Committee Chairman V.M. Okulov committees, the CEO and other key management personnel, ‹ Committee Chairman V.M. Okulov (Independent Director), Advisor on Civilian as well as criteria for evaluating the performance of the (Independent Director), Advisor on Civilian Aviation to the CEO of United Aircraft above-mentioned employees of the Company Aviation to the CEO of United Aircraft Corporation, member of the Board — Other. Corporation, member of the Board The Audit Committee held six meetings in 2020, of Directors of Directors at which it considered 35 issues. The main ‹ A.V. Kholopov, Deputy Department Director, ‹ I.S. Alafinov, Member of the Board issues considered by the Audit Committee Transport Ministry of Russia The Nomination and Remuneration Committee held three of Directors of JSC GTLK included the following: ‹ S.N. Khramagin, Advisor meetings in 2020, at which it considered 12 issues. The main ‹ O.E. Bocharov, Deputy Industry and Trade — Internal control and audit, including review to CEO of JSC GTLK, member of the Board issues considered by the Committee included the following: Minister of Russia, member of the Board of reports on internal audit activities and annual of Directors. — Results of meeting KPI and achievement of operational of Directors and interim results of the Company’s operations goals ‹ Е.I. Ditrikh, CEO of JSC GTLK, member — Organizational issues concerning the — Remuneration of members of management and control of the Board of Directors Committee’s activities bodies, including the issue of bonuses ‹ S.N. Khramagin, Advisor — Corporate governance, including risk — HR issues and recommendations on the composition to CEO of JSC GTLK, member of the Board management of the Board of Directors, including changes to the incentive of Directors. — The Company’s financial and operating system, setting priorities for strengthening the composition results (financial statements) of the Board, recommendations on candidates, professional — Approval of transactions, and other issues. qualifications and independence of candidates nominated to the Board, and other issues.

¹ As of December 31, 2020.

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Breakdown of issues Main goals and duties considered by Executive of Strategic Planning Audit Committee in 2020 management Committee 2 Long-term Development Program 1 Business planning & control bodies of operations 7 Other issues Executive management bodies are responsible for The position of CEO at JSC GTLK was held by Sergei Khramagin in the period from GOAL: issues concerning the Company’s current operations, Help improve the Company’s long-term November 2012 to March 2020. with the exception of matters reserved to the authority performance. of the General Meeting of Shareholders and the Board Sergei Khramagin CEO of JSC GTLK from Nov 2012 DUTIES: of Directors. to March 2020 — Determine strategic goals for the The JSC GTLK Board’s audit, strategic Company’s business JSC GTLK’s individual executive body, the Chief Executive Year of birth: 1965. planning and nomination and remuneration Education: St. Petersburg State University, major in Political — Monitor implementation of the Company’s Long- Officer, manages the Company’s current operations and committees held one joint meeting in 2020, Economy; term Development Program (development ensures efficient implementation of the Company’s strategic Herzen State Pedagogical University of Russia (formerly strategy) at which they considered three issues: objectives. Herzen Leningrad Pedagogical Institute, renamed in 1991), — Make recommendations to the Board Graduate School, major in Political Economy; Russian Presidential Academy of National Economy and Public of Directors on revising the Company’s current 1 Updated KPI for 2020. Administration, major in National Economy Long-term Development Program (development 2 A new version of the methodology for Work experience: strategy) 2007-2012 – CEO, Raznoimport Holding LLC — Other issues as requested by the Board calculating the indicator “Reduction of (per unit) Main goals and duties 2012-2020 – CEO, JSC GTLK of Directors concerning the Board’s mandate. operating expenses”. of Chief Executive Officer 2020-present — Advisor to CEO of JSC GTLK 3 JSC GTLK (GTLK Group) business plan The Strategic Planning Committee held four meetings in 2020, at which it considered 10 issues. for 2021, JSC GTLK’s budget for general GOAL: The main issues considered by the Committee and administrative expenses for 2021 and Manage the Company’s current operations. included the following: JSC GTLK’s KPI for 2021. — Determining the Company’s financial policy, DUTIES: Sergei Khramagin was dismissed from the including issues related to increasing the — Execute the decisions of the Company’s GMS and Board position of JSC GTLK CEO by an order of the Company’s charter capital of Directors Transport Ministry of Russia dated March 23, — Business planning and control of operations, — Conclude agreements and carry out other transactions 2020.¹ Mikhail Poluboyarinov was elected CEO including approval of the Company’s business plan in accordance with Russian law and the Company’s Charter of JSC GTLK. — Preliminary approval of the annual report — Represent the employer in concluding the collective agreement — Termination of participation in another in accordance with the procedure established by Russian law organization — Approve rules, instructions and other internal documents — Long-term Development Program, including Mikhail Poluboyarinov of the Company CEO of JSC GTLK from March to Nov 2020 program progress report, and other issues. — Determine the organizational structure of the Company, approve staff schedule of the Company, its branches and offices Year of birth: 1966. Education: Moscow Finance Institute, graduated in 1988 with — Organize efficient collaboration between the degree in Finance and Credit; Company’s business units Plekhanov Academy of Economics Graduate School, 1998, PhD — Hire and dismiss employees in Economics — Decide other issues concerning the Company’s current Work experience: operations. 2012-2020 — Member of the management board, VEB.RF 2012-2020 — First Deputy Chairman, VEB.RF March-Nov 2020 — CEO, JSC GTLK Nov 2020-present — CEO, Aeroflot Russian Airlines

¹ Transport Ministry of Russia Order No. ED-55-R, dated March 23, 2020. 96 97 01 02 03 04 05 06

Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results

Corporate secretary

Marina Mescheryakova was elected the Mikhail Poluboyarinov was dismissed The Corporate Secretary is an officer of the Company and — Ensure compliance with legislation and the Company’s Corporate Secretary at a meeting from the position of JSC GTLK CEO by an order is appointed by the decision of a majority of the members Company’s internal documents regarding the storage of the Board of Directors on March 13, 2019 of the Transport Ministry of Russia dated of the Company’s Board of Directors participating at such of corporate documents and provision of documents (Minutes No. № 114/2019, dated March 13, 2019). November 19, 2020.¹ Evgeny Ditrikh was elected meeting. The Corporate Secretary is administratively and information about the Company at the request CEO of JSC GTLK. subordinate to the CEO of the Company, but is accountable of shareholders, including by using the Inter-Agency Portal to and supervised by the Board of Directors. for Management of State Property (hereinafter, IA Portal) — Ensure implementation of corporate procedures stipulated by law Marina Mescheryakova Evgeny Ditrikh GOALS: — Prepare proposals for and organize execution — Ensure that the Company’s executive bodies and of Board decisions regarding the development of the Corporate Secretary, JSC GTLK (March 2019 to present) CEO of JSC GTLK from Nov 2020 to present employees comply with current legislation, the Charter and Company’s corporate governance practices internal documents of the Company that guarantee the rights Year of birth: 1983. Year of birth: 1973. — Assist the Company’s management bodies in developing and legal interests of shareholders best practices in corporate governance, as well Education: Education: — Ensure respect for the rights and property interests as analyzing existing practices Sholokhov Moscow State Pedagogical University – Lawyer Moscow State Engineering Physics Institute (renamed of shareholders, help shareholders exercise their rights, — Organize cooperation between the Company and its specializing in Jurisprudence, 2005 National Research University MEPHI in 2009), graduated maintain a balance of interests among participants shareholders, including by using the IA Portal in 1996 with degree in Applied Mathematics; in corporate relations — Inform members of the Board of Directors and/or the Work experience: Higher School of Privatization and Business, graduated in 1999 Nov 1, 2013-present – Head of Corporate Governance, — Make arrangements for the resolution of disputes with degree in Legal Studies CEO about impediments to compliance with procedures JSC GTLK concerning violation of shareholder rights that the Corporate Secretary is responsible for assuring May 30, 2014-Oct 8, 2018 – Corporate Secretary, JSC GTLK Work experience: — Develop the Company’s corporate governance practices — Inform members of the Board of Directors 2012-2015 — Deputy Director, Industry and Infrastructure in the interests of shareholders. of noncompliance with corporate law and the Department of the Government of Russia July-Oct 2015 — Director, Federal Transport Oversight Service Company’s internal documents in the management of the 2015-2018 — First Deputy Transport Minister of Russia Company 2018-2020 — Transport Minister of Russia DUTIES: — Other issues related to assuring the rights 2020-present — CEO, JSC GTLK — Monitor compliance with corporate law, the Charter and of shareholders and compliance with corporate law. internal documents of the Company, monitor observance of the rights and property interests of shareholders in decision making by the Company’s management bodies — Prepare and organize annual and extraordinary General Meetings of Shareholders — Prepare and support the work of the Board of Directors — Prepare and support the work of Board committees and commissions — Monitor execution of decisions made by the General Meeting of Shareholders and Board of Directors, as well as the recommendations of Board committees and ¹ Transport Ministry of Russia Order No. DZ-224-r, dated commissions for the Company’s management November 19, 2020.

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GRI 102-37 System of remuneration for members of the board of directors and management bodies

The amount and procedure for paying Additional remuneration Remuneration remuneration to members of the Board Remuneration of CEO of Directors, as well as the amount and The Chairman of the Board of Directors is paid 50% of the base portion of Board members of remuneration in proportion to the duration of service in this position in the procedure for paying compensation of expenses corporate year. they incur in relation to executing their duties are defined by the Regulation on Remuneration On the condition that a member of the Board of Directors personally The Regulation on PJSC GTLK Key and Compensation of Members of the Board participates (is present) in at least 70% of in-person meetings of Board Performance Indicators and Their Use for committees of which they are members in the corporate year: The Company’s policy in the area of Directors of JSC GTLK. A new version of this — The chairman of a Board committee is paid 30% of the base portion of the Purposes of Remuneration of PJSC GTLK of remuneration for members of the Board regulation was approved in 2020 by order of the remuneration in proportion to the duration of service in this position in the Management that was in effect in 2020, which of Directors is aimed at incentivizing service Transport Ministry of Russia (No. ED-35-r, dated corporate year was approved by the Board of Directors — A member of a Board committee is paid 15% of the base portion of on the Board by highly qualified professionals February 18, 2020).¹ remuneration in proportion to the duration of service in this position in the on December 19, 2019 (Minutes No. 123/2019, with the experience and skills needed The calculation of the amount of remune­ corporate year dated December 20, 2019), provides for to improve the Board’s performance, align the ration for members of the Board of Directors — If a Board member serves as a member and/or chairman of more than one a correlation between the CEO’s remuneration Board committee, they are paid the maximum accrued additional remuneration interests of Board members with the interests is considered by the Board’s Nomination and for serving in one capacity on one Board committee. and the Company’s system of KPI. of the Company’s shareholder and promote the Remuneration Committee and approved by the Company’s long-term, sustainable development. Board as a recommendation to the GMS. The The recommended amount of remuneration is not calculated for amount of remuneration for members of the members of the Board of Directors who: Company’s Board of Directors is set by decision ‹ Are persons subject to restrictions or prohibitions against of the GMS. receiving any payments from commercial organizations Compliance with corporate governance Remuneration is paid on the condition that best practices Compliance with corporate governance under current Russian law the member of the Board of Directors personally The system of remuneration for best practices ‹ Are executive bodies of the Company. participates (is present) in at least 70%² of in- the Company’s CEO and other key The Board of Directors determines the person meetings of the Board of Directors management personnel links remuneration Company’s policy on remuneration and/ Members of the Board of Directors have the right to decline to which he/she was elected in the course of the to the Company’s results and their personal or compensation of expenses of members remuneration in full or in part by submitting such a request to the corporate year.³ contribution to the achievement of these of the Board, executive bodies and other key Company. The structure of remuneration includes base results. management personnel. The Company compensates documented expenses actually and additional portions of remuneration. For more details about the The level of remuneration paid by the incurred by members of the Board of Directors for the purposes Company’s general approaches to motivating Company is sufficient to attract, motivate and of participating in meetings of the Board and Board committees employees, see the Sustainable Development retain individuals with the competencies and of which they are members, such as travel, accommodation, section. qualifications that the Company requires. food and so on, if such meetings are held outside of the Board member’s permanent place of residence.

The Company’s practices in the area of remuneration and Base portion of remuneration compensation of expenses of Board members make it possible to: ‹ Reflect the scale of the Company’s operations and difficulty Paid at the end of the corporate year and calculated ¹ Under Russian government Resolution No. 93, dated February 4, 2009, “On Exercising the based on actual duration of service as member of the Board of managing the business Rights of Shareholder of Open Joint-stock Company State Transport Leasing Company on of Directors. ‹ Take into account the responsibility of Board members, Behalf of the Russian Federation”, the Transport Ministry of Russia has the authority to exercise the rights of shareholder of JSC GTLK on behalf of the Russian Federation, which their authority and the time required to make balanced and owns 100% of the Company’s shares. effective decisions concerning the Company’s business ² Including participation in discussion of issues on the agenda and voting remotely, by tele- and video conferencing. ‹ Reflect the individual contribution of each member of the ³ In the event that the GMS decides to dismiss all members of the Board of Directors ahead of Board of Directors. schedule (elect a new Board of Directors at an EGM), remuneration to members of the Board of Directors is paid on the condition that they personally participated (were present) in at least 70% of all in-person meetings of the Board of Directors, including participation in discussion of issues on the agenda and voting remotely, by tele- and video conferencing, during the respective part of the corporate year. 100 101 01 02 03 04 05 06

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Control and audit Internal audit External audit

The Company has a separate division that The Regulation on Internal Audit at JSC GTLK of information and financial statements to users The Company annually engages external auditors is responsible for internal audit. The Internal Audit provides for: (external and internal) to conduct an independent evaluation of the accuracy of its Service assesses the adequacy and effectiveness ‹ Undergoing an external evaluation at least — Provide active assistance to the financial statements to International Financial Reporting of the internal control system, assesses the once every five years in accordance with the Company’s management in building the internal control Standards (IFRS) and Russian Accounting Standards (RAS). effectiveness of the risk management system and approved Operational Plan for Internal Audit system. The auditors to conduct the independent audits of the evaluates corporate governance. ‹ Conducting an internal evaluation of the Company’s financial statements to RAS and IFRS were chosen performance of internal audit (by self- The goals, objectives and status of the by holding a public tender as per the procedure established The goals, objectives, authority, responsibility evaluation) at least once every two years Company’s internal control division, as well as the scope by Russian legislation on the contract system in purchasing and status of internal audit at the Company, in accordance with the approved Operational and content of its activities, are set out in the Regulation of goods and services for state and municipal needs, as well as the scope and content of internal audit Plan for Internal Audit on the Internal Control Service of JSC GTLK, an internal as required by Federal Law № 307-FZ, dated December 30, activities, are set out in the Regulation on Internal regulation signed by the CEO. The current version of the 2008.¹ Audit at JSC GTLK, an internal regulation that was A regular self-evaluation (internal regulation was approved on November 12, 2018. Under the GTLK Charter, the auditor for conducting the approved by the Board of Directors in its current assessment) and external evaluation of the independent audit of the Company’s financial statements version on October 1, 2019. quality of internal audit were not conducted Documents regulating the activities of the internal to RAS is confirmed by the General Meeting of Shareholders, in 2020. control division also include: in the person of the Transport Ministry of Russia. Documents regulating internal audit activities — Job descriptions of the director and employees of the also include: Internal Control Service Audit to RAS Internal control In accordance with the terms set in tender documentation ‹ Job descriptions of internal audit director and — The Company’s internal regulations regarding the Internal Audit Service employees; activities of the Internal Control Service. for conducting the independent audit of the Company’s financial Internal control at the Company is exercised statements to RAS, the bid submitted by HLB Vneshaudit was ‹ Internal audit standards: by a separate division, among other means. declared to be the winner of the tender. — Procedure for planning and conducting internal The main responsibilities of the Internal Control The director of the Internal Control Service audits of business processes at JSC GTLK is appointed to and dismissed from his/her position The amount of remuneration for the auditor is determined Service are to: as per Federal Law No. 44-FZ, dated April 5, 2013. — Reporting to the Board — Monitor the effectiveness of the management by order of the CEO according to the procedure — Reporting on results established at the Company. Remuneration under the contract for the audit of financial of the Company’s inherent regulatory risk; statements for 2020 totaled 3,620,000 rubles (including VAT). — Monitoring actions based on the results participate in the development of measures The Internal Control Service is functionally and of measures (inspections) administratively accountable to the Company’s deputy to reduce the level of regulatory risk and prevent Audit to IFRS — Internal evaluations the realization of this risk; monitor elements CEO for internal control, risk management and — Other documents regulating internal audit compliance. In line with the terms set in tender documentation for of internal control within the scope of regulatory conducting the independent audit of the Company’s financial activities. The activities of the Internal Control Service are risk management statements to IFRS, the bid submitted by FBK LLC was The functional and administrative accountability overseen by the Company’s deputy CEO for internal — Organize continuous, preventative declared to be the winner of the tender. of internal audit are divided: internal audit control, risk management and compliance, including control through regular audits of the Remuneration of the external auditor for a review functionally reports to the Board of Directors and through the approval of a risk-oriented work schedule Company’s divisions and individual employees, of financial statements as of June 30, 2020 and as of September administratively to the CEO of the Company. for the Internal Control Service and review of reports as well as other control procedures for 30, 2020, as well as the audit of financial statements to IFRS The internal audit director (director of the Internal on monitoring the execution of instructions issued based their compliance with Russian law and the as of and beyond the reporting period ended December 31, Audit Service) is appointed to and dismissed from on the results of the Internal Control Service’s control Company’s internal rules, regulations and 2020 totaled 8,100,000 rubles (including VAT). his/her position by order of the CEO on the basis policies measures. of decisions made by the Board of Directors on the — Current control of the accuracy, appointment and dismissal of the internal audit completeness, objectivity and timeliness director. of accounting and preparation of financial statements, as well as the reliability and ¹ Point 4, Article 5 of Federal Law № 307-FZ, dated December 30, 2008, “On Auditing timeliness of collection and provision Activities”. ² Russian Federal Law No. 44-FZ, dated April 5, 2013, “On the contract system in the area of purchasing goods, work and services for meeting state and municipal requirements”.

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Internal audit commission

JSC GTLK’s Internal Audit Commission arise as a result of and in the process of the is an elected body that exercises control over the Company’s financial and business activities. Internal Audit Commission Remuneration of Internal Company’s financial and business activities. In the course of audits, the Internal Audit members in 2020–2021 Audit Commission The Internal Audit Commission’s operating Commission can check the Company’s com­ procedures are defined by the Regulation on the pliance with laws and regulations that govern members in 2020 Internal Audit Commission of JSC GTLK, approved its business, the legality of transactions by the Transport Ministry of Russia¹. made by the Company, the organization of the Com­pany’s internal control system, and the Company’s execution of the instructions of the M.V. Groza Members of the Internal Audit Commission President and Government of the Russian may be paid remuneration and/or compensation Federation. Project Office Director, Moscow City Investment Internal Audit for expenses they incur in relation to executing The Internal Audit Commission’s work Management Agency; member of the Internal their duties by decision of the GMS. The amount schedule must include an audit of the Compa- Audit Commission of JSC GTLK Commission’s main of such remuneration and compensation is set ny’s financial and business activities for the year. by decision of the GMS. goals and duties The Commission submits a report to the Board O.V. Kurochkina In accordance with the decision of Directors on the results of the scheduled audit of the AGM, remuneration for members of the GOAL: Control the Company’s financial and of the Company’s financial and business activities Teaching and Learning Specialist, Space Research Company’s Internal Audit Commission totaled business activities, and identify and assess risks for the year, including an opinion on the fairness Faculty, Moscow State University; member of the 450,000 rubles, including 198,000 for M.V. Groza that arise as a result of and in the process of the of data included in the Company’s annual report Internal Audit Commission of JSC GTLK and 252,000 rubles for M.Z. Mardanshin. The Company’s operations. and annual financial statements. remuneration was paid in full. The Internal Audit Commission of three M.Z. Mardanshin DUTIES: members is elected by the GMS for the period — Audit the Company’s financial and business to the next AGM according to procedures set out Chief Accountant, Engeocom Association JSC; activities in Russian legislation and the Company’s Charter. member of the Internal Audit Commission — Confirm the accuracy of data in reports and Members of the Commission cannot simul- of JSC GTLK other financial documents of the Company, detect taneously serve on the Board of Directors or hold violations in the pursuit of GTLK activities other positions in management bodies of the — Prepare proposals/recommendations Company. to improve the efficiency of asset management, Members of the Commission are accountable and improve the risk management and internal for unethically carrying out their duties control system. as specified in current Russian legislation.

The Company’s financial and business activities are audited at the end of the ¹ Transport Ministry of Russia Order No. MS-50-r, dated June 5, 2015, “Provision on remuneration and compensation for members of the Company’s operations for the year, as well Internal Audit Commission of JSC GTLK”. as at any time on the initiative of the Internal Audit ² Transport Ministry of Russia Order No. DZ-190-r, dated September 30, 2020, “On decisions of the annual general meeting of shareholders Commission, by decision of the GMS or Board of JSC GTLK in 2020”. of Directors, or at the request of shareholders who together own at least 10% of voting shares. The target of Internal Audit Commission audits is the Company’s operations, including identification and assessment of risks that

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results Business ethics and anticorruption practices

GRI 102-16 GRI 102-25 GRI 205-1 – 205-3, 418-1 Code Conflict Fighting corruption Access to insider of ethics of interest information

GTLK has a Corporate Code of Ethics (hereinafter, A conflict of interest is understood to mean Corruption is understood to mean abuse of office, receiving Confidential information, which includes also the Code) that defines its corporate values and any situation in which the private interests or giving bribes, abuse of authority, trading in influence, or information that constitutes a commercial outlines the main rules of business conduct aimed of an employee, direct or indirect, influence or any other illegal use of an employee’s position contrary to and secret, professional secret, insider information, at increasing the profitability, success and efficiency might influence the employee’s proper, objective to the detriment of the legal interests of the Company in order personal data or other information about the of the Company and improving its corporate culture. and impartial performance of their duties. to reap benefits in the form of money, valuables, other property Company’s operations and development, For details about GTLK’s corporate values, see the Company employees must avoid situations or services of a material nature and other property rights for to a great extent determines its competitiveness Sustainable Development section. in which a conflict of interest arises for them. themselves or third parties or to have such benefits illegally on the market. GTLK has a Corporate Ethics Commission The Company is committed to preventing provided to such party by other individuals, as well as committing Disclosure of information of a confidential to ensure the efficacy of the Code of Ethics. The and minimizing the impact of possible conflicts such actions in the name of or in the interests of a legal entity. nature can hurt the interests and reputation Commission’s responsibilities include: of interest among its employees. In its day-to-day operations, GTLK follows Russian law in the of GTLK, so every employee is obligated ‹ Collection and analysis of proposals to revise the Conflicts of interest are resolved on the area of combating corruption, abides by the provisions of the to observe the rules established by current Code of Ethics basis of JSC GTLK’s Corporate Code of Ethics Corporate Code of Ethics and the requirements of relevant internal Russian legislation and set by the Company ‹ Clarification of and enforcement of compliance (Order No. 195, dated October 31, 2018) and the regulations, and affirms its commitment to global standards for for handling confidential information obtained with the standards and provisions of the Code Regulation on Conflicts of Interest at JSC GTLK fighting corruption. in the course of their work, including insider of Ethics. (Order No. 147, dated July 20, 2018). The Company GTLK’s anticorruption efforts are aimed at reducing information. has formed a Commission for Corporate Ethics the risks of the Company incurring material or reputational GTLK’s Board of Directors has approved The Corporate Code of Ethics, Anticorruption and Resolution of Conflicts of Interest (Order damages from corruption. The Company applies a risk- procedures for access to insider information, Policy and Anti-money Laundering Policy must No. 163, dated August 20, 2018). No conflicts oriented approach to preventing and fighting corruption. and rules for protecting its confidentiality and be included in GTLK’s principal documents in the area of interest were found at the Company in the The Company’s Anticorruption Policy is consistent with the enforcing compliance with legislation against of sustainable development. reporting period. Federal State Property Management Agency’s Methodological the unlawful use of insider information and Recommendations for Managing Risks and Internal Control in the market manipulation, including a list of insider Area of Preventing and Combatting Corruption. information. In the reporting period, the Company held an online seminar Insider information includes precise on combatting corruption for employees, with subsequent testing. and specific information that has not been The Company has an anticorruption hotline, the number for disseminated or disclosed, and the dissemination which is posted on GTLK’s website. or disclosure of which could have a significant The Company has preventive measures for all types impact on the prices of the Company’s financial Principal documents in the area of sustainable development of corporate fraud, distortion of financial reporting, corrupt instruments, foreign currency and/or goods, — Policy to Combat Money Laundering and Financing of Terrorism and Proliferation actions, theft, willful damage and other abuses in regard to GTLK as per the list specified by Federal Law No. 224- of Weapons of Mass Destruction (2020) assets, and maintains a general atmosphere of zero tolerance for FZ, dated July 27, 2010. — Anticorruption Policy, with a list of factors recommended for factoring into assessment corrupt conduct. Employees with insider information must not of corruption risks (2019) No cases of corruption were found at the Company in 2020. use it to derive personal gain on the securities — Risk Management and Internal Control Policy (2019) The Company upholds a policy of zero tolerance for corruption market or disclose it to third parties. — Supplier Relations Policy (2016) in any form and manifestation, which means managers, — Quality Management Policy (2015) employees and other persons acting in the name of the Company — Corporate Code of Ethics (2018) and/or in its interests are absolutely prohibited from participating — Sponsorship and Philanthropy Policy (2016) in corrupt conduct directly or indirectly, personally or through some intermediary.

¹ Federal State Property Management Agency Order No. 80, dated March 2, 2016, “On approval of Methodological Recommendations for Managing Risks and Internal Control in the Area of Preventing and Combatting Corruption”. ² Federal Law No. 224-FZ, dated July 27, 2010, “On combatting unlawful use of insider information and market manipulation and amendments to certain legislative acts of the Russian Federation”.

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The success of JSC GTLK’s business is due in large part Information Dividend policy Bonds to its extensive experience working with both Russian and foreign financial institutions, for which the Company for investors is an attractive financial partner. JSC GTLK’s financial portfolio includes loans and bonds, in addition to federal Type and format of security Trading organizer Exchange-traded certificated Moscow Exchange budget funds. bearer bonds

The Company’s dividend policy is based on the Regulation Date of state Moscow Amount JSC GTLK on the Dividend Policy of JSC GTLK that was approved by the State registration/ Exchange Date Date Issue amount, outstanding Company’s Board of Directors on December 20, 2011 (Minutes Series registration assignment quotation of placement of maturity RUB (by current face share capital¹ No./ID No. №25/2011, dated December 20, 2011) and drafted in accordance with the of ID list value), RUB Common Total share legislation of the Russian Federation, the Company’s Charter and other shares capital² internal documents. BO-03 4B02-03-32432-H 24.04.2014 Level 2 23.12.2014 10.12.2024 1,500,000,000 1,500,000,000 The Company’s dividend policy is aimed at achieving the following Number BO-04 4B02-04-32432-H 24.04.2014 Level 1 19.03.2015 06.03.2025 5,000,000,000 5,000,000,000 of shares 8,143,713 8,143,713 goals: — Increasing the Company’s investment appeal and its capitalization BO-05 4B02-05-32432-H 04.09.2015 Level 1 30.10.2015 17.10.2025 4,000,000,000 4,000,000,000 Par value — Maintaining the Company’s financial position at the required level 10 10 of 1 share, BO-06 4B02-06-32432-H 04.09.2015 Level 1 02.11.2015 20.10.2025 4,000,000,000 4,000,000,000 ‘000 RUB and ensuring prospects for its development — Compliance of the Company’s dividend accrual and payment BO-07 4B02-07-32432-H 04.09.2015 Level 1 29.12.2015 16.12.2025 4,000,000,000 4,000,000,000 practices with Russia law Par value, 81,437,130 81,437,130 ‘000 RUB — Achieving an optimal balance between the interests of the Company BO-08 4B02-08-32432-H 01.08.2016 Level 1 13.09.2016 01.09.2026 5,000,000,000 5,000,000,000 and its shareholders 001R-01 4В02-01-32432-Н-001Р 14.09.2016 Level 1 23.09.2016 05.09.2031 4,040,000,080 2,312,680,440 — Ensuring transparency of the mechanism for determining the Common amount of dividends and their payment. 001R-02 4В02-02-32432-Н-001Р 30.11.2016 Level 1 12.12.2016 24.11.2031 7,780,000,000 5,661,506,000 001R-03 4В02-03-32432-Н-001Р 03.02.2017 Level 1 09.02.2017 22.01.2032 10,000,000,000 10,000,000,000 shares The decision to declare, pay or not pay dividends, including the decision on the amount of the dividend, form, timing and procedure 001R-04 4В02-04-32432-Н-001Р 20.04.2017 Level 1 25.04.2017 06.04.2032 10,000,000,000 10,000,000,000 of its payment on shares of each category (type) is made by General All shares confer equal rights in regard to the 001R-05 4В02-05-32432-Н-001Р 15.08.2017 Level 1 30.08.2017 21.08.2024 170,000,000 116,450,000 Group’s net assets. The owners of common Meetings of the Company’s shareholders in accordance with the shares have the right to receive dividends Company’s Charter and on the basis of the recommendations of the 001R-06 4В02-06-32432-Н-001Р 14.09.2017 Level 1 20.09.2017 01.09.2032 20,000,000,000 16,722,200,000 as they are declared, and also have the right Company’s Board of Directors regarding the amount of the dividend. 001R-07 4В02-07-32432-Н-001Р 15.01.2018 Level 1 19.01.2018 31.12.2032 10,000,000,000 10,000,000,000 to one vote per share at General Meetings of the The amount of the dividend cannot be greater than recommended Company’s shareholders by the Board of Directors. 001R-08 4В02-08-32432-Н-001Р 31.01.2018 Level 1 06.02.2018 18.01.2033 10,000,000,000 10,000,000,000 Under Russian government Resolution Under Russian legislation, the amount of dividends that can be paid 001R-09 4В02-09-32432-Н-001Р 29.03.2018 Level 1 06.04.2018 18.03.2033 10,000,000,000 10,000,000,000 No. 93, dated February 4, 2009, the authority is limited by the amount of the Company’s retained earnings, reported to exercise the rights of shareholder of JSC GTLK in the Company’s financial statement prepared according to Russian 001R-10 4В02-10-32432-Н-001Р 30.05.2018 Level 1 08.06.2018 20.05.2033 10,000,000,000 10,000,000,000 on behalf of the Russian Federation is held Accounting Standards (RAS). 001R-11 4В02-11-32432-Н-001Р 14.06.2018 Level 1 22.06.2018 03.06.2033 150,000,000 150,000,000 by the Transport Ministry of Russia (the Russian JSC GTLK shareholders decided at the GMS on September 30, 2020 Federation, as represented by the Transport to pay 494.25 million rubles in dividends on common shares for 2019 001R-12 4В02-12-32432-Н-001Р 21.11.2018 Level 1 23.11.2018 04.11.2033 5,000,000,000 5,000,000,000 Ministry of the Russian Federation owns, 100% in cash. of the Company’s shares). The date of record for determining persons who have the right 001R-13 4В02-13-32432-Н-001Р 06.02.2019 Level 1 08.02.2019 20.01.2034 10,000,000,000 10,000,000,000 to receive dividends is set at least 10 days from the date on which 001R-14 4В02-14-32432-Н-001Р 06.06.2019 Level 1 13.06.2019 25.05.2034 10,000,000,000 10,000,000,000 the decision on payment (announcement) of dividends is made and no later than 20 days from the date on which such decision is made. The 001R-15 4B02-15-32432-H-001P 24.10.2019 Level 1 29.10.2019 21.10.2025 25,000,000,000 25,000,000,000 deadline for payment of dividends does not exceed 25 working days 001R-16 4B02-16-32432-H-001P 24.12.2019 Level 1 27.02.2020 17.02.2028 10,000,000,000 10,000,000,000 from the date of record for eligibility to receive dividends. ¹ As of December 31, 2020. 001R-17 4B02-17-32432-H-001P 24.12.2019 Level 1 01.06.2020 14.05.2035 10,000,000,000 10,000,000,000 ² Registered, issued and fully paid-in share capital. The dividends for 2019 have been paid in full. ³ Point 1 of Russian government Resolution No. 93, dated February 4, 2009, “On exercising the rights of shareholder of Open Joint-stock 001R-18 4B02-18-32432-H-001P 24.12.2019 Level 1 10.06.2020 23.05.2035 5,000,000,000 5,000,000,000 Company State Transport Leasing Company on behalf of the Russian Federation”. 001R-19 4B02-19-32432-H-001P 24.12.2019 Level 1 10.06.2020 23.05.2035 5,000,000,000 5,000,000,000

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06 CONTENTS

Independent Auditor’s Report ...112 10. Assets leased out under operating leases ...164 Consolidated statement of financial 11. Advances to suppliers ...169 position ...118 12. Other assets ...171 13. Investment property ...174 Consolidated statement of profit or loss and 14. Asset on concession agreement ...175 other comprehensive income ...120 15. Loans granted ...177 16. Taxation ...180 Consolidated statement 17. Loans and borrowings received ...183 of cash flows ...122 18. Lease liabilities ...185 19. Debt securities issued ...187 Consolidated statement of changes in 20. Other liabilities ...191 equity ...125 21. Other than income tax payable ...192 22. Share capital ...192 Notes to the consolidated financial 23. Interest income and interest statements ...126 expense ...194 24. Administrative expenses ...195 1. Principal activities ...126 25. Other operating income and expenses ...195 2. Basis of preparation ...132 26. Financial risk management ...197 3. Summary of accounting policies ...134 27. Fair values of financial instruments ...220 4. Use of estimates and judgments ...149 28. Capital management and capital 5. Business combinations ...152 adequacy ...223 6. Cash and cash equivalents ...155 29. Commitments and contingencies ...224 7. Financial assets at fair value through profit 30. Related parties ...225 or loss ...157 31. Changes in circumstances relating to 8. Due from banks ...158 financial activities ...229 9. Net investment in leases ...159 32. Events after the reporting date ...231 Financial Results

INDEPENDENT AUDITOR’S REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Independent Auditor’s Report

112 113

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114 115

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116 117

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Annual Report GTLK GTLK Strategic Sustainable Corporate Financial 2020 today profile report development governance results Consolidated financial statements as at 31 December 2020 (all amounts in millions Consolidated statement of Russian roubles unless otherwise indicated) of financial position

31 December 31 December 31 December 31 December Assets Note Liabilities Note 2020 2019 2020 2019

Cash and cash equivalents 6 75,527 17,686 Loans and borrowings received 17 340,530 287,707

Financial assets at fair value through profit or loss 7 487 3,231 Lease liabilities 18 41,743 41,128

Due from banks 8 3,655 83 Debt securities issued 19 464,660 308,005

Advances to suppliers 11 99,073 74,271 Financial liabilities at fair value through profit or loss 1,249 —

Equipment purchased for leasing puiposes 4,098 2,917 Advances received 3,825 1,391

Loans granted 15 36,835 11,802 Deferred income tax liabilities 16 2,587 1,128

Financial assets at fair value through other comprehensive income — 745 Income tax payable 69 302 Inventories 179 200 Other than income tax payable 21 1,065 15,724 Financial assets at amortized cost 1,377 — Other liabilities 20 11,481 11,632 Net investment in leases 9 290,373 246,507 Total liabilities 867,209 667,017 Assets leased out under operating leases 10 413,917 344,906 Equity Asset under concession agreement 14 8,468 7,320 Share capital 22 81,437 71,637 Investments in associates and joint ventures 1,013 — Additional capital 22 32,913 31,255 Investment property 13 5,974 6,591

Accumulated losses (1,926) (1,342) Property and equipment, intangible assets and right-of-use assets 972 744

Currency translation difference and other reserves 423 (17) Deferred income tax assets 16 3,951 2,782

Income tax receivable 169 85 Equity attributable to a shareholder of the Company 112,847 101,533

VAT recoverable 1,507 23,052 Non-controlling interest 1,243 1,495

Other assets 12 33,724 27,123 Total equity 114,090 103,028

Total assets 981,299 770,045 Total liabilities and equity 981,299 770,045

Approved for issue and signed by the General Director of JSC “GTLK” on 17 March 2021. ______

Ditrikh Е.I., General Director 118 119 01 02 03 04 05 06

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for the year ended 31 December 2020 (all amounts in millions of Russian roubles Consolidated statement of profit unless otherwise indicated) or loss and other comprehensive income

Note 2020 2019 Note 2020 2019

Finance lease interest income 23 24,366 26,696 Other comprehensive income (loss), net of income tax

Other interest income 23 5,760 4,210 Items that are or may be reclassified subsequently to profit or loss:

Operating lease income 51,213 29,764 Currency translation difference 442 (317)

Interest expense 23 (48,212) (34,745) Net change in fair value of debt instruments remeasured at fair value through other (2) — comprehensive income Depreciation of assets leased out under operating leases 10 (20,614) (13,723) Total items that are or may be reclassified subsequently to profit or loss 440 (317) 12,513 12,202 Other comprehensive income (loss), net of income tax 440 (317) Charge of provision for expected credit losses on interest bearing assets (3,272) (2,112) Total comprehensive income for the year 316 1,660 9,241 10,090 Attributable to: Administrative expenses 24 (4,977) (3,551) - Shareholder 350 1,677 Other operating income 25 2,512 2,854 - Non-controlling interest (34) (17) Other operating expenses 25 (4,188) (3,578)

Net foreign exchange translation (loss)/gain (522) 491

Share in loss of associates and joint ventures (32) —

Charge of provision for expected credit losses on non-interest bearing assets 12 (1,519) (3,727)

Profit before taxation 515 2,579

Income tax expense 16 (639) (602)

(Loss)/profit for the year (124) 1,977

Attributable to:

- Shareholder (90) 1,994

- Non-controlling interest (34) (17)

Approved for issue and signed by the General Director of JSC “GTLK” on 17 March 2021. ______

Ditrikh Е.I., General Director 120 121 01 02 03 04 05 06

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for the year ended 31 December 2020 (all amounts in millions of Russian roubles Consolidated statement unless otherwise indicated) of cash flows

Cash flows from operating activities Note 2020 2019 Cash flows from investing activities Note 2020 2019

Cash received from lessees (except for interest received) 56,123 62,811 Net change in due from banks (3,580) 2,229

Interest received from lessees 24,967 25,906 Granting of loans (15,908) (12,360)

Proceeds from disposal of repossessed equipment 2,322 12,362 Repayment of loans granted 1,446 3,897

Cash paid to suppliers of equipment for leasing purposes (139,003) (244,572) Cash paid under concession agreement (270) (3,616)

Cash paid for insurance of leased equipment (727) (394) Proceeds from sale (acquisitions) of financial assets at fair value through other comprehensive 304 (312) income Interest received from operations other than finance lease 3,310 2,019 Acquisition of financial assets at amortized cost (722) — Interest paid (47,085) (36,616) Acquisition of a subsidiary bank less cash received 5 — (1,748) Government grants related to compensation of interest expenses 2,238 2,957 Proceeds from sale of investment property 330 — Receipts on taxes other than income tax 6,579 3,865 Acquisition of subsidiaries — (2,615) Net income (expenses) from transactions with financial assets at fair value through profit or loss 1,245 (2,643) Net cash flows used in investing activities (18,400) (14,525) Net proceeds (payments) from derivative financial instruments and conversion deals (1,935) 1,533

Administrative and other expenses paid (4,737) (4,276)

Operating lease expenses and net other income received (expenses paid) (2,586) (3,671)

Net cash flows used in operating activities before income tax (99,289) (180,719)

Income tax paid (655) (244)

Net cash flows used in investing activities (99,944) (180,963)

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for the year ended 31 December 2020 (all amounts in millions of Russian roubles Consolidated statement unless otherwise indicated) of changes in equity

Attributable to the shareholder of the Company Cash flows from financing activities Note 2020 2019

Accu- Currency transla- Non-con- Loans and borrowings received 134,836 134,702 Share Additional Total mulated tiondifference and Total trolling capital capital equity Loans and borrowings repaid (96,352) (49,401) losses other reserves interest

Debt securities issued 149,666 113,543 Balance as at 1 January 2019 68,637 20,700 (2,832) 300 86,805 — 86,805 Repayment of debt securities issued (24,585) (2,722)

Lease liabilities paid (7,762) (3,911) Profit for the year — — 1,994 — 1,994 (17) 1,977 Proceeds from sale of non-controlling interests in subsidiaries 45 1,162 Other comprehensive loss for the year — — — (317) (317) — (317) Acquisition of non-controlling interests in subsidiaries (218) — Total comprehensive income — 1,994 (317) 1,677 (17) 1,660 Dividends paid 22 (494) (504) Acquisition of subsidiary (Note 5) — — — — — 1,512 1,512 Share capital 22 — 3,000 Dividends declared (Note 22) — — (504) — (504) — (504) Additional capital 22 15,482 5,900 Ordinary shares issued (Note 22) 3,000 — — — 3,000 — 3,000 Net cash flows from financing activities 170,618 201,769 State subsidy (Note 22) — 10,555 — — 10,555 — 10,555 Effect of changes in exchange rates on cash and cash equivalents 5,567 (2,450) Balance as at 31 December 2019 71,637 31,255 (1,342) (17) 101,533 1,495 103,028 Net increase in cash and cash equivalents 57,841 3,831 Loss for the year — — (90) — (90) (34) (124) Cash and cash equivalents at the beginning of the year 17,686 13,855 Other comprehensive income for the year — — — 440 440 — 440 Cash and cash equivalents at the end of the year 6 75,527 17,686 Total comprehensive income — — (90) 440 350 (34) 316

Acquisition of non-controlling interests in — — — — — (218) (218) subsidiaries (Note 1)

Dividends declared 9 800 (9 800) — — — — —

(Note 22) — — (494) — (494) — (494)

Ordinary shares issued (Note 22) 9,800 (9,800) — — — — —

State subsidy (Note 22) — 11,458 — — 11,458 — 11,458

Balance as at 31 December 2020 81,437 32,913 (1,926) 423 112,847 1,243 114,090

Approved for issue and signed by the General Director Approved for issue and signed by the General Director of JSC “GTLK” on 17 March 2021. of JSC “GTLK” on 17 March 2021. ______

Ditrikh Е.I., General Director Ditrikh Е.I., General Director 124 125 01 02 03 04 05 06

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for the year ended 31 December 2020 (all amounts in millions of Russian roubles unless otherwise indicated)

Company registration Country Date of incorporation/ Share, % 1. Principal activities number of incorporation acquisition date STLC Europe One Leasing Limited 530075 100 Ireland 10 July 2013 JSC “GTLK” (the Company) was incorporated in the Russian On 31 December 2020, a new name of the Company was Federation as a Closed Joint Stock Company “Leasing Com- entered into the Unified State Register of Legal Entities — GTLK AFL Limited 47929 100 Bermuda 11 July 2013 pany of Civilian Aviation” on 12 November 2001. JSC “GTLK”. GTLK BO1 Limited 47930 100 Bermuda 11 July 2013

From 9 February 2015 to 31 December 2020, the Company The Company’s principal business activity is provision of fi- GTLK BO2 Limited 47931 100 Bermuda 11 July 2013 had a public status and was named PJSC “State transport nance and operating leases to companies within the Russian leasing company”. Federation and CIS. GTLK BO3 Limited 47987 100 Bermuda 24 July 2013

STLC Europe Two Leasing Limited 533928 100 Ireland 10 October 2013 Order of the Ministry of Transport of Russia No. DZ- he Company’s registered office is located at 629008, Russia, 225-r dated 20 November 2020 on Resolutions of the Yamalo-Nenetsky avtonomny okrug, Salehard, Respubli- GTLK Malta Limited С62196 100 Malta 10 October 2013 Extraordinary General Shareholders Meeting of Public Joint ki St., 73, office 100. Stock Company “State transport leasing company” approved GTLK BO4 Limited 48730 100 Bermuda 13 February 2014 the Company’s Articles of Association, which excluded its As at 31 December 2020 and 31 December 2019 the sole GTLK BO5 Limited 48734 100 Bermuda 14 February 2014 public status (the legal form remained the same — joint shareholder of the Company is the Russian Federation. stock company) in 2020. GTLK Lietuva 01 UAB 303248146 100 Lithuania 21 February 2014 The Company and its subsidiaries shown in the table below, GTLK BO6 Limited 49036 100 Bermuda 29 April 2014 as at 31 December 2020, form the GTLK Group (the Group). STLC Europe Three Leasing Limited 571533 100 Ireland 10 November 2015

STLC Europe Four Leasing Limited 572072 100 Ireland 18 November 2015

Company registration Country Date of incorporation/ STLC Europe Five Leasing Limited 576865 100 Ireland 10 February 2016 Share, % number of incorporation acquisition date GTLK Malta Two Limited C76031 100 Malta 13 June 2016

LLC “GTLK-Finance” 1046605195405 100 Russia 5 May 2004 GTLK Malta Three Limited C76721 100 Malta 3 August 2016

GTLK Europe DAC 512927 100 Ireland 9 May 2012 STLC Europe Six Leasing Limited 592364 100 Ireland 3 November 2016

LLC “Rozana” 1067746754932 100 Russia 29 November 2016 STLC Europe Seven Leasing Limited 599109 100 Ireland 22 February 2017

GTLK Asia Limited 2742447 100 Hong Kong 5 September 2018 STLC Europe Eight Leasing Limited 599120 100 Ireland 22 February 2017

LLC “GTLK-1520” 1187746938213 100 Russia 15 November 2018 STLC Europe Nine Leasing Limited 606952 100 Ireland 30 September 2017

LLC “Morskoy port “Lavna” 1065190091328 5 Russia 29 November 2016 STLC Europe Ten Leasing Limited 607932 100 Ireland 13 July 2017

LLC “GTLK-Invest” 1167746386917 100 Russia 18 April 2016 GTLK Malta Four Limited C82877 100 Malta 6 October 2017

LLC “Sukhoy Port Yuzhnouralskiy” 1187746907700 100 Russia STLC Europe Eleven Leasing Limited 615290 100 Ireland 14 November 2017

LLC “Logic Land” 1117746778632 100 Russia 31 October 2018 GTLK Malta Five Limited C83767 100 Malta 30 November 2017

GTLK 5737 Limited 522912 100 Ireland 24 January 2013 STLC Europe Sixteen Leasing Limited 573029 100 Ireland 22 December 2017

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Company registration Country Date of incorporation/ Company registration Country Date of incorporation/ Share, % Share, % number of incorporation acquisition date number of incorporation acquisition date

STLC Europe Twelve Leasing Limited 618141 100 Ireland 3 January 2018 GTLK Asia A2 Limited 2855782 100 Hong Kong 24 July 2019

STLC Europe Thirteen Leasing Limited 618947 100 Ireland 17 January 2018 GTLK Asia A3 Limited 2855802 100 Hong Kong 24 July 2019

GTLK Europe Capital DAC 619002 100 Ireland 17 January 2018 GTLK Asia A4 Limited 2855847 100 Hong Kong 24 July 2019

STLC Europe Fourteen Leasing Limited 620555 100 Ireland 7 February 2018 GTLK Asia A5 Limited 2855917 100 Hong Kong 24 July 2019

STLC Europe Fifteen Leasing Limited 620792 100 Ireland 9 February 2018 GTLK Asia M1 Limited 2856042 100 Hong Kong 24 July 2019

STLC Europe Seventeen Leasing Limited 622632 100 Ireland 13 March 2018 GTLK Asia M2 Limited 2856059 100 Hong Kong 24 July 2019

STLC Europe Eighteen Leasing Limited 622633 100 Ireland 13 March 2018 GTLK Asia M3 Limited 2856075 100 Hong Kong 24 July 2019

STLC Europe Nineteen Leasing Limited 622634 100 Ireland 13 March 2018 GTLK Asia M4 Limited 2855871 100 Hong Kong 24 July 2019

STLC Europe Twenty Leasing Limited 622635 100 Ireland 13 March 2018 GTLK Asia M5 Limited 2855885 100 Hong Kong 24 July 2019

STLC Europe Twenty One Leasing Limited 622636 100 Ireland 13 March 2018 GTLK Asia M6 Limited 2855903 100 Hong Kong 24 July 2019

STLC Europe Twenty Two Leasing Limited 622637 100 Ireland 13 March 2018 GTLK Asia M7 Limited 2855916 100 Hong Kong 24 July 2019

STLC Europe Twenty Three Leasing Limited 622638 100 Ireland 13 March 2018 GTLK Asia M8 Limited 2855947 100 Hong Kong 24 July 2019

STLC Europe Twenty Four Leasing Limited 622639 100 Ireland 13 March 2018 GTLK Asia M9 Limited 2855964 100 Hong Kong 24 July 2019

STLC Europe Twenty Five Leasing Limited 622640 100 Ireland 13 March 2018 GTLK Asia M10 Limited 2855975 100 Hong Kong 24 July 2019

STLC Finance One Limited 622641 100 Ireland 13 March 2018 STLC Europe Twenty Nine Leasing Limited 656380 100 Ireland 03 September 2019

GTLK Middle East FZCO DAFZ/1918 100 UAE 7 October 2018 STLC Europe Thirty Leasing Limited 656340 100 Ireland 03 September 2019

STLC Europe Twenty Eight Leasing Limited 623507 100 Ireland 29 March 2019 STLC Europe Thirty One Leasing Limited 656374 100 Ireland 03 September 2019

STLC Finance Two Limited 648981 100 Ireland 29 April 2019 STLC Europe Thirty Four Leasing Limited 656350 100 Ireland 03 September 2019

STLC Europe Twenty Seven Leasing Limited 632650 100 Ireland 17 May 2019 STLC Europe Thirty Five Leasing Limited 656362 100 Ireland 03 September 2019

Swiss STLC Europe Thirty Two Leasing Limited 656418 100 Ireland 04 September 2019 Advanced Logistics & Finance Solutions SA 3492579 100 2 August 2019 Confederation STLC Europe Thirty Three Leasing Limited 656419 100 Ireland 04 September 2019 GTLK Malta Six Limited C92775 100 Malta 31 July 2019 Joint-Stock Commercial Bank “National Reserve 1027700458224 81.32 Russia 06 December 2019 GTLK Asia Aviation Limited 2853204 100 Hong Kong 17 July 2019 Bank” (JSC)

GTLK Asia Maritime Limited 2853207 100 Hong Kong 17 July 2019 NRB-Capital LLC 1207700031395 81.32 Russia 30 January 2020

GTLK Asia A1 Limited 2855940 100 Hong Kong 24 July 2019 GTLK Middle East SPV One Limited 000003318 100 UAE 27 January 2020

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Company registration Country Date of incorporation/ Share, % RUSSIAN BUSINESS ENVIRONMENT As a result of these events, in March to December 2020, number of incorporation acquisition date there were significant changes in the operating environment The Group’s operations are primarily located in the Rus- in the Russian Federation: GTLK Middle East SPV Two Limited 000003323 100 UAE 27 January 2020 sian Federation. Consequently, the Group is exposed to the ― Economic decline and decrease in business activity GTLK Middle East SPV Three Limited 000003954 100 UAE 06 May 2020 economic and financial risks in the markets of the Russian in many economy sectors as a result of govern- Federation, which display emerging-market characteristics. ment-imposed restrictions related to measures to con- GTLK Middle East SPV Four Limited 000003955 100 UAE 06 May 2020 The country’s economy is particularly sensitive to oil and tain the spread of the COVID-19 pandemic; gas prices. Legal, tax and regulatory frameworks continue ― State aid to the citizens and business due to the spread GTLK Middle East SPV Five Limited 000003956 100 UAE 06 May 2020 to be developed, but are subject to varying interpretations of the COVID-19 pandemic; GTLK Middle East SPV Six Limited 000003957 100 UAE 06 May 2020 and frequent changes that, together with other legal and ― High volatility and decrease in stock indices, oil prices; fiscal impediments, contribute to the challenges faced ― Significant decrease in the operations in stock market GTLK Middle East SPV Seven Limited 000003958 100 UAE 06 May 2020 by entities operating in the Russian Federation. and forward market; ― Significant devaluation of the Russian rouble against GTLK Middle East SPV Eight Limited 000003959 100 UAE 06 May 2020 The conflict in Ukraine and related events has increased the main foreign currencies, high volatility in currency GTLK Asia M11 Limited 2972889 100 Hong Kong 31 August 2020 perceived risks of doing business in the Russian Federation. market. The imposition of economic sanctions on Russian individ- GTLK Asia M12 Limited 2972931 100 Hong Kong 31 August 2020 uals and legal entities by the European Union, the United The negative impact of the coronavirus outbreak enhanced States of America, Japan, Canada, Australia and others, by the above country factors contributed to the economic GTLK Asia M13 Limited 2972963 100 Hong Kong 31 August 2020 as well as retaliatory sanctions imposed by the Russian downturn in the country characterized by the fall of the GTLK Asia M14 Limited 2972776 100 Hong Kong 31 August 2020 government, has resulted in increased economic uncertain- gross domestic product. Financial markets are still char- ty including more volatile equity markets, a depreciation acterized by instability, frequent and significant changes GTLK Asia M15 Limited 2972777 100 Hong Kong 31 August 2020 of the Russian Rouble, a reduction in both local and foreign in prices and increase in trading spread. direct investment inflows and a significant tightening in the availability of credit. In particular, some Russian entities Such economic environment has material impact on the may be experiencing difficulties in accessing international activities and financial position of the Group. The manage- In July 2019, AURUM LEASING LIMITED was formed, which In June 2020, JSCB “NRBank” (JSC) acquired a 16% interest equity and debt markets and may become increasingly de- ment takes all measures necessary to ensure sustainable is a joint venture with a third-party investor and 50% owner- in GDC Energy Group LLC (the Group’s ownership interest pendent on Russian state banks to finance their operations. activities of the Group. ship interest of the Group. is 13%), which was accounted for within financial assets at fair The longer term effects of recently implemented sanctions, value through profit or loss. Then in July 2020, the Group start- as well as the threat of additional future sanctions, are On 6 December 2019, the Group acquired 78.19% voting ed to have significant influence over that company because its difficult to determine. shares in Joint-Stock Commercial Bank “National Reserve representatives had been appointed to the company’s board Bank” (Joint-Stock Company) (hereinafter the “Bank” or of directors. Since that moment, that investment has been The consolidated financial statements reflect manage- “JSCB “NRBank” (JSC)”), having obtained an authorization accounted for under the equity method in accordance with IAS ment’s assessment of the impact of the Russian business from the relevant regulatory authorities (Note 5). On 20 28 Investments in Associates and Joint Ventures. environment on the operations and financial position of the May 2020, the Group acquired an additional block of shares Group. The future business environment may differ from increasing its own interest in the Bank up to 81.32%. In August 2020, the general shareholders meeting of Rozana management’s assessment. LLC passed a resolution on voluntary liquidation of this On 16 July 2020, an agreement for the sale of a 100% inter- subsidiary due to the achievement of the goal set. Effect of the COVID-19 global outbreak on the operating est (81.32% at the Group level) in the share capital of Prom environment of the Group Tech Leasing LLC (a subsidiary) was concluded with a third In December 2020, the Group liquidated SkyParts LLC (for- Since the beginning of 2020, the COVID-19 coronavirus (the party. That interest was sold for RUB 45 million, and the sale merly — LLC “Morskoy terminal “Mezhdurechye”) due to the “coronavirus”) outbreak has spread throughout the world, transaction resulted in a profit of RUB 45 million. achievement of the goal set. which has affected the global economy.

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USE OF ESTIMATES AND JUDGMENTS financial asset are solely payments of principal and in- 2. Basis of preparation terest on the principal amount outstanding — see “Clas- In preparing these consolidated financial statements, sification of financial assets and liabilities” in Note 3. the management has made judgements, estimates and ― establishing the criteria for determining whether credit assumptions that affect the application of the Group’s ac- risk on the financial asset has increased significantly STATEMENT OF COMPLIANCE financial position, however, it used all available information counting policies and the reported amounts of assets and since initial recognition, determining methodology for to estimate the quantitative and qualitative impact of these liabilities, income and expense. incorporating forward-looking information into mea- The Group’s financial statements have been prepared events on its financial position. surement of ECL and selection and approval of models in accordance with International Financial Reporting Stan- Estimates and underlying assumptions are reviewed used to measure ECL — Note 4. dards (IFRS), including all previously approved IFRS and When estimating the impact of these events on its financial on an ongoing basis. Revisions to accounting estimates are Interpretations of the Standing Interpretations Committee position, the Group used the updated data of its budgets recognised in the period in which the estimates are revised and International Financial Reporting Standards Interpre- taking into account the updated forecast data. and in any future periods affected. ASSUMPTIONS AND ESTIMATIONS UNCERTAINTY tations Committee. The Company and its subsidiaries and associates keep books and prepare financial statements In its judgements, the Group took into account the support Judgements, estimates and assumptions applied in the Information about assumptions and estimation uncertain- in accordance with the requirements of the legislation ap- measures taken by the Government of the Russian Federa- consolidated financial statements for the for the year ended ties that have a significant risk of resulting in a material plied in the countries of their registration. These financial tion and the Central Bank of the Russia (“CBR”) as effective 31 December 2020, including the main sources of estimation adjustment in the year ended 31 December 2020 is included statements have been prepared on the basis of the RAS at the reporting date. uncertainty, were adjusted in response to new conditions in the following notes: financial statements with adjustments and re-classifica- of business operations. ― impairment of financial instruments: determining tion of items which are required for bringing them in line The management of the Group does not intend to liquidate inputs into the ECL measurement model, including with IFRS. The accounting policies used in the preparation the Group or discontinue its operations. As part of the As part of the recommendations of the IASB and the Eu- incorporation of forward-looking information — Note 4. of these consolidated financial statements are set out going concern assumption, the assets and liabilities are ropean Banking Authority, the Group applied the following ― Impairment of assets leased out under operating below. These principles have been applied consistently accounted for on the basis that the Group will be able to sell international practices to correctly reflect the material lease — Note 10. to all periods presented in the financial statements (unless its assets and perform its liabilities in the ordinary course uncertainties associated with the COVID — 19 pandemic: ― estimates of fair values of financial assets and liabili- otherwise stated). of business. ― Approach to assessing impact of macroeconomic indi- ties — Note 27. cators is updated; ― recognition of deferred income tax assets: availability The consolidated financial statements are presented The Group received total income in 2020 and 2019; the ― Estimated probability of default under the economic of future taxable profit against which carry-forward tax in million of Russian Roubles (here and after — RUB million), Group has positive net assets and net working capital both downturn conditions is adjusted; losses can be utilised — Note 16. unless otherwise stated. as at 31 December 2020 and as at 31 December 2019. ― Algorithm to forecast early repayments in order to as- sess exposure at default (EAD) is adjusted. The Group timely and without delay pays salaries to em- FUNCTIONAL AND PRESENTATION CURRENCY ployees, timely and fully pays the relevant social contribu- Actual results may differ from the judgements, estimates GOING CONCERN tions to insurance funds and other taxes, and makes without and assumptions made by the management and from the The consolidated financial statements are presented in Rus- delay all payments related to the financial and economic estimated results. sian Roubles that are the function and presentation curren- These consolidated financial statements have been pre- activities of the Group, including to service bank and other cy of the Company. Each company in the Group has its own pared assuming that the Group will be a going concern loans, and other liabilities to all creditors. functional currency and financial statement captions of each in the foreseeable future taking into account the coronavi- JUDGEMENTS company are measured in its functional currency. rus impact on its financial position. Information about judgements made in applying account- As at the reporting date assets and liabilities of subsidiaries The Group considers the spread of coronavirus and in- BASIS OF MEASUREMENT ing policies that have the most significant effects on the which functional currency differs from the Group presenta- creased volatility in the markets to be those factors that amounts recognised in the consolidated financial state- tion currency are translated to Russian Roubles at the closing may affect the Group’s ability to continue as a going concern These consolidated financial statements have been pre- ments is included in the following notes: rate at the date of that statement of financial position, income in the future. Due to the uncertainty and duration of the pared under the historical cost principle except for certain ― classification of financial assets: assessment of the and expenses for each statement of profit or loss are trans- above events, the Group cannot accurately and reliably financial assets and liabilities at fair value, which is speci- business model within which the assets are held and lated at year-average exchange rates. All resulting exchange estimate the quantitative impact of these events on its fied further in Note 3 Significant accounting policies. assessment of whether the contractual terms of the differences are recognised in other comprehensive income. 132 133 01 02 03 04 05 06

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This amendment had no impact on the Group’s consolidated STANDARDS ISSUED BUT NOT YET EFFECTIVE 3. Summary of accounting policies financial statements. IFRS 17 Insurance Contracts Amendments to IAS 1 Presentation of Financial The new standard establishes the principles for the recogni- Statements tion, measurement, presentation and disclosure of insur- CHANGES IN ACCOUNTING POLICIES Main changes: The IASB issued limited amendments to IAS 1 Presentation ance contracts and replaces IFRS 4 Insurance Contracts. ― The gaps in definition “measurements” are eliminated; of Financial Statements and to Practice Statement (PS) The standard provides for an application of the general The accounting policies and accounting methods used ― The requirements for the qualitative characteristics 2 Making Materiality Judgements. Both documents relate model modified in accordance with insurance contracts with in preparation of these consolidated financial statements of financial information are disclosed in more details; to the rules for disclosure of information on accounting direct investment components, described as agreements are consistent with the accounting policies and methods ― The criteria for recognition and measurement of the policies in the entity. with a variable insurance compensation. used and described in the Group’s annual consolidated elements of financial statements are harmonized; financial statements for the year ended 31 December 2019, ― The definitions, in particular those of an asset and IAS 1 requires disclosure of material accounting policies The general model is simplified, subject to the defined crite- except for new standards effective for annual periods begin- a liability, are improved; and does not define “significance” but introduces a new defi- ria, by means of measurement of the liability for the remain- ning on and after 1 January 2020 and for application of the ― The criteria for inclusion of assets and liabilities in the nition of “materiality”. Pursuant to the issued amendments, ing coverage using the premium allocation approach. The revised Conceptual Framework for Financial Reporting. financial statements are elaborated. the information on accounting policies will be considered general model will employ current assumptions to estimate The Group has not early adopted any standards, interpreta- material if, combined with other information also included amounts, timing and uncertainties of future cash flows tions or amendments that have been issued but are not yet This version of the conceptual framework had no impact in the financial statements, it may have an impact on the as well as measure separately values of such uncertain- effective. The nature and impact of each amendment are on the Group’s consolidated financial statements. decisions of users of the financial statements regarding this ties. The model is to apply market interest rates and factor described below. entity. in options and guarantees of the policyholders. Profit from Amendments to IFRS 10 Consolidated Financial sale of insurance certificates is deferred to future periods Statements and IAS 28 Investments in Associates and These changes did not have an impact on the Group’s con- in a separate liability component on the 1st day and aggre- Joint Ventures relating to sale or contribution of assets solidated financial statements for 2020. gated in groups of insurance contracts; then it is reflected NEW AND REVISED IFRSS ISSUED AND between an investor and its associate or joint venture. consistently in the statement of profit or loss during the EFFECTIVE ON AND AFTER 1 JANUARY 2020: The amendments clarify that gain or loss are recognised Amendments to IAS 8 Accounting Policies, Changes period, in which insurers provide insurance coverage after in full if assets contributed to an associate or a joint venture in Accounting Estimates and Errors adjustments due to the changes in assumptions on future Conceptual Framework for Financial Reporting constitute a business as defined in IFRS 3 Business Combi- The definition of “materiality” in IAS 8 is changed to the insurance coverage. (Conceptual Framework) nations. Gain or loss resulting from the sale or contribution definition of “materiality” in accordance with IAS 1. Amend- The IASB issued the revised Conceptual Framework for of assets that do not constitute a business are recognised ments are made to other IFRSs and the Conceptual Frame- The standard applies retrospectively unless impracticable, Financial Reporting (Conceptual Framework). The Concep- to the extent of the share in an associate or a joint venture work for Financial Reporting, which contain the definition in which case the modified retrospective approach or the tual Framework is the basis for preparation of all IFRSs not owned by the investor. of “materiality” or refer to the term “materiality”. fair value approach is used. The Group expects that adop- and it also serves as a guidance for the Board itself when tion of these amendments will not have a material impact preparing international financial reporting standards. This amendment had no impact on the Group’s consolidated The IASB revised the definition of accounting estimates, on the Group’s consolidated financial statements. Although any issued standard prevails over the Conceptual financial statements. having indicated that: Framework, the fact that there is a single basic document The standard is effective for annual periods beginning on or helps the Board ensure consistency of the provisions of the Amendment to IFRS 3 Business Combinations a) Accounting estimates are monetary amounts in financial after 1 January 2021. standards, focus on the interests of users of the financial The amendments clarify the requirements for corporate statements that are subject to measurement uncertainty; statements, and compliance with the unified principles. acquisition in order to classify it as a business or as a group b) Such monetary amounts are outputs of measurement Amendments to IAS 1 Presentation of Financial Also, based on the Conceptual Framework, companies pre- of assets. The new amendment only amends Appendix techniques used when applying accounting policies; Statements pare their accounting policies in the situations where there A containing the definitions of terms and application guid- c) An entity uses judgements and/or assumptions in devel- The amendment to IAS 1 Presentation of Financial State- are no particular provisions of the standards. ance as well as gives new illustrative examples. oping an accounting estimate. ments changes paragraphs concerning classification of cur- This amendment had no impact on the Group’s consolidated rent and non-current liabilities. financial statements.

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These amendments should apply to annual reporting peri- BASIS OF CONSOLIDATION rights to, variable returns from its involvement with the tary assets and liabilities denominated in foreign currencies ods beginning on or after 1 January 2022. investee and has the ability to affect those returns through at the reporting date are retranslated to the functional cur- Business combinations its power over the investee. In particular, the Group con- rency at the exchange rate at that date. The foreign currency This amendment will have no material impact on the Business combinations are accounted for using the acqui- solidates investees that it controls on the basis of de facto gain or loss on monetary items is the difference between Group’s consolidated financial statements. sition method as at the acquisition date, which is the date circumstances. The financial statements of subsidiaries amortised cost in the functional currency at the beginning on which control is transferred to the Group. are included in the consolidated financial statements from of the period, adjusted for effective interest and payments the date that control commences until the date that control during the period, and the amortised cost in foreign curren- Annual improvements to standards published The Group measures goodwill as the fair value of the ceases. cy translated at the exchange rate at the end of the reporting by the IASB in May 2019. consideration transferred (including the fair value of any period. Non-monetary items that are measured in terms previously-held equity interest in the acquiree) and the of historical cost in a foreign currency are translated using Amendments to IFRS 9 Financial Instruments recognised amount of any non-controlling interest in the ac- Associates the exchange rate at the date of the transaction. Non-mon- (10% test for derecognition offinancial liabilities) quiree, less the net recognised amount (generally fair value) Associates are those entities in which the Group has etary assets and liabilities denominated in foreign curren- When determining whether to derecognise a financial lia- of the identifiable assets acquired and liabilities assumed, significant influence, but not control, over the financial and cies that are measured at fair value are retranslated to the bility which terms have been changed or modified, an entity all measured as at the acquisition date. When the excess operating policies. The consolidated financial statements functional currency at the exchange rate at the date that shall evaluate whether the terms differ materially or not, is negative, a bargain purchase gain is recognised immedi- include the Group’s share of the total recognised gains and the fair value is determined. Foreign exchange differences based on the 10 per cent criterion. ately in profit or loss. losses of associates on an equity-accounted basis, from the arising on the retranslation are recognised in the consoli- date that significant influence effectively commences until dated statement of profit or loss and other comprehensive Amendments to IAS 41 Agriculture (taxation in fair value The consideration transferred does not include amounts the date that significant influence effectively ceases. When income. measurement) related to the settlement of pre-existing relationships. Such the Group’s share of losses exceeds the Group’s interest It is proposed to exclude from paragraph 22 of IAS 41 Agri- amounts are generally recognised in profit or loss. (including long-term loans) in the associate, that interest Differences between the contractual exchange rate culture the requirement for exclusion of cash flows for tax is reduced to nil and recognition of further losses is dis- of a transaction in a foreign currency and the CBR exchange purposes when measuring fair value upon adoption of this Any contingent consideration payable is measured at fair continued, except to the extent that the Group has incurred rate on the date of the transaction are included in gains less standard. value at the acquisition date. If the contingent consideration obligations in respect of the associate. losses from dealing in foreign currencies. The official CBR is classified as equity, then it is not remeasured and settle- exchange rates as at 31 December 2020 and 31 December IFRS 1 First-time Adoption of IFRS ment is accounted for within equity. Otherwise subsequent 2019 were RUB 73.8757 and RUB 61.9057 to USD 1, respec- The proposed change is to extend exemption provided for changes in the fair value of the contingent consideration are Transactions eliminated on consolidation tively. The official CBR exchange rates as at 31 Decem- by paragraph D16 (a) to cumulative translation gains and recognised in profit or loss. Intra-group balances and transactions, and any unrealised ber 2020 and 31 December 2019 were RUB 90.6824 and losses in the financial statements of a subsidiary that first gains arising from intra-group transactions, are elimi- RUB 69.3406 to EURO 1, respectively. adopts IFRS later than its parent company. The Group elects on transaction-by-transaction basis nated in preparing the consolidated financial statements. whether to measure non-controlling interests at fair value, or Unrealised gains arising from transactions with associates The draft changes propose to compel the subsidiary that de- at their proportionate share of the recognised amount of the are eliminated to the extent of the Group’s interest in the cides to apply paragraph D16 (a) of IFRS 1 First-time Adop- identifiable net assets of the acquiree, at the acquisition date. enterprise. Unrealised gains resulting from transactions OFFSETTING tion of IFRS to measure cumulative translation gains and with associates are eliminated against the investment in the losses using the amounts calculated by the parent company Transaction costs, other than those associated with the associate. Unrealised losses are eliminated in the same Financial assets and liabilities are offset and the net from the date the parent company adopts IFRS. This means issue of debt or equity securities, that the Group incurs way as unrealised gains except that they are only eliminated amount reported in the consolidated statement of financial that the subsidiary does not need to keep double account- in connection with a business combination are expensed to the extent that there is no evidence of impairment. position when there is a legally enforceable right to set off ing due to different dates of IFRS adoption. The proposed as incurred. the recognised amounts and there is an intention to settle change will also apply to an associate or a joint venture that on a net basis, or realise the asset and settle the liability will decide to apply paragraph D16 (a) of IFRS 1. Foreign currency translation simultaneously. Subsidiaries Transactions in foreign currencies are translated to the The amendments are expected to have no material impact Subsidiaries are investees controlled by the Group. The respective functional currencies of the Group entities at the on the Group’s consolidated financial statements. Group controls an investee when it is exposed to, or has foreign exchange rate at the date of the transactions. Mone-

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CASH AND CASH EQUIVALENTS variable lease payments that depend on an index or a rate, The Group has the option, under some of its leases to lease Net investment in leases / financial income from leases and amounts expected to be paid under residual value guar- the assets for additional terms of three to five years. The Net investment in leases is the gross investment in the lease Cash and cash equivalents comprise cash on hand, due antees. The lease payments also include the exercise price Group applies judgement in evaluating whether it is rea- discounted at the interest rate implicit in the lease. Gross from the CBR (except for mandatory cash balances), settle- of a purchase option reasonably certain to be exercised sonably certain to exercise the option to renew. That is, investment in the lease is the sum of the lease payments re- ment accounts and short-term deposits in banks. Deposits by the Group and payments of penalties for terminating it considers all relevant factors that create an economic ceivable by a lessor under a finance lease and any unguaran- in banks are classified as cash and cash equivalents if a lease, if the lease term reflects the Group exercising the incentive for it to exercise the renewal. After the com- teed residual value accruing to the lessor. The interest rate initial contractual maturities of such deposits are less than option to terminate. The variable lease payments that do mencement date, the Group reassesses the lease term if implicit in the lease is the rate of interest rate that causes 3 months. not depend on an index or a rate are recognised as expense there is a significant event or change in circumstances that the present value of the lease payments and the unguaran- in the period on which the event or condition that triggers is within its control and affects its ability to exercise (or not teed residual value to equal the sum of the fair value of the the payment occurs. to exercise) the option to renew (e.g., a change in business underlying asset and any initial direct costs of the lessor. strategy). LEASE In calculating the present value of lease payments, the The difference between the gross investment in the lease Group uses the incremental borrowing rate at the lease and the net investment in leases represents unearned i. Group as a lessee commencement date if the interest rate implicit in the ii. Operating − Group as a lessor finance income. The lessor shall recognise finance income The Group applies a single recognition and measurement lease is not readily determinable. After the commencement Leases in which the Group does not transfer substantially over the lease term, based on a pattern reflecting a con- approach for all leases, except for short-term leases and date, the amount of lease liabilities is increased to reflect all the risks and rewards incidental to ownership of an asset stant periodic rate of return on the lessor’s net investment leases of low-value assets. The Group recognises lease the accretion of interest and reduced for the lease pay- are classified as operating leases. Rental income arising in leases. liabilities to make lease payments and right-of-use assets ments made. In addition, the carrying amount of lease is accounted for on a straight-line basis over the lease representing the right to use the underlying assets. liabilities is remeasured if there is a modification, a change terms and is included in revenue in the statement of profit or Initial direct costs, other than those incurred by manufac- in the lease term, a change in the in-substance fixed lease loss due to its operating nature. Initial direct costs incurred turer or dealer lessors, are included in the initial measure- Right-of-use assets payments or a change in the assessment to purchase the in negotiating and arranging an operating lease are added ment of the net investment in leases and reduce the amount The Group recognises right-of-use assets at the com- underlying asset. to the carrying amount of the leased asset and recognised of income recognised over the lease term. The interest rate mencement date of the lease (i.e., the date the underlying over the lease term on the same basis as rental income. implicit in the lease is defined in such a way that the initial asset is available for use). Right-of-use assets are mea- Short-term leases and leases of low-value assets Contingent rents are recognised as revenue in the period direct costs are included automatically in the net investment sured at cost, less any accumulated depreciation and The Group applies the short-term lease recognition exemp- in which they are earned. in leases; there is no need to add them separately. impairment losses, and adjusted for any remeasurement tion to its short-term leases (i.e., those leases that have of lease liabilities. The cost of right-of-use assets includes a lease term of 12 months or less from the commencement Identifying a lease the amount of lease liabilities recognised, initial direct costs date and do not contain a purchase option). It also applies iii. Finance − Group as a lessor At inception of a contract, an entity shall assess whether the incurred, and lease payments made at or before the com- the lease of low-value assets recognition exemption to leas- contract is, or contains, a lease. A contract is, or contains, mencement date less any lease incentives received. Unless es of office equipment that are considered of low value (i.e., Inception date of the lease a lease if the contract conveys the right to control the use the Group is reasonably certain to obtain ownership of the up to RUB 350 thousand). Lease payments on short-term The inception date of the lease is the earlier of the date of an identified asset for a period of time in exchange for leased asset at the end of the lease term, the recognised leases and leases of low-value assets are recognised as ex- of a lease agreement and the date of commitment by the consideration. For a contract that is, or contains, a lease, right-of-use assets are depreciated on a straight-line basis pense on a straight-line basis over the lease term. parties to the principal terms and conditions of the lease. an entity shall account for each lease component within over the shorter of its estimated useful life and the lease For the purposes of this definition, a contingent commit- the contract as a lease separately from non-lease compo- term. Right-of-use assets are subject to impairment. Significant judgement in determining the lease term ment shall be in writing, signed by the parties interested nents of the contract, unless the entity applies the practical of contracts with renewal options in the transaction and shall describe the material terms and expedient. For a contract that contains a lease component Lease liabilities The Group determines the lease term as the non-cancel- conditions of the transaction. and one or more additional lease or non-lease components, At the commencement date of the lease, the Group rec- lable term of the lease, together with any periods covered a lessor shall allocate the consideration in the contract ognises lease liabilities measured at the present value by an option to extend the lease if it is reasonably certain Commencement date of the lease applying IFRS 15 Revenue from Contracts with Customers. of lease payments to be made over the lease term. The to be exercised, or any periods covered by an option to ter- The commencement date of the lease is the date on which lease payments include fixed payments (including in-sub- minate the lease, if it is reasonably certain not to be exer- a lessor makes an underlying asset available for use The Group begins to accrue interest income from the com- stance fixed payments) less any lease incentives receivable, cised. by a lessee. It is the date of initial recognition of the lease. mencement date of the lease.

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Payments received by the Group from lessees are recorded If assets purchased under an agreement to resell are sold expected to be applied to the temporary differences when Other operating taxes as advances received from lessees (a separate line within to third parties, the obligation to return securities is record- they reverse, based on the laws that have been enacted or Various operating taxes applied to the Group’s operations liabilities) up to the commencement date of the lease and ed as a trading liability and measured at fair value. substantively enacted by the reporting date. are recognised in other operating expenses. recognition of the net investment in leases adjusted for payments received from lessees. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available Any advances to suppliers are recorded as advances to sup- INVESTMENT PROPERTY against which the temporary differences, unused tax losses PROPERTY AND EQUIPMENT AND ASSETS pliers under lease transactions. and credits can be utilised. Deferred tax assets are reduced LEASED OUT UNDER OPERATING LEASES Investment property is property held either to earn rental in- to the extent that taxable profit will be available against Equipment for finance lease come or for capital appreciation or for both, but not for sale which the deductible temporary differences can be utilized. Items of property and equipment and assets leased out un- Items purchased for finance lease purposes represent in normal course of business, or for the use in production or der operating leases are stated at cost less accumulated de- assets purchased for subsequent transfer to lessees but not supply of goods or services or for administrative purposes. preciation and impairment losses. Where an item of property transferred as at the reporting date. The assets are record- Investment property is measured at cost less accumulated Value added tax (VAT) and equipment and assets leased out under operating leases ed at the lower of cost and net realizable value. depreciation and impairment losses. Depreciation is charged The tax authorities permit the settlement of VAT from sales comprises major components having different useful lives, to profit or loss on a straight-line basis over the estimated and purchases on a net basis. they are accounted for as separate items of property and Allowances for expected credit losses useful life. Depreciation commences on the date of acquisi- equipment and assets leased out under operating leases. The Group estimates allowance for expected credit losses tion. The average useful life for premises is 45-50 years. VAT is payable to tax authorities upon accrual of sales. for the net investment in leases using the policy described below and applied to estimate allowance for impairment VAT receivable relates to purchases that have not been Depreciation of financial assets being debt instruments. settled at the reporting date. Depreciation is charged to the consolidated state- TAXATION ment of profit or loss and other comprehensive income Amounts of VAT payable relating to future lease payments, on a straight-line basis over the estimated useful lives of the Income tax excluding lease payments that are deemed current in accor- individual assets. REPURCHASE AND REVERSE REPURCHASE Income tax comprises current and deferred tax. Income dance with lease agreements and included in lease payments AGREEMENTS tax is recognised in profit or loss except to the extent that receivable, are not reflected in the consolidated statement Depreciation commences on the date of acquisition. Depre- it relates to items of other comprehensive income or trans- of financial position. Those amounts are included in the lease ciation of assets under construction and those not placed Securities sold under sale and repurchase (repo) agree- actions with shareholders recognised directly in equity, payments receivable and taxes payable when the lease pay- in service commences from the date the assets are placed ments are accounted for as secured financing transactions, in which case it is recognised within other comprehensive ment becomes due in accordance with the payment schedule. into service. The estimated useful lives are as follows: with the securities retained in the consolidated statement income or directly within equity. of financial position and the counterparty liability includ- ed in payables under repo stated as a separate line in the Current tax expense is the expected tax payable on the consolidated statement of financial position. The difference taxable income for the year, using tax rates enacted or sub- between the sale and repurchase prices represents interest stantially enacted at the reporting date, and any adjustment Aircraft 15-25 years expense and is recognised in profit or loss over the term to tax payable in respect of previous years. of the repo agreement using the effective interest method. Railroad rolling stock 22-32 years Deferred tax is recognised in respect of temporary dif- Premises 50 years Securities purchased under agreements to resell (reverse ferences between the carrying amounts of assets and repo) are recorded as amounts receivable under reverse liabilities for financial reporting purposes and the amounts Equipment and machinery 3-5 years repo transactions. The difference between the purchase and used for taxation purposes. Deferred tax is not recognised resale prices represents interest income and is recognised for the initial recognition of assets or liabilities that affect Vehicles 5 years in profit or loss over the term of the repo agreement using neither accounting nor taxable profit. Deferred tax as- Other 5-7 years the effective interest method. sets and liabilities are measured at the tax rates that are

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The Group has adopted a component based depreciation PROVISIONS The calculation of the effective interest rate includes trans- For information on when financial assets are credit-im- accounting model for certain groups of its assets (such action costs and fees and points paid or received that are paired, see Note below in section Financial assets and as aircraft). Under this approach, depreciation of certain A provision is recognised in the consolidated statement an integral part of the effective interest rate. Transaction financial liabilities, clause 4. Impairment. parts of the relevant assets with a cost that is significant of financial position when the Group has a legal or construc- costs include incremental costs that are directly attributable in relation to the total cost of such assets is calculated tive obligation as a result of a past event, and it is probable to the acquisition or issue of a financial asset or financial Presentation separately. Useful life of these parts may differ from the that an outflow of economic benefits will be required to set- liability. Interest income calculated using the effective interest overall useful life of the relevant assets. The Group esti- tle the obligation. If the effect is material, provisions are method presented in the statement of profit or loss and mates depreciation of certain components based on their determined by discounting the expected future cash flows Amortised cost and gross carrying amount other comprehensive income includes: actual utilisation (not useful life) whenever this depreci- at a pre-tax rate that reflects current market assessments The ‘amortised cost’ of a financial asset or financial liability ― interest on financial assets measured at amortised ation method allows for a more accurate estimate of the of the time value of money and, where appropriate, the risks is the amount at which the financial asset or financial liabil- cost; pattern of consumption of the future economic benefits specific to the liability. ity is measured on initial recognition minus the principal re- ― finance lease interest income. embodied in such components. The Group reviews its payments, plus or minus the cumulative amortisation using assumptions on useful life and/or utilisation on a regular At initial recognition, provisions formed for more than the effective interest method of any difference between that Interest expense presented in the statement of profit or loss basis. 12 months are measured at discounted value of the expect- initial amount and the maturity amount and, for financial and other comprehensive income includes: ed future cash flows at a pre-tax rate that reflects current assets, adjusted for any expected credit loss allowance. ― financial liabilities measured at amortised cost. Costs related to repairs and renewals are charged when in- market assessments of the time value of money and, where curred and included in general and administrative expenses, appropriate, the risks specific to the liability. The ‘gross carrying amount of a financial asset’ measured unless they qualify for capitalization. at amortised cost is the amortised cost of a financial asset FINANCIAL ASSETS AND FINANCIAL LIABILITIES Provisions formed for less than 12 months are not discount- before adjusting for any expected credit loss allowance. ed and are disclosed in the financial statements of the Group 1. Classification of financial instruments separately from long-term provisions. Calculation of interest income and expense INTANGIBLE ASSETS The effective interest rate of a financial asset or financial li- Basis of measurement ability is calculated on initial recognition of a financial asset On initial recognition, a financial asset is classified as mea- Intangible assets include computer software and licenc- or a financial liability. sured at: amortised cost, FVOCI or FVTPL. es. Intangible assets acquired are measured the financial INTEREST INCOME AND EXPENSES statements on initial recognition at cost. Following initial In calculating interest income and expense, the effective A financial asset is measured at amortised cost if it meets recognition, intangible assets are carried at cost less any Effective interest rate interest rate is applied to the gross carrying amount of the both of the following conditions and is not designated accumulated amortisation and any accumulated impair- Interest income and expense are recognised in profit or loss asset (when the asset is not credit-impaired) or to the am- as at FVTPL: ment losses. Intangible assets are amortised over the using the effective interest method. The ‘effective interest ortised cost of the liability. ― the asset is held within a business model whose objec- useful economic lives of 5 to 10 years and assessed for im- rate’ is the rate that exactly discounts estimated future tive is to hold assets to collect contractual cash flows; pairment whenever there is an indication that the intangible cash payments or receipts through the expected life of the However, for financial assets that have become credit-im- and asset may be impaired. financial instrument to: paired subsequent to initial recognition, interest income ― the contractual terms of the financial asset give rise ― the gross carrying amount of the financial asset; or is calculated by applying the effective interest rate to the on specified dates to cash flows that are solely pay- ― the amortised cost of the financial liability. amortised cost of the financial asset. If the asset is no lon- ments of principal and interest on the principal amount ger credit-impaired, then the calculation of interest income outstanding. CONTINGENT ASSETS AND LIABILITIES When calculating the effective interest rate for financial reverts to the gross basis. instruments other than purchased or originated credit-im- A debt instrument is measured at FVOCI only if it meets both Contingent liabilities are not recognised in the consolidated paired assets, the Group estimates future cash flows con- For financial assets that were credit-impaired on initial of the following conditions and is not designated as at FVTPL: financial statements but are disclosed unless the possi- sidering all contractual terms of the financial instrument, recognition, interest income is calculated by applying the ― the asset is held within a business model whose ob- bility of any outflow in settlement is remote. A contingent but not expected credit losses. For purchased or originated credit-adjusted effective interest rate to the amortised cost jective is achieved by both collecting contractual cash asset is not recognised in the consolidated financial state- credit-impaired financial assets, a credit-adjusted effective of the asset. The calculation of interest income does not flows and selling financial assets; and ments but disclosed when an inflow of economic benefits interest rate is calculated using estimated future cash flows revert to a gross basis, even if the credit risk of the asset ― the contractual terms of the financial asset give rise is probable. including expected credit losses. improves. on specified dates to cash flows that are solely pay- 142 143 01 02 03 04 05 06

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ments of principal and interest on the principal amount financial assets to the duration of the liabilities that are ― contingent events that would change the amount and In transactions in which the Group neither retains nor trans- outstanding. funding those assets or realising cash flows through timing of cash flows; fers substantially all of the risks and rewards of ownership the sale of the assets; ― leverage features; of a financial asset and it retains control over the asset, the For debt financial assets measured at FVOCI, gains and ― how the performance of the portfolio is evaluated and ― prepayment and extension terms; Group continues to recognise the asset to the extent of its losses are recognised in other comprehensive income, reported to the Group’s management; ― terms that limit the Group’s claim to cash flows from continuing involvement, determined by the extent to which except for the following, which are recognised in profit or ― the risks that affect the performance of the business specified assets (e.g. non -recourse asset arrange- it is exposed to changes in the value of the transferred asset. loss in the same manner as for financial assets measured model (and the financial assets held within that busi- ments); and at amortised cost: ness model) and how those risks are managed; ― features that modify consideration of the time value Financial liabilities ― interest income using the effective interest method; ― how managers of the business are compensated — e.g. of money — e.g. periodical reset of interest rates. The Group derecognises a financial liability when its con- ― ECL and reversals; and whether compensation is based on the fair value of the tractual obligations are discharged or cancelled, or expire. ― foreign exchange gains and losses. assets managed or the contractual cash flows collect- Reclassification ed; and Financial assets are not reclassified subsequent to their ini- Expected credit losses for debt instruments measured ― the frequency, volume and timing of sales in prior tial recognition, except in the period after the Group changes 3. Modification of financial assets and financial at FVOCI do not reduce the carrying amount of these periods, the reasons for such sales and its expectations its business model for managing financial assets. liabilities financial assets in the statement of financial position, which about future sales activity. However, information about remain to be measured at fair value. Instead, an amount sales activity is not considered in isolation, but as part Financial assets equal to the allowance for expected losses that would arise of an overall assessment of how the Group’s stated 2. Derecognition When the terms of a financial asset change, the Group anal- if the asset was measured at amortised cost is recognised objective for managing the financial assets is achieved yses such a modification for materiality. For this purpose, within other comprehensive income as an accumulated and how cash flows are realised. Financial assets these changes are quantitatively and qualitatively evaluated. impairment, with a relevant charge to profit or loss. The The Group derecognises a financial asset when the contrac- accumulated loss recognised within other comprehensive Financial assets that are held for trading or managed and tual rights to the cash flows from the financial asset expire, When making the quantitative evaluation, the Group income is reclassified to profit and loss at derecognition whose performance is evaluated on a fair value basis are or it transfers the rights to receive the contractual cash considers how materially the cash flows of the modified of the asset. measured at FVTPL because they are neither held to collect flows in a transaction in which substantially all of the risks asset differ before and after the change in the asset terms. contractual cash flows nor held both to collect contractual and rewards of ownership of the financial asset are trans- If the net present value of the cash flows under new terms, All other financial assets are classified as measured at FVTPL. cash flows and to sell financial assets. ferred or in which the Group neither transfers nor retains discounted at the original effective interest rate, materi- substantially all of the risks and rewards of ownership and ally differs from the carrying amount of the original asset In addition, on initial recognition, the Group may irrevoca- Assessment whether contractual cash flows are solely it does not retain control of the financial asset. (by more than 10%), the modification of the asset is consid- bly designate a financial asset that otherwise meets the payments of principal and interest (SPPI test) ered to be material by the Group. For floating-rate financial requirements to be measured at amortised cost or at FVOCI For the purposes of this assessment, ‘principal’ is defined On derecognition of a financial asset, the difference between assets, the original effective interest rate used to calculate as at FVTPL if doing so eliminates or significantly reduces as the fair value of the financial asset on initial recognition. the carrying amount of the asset (or the carrying amount the modification gain or loss is adjusted to reflect current an accounting mismatch that would otherwise arise. ‘Interest’ is defined as consideration for the time value allocated to the portion of the asset derecognised) and the market terms at the time of the modification. of money and for the credit risk associated with the principal sum of the consideration received (including any new asset Business model assessment amount outstanding during a particular period of time and obtained less any new liability assumed) and any cumulative Qualitative changes in the terms of the financial asset, such as: The Group makes an assessment of the objective of a busi- for other basic lending risks and costs (e.g. liquidity risk and gain or loss that had been recognised in other comprehen- ― change in the currency of the financial asset; ness model in which an asset is held at a portfolio level administrative costs), as well as profit margin. sive income is recognised in profit or loss. ― change in the collateral or other credit enhancement, etc., because this best reflects the way the business is managed are considered by the Group as a material modification and information is provided to management. The informa- In assessing whether the contractual cash flows are solely The Group enters into transactions whereby it transfers of the financial asset. tion considered includes: payments of principal and interest, the Group considers the assets recognised on its consolidated statement of financial ― the stated policies and objectives for the portfolio and contractual terms of the instrument. This includes assess- position, but retains either all or substantially all of the risks If, based on the quantitative and qualitative analysis of the the operation of those policies in practice. In particular, ing whether the financial asset contains a contractual term and rewards of the transferred assets or a portion of them. changes in the terms of the financial asset, the modification whether management’s strategy focuses on earning that could change the timing or amount of contractual cash In such cases, the transferred assets are not derecognised. is recognised as material, then the contractual rights to cash contractual interest revenue, maintaining a particu- flows such that it would not meet this condition. In making Examples of such transactions are securities lending and flows from the original financial asset are deemed to have ex- lar interest rate profile, matching the duration of the the assessment, the Group considers: sale-and-repurchase transactions. pired. In this case, the original financial asset is derecognised 144 145 01 02 03 04 05 06

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and a new financial asset is recognised at fair value with any The Group further performs qualitative evaluation of wheth- ing amount of the liability and amortised over the remaining Restructured financial assets eligible transaction costs. Any commissions received as part er the modification is substantial. term of the modified financial liability by re-computing the If the terms of a financial asset are renegotiated or modified of the modification are recognised as follows: effective interest rate on the instrument. or an existing financial asset is replaced with a new one due Financial liabilities to financial difficulties of the counterparty, then an as- ― commissions that are considered in determining the The Group derecognises a financial liability when its terms sessment is made of whether the financial asset should fair value of the new asset and commissions that are modified and the cash flows of the modified liability are 4. Impairment be derecognised (see above clause 3. Modification of finan- represent reimbursement of eligible transaction costs substantially different. In this case, a new financial liability cial assets and financial liabilities) and ECL are measured are included in the initial measurement of the asset and based on the modified terms is recognised at fair value. The The Group recognises loss allowances for expected credit as follows. are amortised over the remaining term of the modified difference between the carrying amount of the financial losses (ECL) on the following financial instruments that are ― If the expected restructuring will not result in derecog- financial asset; liability extinguished and the new financial liability with not measured at FVTPL: nition of the existing asset, then the expected cash ― other commissions are included in profit or loss as part modified terms is recognised in profit or loss. Consideration ― financial assets that are debt instruments; flows arising from the modified financial asset are of the gain or loss on derecognition. paid includes non-financial assets transferred, if any, and ― net investment in leases. included in calculating the cash shortfalls from the the assumption of liabilities, including the new modified existing asset (see Note 4). If, based on the quantitative analysis of the changes in the financial liability. The Group measures loss allowances at an amount equal ― If the expected restructuring will result in derecogni- terms of the financial asset, the modification is recognised to lifetime ECL, except for the following, for which they are tion of the existing asset, then the expected fair value as immaterial (the net present value of the cash flows under Group performs a quantitative and qualitative evaluation measured as 12-month ECL (see Note 4). of the new asset is treated as the final cash flow from new terms, discounted at the original effective interest of whether the modification is substantial considering the existing financial asset at the time of its derecog- rate, differs from the carrying amount of the original asset qualitative factors, quantitative factors and combined effect 12-month ECL are the portion of ECL that result from default nition. This amount is included in calculating the cash by less than 10%), the Group adjusts the carrying amount of qualitative and quantitative factors. The Group concludes events on a financial instrument that are possible within shortfalls from the existing financial asset that are dis- of the asset by restating the present value of the estimated that the modification is substantial as a result of the follow- the 12 months after the reporting date. Financial instru- counted from the expected date of derecognition to the future contractual cash flows, discounting them using the ing qualitative factors: ments for which a 12-month ECL is recognised are referred reporting date using the original effective interest rate original effective interest rate of the financial instrument, ― change the currency of the financial liability; to as ‘Stage 1’ financial instruments. of the existing financial asset. and recognises the resulting difference as a modification ― change in collateral or other credit enhancement; gain or loss in profit or loss. ― inclusion of conversion option; Lifetime ECLs are the ECLs that result from all possi- Credit-impaired financial assets ― change in the subordination of the financial liability. ble default events over the expected life of the financial At each reporting date, the Group assesses whether finan- Changes in cash flows on existing financial assets or instrument. Financial instruments for which a lifetime ECL cial assets carried at amortised cost and finance lease re- financial liabilities are not considered as modification, if For the quantitative assessment the terms are substantially is recognised are referred to as ‘Stage 2’ financial instru- ceivables are credit-impaired. A financial asset is ‘credit-im- they result from existing contractual terms, e.g. changes different if the discounted present value of the cash flows ments (in case of significant increase of credit risk since paired’ when one or more events that have a detrimental in interest rates initiated by the Group due to changes under the new terms, including any fees paid net of any fees initial recognition of financial instrument but not credit-im- impact on the estimated future cash flows of the financial in the CBR key rate, if the agreement entitles the Group received and discounted using the original effective interest paired financial instruments) and ‘Stage 3’ (in case financial asset have occurred. to do so. rate, is at least 10 % different from the discounted present instrument is credit-impaired). value of the remaining cash flows of the original financial Evidence that a financial asset is credit-impaired includes If cash flows are modified when the counterparty is in fi- liability. Measurement of ECL the following observable data: nancial difficulties, then the objective of the modification ECL are a probability-weighted estimate of credit losses. ― significant financial difficulty of the counterparty or is usually to maximise recovery of the original contractual If the modification of a financial liability is not accounted They are measured as follows: issuer; terms rather than to originate a new asset with substantial- for as derecognition, then the amortised cost of the liability ― financial assets that are not credit-impaired at the re- ― a breach of contract such as a default or past due event; ly different terms. If the Group plans to modify a financial is recalculated by discounting the modified cash flows at the porting date: as the present value of all cash shortfalls ― the restructuring of a financial instrument or advance asset in a way that would result in forgiveness of cash original effective interest rate and the resulting gain or loss (i.e. the difference between the cash flows due to the by the Group on terms that the Group would not consid- flows, then it first considers whether a portion of the asset is recognised in profit or loss. For floating-rate financial lia- entity in accordance with the contract and the cash er otherwise; should be written off before the modification takes place bilities, the original effective interest rate used to calculate flows that the Group expects to receive); ― it is becoming probable that the counterparty will enter (see below for write-off policy). This approach impacts the the modification gain or loss is adjusted to reflect current ― financial assets that are credit-impaired at the reporting bankruptcy or other financial reorganisation. result of the quantitative evaluation and means that the market terms at the time of the modification. Any costs and date: as the difference between the gross carrying amount derecognition criteria are not usually met in such cases. fees incurred are recognised as an adjustment to the carry- and the present value of estimated future cash flows. 146 147 01 02 03 04 05 06

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A financial instrument that has been renegotiated due GENERAL AND ADMINISTRATIVE EXPENSES to a deterioration in the counterparty’s condition is usually 4. Use of estimates and judgments considered to be credit-impaired unless there is evidence that All expenses incurred by the Group other than those the risk of not receiving contractual cash flows has reduced recorded in the separate lines of the consolidated state- The preparation of these consolidated financial statements As part of general approach, allowance for expected credit significantly and there are no other indicators of impairment. ment of profit or loss and other comprehensive income are in conformity with International Financial Reporting Stan- losses is formed based on: recorded as general and administrative expenses. General dards (IFRS) requires management to make judgments, ― 12-month expected credit losses: for financial in- Presentation of allowance for ECL in the consolidated and administrative expenses are recognised on the accrual estimates and assumptions that affect the application struments without any factors evidencing significant statement of financial position basis in the period to which they relate. of policies and the reported amounts of assets and liabil- deterioration of credit quality since the date of initial Loss allowances for ECL are presented in the consolidated ities, income and expense. The estimates and associated recognition and without signs of impairment; statement of financial position as follows: assumptions are based on historical experience and various ― Lifetime expected credit losses: for financial instru- ― financial assets measured at amortised cost: as a de- other factors that are believed to be reasonable under the ments, for which factors evidencing significant dete- duction from the gross carrying amount of the assets. SHARE CAPITAL circumstances, the results of which form the basis of mak- rioration of credit quality and signs of impairment are ing the judgments about carrying values of assets and identified. Write-offs Share capital liabilities that are not readily apparent from other sources. Financial instruments are written off (either partially or Issued and paid ordinary shares are classified as equity. Any Although these estimates are based on management’s best Factors of Significant Deterioration of Credit Quality in full) when there is no reasonable expectation of recover- excess of the fair value of consideration received over the knowledge of current events and actions, actual results The factors of significant deterioration of credit quality ing a financial asset in its entirety or a portion thereof. This par value of shares issued is recognised as share premium ultimately may differ from these estimates. include: is generally the case when the Group determines that the (additional capital). counterparty does not have assets or sources of income The estimates and underlying assumptions are reviewed а) Past due debts to the Group as at the reporting date that could generate sufficient cash flows to repay the on an ongoing basis. Revisions to accounting estimates are on principal amount and/or interest as well as on other amounts subject to the write-off. This assessment is car- Dividends recognised in the period in which the estimate is revised if contractual payments for: ried out at the individual asset level. Dividends are recognised as a liability and deducted from the revision affects only that period or in the period of the ― 31 to 90 days for financial instruments, the counterpar- equity at the reporting date only if they are declared before revision and future periods if the revision affects both cur- ty under which is not a state/budget-funded institution Recoveries of amounts previously written off are included or on the reporting date. Dividends are disclosed when they rent and future periods. (sources of repayment of liabilities for the financial in ‘impairment losses on financial instruments’ in the state- are proposed before the reporting date or proposed or de- instrument are not provided for by the budget of a coun- ment of profit or loss and other comprehensive income. clared after the reporting date but before the consolidated try, region, or municipality). financial statements are authorised for issue. ― 181 to 270 days for financial instruments, the counter- Financial assets that are written off could still be sub- ALLOWANCES FOR EXPECTED CREDIT LOSSES party under which is a state/budget-funded institution ject to enforcement activities in order to comply with the ON FINANCIAL INSTRUMENTS (sources of repayment of liabilities for the financial instru- Group’s procedures for recovery of amounts due. ment are provided for by the budget of a country, region, SEGMENT REPORTING Key Principle of Allowance Calculation or municipality in a separate line) in accordance with IFRS In accordance with IFRS 9 Financial Instruments, to make 9 Financial Instruments in part of rebuttable presumption The Group’s operations constitute a single industry seg- allowances for financial instruments, the Group uses an ex- on payments past due for more than 30 days. FEE AND COMMISSION INCOME AND EXPENSE ment — leases. The newly acquired “banking services” pected credit loss model, which key principle is to timely segment (see Note 5) does not exceed the quantitative record any deterioration or improvement in financial b) Material aggravation of the score for a financial instru- Fees, commissions and other income and expense items thresholds specified in IFRS 8 Operating Segments, which instruments’ credit quality subject to the current and fore- ment as compared to the forecast. are recorded on an accrual basis when the service has been is insignificant both for analysis by the Group’s management cast information. The volume of the expected credit losses provided. and for disclosures in the Notes. recognised as allowance depends on the extent of a change The score reflects the credit quality of a counterparty under in the credit quality from the date of initial recognition a financial instrument and is calculated as part of a scoring of a financial instrument. model based on the counterparty’s financial performance.

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Signs of impairment reporting dates, the Group classifies financial instruments cash flows from possible sale of the leased item/collateral for impairment. Recoverable amount is most sensitive The signs of impairment include: as one of the following stages: in case of default, multiplied by the probability of such default. to the discount rate used in the discounted cash flow model and to the expected cash inflows and growth rates used а) Past due debts to the Group as at the reporting date Stage 1. Financial instruments, for which there are no fac- for extrapolating. Further details on the key assumptions on principal amount and/or interest as well as on other tors evidencing a significant deterioration of the credit Individual approach to allowance calculation used in determining the recoverable amount of the var- contractual payments for: quality and which bear no signs of impairment, for which As part of calculation of allowance for expected credit loss- ious cash-generating units are presented and explained ― More than 90 days for financial instruments, the 12-month expected credit losses are estimated. es, the Group may apply an individual approach to allowance in Note 10. counterparty under which is not a state/budget-funded calculation. This approach is mostly applicable to calcula- institution (sources of repayment of liabilities for the Stage 2. Financial instruments, for which there are factors tion of allowance for financial instruments at the third stage financial instrument are not provided for by the budget evidencing a significant deterioration of the credit quality, of impairment. Income tax of a country, region, or municipality). but which bears no signs of impairment, for which lifetime Deferred income tax assets are recognised on unused tax ― More than 270 days for financial instruments, the coun- expected credit losses are estimated. As part of an individual approach to allowance calculation, losses to the extent that it is probable that taxable profit will terparty under which is a state/budget-funded institu- the most probable scenarios of the expected contractual be available in the future, against which the tax losses can tion (sources of repayment of liabilities for the financial Stage 3. Financial instruments bearing signs of impairment, cash flows are expertly assessed. be utilized. instrument are provided for by the budget of a country, for which lifetime expected credit losses are estimated. region, or municipality in a separate line). To calculate the recoverable amount for each scenario, To determine the amount of deferred income tax assets, the timing and amount of receipts to repay the debt are which may be recognised in the financial statements based b) Initiation and/or performance of restructuring procedure. Credit Quality Recovery assessed and the discounted cash flow method is applied on the probable period of receipt and the amount of future The credit quality recovery means the transfer of a financial using the effective interest rate as the discount rate. taxable profit as well as the tax planning strategy, manage- c) Initiation of a bankruptcy case against the counterparty. instrument to another (better) stage: from stage 3 or stage ment’s significant judgement is required. 2 to stage 1. d) Inclusion of the counterparty in the List of Organisations Impairment of non-financial assets Tax losses carried forward by the Group amount and Individuals with Respect to which there is Evidence In accordance with the Group’s policy, financial instru- There is an impairment if the carrying amount of the to RUB 73,936 million as at 31 December 2020 of their Involvement in Extremist or Terrorist Activities. ments are considered to be recovered and, therefore, are cash-generating asset or unit exceeds its recoverable (RUB 54,637 million as at 31 December 2019). These losses transferred from Stage 3, when none of the default criteria amount, which is the largest of fair value less costs of dis- are associated with the subsidiaries that had losses in the e) Beginning of the counterparty’s liquidation procedure has been observed for at least three consecutive months. posal or value in use. The measurement of fair value less previous periods, have no period of limitation, and can or exclusion of the counterparty from the Unified State A decision whether the asset should be classified as Stage costs of disposal is based on the available information be utilized against the taxable profit of the Group. Based Register of Legal Entities upon a decision of a tax authority 2 or Stage 1, if recovered, depends on the revised cred- on binding transactions in sale of similar assets at arms’ on tax planning, the Group concluded that it was unable (except liquidation is connected with transfer of the activi- it rating at the time of recovery and evaluation whether length or on observable market prices less additional costs to recognise deferred income tax assets in respect of the ties to another legal entity). there is a significant increase in the credit risk since initial that would have been incurred due to disposal of the asset. tax losses carried forward and amounting to RUB 2,486 mil- recognition as well as if there is no past due debts as at the The measurement of value in use is based on a discounted lion as at 31 December 2020 (RUB 118 million as at 31 De- reporting date. cash flow model. Cash flows are drawn from the budget cember 2019). If the Group was able to recognise all unrec- Classification of financial instruments by impairment for the next five (or more) years and do not include restruc- ognised deferred income tax assets, profit and equity would stages turing activities for which the Group has no commitments increase by RUB 2,500 million as at 31 December 2020 As at the reporting date, each financial instrument is clas- Allowance calculation model or substantial investments in the future that will improve (RUB 24 million as at 31 December 2019). Further details sified to one of the stages, depending on the identification Allowance for expected credit losses is determined as the the asset results of the cash-generating unit being tested on taxes are presented in Note 16. of factors of significant deterioration of credit quality or difference between all contractual cash flows that are due signs of impairment. to the entity and all the cash flows that the entity expects to receive, discounted at the effective interest rate. In accordance with the general approach, as at the recog- nition date, financial instruments are classified as stage 1; Expected cash flows are determined taking into account further, depending on the degree of deterioration of credit the analysis of the probability of each contractual payment quality from the date of initial recognition as at subsequent default based on the transfer matrix and take into account the 150 151 01 02 03 04 05 06

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Fair value recognised at the acquisition

5. Business combinations Liabilities

Debt securities issued 39

Trade and other payables 1,945 ACQUISITION OF JOINT-STOCK COMMERCIAL and provides other banking services to its commercial and BANK “NATIONAL RESERVE BANK” (JOINT- retail customers. The main purpose of the acquisition of the Income tax payable 168 STOCK COMPANY) Bank by the Group is to achieve the synergy effect from the Group’s access to banking products and services both Other than income tax payable 52 On 6 December 2019, the Group acquired 78.19% voting to increase the Group’s income and profit and to expand the Total liabilities 2,204 shares in Joint-Stock Commercial Bank “National Reserve range of services offered to the Group’s major clients and Bank” (Joint-Stock Company), having obtained an authori- their partners. Total identifiable net assets 6,933 zation from the relevant regulatory authorities. The Bank accepts deposits from the public and extends credit, trans- As at the acquisition date, the fair value of the acquired Non-controlling interest (1,512) fers payments in Russia and abroad, exchanges currencies, identifiable assets and liabilities of the Bank amounted to: Excess of acquisition cost over fair value of net assets 2

Consideration transferred at the acquisition 5,423

Fair value recognised at the acquisition

Assets The excess of acquisition cost over fair value of net assets Since the acquisition date, the Bank’s contribution to the in the amount of RUB 2 million has not caused formation Group’s financial result for the main activities has amount- Cash and cash equivalents 3,675 of goodwill; this excess has been simultaneously recognised ed to RUB (10) million, to other losses — RUB (67) million, Financial assets at fair value through profit or loss 158 in the consolidated statement of profit or loss and other to the Group’s net profit before tax — a loss in the amount comprehensive income in other operating expenses. of RUB (77) million. If combined at the beginning of the year, Due from banks 21 the Bank’s contribution to the Group’s financial result for the

Other receivables 148 The Group has decided to measure the non-controlling in- main activities would have amounted to RUB (397) million, terest in the Bank by the owned share of identifiable net as- to other losses — RUB (561) million, to the Group’s net profit Loans granted 2,527 sets of the acquiree pro rata to the non-controlling interest. before tax — a loss in the amount of RUB (958) million.

Financial assets at fair value through other comprehensive income 448

Inventories 1 Cash outflow on acquisition of the subsidiary

Investment property 2,059

Property and equipment, intangible assets and right-of-use assets 60 Transaction costs of the acquisition (included in cash flows from operating activities) (2) Income tax receivable 40 Net cash acquired with the subsidiary (included in cash flows from investing activities) 3,675 Total assets 9,137 Cash paid (included in cash flows from investing activities) (5,423)

Net cash outflow (1,750)

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The transaction costs of RUB 2 million have been expensed and are included in other operating expenses. RUB 3,477 million). The interest rate on the deposits varies All cash and cash equivalents are classified as Stage 1. from 0.15% to 5.0% (31 December 2019: from 0.7% to 6.7%) depending on its currency, outstanding amount and term. Analysis of changes of allowance for expected credit losses The Group can withdraw funds placed into these deposits for the year ended 31 December 2020 and year ended 31 De- at any time before the agreed term but in this case the inter- cember 2019 is shown in the tables below: 6. Cash and cash equivalents est rate will be significantly reduced.

2020 2019 31 December 31 December 2020 2019 Allowance for expected credit losses as at 1 January — —

Cash on hand 101 123 Creation of allowance for expected credit losses 1 —

Cash balances with the CBR, other than mandatory reserve deposits 531 160 Allowance for expected credit losses as at 31 December 1 —

Correspondent accounts and overnight deposits with other credit institutions:

- From the range rated AA 27 22

- From the range rated A 39,868 6,386

- From the range rated BBB 13,959 3,378

- From the range rated BB 17,388 2,325 7. Financial assets at fair value through - Other banks 3,654 3,306 profit or loss Repurchase and reverse repurchase agreements with other credit institutions Financial assets at fair value through profit or loss (“FVTPL”) - From the range rated BBB — 1,986 include the following positions:

75,528 17,686

Allowance for expected credit losses (1) —

Total cash and cash equivalents 75,527 17,686 31 December 31 December 2020 2019

Trading financial assets 487 2,808

The ratings shown in the table above represent classifica- As at 31 December 2020 the amount of cash and cash Derivative financial instruments — 423 tion by long term credit ratings as reported by S&P rating equivalents for special use is RUB 3,772 million (31 Decem- agency, or Moody’s and Fitch’s ratings, translated into ber 2019: RUB 3,812 million). Total financial assets at FVTPL 487 3,231 S&P’s equivalent rating. As at 31 December 2020 cash and cash equivalents in- clude deposits of RUB 28,521 million (31 December 2019: 154 155 01 02 03 04 05 06

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Derivative financial instruments include derivatives not meet- Trading financial assets owned by the Group include the The ratings shown in the table above represent classifica- institution. The Bank’s ability to withdraw such deposit ing the requirements for hedge accounting under to IFRS 9. following positions: tion by long term credit ratings as reported by S&P rating is significantly restricted by the legislation. agency, or Moody’s and Fitch’s ratings, translated into S&P’s equivalent rating. As at 31 December 2020 due from banks includes deposits of RUB 3,612 million (31 December 2019: RUB 64 million). All amounts due from banks are classified as Stage 1. The interest rate on the deposits varies from 0.3% to 5.0% 31 December 31 December (31 December 2019: from 5.0% to 6.2%) depending on its 2020 2019 Credit institutions (in particular, JSCB “NRBank” (JSC)) are currency, outstanding amount and term. The Group can required to maintain a non-interest earning cash depos- withdraw funds placed into these deposits at any time Debt securities it (mandatory cash balance) with the CBR, the amount before the agreed term but in this case the interest rate will Russian Federation federal loan bonds (OFZs) 487 2,078 of which depends on the volume of cash raised by the credit be significantly reduced.

Bonds of the CBR — 699

Equity securities — 31

Total trading financial assets 487 2,808 9. Net investment in leases

31 December 31 December 8. Due from banks 2020 2019

Amounts due from banks include the following positions: Gross investment in leases 470,387 420,018

Unearned financial income (173,165) (170,250)

Net investment in leases gross of allowance for expected credit losses 297,222 249,768 31 December 31 December 2020 2019 Allowance for expected credit losses (6,849) (3,261)

Mandatory cash balances on accounts with the CBR 43 19 Net investment in leases 290,373 246,507

Term deposits with other credit institutions:

- From the range rated BBB 63 63 The Group holds title to the leased assets during the lease The Group provides two types of finance lease products

- From the range rated BB 3,549 1 term. Titles to the assets under finance lease agreements to its customers: commercial leases and noncommercial pass to the lessees at the end of the lease term. Risks leases. There are no differences in internal procedures 3,655 83 related to the leased property such as damage and theft are of risk assessment and decision making between these two insured. The beneficiary under the insurance policy on the types of leases. Unified risk management policy is applied Allowance for expected credit losses — — vast majority of the lease agreements is the Group. to all the financial leases regardless of their type. Total due from banks 3,655 83 Net investment in leases are secured by assets for which leases were obtained, such as railroad rolling stock, air- 156 craft, cars, other vehicles and equipment. 157 01 02 03 04 05 06

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NON-COMMERCIAL LEASES Ueased assets should be new and produced or assembled The currency breakdown of the net investment in leases in the Russian Federation. The lease terms under non-­ as at 31 December 2020 is as follows: Non-commercial lease programmes are programmes/ commercial leases vary from 2 to 20 years projects implemented by the Group in the course of its ordinary business activity, which are specifically aimed to promote the governmental policy in transportation and transport infrastructure development, including replace- Net investment in leases Allowance for Net COMMERCIAL LEASES Gross investment ment of the existing fleet of transportation companies Unearned income gross of allowance for expected credit investment in leases by the higher-efficiency innovative domestically manufac- Commercial leases are a standard lease program under which expected credit losses losses in leases tured equipment. leases are issued on market terms. The commercial leases program has no specific requirements to lessees except that USD 95,183 (30,184) 64,999 (202) 64,797

Non-commercial lease programmes funding is sourced from they must meet requirements on their financial position and EURO 22,887 (7,920) 14,967 (81) 14,886 the capital contributions received from the federal budget creditworthiness. There are no specific requirements related and the moneys borrowed, both in accordance with terms to the type of leased assets. These types of lease agreements RUB 352,317 (135,061) 217,256 (6,566) 210,690 and conditions of the relevant programmes. The procedure are funded with borrowings from third parties. The lease term Total 470,387 (173,165) 297,222 (6,849) 290,373 for funding these programs is regulated by the regulations under commercial leases normally varies from 3 to 21 years. of the Government of the Russian Federation and the Minis- try of Transport of Russia and applies to the entities involved Accounts receivable under finance lease agreements (gross in the transport infrastructure of the Russian Federation. investment in leases) and their present value are as follows: The currency breakdown of the net investment in leases as at 31 December 2019 is as follows:

31 December 31 December 2020 2019 Net investment in leases Allowance for Net Gross investment in leases Gross investment Unearned income gross of allowance for expected credit investment in leases Less than 1 year 55,190 42,941 expected credit losses losses in leases

From 1 year to 2 years 44,158 39,637 USD 84,260 (28,626) 55,634 (67) 55,567

2–3 years 41,611 37,771 RUB 335,758 (141,624) 194,134 (3,194) 190,940

3–4 years 40,099 35,782 Total 420,018 (170,250) 249,768 (3,261) 246,507

4–5 years 40,127 33,043

More than 5 years 249,202 230,844

Gross investment in leases 470,387 420,018

Unearned finance income (173,165) (170,250) ALLOWANCE FOR EXPECTED CREDIT LOSSES (“ECL”) FOR NET INVESTMENT IN LEASES Net investment in leases gross of allowance for expected credit losses 297,222 249,768 Analysis of changes of gross carrying amount of net Allowance for expected credit losses (6,849) (3,261) investment in leases and relevant ECLs for the year ended Net investment in leases 290,373 246,507 31 December 2020 is shown in the tables below:

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Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Gross carrying amount as at 1 January 2020 225,642 12,558 11,568 249,768 Gross carrying amount as at 1 January 2019 216,476 9,048 1,965 227,489

Transfer to Stage 1 2,242 (2,242) — — Transfer to Stage 1 5,809 (5,734) (75) —

Transfer to Stage 2 (21,589) 21,589 — — Transfer to Stage 2 (12,240) 12,607 (367) —

Transfer to Stage 3 (10,523) (4,238) 14,761 — Transfer to Stage 3 (7,047) (3,197) 10,244 —

Net changes of gross carrying amount (10,382) (1,122) 8,031 (3,473) Net changes of gross carrying amount (13,409) (49) (199) (13,657)

Newly originated or acquired financial assets 81,570 — — 81,570 Newly originated or acquired financial assets 111,863 — — 111,863

Financial assets that have been derecognised (34,178) — (8,271) (42,449) Financial assets that have been derecognised (75,810) (117) — (75,927)

Foreign exchange 9,543 2,263 — 11,806 Foreign exchange — — — —

Gross carrying amount as at 31 December 2020 242,325 28,808 26,089 297,222 Gross carrying amount as at 31 December 2019 225,642 12,558 11,568 249,768

Analysis of changes of gross carrying amount of net investment in leases and relevant ECLs for the year ended 31 December 2019 is shown in the tables below: Stage 1 Stage 2 Stage 3 Total

Expected credit losses as at 1 January 2019 1,371 185 296 1,852

Transfer to Stage 1 112 (99) (13) — Stage 1 Stage 2 Stage 3 Total Transfer to Stage 2 (576) 584 (8) — Expected credit losses as at 1 January 2020 1,105 1,283 873 3,261 Transfer to Stage 3 (430) (83) 513 — Transfer to Stage 1 49 (49) — — Net changes of allowance for expected credit losses (273) 699 85 511 Transfer to Stage 2 (210) 210 — — Newly originated or acquired financial assets 1,126 — — 1,126 Transfer to Stage 3 (474) (246) 720 — Financial assets that have been derecognised (225) (3) — (228) Net changes of allowance for expected credit losses 287 912 1,409 2,608 Foreign exchange — — — — Newly originated or acquired financial assets 1,227 — — 1,227 Expected credit losses as at 31 December 2019 1,105 1,283 873 3,261 Financial assets that have been derecognised (94) — (168) (262)

Foreign exchange 14 1 — 15

Expected credit losses as at 31 December 2020 1,904 2,111 2,834 6,849

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Railroad rolling stock OTHER INFORMATION ON NET INVESTMENT spective finance lease agreements passes to the lessee, Aircrafts Total IN LEASES subject to all lease payments made (31 December 2019: and other equipment 120 months). Balance as at 31 December 2019 241,118 141,997 383,115 As at 31 December 2020, net investment in leases with five largest lessees comprised 32.2% of the Group’s net As at 31 December 2020 the amount of gross investment Additions 9,512 55,187 64,699 investment in leases gross of allowance for expected credit in leases related to contracts that have been signed off but losses, or RUB 95,731 million (31 December 2019: 32.9%, have not commenced is RUB 315,093 million (31 December Disposals (2,444) (1,798) (4,242) or RUB 82,188 million). These lessees related to the air, 2019: RUB 231,739 million). Translation difference 33,158 — 33,158 railroad and water transport business. The total amount of interest income received from five largest lessees for the As at 31 December 2020 and 31 December 2019, certain as- Balance as at 31 December 2020 281,344 195,386 476,730 2020 amounted to RUB 7,029 million, or 28.8% of the total sets leased out or flows under financial leases were pledged Accumulated depreciation finance lease income (for the 2019: RUB 6,542 million, or to secure loans received. As at 31 December 2020, net in- 23.3% of the total finance leases income). vestment in leases in the total amount of RUB 208,092 mil- Balance as at 1 January 2019 (28,362) (782) (29,144) lion (31 December 2019: RUB 168,578 million) related As at 31 December 2020, the average lease term is 120 to assets used to collateralize loans received. Depreciation charge (12,556) (1,167) (13,723) months, after which the title to the assets under re- Disposals — 147 147

Aircraft maintenance 1,400 — 1,400

Reversal of previously recognised impairment 184 — 184 10. Assets leased out under operating leases Translation difference 2,927 — 2,927 Balance as at 31 December 2019 (36,407) (1,802) (38,209) Assets leased out under operating leases are mainly rep- Movements in assets leased out under operating leases are Depreciation charge (14,770) (5,844) (20,614) resented by aircraft and railway rolling stock and include as follows: assets that have already been leased and are in the process Disposals 771 314 1,085 transfer to operating leases. Aircraft maintenance 550 — 550

Reversal of previously recognised impairment — — —

Translation difference (5,625) — (5,625) Railroad rolling stock Aircrafts Total and other equipment Balance as at 31 December 2020 (55,481) (7,332) (62,813)

Cost Carrying amount

Balance as at 1 January 2019 198,867 6,105 204,972 As at 1 January 2019 170,505 5,323 175,828

Additions 58,867 136,907 195,774 As at 31 December 2019 204,711 140,195 344,906

Disposals — (1,015) (1,015) As at 31 December 2020 225,863 188,054 413,917

Translation difference (16,616) — (16,616)

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Maturity breakdown of non-cancellable minimum cash Aircraft impairment analysis for 2020 was prepared using expected residual value of the aircraft which is based inflows (including VAT) from operating lease is presented two-stage testing. The scope of testing includes 51 aircraft on the data received from an independent appraiser. below: leased out to a number of lessees under operating leases ― value in use is based on the net present value of ex- and 5 aircraft in remarketing. Stage 1 testing is performed pected cash flows calculations. Discount rate applied by comparing with the current market value provided is 2.2% (31 December 2019: 5%) by five independent appraisers. Stage 2 testing was applied to the remaining aircraft based on the discounted cash flow Sensitivity of the recoverable amount of aircrafts produced 31 December 31 December model. The model combines the expected cash flows from in Russia to changes in that assumption: 2020 2019 operating activities for each aircraft and the estimated cost ― a decrease in the discount rate by 0.22% does not lead of selling the aircraft at the end of the lease. to a property and equipment impairment loss, while Less than one year 48,861 46,612 an increase in the discount rate by 0.22% does not lead From one year to two years 53,056 44,325 For the purposes of the model, the following assumptions to an impairment loss as well. were made: From two years to three years 54,479 42,443 ― Impairment test is performed to evaluate the efficiency Discount rate applied for domestically produced aircraft

From three years to four years 45,771 43,971 of assets during the current lease term, assuming sale was adjusted to reflect governmental subsidies related of the aircraft at the end of the lease term; to compensation of interest expenses on bank loans. From four years to five years 44,174 37,319 ― Future maintenance reserve payments are based on average utilization rates and rates for each compo- Impairment tests in respect of railroad rolling stock of total More than five years 124,706 151,675 nent of the aircraft; carrying value of RUB 188,054 million (as at 31 December Total 371,047 366,345 ― All the costs of inspections and their timings are based 2019 RUB 140,195 million) are based on the following judge- on technical analysis reports provided by the technical ments: team; ― fair value of the assets less direct selling costs is based ― The cost of selling of the aircraft at the end of the lease on comparable market offerings analysis in respect to RUB 13,396 million, or 26.2% of the total income from op- is based on future cost forecasts provided by indepen- of similar equipment, and further adjustments to ac- As at 31 December 2020 the aircraft of total carrying erating leases (for 2019: RUB 12,739 million, or 42.8% of the dent appraisers. count for a discount that may be applicable to the sale value of RUB 15,447 million were received by the Group total income from operating leases). The base discount rate of 5.59% (2019: 5.5%) is determined transaction. under lease agreements. The present value of minimum with using of the weighted average cost of capital using lease payments under these arrangements as at the As at 31 December 2020 and 31 December 2019, one of the certain assumptions . Key judgements applied for impairment tests are attribut- reporting date is RUB 12,067 million (31 December 2019: largest railway operators not being a related party was the able to Level 3 of the fair value hierarchy. RUB 13,502 million and RUB 10,816 million, respectively). largest lessee under railway rolling stock operating lease Sensitivity of the recoverable amount of aircrafts produced agreements. Its share accounts for 34.7% of all assets in Russia to changes in that assumption: Based on the results of a test, no impairment as at 31 De- As at 31 December 2020 assets leased out under operating leased out under operating leases (2019: 37.5%). The income ― decrease in the discount rate by 0.56% does not lead cember 2020 was identified either. leases of total carrying value of RUB 254,915 million (31 De- received from operating lease to this railway operator not to a property and equipment impairment loss, while cember 2019: RUB 141,820 million) were pledged to secure being a related party for 2020 amounted to RUB 18,284 mil- an increase in the discount rate by 0.56% would lead As a result as at 31 December 2019, reversal of previously loans received. lion, or 35.7% of the total income from operating leases (for to an impairment loss of RUB 136 million. recognised impairment of assets leased under operating 2019: RUB 2,831 million, or 9.5% of the total income from lease amounted to RUB 184 million and is reflected in the As at 31 December 2020 and 31 December 2019 Aero- operating leases). For aircraft with a net book value of RUB 58,795 million line item “Charge of provision for expected credit losses flot Group was the largest lessee under operating lease (as at 31 December 2019: RUB 62,353 million), impairment on non-interest bearing assets” of the consolidated statement agreements in terms of carrying value of leased assets: For aircraft with a net book value of RUB 167,068 mil- testing was based on the following judgments: of profit and loss and other comprehensive income for 2019. 22.1 % of assets leased out under operating leases were lion, impairment analysis was prepared with us- ― key judgements used to determine the future cash leased to Aeroflot Group (2019: 23.9%). The income received ing of ­two-stage testing (as at 31 December 2019 flows are expected lease income under the existing from operating lease to this Group for 2020 amounted RUB 142,358 million). lease contracts, expected maintenance reserves and

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The joint industry breakdown of net investment in leases Net investment Assets leased out and net book values of assets leased out under operating in leases (before under operating Total % leases as at 31 December 2020 is as follows: deducting ECL) leases

Aircraft industry and airport services 53,679 204,711 258,390 43.45

Railroad transport 114,591 140,192 254,783 42.84

Net investment Assets leased out Naval transportation and port facilities 56,836 — 56,836 9.56 in leases (before under operating Total % deducting ECL) leases Cargo and passenger motor transport 10,341 — 10,341 1.74

Aircraft industry and airport services 67,232 225,863 293,095 41.21 Financial activity 6,293 — 6,293 1.06

Railroad transport 112,858 188,052 300,910 42.31 Machinery construction 3,167 — 3,167 0.53

Naval transportation and port facilities 82,842 — 82,842 11.65 Mining industry 1,767 — 1,767 0.30

Cargo and passenger motor transport 18,616 — 18,616 2.62 Trading activities 1,685 — 1,685 0.28

Financial activity 6,020 — 6,020 0.85 Road construction 1,119 — 1,119 0.19 Machinery construction 3,351 — 3,351 0.47 Other industries 290 3 293 0.05 Trading activities 3,205 — 3,205 0.45 Total 249,768 344,906 594,674 100.00 Mining industry 1,171 — 1,171 0.17

Road construction 887 — 887 0.12

Information technology and telecommunications 388 — 388 0.06

Other industries 652 2 656 0.09 Total 297,222 413,917 594,674 100.00 11. Advances to suppliers

Advances paid to suppliers represent advances for ALLOWANCE FOR EXPECTED CREDIT LOSSES leased assets, capitalized borrowing costs and accrued (“ECL”) ON ADVANCES PAID TO SUPPLIERS interest. Costs are accumulated till the date of delivery. The joint industry breakdown of net investment in leases As at 31 December 2020 advances issued to five largest Analysis of changes of gross carrying amount of advanc- and net book values of assets leased out under operating lease equipment suppliers amounted to 54% of the total es paid to suppliers and relevant ECLs for the year ended leases as at 31 December 2019 is as follows: advances issued. (as at 31 December 2019: five largest lease 31 December 2020 is shown in the tables below: equipment suppliers amounted to 73% of the total advances issued). As at 31 December 2020, the amount of impairment of advances paid to suppliers of equipment to be leased is RUB 129 million (as at 31 December 2019: RUB 261 mil- lion). All advances paid to suppliers are classified as Stage 1.

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Total Stage 1 Total Stage 1 Total Gross carrying amount as at 1 January 2020 74,532 74,532 Expected credit losses as at 1 January 2019 397 397 Net changes of gross carrying amount 11,238 11,238 Net changes of allowance for expected credit losses (202) (202) Newly originated or acquired financial assets 40,920 40,920 Newly originated or acquired financial assets 198 198 Financial assets that have been derecognised (31,763) (31,763) Financial assets that have been derecognised (132) (132) Foreign exchange 4,275 4,275 Foreign exchange — — Gross carrying amount as at 31 December 2020 99,202 99,202 Expected credit losses as at 31 December 2019 261 261 Expected credit losses as at 1 January 2020 261 261

Net changes of allowance for expected credit losses (28) (28)

Newly originated or acquired financial assets 23 23

Financial assets that have been derecognised (128) (128)

Foreign exchange 1 1 12. Other assets

Expected credit losses as at 31 December 2020 129 129

31 December 31 December Analysis of changes of gross carrying amount of advanc- 2020 2019 es paid to suppliers and relevant ECLs for the year ended Other financial assets 31 December 2019 is shown in the tables below: Receivables on cancelled lease agreements 3,740 7,028

Receivables on operating lease agreements 20,930 7,900

Receivables on other taxes 8 5 Total Receivables on subsidy as a contribution to additional capital (Note 22) 397 10,555 Gross carrying amount as at 1 January 2019 57,501

Accounts receivable due from lessees on refund of VAT payable to the budget 4,862 2,659 Net changes of gross carrying amount (6,828)

Other receivables 9,797 6,746 Newly originated or acquired financial assets 51,140

Total other financial assets before allowance for expected credit losses 39,734 34,893 Financial assets that have been derecognised (27,281)

Foreign exchange —

Gross carrying amount as at 31 December 2019 74,532

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31 December 31 December During 2020, the Group recognised operating lease ALLOWANCE FOR EXPECTED CREDIT LOSSES 2020 2019 incentives in the amount of RUB 719 million (during 2019: (“ECL”) ON OTHER FINANCIAL ASSETS RUB 1,507 million). These expenses are capitalized and writ- Allowance for expected credit losses (13,442) (14,128) ten off over the entire term of the lease agreement of 1 year Analysis of changes of the allowance for expected credit Total other financial assets less allowance for expected credit losses 26,292 20,765 to 10 years (2019: of 1 year to 10 years). losses for other assets for the year ended 31 December 2020 is as follows: Other non-financial assets During 2020 and 2019 there were no deferred lease expense.

Advances paid to suppliers (other than payments for leasing assets and property and equipment) 1,228 947 These expenses incurred in 2016 are capitalized and written off over the entire term of the lease agreement of 12 years. Operating lease incentives 3,940 3,260

Deferred rental expense 2,269 2,151

Total other non-financial assets before allowance for impairement losses 7,437 6,358 Stage 1 Stage 2 Stage 3 Total Allowance for impairement losses (5) — Expected credit losses as at 1 January 2020 116 10 14,002 14,128 Total other non-financial assets less allowance for impairement losses 7,432 6,358 Transfer to Stage 1 — — — — Total other assets 33,724 27,123 Transfer to Stage 3 — — — —

Net changes in allowance for expected credit losses 381 999 (1,058) 322

Newly originated or purchased financial assets 97 297 1,019 1,413

Derecognised financial assets — — (216) (216) RECLASSIFICATION OF COMPARATIVE them with changes in the presentation of the consolidated INFORMATION financial statements in the current year. The effect of the Write-offs — — (2,578) (2,578) above changes on the presentation of data as at 31 Decem- Exchange rate changes and other changes — (4) 377 373 The Group revised its classification of certain types of trans- ber 2019 is shown below: actions in 2020. Comparatives were reclassified to align Expected credit losses as at 31 December 2020 594 1,302 11,546 13,442

Recognition of the newly originated receivables at stage Write-off of other receivables in the amount Before Аdjustment After adjustment 3 in the amount of RUB 1,307 million has resulted in recogni- of RUB 2,578 million resulted in the decrease of expected adjustment tion of ECL in the amount of RUB 1,019 million. credit loss.

Receivables on operating lease agreements 9,426 (1,526) 7,900 Repayment of receivables in the amount of RUB 714 mil- Analysis of changes of the allowance for expected credit Other receivables 5,220 1,526 6,746 lion recognised as at 31 December 2019 has resulted in the losses for other assets for the year ended 31 December decrease of ECL by RUB 216 million. 2019 is as follows:

Receivables on cancelled lease agreements represent in respect of related Group’s claims arising from or made amounts due and payable under the terms of lease agree- in connection with cancelled lease agreements. ments which were cancelled and considerations payable 170 171 01 02 03 04 05 06

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Stage 1 Stage 2 Stage 3 Total During 2013-2015 the Group financed the construction of the date. No impairment was recognised as at 31 December

Expected credit losses as at 1 January 2019 247 66 10,833 11,146 “Yuzhnouralskiy” logistics hub located in the Uvelskiy dis- 2020 and 31 December 2019. trict of the Chelyabinsk region. These assets are recorded Transfer to Stage 1 2 (2) — — as investment property as the Group is planning to benefit Impairment tests supported by future cash flows calcula- from growth of the market value of the premises. tions are based on the following key judgements: Transfer to Stage 3 — (19) 19 — ― discount rate applied was 13.0% (2019: 15%). Net changes in allowance for expected credit losses (182) (36) 1,778 1,560 Depreciation is charged to the consolidated state- ment of profit or loss and other comprehensive income In December 2019, the Group received investment property Newly originated or purchased financial assets 50 10 2,443 2,503 on a straight-line basis over the estimated useful life of the placed into trust as part of acquisition of JSCB “NRBank”

Derecognised financial assets (1) (9) (326) (336) asset which is 50 years. (JSC). The fair value of the acquired investment property as at the acquisition date has been measured by the man- Write-offs — — (745) (745) In 2019, “Yuzhnouralskiy” logistics hub was modernized agement of the Group engaging an independent professional and the non-removable improvements in the amount appraiser having the relevant professional qualifications. Expected credit losses as at 31 December 2019 116 10 14,002 14,128 of RUB 95 million were made. Depreciation life of the The investment property placed into trust, represented two non-removable improvements is 5 years. office buildings with non-residential premises in Moscow. In May 2020, one of the buildings was sold to a third party. Recognition of the newly originated receivables at stage Repayment of receivables in the amount of RUB 485 mil- As at 31 December 2020, the book value of the Loss on this sale amounted to RUB 107 million. 3 in the amount of RUB 2,622 million has resulted in recog- lion recognised as at 31 December 2018 has resulted in the ­“Yuzhnouralskiy” logistics hub was RUB 4,465 million less nition of ECL in the amount of RUB 2,443 million. decrease of ECL by RUB 336 million. accumulated depreciation of RUB 422 million (as at 31 De- As at 31 December 2020 the Group owns one office building cember 2019: RUB 4,536 million and RUB 306 million to derive lease income and benefit from growth of the mar- Write-off of other receivables in the amount of RUB 745 mil- respectively). ket value of the premises. Its depreciation life is 50 years. lion resulted in the decrease of expected credit loss. Fair value of investment property is greater than its carrying Management believes that the fair value of investment prop- amount as at the reporting date. No impairment has been erty is at least equal to its carrying value as at the reporting recognised as at 31 December 2020 and 31 December 2019.

13. Investment property 14. Asset on concession agreement

During 2018 the Group entered into a concession agreement object of agreement for a period specified in the agreement, 31 December 31 December on building Murmansk sea port infrastructure. As at 31 De- and perform other obligations established thereunder. 2020 2019 cember 2020 and 31 December 2019, these items have been accounted for in accordance with IFRIC 12 Service Conces- The object of agreement in the meaning of Part 1 of Article “Yuzhnouralskiy” logistics hub 4,465 4,536 sion Arrangements. 3 of the Law on Concession Agreements shall be the infra- structure facilities of Murmansk see port planned to be cre- Investment property placed into trust 1,509 2,055 In accordance with the concession agreement and current leg- ated. The purpose of a coal transhipment complex is the Total investment property 5,974 6,591 islation of the RF, a concessionaire undertakes, at the expense handling of bulk commodities — coal delivery by railway of its own funds and raised funds, to provide financing, estab- transport to the vessels, temporary storage of cargoes. lish and operate the object of agreement, the title to which will belong to the grantor, while the grantor undertakes to provide The term of agreement shall be calculated effective from the concessionaire with right of possession and use of the the date of singing the agreement and till 31 December 2038 172 173 01 02 03 04 05 06

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and include, inter alia, a period for creation and operation ― to ensure that the concessionaire is provided with The financial and economic model used in 2019 was devel- to extend the deadline for works completion until 2023 of the object of agreement and concessionaire’s property a body of water intended for creation and operation oped by independent financial consultant and included in the and to extend the concession agreement until 2043, and performance of other obligations of the parties. of the object of agreement; concession agreement (Annexes 10 and 11 thereto). In turn, accordingly. To date, these amendments have been agreed ― to ensure transport accessibility, provided that the the concession agreement has been approved by the Gov- upon between the parties to the concession agreement The concessionaire’s key obligations under the agreement concessionaire is able to render assistance in ensuring ernment of Russia. When conducting such test, the manage- and the funding organization and are under approval are as follows: thereof, and with regard to accesses to the common ment of the Group has used the following key judgements: by the Government of Russia. In this regard, the finan- ― to create of the object of agreement at the expense amenities — subject to availability of a respective deci- ― Discount rate applied was 14% , cial and economic model used in 2020 is a modification of its own funds and raised funds, in accordance with sion of the Government of the Russian Federation; ― Useful life of the asset has been taken as 18 years (until of the previously used model taking into account new key insurance obligations set by the agreement, technical ― to ensure that amendments to the acts determining 2037, inclusively) without terminal period. assumptions: requirements to the object of agreement and time- the boundaries of Murmansk sea port (if necessary) ― discount rate is 8%, frame; are made in accordance with the procedure established In 2020, the concessionaire sent a proposal to the Gov- ― useful life is 24 years (until 2043, inclusively) without ― to commission the object of agreement in accordance by the current legislation; ernment of Russia to amend the project, in particular, terminal period. with the current legislation, not later than the sched- ― to provide assistance to the concessionaire in organis- uled commissioning date of the object of agreement; ing intercommunication of the concessionaire with the ― to ensure compliance of the object of agreement with state authorities for performance by the concessionaire technical requirements for the object of agreement; of its liabilities under the agreement; ― to perform actions as required by the current legisla- ― to pay compensation in the event of termination in cas- 15. Loans granted tion to make decision on introduction of state regu- es, in accordance with the procedure and in the amount lation of the concessionaire’s operations as a subject as provided for by the agreement; of natural monopoly; necessary actions to set the amount of payments for the concessionaire’s services to pay for additional expenses in cases, in accordance with provided using the object of agreement and conces- the procedure and in the amount as provided for by the 31 December 31 December sionaire’s property, or make decision on non-applica- agreement 2020 2019 tion of price regulation to the payments for services provided by the concessionaire; actions aimed at inclu- During 2019 and 2020, the Group continued funding forma- Loans granted to jointly controlled entities 20,040 5,242 sion of the data on the concessionaire in the Register tion of a concession asset to transfer it for operation under of Sea Ports of the Russian Federation, including data the concession agreement. As at 31 December 2020, the val- Loans to legal entities 16,705 7,315 on the concessionaire in the capacity of a sea terminal ue of the asset on concession agreement is RUB 8,468 mil- operator; lion (as at 31 December 2019: RUB 7,320 million). Loans to individuals 823 110

― to sign with the resource supplying organisations the 37,568 12,667 contracts for supply of energy resources, which are The management of the Group believes that the fair value consumed during creation and operation, and payment of the asset on concession agreement is at least equal to its Allowance for expected credit losses (733) (865) for said energy resources; carrying value as at the reporting date. No impairment has Loans granted 36,835 11,802 ― to provide the necessary insurance coverage; been recognised as at 31 December 2020 and 31 December ― to pay a concession fee in the amount and according 2019 in accordance with IAS 36 Impairment of Assets. Lavna to the procedure determined in the agreement. The Coal Complex in the seaport of Murmansk has been taken grantor’s key obligations under the agreement are as a cash-generating unit for the impairment test. Accord- As at 31 December 2020 and 31 December 2019, the 2020 amounted to RUB 0 million (as at 31 December 2019 as follows: ingly, the impairment test (determination of the recoverable loans granted to jointly controlled entities were provided to RUB 252 million). ― to ensure adoption of the regulatory legal acts to fulfil amount of cash-generating unit) has been based on the on arm’s length terms. The interest income from these the grantor’s financial liabilities in accordance with the calculation of the value in use using discounted cash flows loans for 2020 amounted to RUB 1,078 million (as at 31 De- As at 31 December 2019 the loans granted to legal entities established procedure; based on the financial and economic model. cember 2019 to RUB 36 million) and the estimated al- include a loan in the amount of RUB 959 million. In order lowance for expected credit losses as at 31 December to improve the credit quality of this loan, promissory notes

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for the amount of loan debt were issued, which were ac- ALLOWANCE FOR EXPECTED CREDIT LOSSES Analysis of changes of gross carrying amount of loans cepted against the pledge of the above loan. As of December (“ECL”) ON LOANS GRANTED granted and relevant ECLs for the year ended 31 December 31, 2020, this loan has been settled due to the assignment 2019 is shown in the tables below: of debt to a third party. Analysis of changes of gross carrying amount of loans granted and relevant ECLs for the year ended 31 December 2020 is shown in the tables below:

Stage 1 Stage 2 Stage 3 Total

Stage 1 Stage 2 Stage 3 Total Gross carrying amount as at 1 January 2019 12,644 757 — 13,401

Gross carrying amount as at 1 January 2020 10,424 381 1,862 12,667 Transfer to Stage 3 (357) (500) 857 —

Transfer to Stage 2 (782) 782 — — Net changes of gross carrying amount (4) 105 50 151

Net changes of gross carrying amount 291 8 52 351 Newly originated or acquired financial assets 10,697 19 955 11,671

Newly originated or acquired financial assets 24,723 — — 24,723 Financial assets that have been derecognised (11,839) — — (11,839)

Financial assets that have been derecognised (264) (19) (955) (1,238) Foreign exchange (717) — — (717)

Write-off — — (3) (3) Gross carrying amount as at 31 December 2019 10,424 381 1,862 12,667

Foreign exchange 1,068 — — 1,068

Gross carrying amount as at 31 December 2020 35,460 1,152 956 37,568

Stage 1 Stage 2 Stage 3 Total

Expected credit losses as at 1 January 2019 14 24 — 38

Stage 1 Stage 2 Stage 3 Total Transfer to Stage 3 (3) (11) 14 —

Expected credit losses as at 1 January 2020 304 8 553 865 Net changes of allowance for expected credit losses 1 (5) 539 535

Transfer to Stage 2 (36) 36 — — Newly originated or acquired financial assets 315 — — 315

Net changes of allowance for expected credit losses (273) 15 14 (244) Financial assets that have been derecognised (11) — — (11)

Newly originated or acquired financial assets 75 — — 75 Foreign exchange (12) — — (12)

Financial assets that have been derecognised (2) — — (2) Expected credit losses as at 31 December 2019 304 8 553 865

Write-off — — (3) (3)

Foreign exchange 42 — — 42 Financial assets acquired as part of business combination acquisition date (6 December 2019) to the reporting date Expected credit losses as at 31 December 2020 110 59 564 733 (Note 5) in the amount of RUB 19 million (Stage 2) and in the (31 December 2019) no additional ECLs were recognised. amount of RUB 955 million (Stage 3) were recognised at fair value as at the acquisition date. For the period from the

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16. Taxation RECOGNISED DEFERRED INCOME TAX ASSETS from HKD 0 to 2 million and 16.5% for income exceeding AND LIABILITIES HKD 2 million.

INCOME TAX EXPENSE The difference between IFRS and Russian statutory taxation The Company and its subsidiaries may not offset current regulations gives rise to temporary differences between tax assets and liabilities among legal entities, therefore, de- the carrying value of certain assets and liabilities for ferred income tax assets and deferred income tax liabilities 2020 2019 financial reporting purposes and for income tax purposes. are measured separately for each company.

Current tax expense (521) (549) Deferred income tax assets and liabilities for the Company are measured at 20% as at 31 December 2020 and 2019, Deferred income tax assets/liabilities movement due to origination and reversal of temporary differences (118) (53) the rate applicable when the asset or liability will reverse. Applicable tax rate for GTLK Europe DAC and its subsid- MOVEMENT IN TEMPORARY DIFFERENCES Income tax expense for the year (639) (602) iaries is 12.5%, the current rate of income tax for GTLK Asia and its subsidiaries is 8.25% for income amounting Movements in temporary differences for 2020 are as follows:

EFFECTIVE INCOME TAX RATE CALCULATION

The effective income tax rate differs from the statutory 31 December Recognised in profit Translation 31 December income tax rates. A reconciliation of the income tax expense 2019 or loss difference 2020 based on statutory rates with actual is as follows: Net investment in leases and assets leased out under operating lease (11,039) (2,848) (1,012) (14,894)

Other payables and receivables 3,918 496 — 4,414

2020 2019 Loans and borrowings received and debt securities issued 237 669 — 906

Profit before tax 515 2,579 Inventories 278 (166) — 112

Income tax at the applicable tax rate (103) (516) Property and equipment and investment property (73) (153) — (226)

Application of income tax rates in other jurisdictions 110 112 Derivative financial instruments — — — —

Income tax adjustment for the previous periods 125 18 Tax loss carried forward 8,357 2,355 840 11,552

Non-taxable expenses (374) (195) Deferred income tax assets / (liabilities) 1,678 358 (172) 1,864

Effect of income tax on intragroup dividends (9) — Deferred income tax assets not recongised in the statement of (24) (476) — (500) financial position Change in deferred income tax assets not recognised in the statement of financial position (476) (24) Net deferred income tax assets / (liabilities) 1,654 (118) (172) 1,364 Income not subject to income tax 32 282 Of which those stated in the consolidated statement of financial position: Income taxed at other tax rates (148) (279) Deferred income tax assets 2,782 n/a n/a 3,951 Other 204 — Deferred income tax liabilities (1,128) n/a n/a (2,587) Expense on income tax for the year (639) (602)

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Deferred income tax assets are only recorded when the that some or all of such assets will not be realized no longer Movements in temporary differences for 2019 are as fol- probability of realisation of that assets against future exists. lows: taxable income is more likely. The Group in assessing the above probability the Group considers whether it is prob- When accounting for deferred income tax assets, manage- able that future taxable income amount would be enough ment of the Group believes it is more likely than not that the to cover the total amount of temporary differences, non-de- Group will generate future taxable income sufficient to real- ductible costs and unused tax credits. Deferred income tax ise the benefits of these deductible differences. 31 December Recognised in profit Translation 31 December assets may be reduced to the extent that the probability 2018 or loss difference 2019

Net investment in leases and assets leased out under operating lease (7,261) (4,297) 519 (11,039)

Other payables and receivables 2,697 1,221 — 3,918 Loans and borrowings received and debt securities issued 557 (320) — 237 17. Loans and borrowings received Inventories 255 23 — 278 The bank loans and borrowings were received to purchase The remaining contractual maturity of loans received Property and equipment and investment property 41 (114) — (73) assets to be leased. Part of loans and borrowings received is as follows: is collateralized by the assets or rights to lease agreements. Derivative financial instruments 275 (275) — —

Tax loss carried forward 5,056 3,733 (432) 8,357

Deferred income tax assets / (liabilities) 1,620 (29) 87 1,678 31 December 31 December Deferred income tax assets not recongised in the statement of — (24) — (24) financial position 2020 2019

Net deferred income tax assets / (liabilities) 1,620 (53) 87 1,654 Less than one month 2,144 1,969

Of which those stated in the consolidated statement of financial position: From one to three months 5,513 7,182

Deferred income tax assets 2,303 n/a n/a 2,782 From three to six months 8,019 17,515

Deferred income tax liabilities (683) n/a n/a (1,128) From six months to one year 28,402 21,987

From one year to five years 204,714 146,862

More than five years 91,738 92,192 As at 31 December 2020, the tax losses incurred by the Group’s Russian companies amounts to RUB 30,758 mil- Group’s foreign subsidiaries, which may be offset lion (as at 31 December 2019: RUB 19,979 million). Such Total loans and borrowings received 340,530 287,707 against future taxable income, are RUB 43,205 million tax losses may be carried forward without restrictions, (as at 31 December 2019: RUB 34,658 million). Such tax but such carrying forward should not reduce the tax base losses may be carried forward without restrictions. by more than 50% in the tax periods from January 2017 As at 31 December 2020, a tax losses incurred by the to 31 December 2020. The currency breakdown of loans received is as follows:

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31 December 31 December 2020 2019 18. Lease liabilities USD 66,974 59,467 Assets acquired under finance lease agreements are The Group has leased 12 Airbus A320 aircraft further trans- Euro 32,902 6,676 further leased out either under operating or finance lease. ferred to operating and finance lease to PJSC “Aeroflot”. The Group (as the lessee) uses lease as funding source for RUB 240,654 221,564 aircraft purchases and railway rolling stock .

Total loans and borrowings received 340,530 287,707

31 December 31 December As at 31 December 2020 and 31 December 2019 the majority 2020 2019 amount of loans and borrowings were received from Rus- sian banks. The other part was received from the biggest The ratings shown in the table below represent classifica- Undiscounted lease liabilities 54,200 55,359 international banking groups. tion by long term credit ratings used by S&P rating agency, Finance expenses (12,457) (14,231) or Moody’s and Fitch’s ratings, translated into S&P’s rating.

Present value of lease liabilities 41,743 41,128

31 December 31 December The remaining contractual maturities of finance lease liabili- 2020 2019 ties as at 31 December 2020 are as follows:

Banks from the range rated A and higher 4,203 5,137

Banks from the range rated BBB 77,952 48,631 Total payments Banks from the range rated BB 211,290 185,628 Present value of under lease Finance expenses lease liabilities Banks from the range rated B — 2,778 liabilities

Other banks and financial institutions 47,085 45,533 Less than one month 450 (3) 447

Total loans and borrowings received 340,530 287,707 From one to three months 1,305 (19) 1,286

From three to six months 1,767 (54) 1,713

As at 31 December 2020 and 31 December 2019, other banks amount of RUB 1,068 million and, as at 31 December 2019, From six months to one year 3,538 (202) 3,336 and financial institutions include loans, the final beneficia- a bank having АА rating assigned by ACRA rating agency From one year to five years 27,746 (5,355) 22,391 ry of which is a company having BBB credit rating, in the (JSC), in the amount of RUB 1,576 million. amount of RUB 34,638 million and RUB 36,496 million, More than five years 19,394 (6,824) 12,570 accordingly, and, as at 31 December 2020, a bank having A+(RU) rating assigned by ACRA rating agency (JSC), in the Total lease liabilities 54,200 (12,457) 41,743

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The currency breakdown of the lease liabilities as at 31 De- The remaining contractual maturities of finance lease liabili- cember 2019 is analysed as follows: ties as at 31 December 2019 are as follows:

Total payments Total payments Present value of Present value of under lease Finance expenses under lease Finance expenses lease liabilities lease liabilities liabilities liabilities USD 30,846 (6,687) 24,159 Less than one month 445 (3) 442 RUB 24,513 (7,544) 16,969 From one to three months 1,186 (18) 1,168 Total lease liabilities 55,359 (14,231) 41,128 From three to six months 1,627 (51) 1,576

From six months to one year 3,257 (189) 3,068

From one year to five years 25,563 (5,098) 20,465

More than five years 23,281 (8,872) 14,409

Total lease liabilities 55,359 (14,231) 41,128 19. Debt securities issued

Debt securities issued comprise:

As at 31 December 2020 accrued but unpaid interest under average effective interest rate on RUB denominated lease finance leases in the amount of RUB 25 million were rec- contracts is 10.5% (31 December 2019: 5.2% and 10.5%, ognised as lease liabilities and accrued expenses (31 De- respectively). cember 2019: RUB 26 million). 31 December 31 December The currency breakdown of the lease liabilities as at 31 De- 2020 2019 As at 31 December 2020, the average effective interest cember 2020 is analysed as follows: Bonds issued rate on USD denominated lease contracts is 5.2% and the Eurobonds issued 221,968 127,522

Bonds issued in the domestic market 242,639 179,452

Promissory notes 53 1,031 Total payments Present value of under lease Finance expenses Total debt securities issued 464,660 308,005 lease liabilities liabilities

USD 32,961 (6,535) 26,426

RUB 21,239 (5,922) 15,317 From December 2014 the Group has been issuing documen- As at 31 December 2020 bonds issued are as follows: tary interest-bearing non-convertible bonds (both classical Total lease liabilities 54,200 (12,457) 41,743 and stock exchange bonds).

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Nominal coupon Nominal coupon Nominal amount Principal amount Nominal amount Principal amount Issue date Offer date interest rate as at Issue date Offer date interest rate as at (balance) final maturity (balance) final maturity 31 December 2020 31 December 2020

Series BО-03 1,500 December 2014 December 2024 December 2022 6.83% Series 001Р-16 10,000 February 2020 February 2028 — 6.95%

Series BО-04 5,000 March 2015 March 2025 September 2023 7.98% Series 001Р-17 10,000 June 2020 May 2035 May 2026 7.44%

Series BО-05 4,000 October 2015 October 2025 October 2023 11.00% Series 001Р-18 5,000 June 2020 May 2035 June 2027 7.84% Series BО-06 4,000 November 2015 October 2025 October 2022 6.88% Series 001Р-19 5,000 June 2020 May 2035 June 2028 7.97% Series BО-07 4,000 December 2015 December 2025 December 2022 6.89% Series P01-BO-02 32,930 January 2020 January 2030 January 2025 5.55% Series BО-08 5,000 September 2016 September 2026 September 2021 11.10% Eurobonds (USD 350 mln) 25,856 July 2016 July 2021 — 5.95% Series 001Р-01 1,629 September 2016 September 2031 — 7.29%

Eurobonds (USD 500 mln) 36,938 May 2017 May 2024 — 5.125% Series 001Р-01 (tap issue) 684 December 2016 September 2031 — 7.29%

Eurobonds (USD 500 mln) 36,938 April 2019 April 2025 — 5.95% Series 001Р-02 5,662 December 2016 November 2031 — 9.00%

Eurobonds (USD 550 mln) 40,632 October 2019 February 2026 — 4.949% Series 001Р-03 10,000 February 2017 January 2032 February 2024 11.00%

Eurobonds (USD 600 mln) 44,325 March 2020 March 2027 — 4.65% Series 001Р-04 10,000 April 2017 April 2032 April 2023 9.85%

Eurobonds (USD 500 mln) 36,938 October 2020 February 2028 — 4.8% Series 001Р-05 (USD 116,5 mln) 8,603 August 2017 August 2024 — 4.90%

Series 001Р-06 16,722 September 2017 September 2032 — 5.75%

Series 001Р-07 10,000 January 2018 December 2032 January 2023 5.25% As at 31 December 2019 bonds issued are as follows:

Series 001Р-08 10,000 February 2018 January 2033 August 2022 5.15%

Series 001Р-09 10,000 April 2018 March 2033 October 2024 7.35% Nominal coupon Series 001Р-10 10,000 June 2018 May 2033 June 2022 4.90% Nominal amount Principal amount Issue date Offer date interest rate as at (balance) final maturity Series 001Р-11 (USD 150 mln) 11,081 June 2018 June 2033 June 2023 5.95% 31 December 2019

Series BО-03 1,500 December 2014 December 2024 December 2020 10.90% Series 001Р-12 5,000 November 2018 November 2033 November 2021 9.90% Series BО-04 5,000 March 2015 March 2025 September 2023 7.98% Series 001Р-13 10,000 February 2019 January 2034 February 2022 9.50% Series BО-05 4,000 October 2015 October 2025 October 2023 11.00% Series 001Р-14 10,000 June 2019 May 2034 December 2022 8.85% Series BО-06 4,000 November 2015 October 2025 October 2020 9.48%

Series 001Р-15 25,000 October 2019 October 2025 — 7.69% Series BО-07 4,000 December 2015 December 2025 December 2020 8.15%

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Nominal coupon Nominal amount Principal amount The total amount of bonds issued is represented by docu- On 26 October 2020, the issue of Eurobonds for Issue date Offer date interest rate as at mentary interest-bearing non-convertible bonds, except for USD 500 million with maturity on 26 February 2028 was (balance) final maturity 31 December 2019 bonds series 001Р-16, 001Р-17, 001Р-18, 001Р-19 and P01- placed on Euronext Dublin. Its issuer is GTLK Europe Capital BO-02, that are uncertificated interest-bearing non-con- DAC. In this issue, a fixed coupon is set at the rate of 4.8% Series BО-08 5,000 September 2016 September 2026 September 2021 11.10% vertible bonds. per annum to be paid on 26 February and 26 August of each Series GTLK-001P-01 1,803 September 2016 September 2031 — 7.50% year during the life of the issue. Bonds series 001Р-01, 001Р-02, 001Р-05, 001Р-06, 001Р-15, Series GTLK-001P-01 (additional issue) 757 December 2016 September 2031 — 7.50% 001Р-16 and P01-BO-02 are depreciable. On 28 October 2020, within the tender offer, the part of issue of Eurobonds by GTLK Europe DAC with maturity in July Series GTLK-001P-02 5,931 December 2016 November 2031 — 9.00% The Group, as a rule, provides an offer (being, in fact, a put 2021 for USD 150 million at par was redeemed using part option) to the bond holders, which is exercised on the dates of the funds from a new issue of Eurobonds by GTLK Europe Series GTLK-001P-03 10,000 February 2017 January 2032 February 2024 11.00% shown in the table above. Capital DAC for USD 500 million at par with maturity in Feb- ruary 2028, placed on 26 October 2020. Series GTLK-001P-04 10,000 April 2017 April 2032 April 2023 9.85%

Series GTLK-001P-05 (USD 9,103 August 2017 August 2024 — 4.90% 170 million)

Series GTLK-001P-06 17,496 September 2017 September 2032 — 8.00%

Series GTLK-001P-07 10,000 January 2018 December 2032 January 2023 8.25% 20. Other liabilities

Series GTLK-001P-08 10,000 February 2018 January 2033 August 2022 8.15%

Series GTLK-001P-09 10,000 April 2018 March 2033 October 2024 7.35% 31 December 31 December Series GTLK-001P-10 10,000 June 2018 May 2033 June 2022 7.15% 2020 2019

Series GTLK-001P-11 (USD 150 million) 9,286 June 2018 June 2033 June 2023 5.95% Other financial liabilities

Amounts due to customers 3,456 1,734 Series GTLK-001P-12 5,000 November 2018 November 2033 November 2021 9.90% Trade payables 1,466 3,091 Series GTLK-001P-13 10,000 February 2019 January 2034 February 2022 9.50% Payables on equipment purchased for lease purposes 515 1,433 Series GTLK-001P-14 10,000 June 2019 May 2034 December 2022 8.85% Other payables 393 200 Series GTLK-001P-15 25,000 October 2019 October 2025 — 7.69% Total other financial liabilities 5,830 6,458

Eurobonds (USD 500 million) 30,953 July 2016 July 2021 — 5.95% Other non-financial liabilities

Eurobonds (USD 500 million) 30,953 May 2017 May 2024 — 5.125% Deferred lease income 2,897 2,833

Eurobonds (USD 500 million) 30,953 April 2019 April 2025 — 5.95% Security deposits of clients 1,592 1,058

Provision for legal claims (Note 29) 523 735 Eurobonds (USD 550 million) 34,048 October 2019 February 2026 — 4.949%

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31 December 31 December 2020 2019 22. Share capital Provision for bonuses 508 457 Registered, issued and fully paid share capital comprised: Provision for unused vacations 120 91

Other reserves 11 —

Total other non-financial liabilities 5,651 5,174 31 December 2020 31 December 2019

Total financial liabilities 11,481 11,632 Nominal Nominal Number value of Nominal amount, Number value Nominal amount, of shares 1 share, RUB’000 of shares of 1 share, RUB’000 RUB’000 RUB’000

Ordinary shares 8,143,713 10 81,437,130 7,163,713 10 71,637,130 21. Other than income tax payable Total share capital 8,143,713 10 81,437,130 7,163,713 10 71,637,130

During 2019 the Government of Russian Federation decided and RUB 31,255 million, accordingly. As at 31 December 2020 to provide the Company with a subsidy from federal budget and 31 December 2019, not-paid subsidies in the amount 31 December 31 December in the amount of RUB 10,555 million for Company’s statutory of RUB 397 million and RUB 10,555 million, accordingly, were 2020 2019 activities implementation (2018: RUB 20,700 million). There reflected in other assets (see Note 12). During 2020, the are no further conditions of subsidy provision. Government of Russia paid the above outstanding receivables VAT payable 991 15,647 in the amount of RUB 15,482 million (2019: RUB 5,900 mil- Property tax 38 44 In October 2020, the Government of the Russian Federation lion). During 2020, part of the above receivables was offset changed and sequestered the previously approved federal as an advance payment to equipment suppliers in the form Transport tax 30 33 budget, reducing the subsidy for the Company’s statutory of treasury collateral under Decree of the Government

Other taxes 6 — activities implementation by RUB 565 million. of Russia No. 1825 dated 25 December 2019 and Decree of the Government of Russia No. 1798 dated 24 December 2019. Total other than income tax payable 1,065 15,724 During 2020, the Government of the Russian Federation decided to provide the Company with a subsidy from federal In 4th quarter of 2019, the Company received RUB 3,000 mil- budget in the amount of RUB 12,023 million for the Com- lion from its shareholder as a share capital contribution. pany’s statutory activities implementation. There are no fur- ther conditions of subsidy provision. In accordance with the decision of the Company’s sole shareholder in June 2020, the Company placed 980,000 These funds were transferred to purchase lease assets to facili- ordinary shares of the Company with a par value of RUB 10 tate a number of government lease programs. These assets will thousand each, through an additional issue, for its sole further be leased out under operating and/or finance leases. shareholder. Such shares were issued using the Com- pany’s property, namely: using the additional capital. Thus, accumulated subsidies reflected in equity (additional As a result, as at 31 December 2020, the Company’s share capital) in the consolidated financial statements as at 31 De- capital was increased by RUB 9,800 million and amounted cember 2020 and 31 December 2019 were RUB 32,913 million to RUB 81,437 million. As at 31 December 2020, the addi- 190 191 01 02 03 04 05 06

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tional issue of the Company’s shares was registered by the DIVIDENDS 24. Administrative expenses CBR, the state registration of amendments in the Compa- ny’s statutory documents for increase in the share capital In accordance with Russian legislation the Company’s dis- and the number of outstanding shares was also completed. tributable reserves are limited to the balance of retained earnings as recorded in the Company’s statutory financial 2020 2019 statements prepared in accordance with Russian account- Salary and related social costs 2,997 1,880 ORDINARY SHARES ing principles. Information and consulting services 452 506 All shares rank equally with regard to the Group’s resid- During 2020 the Company declared and paid dividends for Rent of premises 25 17 ual assets. The holders of ordinary shares are entitled 2019 year in the amount of RUB 494 million. to receive dividends as declared from time to time, and Depreciation of property and equipment and right-of-use assets 197 168 are entitled to one vote per share at general shareholders’ During 2019 the Company declared and paid dividends for meetings of the Company. 2018 year in the amount of RUB 504 million. Travel expenses 52 154

Advertising and representation expenses 49 113

Transportation expenses 55 50

Intangible assets amortisation 88 55

23. Interest income and interest expense Other administrative expenses 1,062 608

Total administrative expenses 4,977 3,551

2020 2019

Interest income Finance lease interest income 24,366 26,696 25. Other operating income and expenses Other interest income 5,760 4,210

Total interest income 30,126 30,906 2020 2019 Interest expense Other operating income Loans and borrowings received (16,862) (14,931) Income from sale of ownership interest in Rozana LLC — 1,137 Debt securities issued (28,231) (18,515) Income from sale of assets 642 754 Lease liabilities (3,028) (1,299) Rental income 109 — Payables to customers (92) — Income from charges and penalties 904 381 Total interest expense (48,212) (34,745) Income from the assignment of the right of claim 257 —

Other income 600 582 Interest expense for 2020 is reduced by the amount Total other operating income 2,512 2,854 of governmental grants related to compensation of interest 192 expenses of RUB 2,238 million (2019: 2,957 million). 193 01 02 03 04 05 06

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2020 2019

Other operating expenses 26. Financial risk management

Reversal of previously recognised impairment (impairment) of assets leased out under operating lease — 184 The Group has implemented a continuous risk management details on the credit decision process are presented in the process in order to control the level of risks and restrict “Credit risk” section below. Provision charge for legal claims (Note 20) (348) (735) losses resulting from financial and non-financial risks. Expenses on aircraft maintenance (261) (958) The risk management system is based on an integrated Risk Management Department performs centralized risk approach of identification, assessment, monitoring and con- management tasks and is responsible for the development Property and equipment maintenance (312) (351) trol of risks accepted by the Group. The risk management of risk management policies and procedures and for iden-

Expenses on maintenance of seized leased items (401) (235) policies and procedures are subject to continuous improve- tification, assessment and control of risks. It controls the ment and are implemented to comply with legal require- implementation of risk management and internal control Investment property and equipment depreciation (162) (104) ments and prudential norms, best practices and standards, procedures and monitors the key risk factors which may and internal regulations of the Group. potentially affect the key objectives of the Group. The Risk Property insurance (517) (315) Management Department is in charge of financial mon- Bank charges (282) (51) itoring of the clients of the Group, and reviews business performance of the clients on a regular basis. It is also Taxes other than income tax (230) (221) RISK MANAGEMENT STRUCTURE in charge of credit risk management and property- related

Charges and penalties (21) (42) risk management. Risk management functions are implemented at all corpo- Deferred rental expense (1,067) (359) rate governance levels and are allocated as follows. Financial Department and Economics Department ensure the implementation of structural risk management policy. Other operating expenses (587) (391) Board of Directors performs supervisory functions and pro- They are in charge of currency, interest rate and liquidity Total other operating expenses (4,188) (3,578) vides overall assurance over the risk management process. risk management. It is responsible for the general risk management approach Total other net operating income and expenses (1,676) (724) and the approval of risk management and internal control Day-to-day management of foreign currency risk, interest strategy, key principles and policies. rate risk and liquidity risk is performed by the Treasury within the limits of roles delegated by the Financial Depart- Leasing Council ensures the implementation of strategy, ment, to which it is a structural unit. In November 2016, the Group acquired a 95% share in Roza- included in “Other operating income” line in the consoli- approves the risk management policy, allocates the risk na LLC, which owned the 100% share in LLC “Morskoy port dated statement of profit or loss and other comprehensive management functions between the governance bodies Economic Security Department assesses non-credit risks “Lavna” (hereinafter referred to as “Lavna LLC”). The afore- income for the year ended 31 December 2019. In accordance and business units of the Group and controls their perfor- such as reputational risks or any information on unreliabili- mentioned companies hold permission and construction with the Lavna LLC shareholders’ agreement concluded mance. The responsibility of the Leasing Council includes ty of a client. documentation in respect of the project of a trading seaport, in April 2019, the Company continues to own the existing the approval of total risk limits by type of risk and type and leasehold of certain land plots in the Murmansk region. rights ensuring its current ability to manage the important of business. The Leasing Council reviews risk level reports Legal Department is in charge of the legal aspects of the activities of the investee, therefore, continues to maintain on a regular basis and reallocates the risk limits where transactions, and manages legal risks. In April 2019, the Group acquired a 5% share in Rozana LLC control over investee Lavna LLC. In accordance with IFRS necessary to maintain the pre-set strategic risk profile. (increasing its participatory interest to 100%) and at the 10, Lavna LLC continues to be the Company’s subsidiary, Property Management Department is in charge of proper- same time sold a 95% share in the share capital of Lavna despite a decrease in the Company’s ownership inter- In order to ensure the efficient operation of the risk man- ty-related risk management. It ensures the control of the LLC for cash, as a result of which the Group recognised est in Lavna LLC down to 5% and presence of significant agement system, the Leasing Council delegates the risk physical condition of lease assets and its residual value. profit from sale of shares in the amount of RUB 1,137 million non-controlling share. limits to other collegial bodies, individual business units and employees of the Group. Insurance Department ensures the coverage of lease as- sets. It is in charge of the insurance underwriter selection, The Leasing Council is a collegial body accountable to the and determines the scope of the risks covered by the insur- 194 General Director. It is responsible for the implementation ance policy. It is also in charge of the insurance contracts 195 of the credit policy as related to lease financing. Further roll-over as appropriate to ensure the continuing coverage. 01 02 03 04 05 06

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Internal Audit Department performs internal audit tasks CREDIT RISK The Group has imposed certain limitations on its lease port- Credit quality analysis under which it assesses the effectiveness of the risk man- folio composition and lease transactions aimed to restrict The following table sets out information about the credit agement system taken as a whole and in individual business Credit risk is the risk that the Group will incur a financial the overall risk concentration levels and mitigate probable quality of financial assets measured at FVOCI and at amor- areas. Internal audit function presents the findings of its loss because its counterparties fail to discharge their finan- losses in case of downturn in specific sectors of economy tised cost as at 31 December 2020. reviews to the General Director and the Board of Directors. cial obligations in full or in part when due. and/or credit quality deterioration of specific lessees.

The Internal Control Department monitors the compliance Credit risk is assessed in respect of each decision on lease of the Group’s activities with the statutory requirements financing and any other decisions that may involve credit as well as with the rules and standards applied by the risks. Assessment includes the following: financial analysis 31 December 2020 Group in its activities, monitors proper implementation of the counterparties, evaluation of the lease asset market Stage 1 Stage 2 Stage 3 Total of the approved rules, procedures, instructions, methods value and liquidity, identification and assessment of the to minimize risks of negative consequences, corrective ac- transaction-related risks. Cash and cash equivalents tions for non-compliance with the statutory requirements, Cash on hand 101 — — 101 regulatory requirements and principles of ethical business Portfolio-level risk management is based on the limits set practices, generally accepted standards of business ethics, out in the lease policy. The lease policy is approved by the Cash balances with the CBR, other than mandatory reserve deposits 531 — — 531 and analyses and prevents situations, in which the statutory Board of Directors. Credit risk management also involves Correspondent accounts and overnight deposits with other credit institutions requirements, regulatory requirements, and local regula- the financial monitoring of the counterparties to ensure its tions may not be complied with. ability to meet the obligations under lease contracts and the - From the range rated AA 27 — — 27 monitoring of the physical condition of lease assets. - From the range rated A 39,868 — — 39,868 Exposure to credit risk without taking into account any - From the range rated BBB 13,959 — — 13,959 collateral and netting agreements is as follows: - From the range rated BB 17,388 — — 17,388

Not rated:

Grades: Standard 3,654 — — 3,654 31 December 31 December Note 2020 2019 Repurchase and reverse repurchase agreements with other credit institutions

Cash and cash equivalents 6 75,527 17,686 - From the range rated BBB — — — —

Due from banks 8 3,655 83 75,528 — — 75,528

Advances to suppliers 11 99,073 74,271 Allowance for expected credit losses (1) — — (1)

Loans granted 15 36,835 11,802 Carrying amount 75,527 — — 75,527

Financial assets at FVOCI — 745 Due from banks

Financial assets at amortized cost 1,377 — Mandatory cash balances on accounts with the CBR 43 — — 43

Net investment in leases 9 290,373 246,507 Term deposits with other credit institutions:

Other financial assets 12 26,292 20,765 - From the range rated BBB 63 — — 63

Total credit risk exposure 533,132 371,859 - From the range rated BB 3,549 — — 3,549

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31 December 2020 31 December 2020

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

3,655 — — 3,655 Financial assets at amortized cost

Allowance for expected credit losses — — — — - From the range rated BBB 1,019 — — 1,019

Carrying amount 3,655 — — 3,655 - From the range rated BB 360 — — 360

Advances to suppliers 1,379 — — 1,379

Not rated: Allowance for expected credit (2) — — (2)

Grades: Standard 99,202 — — 99,202 Carrying amount 1,377 — — 1,377

99,202 — — 99,202 Net investment in leases

Allowance for expected credit losses (129) — — (129) Not rated:

Carrying amount 99,073 — — 99,073 Grades: Standard 242,325 — — 242,325

Loans granted measured at amortized cost Grades: Watch list — 28,808 5,162 33,970

Not rated: Grade: Troubled — — 20,927 20,927

Grades: Standard 35,460 — — 35,460 242,325 28,808 26,089 297,222

Grades: Watch list — 636 — 636 Allowance for expected credit losses (1,904) (2,111) (2,834) (6,849)

Grades: Substandard — 516 405 921 Carrying amount 240,421 26,697 23,255 290,373

Grades: Troubled — — 551 551 Other financial assets

35,460 1,152 956 37,568 Not rated:

Allowance for expected credit losses (110) (59) (564) (733) Grades: Standard 12,708 — — 12,708

Carrying amount 35,350 1,093 392 36,835 Grades: Watch list — 1,183 — 1,183

Financial assets at FVOCI Grades: Substandard — 12,198 2,525 14,723

- From the range rated BBB — — — — Grade: Troubled — — 2,040 2,040

Not rated: Grade: Irrevocable — — 9,080 9,080

Grades: Standard — — — — 12,708 13,381 13,645 39,734

— — — — Allowance for expected credit losses (594) (1,302) (11,546) (13,442)

Allowance for expected credit losses — — — — Carrying amount 12,114 12,079 2,099 2,292

Carrying amount — — — —

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The following table sets out information about the credit 31 December 2019 quality of financial assets measured at FVOCI and amortised Stage 1 Stage 2 Stage 3 Total cost as at 31 December 2019. 83 — — 83

Allowance for expected credit losses — — — —

Carrying amount 83 — — 83 31 December 2019 Advances to suppliers Stage 1 Stage 2 Stage 3 Total Not rated: Cash and cash equivalents Grades: Standard 74,532 — — 74,532 Cash on hand 123 — — 123 74,532 — — 74,532 Cash balances with the CBR, other than mandatory reserve deposits 160 — — 160 Allowance for expected credit losses (261) — — (261) Correspondent accounts and overnight deposits with other credit institutions Carrying amount 74,271 — — 74,271 - From the range rated AA 22 — — 22 Loans granted measured at amortized cost - From the range rated A 6,386 — — 6,386 Not rated: - From the range rated BBB 3,378 — — 3,378 Grades: Standard 10,419 18 — 10,437 - From the range rated BB 2,325 — — 2,325 Grades: Watch list 5 363 — 368 Not rated: Grades: Substandard 357 357 Grades: Standard 3,306 — — 3,306 Grades: Troubled — — 1,505 1,505 Repurchase and reverse repurchase agreements with other credit institutions 10,424 381 1,862 12,667 - From the range rated BBB 1,986 — — 1,986 Allowance for expected credit losses (304) (8) (553) (865) 17,686 — — 17,686 Carrying amount 10,120 373 1,309 11,802 Allowance for expected credit losses — — — — Financial assets at FVOCI Carrying amount 17,686 — — 17,686 - From the range rated BBB 436 — — 436 Due from banks Not rated: Mandatory cash balances on accounts with the CBR 19 — — 19 Grades: Standard 309 — — 309 Term deposits with other credit institutions: 745 — — 745 - From the range rated BBB 63 — — 63 Allowance for expected credit losses — — — — - From the range rated BB 1 — — 1 Carrying amount 745 — — 745

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31 December 2019 31 December 2020 31 December 2019

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Net investment in leases Loans granted measured at amortaized cost Not rated: Not past due 35,457 1,151 1 36,609 10,424 381 955 11,760 Grades: Standard 225,642 — — 225,642 Overdue less than 31 days 3 — — 3 — — — — Grades: Watch list — 12,558 — 12,558 Overdue 31–90 days — 1 — 1 — — — — Grade: Troubled — — 11,568 11,568 Overdue more than 90 days — — 955 955 — — 907 907 225,642 12,558 11,568 249,768 35,460 1,152 956 37,568 10,424 381 1,862 12,667 Allowance for expected credit losses (1,105) (1,283) (873) (3,261) Allowance for expected credit losses (110) (59) (564) (733) (304) (8) (553) (865) Carrying amount 224,537 11,275 10,695 246,507 Carrying amount 35,350 1,093 392 36,835 10,120 373 1,309 11,802 Other financial assets Net investment in leases Not rated: Not past due 234,696 17,921 — 252,617 220,826 4,430 — 225,256 Grades: Standard 19,475 — — 19,475 Overdue less than 31 days 4,979 2,188 — 7,167 2,621 332 — 2,953 Grades: Watch list — 170 — 170 Overdue 31–90 days — 7,867 1,531 9,398 2,048 5,662 — 7,710 Grades: Substandard — — 4,498 4,498 Overdue more than 90 days 2,650 832 24,558 28,040 147 2,134 11,568 13,849 Grade: Troubled — — 3,359 3,359 242,325 28,808 26,089 297,222 225,642 12,558 11,568 249,768 Grade: Irrevocable — — 7,391 7,391 Allowance for expected credit losses (1,904) (2,111) (2,834) (6,849) (1,105) (1,283) (873) (3,261) 19,475 170 15,248 34,893 Carrying amount 240,421 26,697 23,255 290,373 224,537 11,275 10,695 246,507 Allowance for expected credit losses (116) (10) (14,002) (14,128) Other financial assets Carrying amount 19,359 160 1,246 20,765 Not past due 11,690 1,083 2,525 15,298 19,475 36 97 19,608

Overdue less than 31 days 1,018 9,826 — 10,844 — 134 564 698

The following table sets out information about overdue Overdue 31–90 days — 100 68 168 — — 793 793 status of net investment in lease, loans granted and other assets in Stages 1, 2 and 3. Overdue more than 90 days — 2,372 11,052 13,424 — — 13,794 13,794

12,708 13,381 13,645 39,734 19,475 170 15,248 34,893

Allowance for expected credit losses (594) (1,302) (11,546) (13,442) (116) (10) (14,002) (14,128)

Carrying amount 12,114 12,079 2,099 26,292 19,359 160 1,246 20,765

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Demand Classification of net investment in leases in the above tables LIQUIDITY RISK From More between the overdue and non-overdue categories is based (including From 1 to From 3 to From 6 to No stated 1 year to than Total on contractual maturities of lease agreements. Liquidity risk is the risk that the Group will not be able overdue) and less 3 months 6 months 12 months maturity 5 years 5 years to settle all liabilities as they fall due. The Group’s liquidity than 1 month As at 31 December 2019 and 31 December 2020 net in- position is carefully monitored and managed. The Group has vestment in leases are secured by the underlying leased in place a detailed budgeting and cash forecasting process Net investment in leases 7,164 3,740 6,147 11,100 84,096 178,126 — 290,373 equipment. Recoverable value of the leased equipment to ensure that it has adequate cash available to meet its Assets leased out under — — — — — — 413,917 413,917 is at least equal to the carrying value of credit-impaired net payment obligations. operating leases investment in leases less impairment allowance. Asset under concession The table below summarizes the maturity profile of assets — — — — — 8,468 — 8,468 agreement Despite the consequences of COVID-19 and the deteriora- and liabilities as at 31 December 2020 by their expected Investments in associates and tion of clients’ economic status, the Group did not provide maturities: — — — — — — 1,013 1,013 any special programs to clients or use state support funds joint ventures in support of the affected industries. Investment property — — — — — — 5,974 5,974

Property and equipment, intangible assets and right-of- — — — — — — 972 972 use assets Demand From More (including From 1 to From 3 to From 6 to No stated Deferred income tax assets — — — — — — 3,951 3,951 1 year to than Total overdue) and less 3 months 6 months 12 months maturity Income tax receivable — — 169 — — — — 169 5 years 5 years than 1 month VAT recoverable — — 1,507 — — — — 1,507 Assets Other assets 2,871 858 3,380 2,707 19,491 4,417 — 33,724 Cash and cash equivalents 69,280 6,247 — — — — — 75,527 Total assets 82,669 29,887 26,887 53,502 159,977 202,328 426,049 981,299 Financial assets at fair value — — 2 336 149 — — 487 through profit or loss Liabilities

Due from banks — 593 2,955 64 — — 43 3,655 Loans and borrowings received 2,144 5,513 8,019 28,402 204,714 91,738 — 340,530

Advances to suppliers 182 6,104 7,412 32,700 46,571 6,104 — 99,073 Lease liabilities 447 1,286 1,713 3,336 22,391 12,570 — 41,743

Equipment purchased for 2,634 — 1,464 — — — — 4,098 Debt securities issued 3,244 6,396 6,320 51,474 236,683 160,543 — 464,660 leasing puiposes Financial liabilities at fair value 1 716 281 218 33 — — 1,249 Loans granted 538 11,969 3,383 6,595 9,137 5,213 — 36,835 through profit or loss

Financial assets at fair value Advances received 217 — 457 635 1,423 1,093 — 3,825 through other comprehensive — — — — — — — — income Deferred income tax liabilities — — — — — — 2,587 2,587

Inventories — — — — — — 179 179 Income tax payable — 69 — — — — — 69

Financial assets at amortized — 376 468 — 533 — — 1,377 Other than income tax payable 226 394 445 — — — — 1,065 cost

Other liabilities 4,032 1,043 819 1,768 1,913 1,560 346 11,481

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Demand Demand (including From More From More From 1 to From 3 to From 6 to No stated (including From 1 to From 3 to From 6 to No stated overdue) and less 1 year to than Total 1 year to than Total 3 months 6 months 12 months maturity overdue) and less 3 months 6 months 12 months maturity than 1 month 5 years 5 years 5 years 5 years than 1 month Asset under concession — — — — — 7,320 — 7,320 agreement Total liabilities 10,311 15,417 18,054 85,833 467,157 267,504 2,933 867,209 Investment property — — — — — — 6,591 6,591 Net position 72,358 14,470 8,833 (32,331) (307,180) (65,176) 423,116 114,090 Property and equipment, Accumulated maturity gap 72,358 86,828 95,661 63,330 (243,850) (309,026) 114,090 intangible assets and — — — — 120 224 400 744 right-of-use assets

Deferred income tax — — — — — — 2,782 2,782 assets The table below summarizes the maturity profile of assets and liabilities as at 31 December 2019 by their expected Income tax receivable — — 85 — — — — 85 maturities: VAT recoverable — 22,312 740 — — — — 23,052

Other assets 950 1,333 11,666 2,644 6,419 4,111 — 27,123 Demand (including From More From 1 to From 3 to From 6 to No stated Total assets 31,319 32,937 31,961 38,789 157,346 122,795 354,898 770,045 overdue) and less 1 year to than Total 3 months 6 months 12 months maturity than 1 month 5 years 5 years Liabilities

Loans and borrowings Assets 1,969 7,182 17,515 21,987 146,862 92,192 — 287,707 received Cash and cash equivalents 17,686 — — — — — — 17,686 Lease liabilities 442 1,168 1,576 3,068 20,465 14,409 — 41,128 Financial assets at fair 2,808 8 107 287 21 — — 3,231 value through profit or loss Debt securities issued 3,116 3,501 4,646 17,345 198,927 80,470 — 308,005

Financial liabilities at fair Due from banks — — — 63 1 — 19 83 — — — — — — — — value through profit or loss Advances to suppliers 1,851 2,843 9,252 17,661 42,664 — — 74,271 Advances received 99 181 — 73 1,014 24 — 1,391 Equipment purchased for 2,917 — — — — — — 2,917 Deferred income tax leasing puiposes — — — — — — 1,128 1,128 liabilities Loans granted 20 50 778 229 2,151 8,574 — 11,802 Income tax payable 302 — — — — — 302 Financial assets at fair Other than income tax value through other 309 — — — 436 — — 745 76 15,648 — — — — — 15,724 comprehensive income payable

Inventories — — — — — — 200 200 Other liabilities 3,645 190 115 2,811 3,356 1,515 — 11,632

Net investment in leases 4,778 6,391 9,333 17,905 105,534 102,566 — 246,507 Total liabilities 9,347 28,172 23,852 45,284 370,624 188,610 1,128 667,017

Assets leased out under Net position 21,972 4,765 8,109 (6,495) (213,278) (65,815) 353,770 103,028 — — — — — — 344,906 344,906 operating leases Accumulated maturity gap 21,972 26,737 34,846 28,351 (184,927) (250,742) 103,028

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Demand and From More Undiscounted cash flows on financial liabilities except for The table below summarizes the undiscounted cash flow for From 1 to From 3 to From 6 to Total amount loans received, finance lease liabilities and bonds issued do listed above liabilities as at 31 December 2020: less than 1 year to than 3 months 6 months 12 months of cash flows not differ significantly from the expected maturity stated. 1 month 5 years 5 years

Inflows 1,289 225 14 — 109 — 1,637

Outflows (1,290) (752) (295) (218) (331) — (2,886)

Demand From More Total gross From 1 to From 3 to From 6 to 12 and less than 1 year to than amount Total The table below presents the term analysis of undiscounted 3 months 6 months months 1 month 5 years 5 years of outflow cash flow profile for derivative financial instrument transac- tions as estimated at the spot rates as at 31 December 2019: Liabilities

Loans and 4,555 8,780 12,642 37,486 250,218 100,796 414,477 340,530 borrowings received

Lease liabilities 450 1,305 1,767 3,538 27,746 19,394 54,200 41,743 Demand and From More From 1 to From 3 to From 6 to Total amount less than 1 year to than Debt securities issued 3,376 5,661 7,502 58,115 293,831 167,154 535,639 464,660 3 months 6 months 12 months of cash flows 1 month 5 years 5 years

Inflows — 153 129 462 30 — 774

The table below summarizes the undiscounted cash flow for Outflows — (145) (20) (176) (9) — (350) listed above liabilities as at 31 December 2019:

Demand and From More Total gross From 1 to From 3 to From 6 to MARKET RISK risk of changes in foreign exchange rates relates primarily less than 1 year to than amount Total to operating activities (when revenues or expenses are 3 months 6 months 12 months 1 month 5 years 5 years of outflow A market risk is the risk of incurring losses due to changes denominated in a different currency from the functional in the exchange or interest rates, quotations of securities currency). Liabilities or prices for precious metals. The market risk results in the Loans and impairment of fair value or future payment flows of financial The following table shows the currency structure of assets 3,478 10,614 22,461 28,435 199,844 103,110 367,942 287,707 borrowings received instruments owned by the Group. and liabilities as at 31 December 2020:

Lease liabilities 445 1,186 1,627 3,257 25,563 23,281 55,359 41,128

Debt securities issued 3,235 3,809 6,045 22,277 259,759 97,737 392,862 308,005 FOREIGN CURRENCY RISK

Foreign currency risk is the risk that the fair value or future The table below presents the term analysis of undiscounted cash flows of a financial instrument will fluctuate because cash flow profile for derivative financial instrument transac- of changes in foreign exchange rates. The exposure to the tions as estimated at the spot rates as at 31 December 2020:

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USD EUR RUB Other Total USD EUR RUB Other Total

Assets Financial liabilities at fair value through profit or loss 772 476 1 — 1,249

Cash and cash equivalents 46,264 12,229 16,937 97 75,527 Advances received 3,234 135 456 — 3,825

Financial assets at fair value through profit or loss — — 487 — 487 Deferred income tax liabilities 1,263 — 1,324 — 2,587

Due from banks 3,548 — 107 — 3,655 Income tax payable 65 — 4 — 69

Advances to suppliers 28,035 16,866 54,172 — 99,073 Other than income tax payable — — 1,065 — 1,065

Equipment purchased for leasing puiposes — — 4,098 — 4,098 Other liabilities 5,145 10 6,321 5 11,481

Loans granted 27,756 — 9,079 — 36,835 Total liabilities 345,533 33,523 488,148 5 867,209

Financial assets at fair value through other comprehensive income — — — — — Net balance position 6,897 11,558 95,543 92 114,090

Inventories — — 179 — 179 Nominal value of derivative financial instruments (2,926) (18,652) 21,578 — —

Financial assets at amortized cost 359 1,018 — — 1,377

Net investment in leases 64,798 14,886 210,689 — 290,373 The following table shows the currency structure of assets Assets leased out under operating leases 167,068 — 246,849 — 413,917 and liabilities as at 31 December 2019:

Asset under concession agreement — — 8,468 — 8,468

Investments in associates and joint ventures 1,013 1,013 USD EUR RUB Other Total Investment property — — 5,974 — 5,974 Assets

Property and equipment, intangible assets and right-of-use assets 152 — 820 — 972 Cash and cash equivalents 6,816 249 10,505 116 17,686

Deferred income tax assets — — 3,951 — 3,951 Financial assets at fair value through profit or loss 261 162 2,808 — 3,231

Income tax receivable — — 169 — 169 Due from banks 6 — 77 — 83

VAT recoverable — 82 1,425 — 1,507 Advances to suppliers 14,236 3,977 55,637 421 74,271

Other assets 14,450 — 19,274 — 33,724 Equipment purchased for leasing puiposes — — 2,917 — 2,917

Total assets 352,430 45,081 583,691 97 981,299 Loans granted 5,051 — 6,751 — 11,802

Liabilities Financial assets at fair value through other comprehensive income 309 436 — — 745

Loans and borrowings received 66,974 32,902 240,654 — 340,530 Inventories — — 200 — 200

Lease liabilities 26,426 — 15,317 — 41,743 Financial assets at amortized cost — — — — —

Debt securities issued 241,654 — 223,006 — 464,660 Net investment in leases 55,567 — 190,940 — 246,507

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USD EUR RUB Other Total to foreign currency changes for all other currencies is not 20%, and 30%. Sensitivity in the range of 10% is the most Assets leased out under operating leases 142,358 — 202,548 — 344,906 material. optimistic scenario, while fluctuations in the range of 30% reflect the most stressful version of the situation at the Asset under concession agreement — — 7,320 — 7,320 As at 31 December 2020, sensitivity has been analysed for market of financial instruments: three probable scenarios: fluctuations in the range of 10%, Investment property — — 6,591 — 6,591

Property and equipment, intangible assets and right-of-use assets 104 — 640 — 744

Deferred income tax assets 22 — 2,760 — 2,782 Appreciation Impact — Appreciation Impact — Appreciation Impact — (strengthening) Income tax receivable — — 85 — 85 profit/(loss) of RUB, % profit/(loss) of RUB, % profit/(loss) of RUB, % VAT recoverable — 65 22,987 — 23,052 USD 10.0 552 20.0 1,104 30.0 2,207 Other assets 8,808 — 18,313 2 27,123 EUR 10.0 925 20.0 1,849 30.0 3,699 Total assets 233,538 4,889 531,079 539 770,045

Liabilities As at 31 December 2019, the sensitivity of profit after exchange rate based on the net balance position is shown Loans and borrowings received 59,467 6,676 221,564 — 287,707 taxation and equity to changes in the USD and EUR to RUB below: Lease liabilities 24,159 — 16,969 — 41,128

Debt securities issued 145,895 — 162,110 — 308,005 Appreciation Impact — Appreciation Impact — Appreciation Impact — Financial liabilities at fair value through profit or loss — — — — — (strengthening) profit/(loss) of RUB, % profit/(loss) of RUB, % profit/(loss) of RUB, % Advances received 914 104 373 — 1,391

USD 10.0 (174) 20.0 (348) 30.0 (522) Deferred income tax liabilities 883 — 245 — 1,128

EUR 10.0 (233) 20.0 (467) 30.0 (933) Income tax payable 129 — 173 — 302

Other than income tax payable — — 15,724 — 15,724 The Group enters into derivative financial instrument of the fair value of such instruments to exchange rates for Other liabilities 4,965 286 6,377 4 11,632 transactions to mitigate the impact of currency risks on its three above scenarios as at 31 December 2020: Total liabilities 236,412 7,066 423,535 4 667,017 business. The following table demonstrates the sensitivity

Net balance position (2,874) (2,177) 107,544 535 103,028

Nominal value of derivative financial instruments 2,811 2,134 (4,945) — — Appreciation Impact — Appreciation Impact — Appreciation Impact — (strengthening) of profit/(loss) of RUB, % profit/(loss) of RUB, % profit/(loss) RUB, %

Sensitivity analysis all other variables held constant, of profit after taxation USD 10.0 (234) 20.0 (468) 30.0 (702) The following table demonstrates the sensitivity, to a rea- and equity. In 2020 and 2019, the Group assessed reason- sonably possible change in the USD and EUR to RUB ably possible changes based on the volatility of foreign EUR 10.0 (1,492) 20.0 (2,984) 30.0 (4,476) exchange rate based on the net balance position, with exchange rates during the reporting periods. The exposure 212 213 01 02 03 04 05 06

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The following table shows sensitivity of the fair value 31 December 2020: 31 December 2019: of derivative financial instruments to exchange rates in one profit / (loss) profit / (loss) scenario relevant as at 31 December 2019: 300 bp parallel fall 4,845 4,576

300 bp parallel rise (4,845) (4,576)

Appreciation 400 bp parallel fall 6,459 6,102 Impact — Appreciation Impact — Appreciation Impact — (strengthening) of profit/(loss) of RUB, % profit/(loss) of RUB, % profit/(loss) 400 bp parallel rise (6,459) (6,102) RUB, % 500 bp parallel fall 8,074 7,627 USD 10.0 171 20.0 341 30.0 512 500 bp parallel rise (8,074) (7,627) EUR 10.0 225 20.0 450 30.0 675

A 10%, 20% and 30% weakening of the RUB against the currencies to the amounts shown above, on the basis that above currencies at the end of the comparable periods all other variables remain constant. STOCK MARKET RISK are taken as invariables) based on the positions existing would have had the equal but opposite effect on the above as at 31 December 2020 has been analysed for three prob- The Group has applied the following exchange rates: A risk of changes in prices for securities (included in finan- able scenarios: fluctuations in the range of 10%, 20%, and cial assets at FVTPL and financial assets at FVOCI) is the 30%. Sensitivity in the range of 10% is the most optimistic risk that the fair value of such securities will decrease scenario, while fluctuations in the range of 30% reflect the as a result of changes in the price indices for shares (and most stressful version of the situation at the market of fi- bonds) and the value of separate shares (and bonds). nancial instruments (if sensitivity was analysed as at 31 De- Average rate Reporting date spot rate cember 2019, the Group would use fluctuations in the range Sensitivity analysis of 5%, 10%, and 20% for three probable scenarios). 2020 2019 31 December 2020 31 December 2019 Sensitivity of equity, profit and loss after tax to changes RUB/USD 72.1464 64.7362 73.8757 61.9057 in the fair value (quotations) of securities (other parameters

RUB/EUR 82.4488 72.5021 90.6824 69.3406

31 December 2020 31 December 2019

Effect on own funds: profit / (loss) Effect on own funds: profit / (loss) INTEREST RATE RISK Interest rate sensitivity analysis The management of interest rate risk based on interest rate 10% increase in quotations 39 284

The Group is exposed to the effects of fluctuations in the gap analysis is suplemented by monitoring the sensitivity 20% increase in quotations 78 568 prevailing levels of market interest rates on its financial of financial assets and liabilities. An analysis of sensitivity position and cash flows. Interest margins may increase of profit or loss and equity (net of taxes) to changes in in- 30% increase in quotations 117 853 as a result of such changes but may also reduce or create terest rates (repricing risk) based on a simplified scenario losses in the event of unexpected interest rate movements. of a 300, 400 and 500 basis point (bp) symmetrical fall or rise in all yield curves and positions of interest-bearing assets and liabilities existing as at 31 December 2020 and 31 December 2019 is as follows: 214 215 01 02 03 04 05 06

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A 10%, 20% and 30% decrease in securities quotation at the and technologies, and resulting from external events. This Fair values of trading securities and bonds issued are based sidered less than active; or other valuation techniques end of the comparable periods would have had the equal definition includes legal risk, but excludes strategic and on quoted market prices or dealer price quotations. The where all significant inputs are directly or indirectly but opposite effect on the above currencies to the amounts reputation risks. estimated fair values of all other financial assets and liabil- observable from market data. shown above, on the basis that all other variables remain ities are calculated using discounted cash flow techniques ― Level 3: inputs that are unobservable. This category constant. Legal risk is the risk to incur losses resulting from based on estimated future cash flows and discount rates for includes all instruments where the valuation tech- non-compliance of the Group with legal regulations and/ similar instruments at the reporting date. nique includes inputs not based on observable data In case of negative trends at the market of financial in- or contractual obligations. It also includes risks of unwilful and the unobservable inputs have a significant effect struments, a decrease in capital (equity) of the Group will violation when carrying out business and risks associated on the instrument’s valuation. This category includes be no more than 1%. with imperfection of the legal framework (internal inconsis- instruments that are valued based on quoted prices for tency of the applicable legislation, lack of legal provisions FAIR VALUE HIERARCHY similar instruments where significant unobservable The Group assumes the stock market risk arising from on certain aspects of the Group’s operations under the adjustments or assumptions are required to reflect changes in the fair value of corporate shares (and bonds) applicable legislation). The Group measures fair values using the following fair differences between the instruments. owned by the Bank in case of changes in their market value hierarchy, which reflects the significance of the inputs quotations. For the purposes of limiting the stock market Operational risk management system includes collection used in making the measurements: The following table analyses the fair value of financial in- risk, the Bank limits the list of issuers, in which shares of information on actual and potential losses, assessment, ― Level 1: quoted market price (unadjusted) in an active struments not measured at fair value and for which carrying (and bonds) trade investments may be made, sets forth and risk chart development and monitoring of the consolidated market for an identical instrument. value does not equal fair value by the level in the fair value implements limits on the total investments in shares (and risk report prepared for management of the Group and the ― Level 2: inputs other than quotes prices included within hierarchy into which each fair value measurement is cate- bonds), including in strict accordance with Regulation of the Board of Directors. Level 1 that are observable either directly (i.e., as pric- gorised as at 31 December 2020. Fair value of other financial CBR No. 511-P On the Procedure for Calculating the Market es) or indirectly (i.e., derived from prices). This category assets and liabilities recorded in the consolidated statement Risk by Credit Institutions (thus ensuring compliance of the includes instruments valued using: quoted market of financial position at amortized cost approximates such Bank’s risk management system with the requirements prices in active markets for similar instruments; quoted carryinmg amount. imposed by the CBR (regulator of credit institutions)). REPUTATIONAL RISK prices for similar instruments in markets that are con-

Reputational risk is the risk of negative perception of the fi- nancial stability of the Group in the public domain as a result OPERATIONAL RISK of certain internal and external factors. Carrying Level 1 Level 2 Level 3 Total Operational risk is the risk of direct or indirect losses Reputational risk management is carried out in accordance amount resulting from deficiencies or errors in internal processes, with the procedures set out in the risk management and Financial assets at amortized cost 1,378 — — 1,378 1,377 actions of employees, operations of information systems internal control policy. Net investment in leases — — 277,968 277,968 290,373

Loans and borrowings received — — (346,130) (346,130) (340,530)

Debt securities issued (206,818) (245,233) (35,918) (487,969) (464,660) 27. Fair values of financial instruments

The estimates of fair value are intended to approximate given the uncertainties and the use of subjective judgment, the price that would be received to sell an asset, or paid the fair value should not be interpreted as being realisable to transfer a liability in an orderly transaction between in an immediate sale of the assets or transfer of liabilities. market participants at the measurement date. However,

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The fair value of such financial instruments is categorised The table below analyses financial instruments measured ment is categorized as at the date. All amounts are based as at 31 December 2019 is as follows: at fair value as at 31 December 2020 by the level in the on those stated in the consolidated statement of financial fair value hierarchy into which each fair value measure- position:

Carrying Level 1 Level 2 Level 3 Total amount Level 1 Level 2 Level 3 Total Net investment in leases — — 233,410 233,410 246,507 Financial assets Loans and borrowings received — — (288,537) (288,537) (287,707) Financial assets at FVTPL, including Debt securities issued (214,037) (110,518) (1,031) (325,586) (308,005) Trading financial assets 487 — — 487

Derivative financial instruments — — — — Discount rates used for estimation of fair values of major financial assets and liabilities as at 31 December 2020 Financial assets at FVOCI — — — — depend on its currency: Financial liabilities

Financial liabilities at fair value through profit or loss, including

31 December 2020 Derivative financial instruments — 1,249 — 1,249

RUB USD Euro

Net investment in leases 8%–11% 7%–8% 5%–6% The table below analyses financial instruments measured value hierarchy into which each fair value measurement

Loans and borrowings received 5%–7% 2%–3% 3%–4% at fair value as at 31 December 2019 by the level in the fair is categorized as at the date:

Discount rates used for estimation of fair values of major fi- Level 1 Level 2 Level 3 Total nancial assets and liabilities as at 31 December 2019 depend Financial assets on its currency: Financial assets at FVTPL, including

Trading financial assets 2,808 — — 2,808 31 December 2019 Derivative financial instruments — 423 — 423 RUB USD Euro Financial assets at FVOCI 745 — — 745 Net investment in leases 9%–12% 8%–9% — Financial liabilities Loans and borrowings received 7%–8% 4%–5% — Financial liabilities at fair value through profit or loss, including

Derivative financial instruments — — — —

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Trading securities and investment securities nomic assumptions regarding the industry and geographi- Trading securities and investment securities, which cost cal jurisdiction, where the investee operates. 29. Commitments and contingencies is set forth using any valuation technique or pricing model, are represented mainly by debt securities (and insignificant Derivative financial instruments amounts of shares). The cost of these financial assets is de- The fair value of financial instruments has been measured termined using models which sometimes only incorporate using the techniques which utilize observable market data LITIGATION The Russian tax authorities still actively cooperate with data observable in the market and at other times use both to determine values for all inputs that may have significant tax authorities of foreign countries within international observable and non-observable data. The nonobservable effect on the fair value estimates. Quoted market prices In the ordinary course of business, the Group is subject exchange of tax information, which makes the companies’ inputs include assumptions regarding the future financial in active markets were used as inputs for the aforemen- to legal actions and complaints. The Group uses judgements activities worldwide more transparent and requiring de- performance of the investee, nature of its risks, and eco- tioned model to assess their probable outcome and necessity to form tailed examination in terms of confirmation of the economic allowance. As at 31 December 2020 and 31 December 2019, purpose of arrangement of an international structure the Group had several unresolved legal actions; accordingly, as part of tax control procedures. as at 31 December 2020, the Group accrued allowance for the above legal actions in the amount of RUB 523 million The legislation on international automatic exchange (as at 31 December 2020 RUB 735 million), which corre- of information and documentation on international groups 28. Capital management and capital adequacy sponds to the probable loss internally determined by the of companies (“IGC”) has been implemented, which provides Group’s lawyers. for preparation of documentation on the IGC with regard The Group maintains an actively managed capital base In order to maintain or adjust the capital structure, the to fiscal years starting from 1 January 2017. The legisla- to cover risks inherent in the business. The primary objec- Group may adjust the amount of distribution payment to the tion provides for preparation of three-tier documentation tives of capital management are to ensure that the Group shareholder and the amount of bonuses paid to employees. on transfer pricing (global documentation, national docu- maintains strong credit ratings and healthy capital ratios TAXATION CONTINGENCIES mentation, and country report) and notices on participation in order to support its business and to maximise the share- The Group monitors net assets using a gearing ratio, which in the IGC. These rules apply to the international groups holder’s value. is total liabilities divided by total equity. The Russian tax, currency and customs legislation is sub- of companies, which consolidated revenue for the finan- ject to divergent interpretations and frequent changes. cial year preceding the reporting period is RUB 50 billion The Group manages its capital structure and makes adjust- As at 31 December 2020 and 31 December 2019 the gearing Interpretation of the legal provisions by the Group’s man- or more, if the parent company of an international group ments to it in light of changes in economic conditions and ratio is calculated as follows: agement concerning the operations and activities of the of companies is recognised as a tax resident of the Russian the risk characteristics of its activities. Company may be challenged by the relevant regional or Federation or if the consolidated revenue of an international federal authorities. group of companies exceeds the threshold set forth by the legislation on provision of a country report of a foreign In 2019, the mechanisms against tax evasion using low-tax country, which tax resident is the parent company of an in- jurisdictions and aggressive tax planning entities were fur- ternational group of companies. 31 December 31 December ther implemented as well as separate parameters of the tax 2020 2019 system of the Russian Federation were generally adjusted. The said changes as well as recent trends in application In particular, these changes included further development and interpretation of certain provisions of the Russian tax Total liabilities 867,209 667,017 of the concept of beneficial ownership, tax residency of legal legislation show that tax authorities may take a stricter Total equity 114,090 103,028 entities at the place of actual activities, permanent repre- position in the interpretation of the legislation and the sentation, and an approach to taxation of controlled foreign audit of tax calculations. As a consequence, tax authorities Gearing ratio 7,6 6,5 companies in the Russian Federation. In addition, since may lodge claims with regard to those transactions and 2019, the general VAT rate has increased to 20% and foreign accounting methods to which they have never lodged claims providers of electronic services are required to register with before. As a result, significant taxes, fines and penalties the Russian tax authorities to pay VAT. may be charged. Determination of the claim amounts under possible but not lodged claims as well as estimation of the probability of negative outcome are impossible. Tax audits 220 221 01 02 03 04 05 06

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may cover three calendar years of activity immediately of applicable Russian tax legislation, official pronounce- parties may not be effected on the same terms, conditions These transactions are conducted in the ordinary cause preceding the year of audit. Under certain circumstances, ments and court decisions. However, the interpretations and amounts as transactions between unrelated parties. of business on terms comparable to those with other enti- tax audits may cover longer tax periods. of the relevant authorities could differ and the effect on the ties that are not government related. financial position, if the authorities were successful in en- Based on the facts available, no provision for potential tax forcing their interpretations, could be significant. The Group has established procurement policies, pricing liabilities is made in these consolidated financial state- TRANSACTIONS WITH GOVERNMENT RELATED strategy and approval process for purchases and sales ments, as management believes it is not likely that an out- ENTITIES of products and services, which are independent of whether flow of funds will be required to settle such obligations. the counterparties are government-related entities or not. PAYMENTS TO SUPPLIERS The Company is directly owned by the Russian Federation These circumstances may create tax risks in the Russian (100%) and managed by the Ministry of Transport of the Rus- The major outstanding balances as at 31 December 2020 Federation that are substantially more significant than Non-cancellable payments to the suppliers of equipment for sian Federation. The Group has transactions with other gov- with related parties and their corresponding average effec- in other countries. Management believes that it has provid- leasing purposes as at 31 December 2020 and 31 December ernment related entities including but not limited to lease tive interest rates are as follows: ed adequately for tax liabilities based on its interpretations 2019 including VAT are as follows: of assets, rendering and receiving services, depositing and borrowing money, and use of public utilities.

31 December 31 December Key management Jointly controlled State controlled entities % Total 2020 2019 personnel entities and state bodies

Less than one year 48 017 74 742 Assets

Between one and five years 94 172 25 206 Cash and cash equivalents — — 18,018 1.4 18,018

Total 142 189 99 948 Financial assets at FVTPL — — 487 7.1 487

Due from banks — — 107 4.3 107

Advances to suppliers — — 42,548 — 42,548 INSURANCE The Group has no insurance coverage against liability for er- Loans granted — 20,040 7,968 4.9 28,008 rors or omissions. Currently, third-party liability insurance is not widespread in Russia. Financial assets at FVOCI — — 468 3.4 468

Net investment in leases — — 34,877 9.1 34,877

Other assets — — 9,041 — 9,041

Liabilities

30. Related parties Loans and borrowings received — — 228,080 6.5 228,080

In accordance with IAS 24 “Related Party Disclosures”, par- ship, attention is directed to the substance of the relation- Financial liabilities at fair value through profit or loss — — 894 — 894 ties are considered to be related if one party has the ability ship, not merely the legal form. to control the other party or exercise significant influence Advances received — — 1,994 — 1,994 over the other party in making financial or operational de- Related parties may enter into transactions which unre- Other liabilities 6 — 4,710 — 4,716 cisions. In considering each possible related party relation- lated parties might not, and transactions between related

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As at 31 December 2020, loans and credits received were cember 2020 is RUB 128,104 million (31 December 2019: As at 31 December 2019 loans and credits received were The results of major transactions with related parties for collateralized by pledged assets leased out under operating RUB 87,876 million). collateralized by pledged assets leased out under operating 2020 are as follows: and financial leases. Net investment in leases is collateral- and financial leases. Net investment in leases is collateral- ized by assets leased out under financial leases. The other The major outstanding balances as at 31 December 2019 ized by assets leased out under financial leases. The other balances are unsecured. with related parties and their corresponding average effec- balances are unsecured. tive interest rates are as follows: The carrying value of the aircrafts leased out under operat- ing leases to the government-related entities as at 31 De-

Key management Jointly controlled State controlled entities Total personnel entities and state bodies

Key management Jointly controlled State controlled entities Finance lease interest income — — 2,553 2,553 % Total personnel entities and state bodies Other interest income — 1,078 2,332 3,410

Assets Operating lease income — — 17,012 17,012

Cash and cash equivalents — — 8,953 5.5 8,953 Interest expense — — (15,487) (15,487)

Financial assets at FVTPL — — 3,146 — 3,146 Subsidy to reimburse costs on interest payment — — 2,238 2,238

Due from banks — — 83 6.2 83 Charge of provision for credit losses on interest — (293) 952 659 bearing assets Advances to suppliers — — 27,895 — 27,895 Other operating expenses — — (599) (599) Loans granted — 5,242 — 6.5 5,242 Administrative expenses (258) — — (258) Financial assets at FVOCI — — 435 — 435

Net investment in leases — — 39,202 9.0 39,202

Other assets — — 15,730 — 15,730 The results of major transactions with related parties for 2019 are as follows: Liabilities

Loans and borrowings received — — 164,815 8.2 164,815 Key management Jointly controlled State controlled entities Advances received — — 864 — 864 Total personnel entities and state bodies Other liabilities 3 — 1,953 — 1,956 Finance lease interest income — — 2,321 2,321

Other interest income — 36 918 954

Operating lease income — — 15,687 15,687

Interest expense — — (9,664) (9,664)

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Key management Jointly controlled State controlled entities Total personnel entities and state bodies 31. Changes in circumstances relating Subsidy to reimburse costs on interest payment — — 2,957 2,957 to financial activities Charge of provision for credit losses on interest — (263) 96 (167) bearing assets

Other operating expenses — — (496) (496)

Loans and Administrative expenses (166) — — (166) Lease liabilities Debt securities issued Total borrowings received

Balance as at 1 January 2019 193,209 35,654 209,115 437,978

Debt issuance 134,702 28,730 113,543 276,975

PAYMENTS TO SUPPLIERS entities as at 31 December 2020 and 31 December 2019 Debt principal repayment (49,401) (3,911) (2,722) (56,034) including VAT are as follows: Expenses associated with debt issuance (78) — (38) (116) Non-cancellable payments to the suppliers of equipment for leasing purposes represented by government related Reclassification 17,300 (17,300) — —

Other changes

Interest accrued 17,706 1,299 18,861 37,866

31 December 31 December Interest paid (18,310) (923) (17,267) (36,500) 2020 2019 Proceeds from change in group structure — — 39 39 Less than one year 15,386 15,186 Fair value adjustment — — — — Between one and five years 19,636 19,357 Translation difference (7,421) (2,421) (13,526) (23,368) Total 35,022 34,543 Balance as at 31 December 2019 287,707 41,128 308,005 636,840

Balance as at 1 January 2020 287,707 41,128 308,005 636,840

Debt issuance 134,836 8 149,666 284,510

Debt principal repayment (96,352) (7,762) (24,585) (128,699)

Expenses associated with debt issuance (106) — (238) (344)

Other changes

Interest accrued 20,122 3,055 28,436 51,613

Interest paid (20,974) (3,055) (25,931) (49,960)

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GRI index

Loans and Lease liabilities Debt securities issued Total Number of borrowings received Indicator Pages indicator Revaluation — 25 — 25 101 PRINCIPLES Non-cash transactions — 2,239 (1,014) 1,225 102 GENERAL DISCLOSURES Translation difference 15,297 6,105 30,321 51,723 Organizational profile Balance as at 31 December 2020 340,530 41,743 464,660 846,933 The inner side 102-1 Name of the organization of the cover

102-2 Activities, brands, products, and services 23 32. Events after the reporting date 102-3 Location of headquarters 246 102-4 Location of operations 126 In accordance with the decision of the Company’s sole shareholder on 5 March 2021, the Company placed 500,000 ordinary 102-5 Ownership and legal form 126 shares with a par value of RUB 10 thousand each, through an additional issue, for its sole shareholder. Such shares were issued using the Company’s property, namely: using the additional capital. 102-6 Markets served 24

On 17 March 2021, the procedure for collecting the bid book for placement of non-convertible interest-bearing uncertificated 102-7 Scale of the organization 3, 118, 126 bonds in the amount of RUB 10,000 million was performed. The offer period is 3.5 years. The quarterly coupon rate is 7.85%. 102-8 Information on employees and other workers 68 The placement date is 22 March 2021. 102-9 Supply chain 78 On 18 February 2021, as part of the tender offer, the issue of Eurobonds by GTLK Europe DAC with maturity in July 2021 was 102-10 Significant changes to the organization and its supply chain 78 partially redeemed for USD 95 million at par. As a result of the redemption, the outstanding issue is USD 255 million at par. 102-11 Precautionary Principle or approach 60

102-12 External initiatives 63

102-13 Membership of associations 63

Strategy

102-14 Statement from senior decision-maker 8, 10

Ethics and integrity

102-16 Values, Principles, standards, and norms of behavior 15, 16, 106

Governance

102-18 Governance structure 83

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Number of Number of Indicator Pages Indicator Pages indicator indicator

102-22 Composition of the highest governance body and its committees 86 MATERIAL TOPICS

102-23 Chair of the highest governance body 87 GRI 201 Economic performance

102-24 Nominating and selecting the highest governance body 85 201-1 Direct economic value generated and distributed 118

102-25 Conflicts of interest 106 201-3 Defined benefit plan obligations and other retirement plans 71

102-30 Effectiveness of risk management processes 50 201-4 Financial assistance received from government 32

102-37 Stakeholders’ involvement in remuneration 100 GRI 204 Procurement practices

Stakeholder engagement 204-1 Proportion of spending on local suppliers 78

102-40 List of stakeholder groups 66 GRI 205 Anti-corruption

102-42 The basis for identifying and selecting stakeholders with whom to engage 66 205-1 Operations assessed for risks related to corruption 107

102-43 Approach to stakeholder engagement 66 205-2 Communication and training about anti-corruption policies and procedures 107

Reporting practice 205-3 Confirmed incidents of corruption and actions taken 107 102-45 Entities included in the consolidated financial statements 126 GRI 401 Employment The inner side 102-48 Restatements of information of the cover 401-1 New employee hires and employee turnover (number hired, sex, age, region) 69

The inner side 401-3 Parental leave 69 102-49 Changes in reporting of the cover GRI 404 Training and education The inner side 102-50 Reporting period of the cover 404-1 Average hours of training per year per employee 70

The inner side 102-51 Date of most recent report 404-2 Programs for upgrading employee skills and transition assistance programs 70 of the cover

404-3 Percentage of employees receiving regular performance and career development reviews 70 The inner side 102-52 Reporting cycle of the cover GRI 406 Non-discrimination 102-53 Contact point for questions regarding the report 246 406-1 Incidents of discrimination and corrective actions taken 71 The inner side 102-54 Claims of reporting in accordance with the GRI Standards of the cover GRI 407 Freedom of association and collective bargaining

102-55 GRI content index 241 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk 71

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Statement of responsibility

We confirm that to the best of our Forward-looking statements Number of Indicator Pages knowledge this Annual Report indicator contains a faithful review of the This Annual Report was prepared using the information available to JSC GTLK development, business performance, as of the date on which it was written. Certain statements in this Annual Report GRI 408 Child labor and condition of JSC GTLK, as well as regarding the business activities, economic indicators, financial condition, the description of the main risks and results of the Company’s business activities and operations, its plans, projects 408-1 Operations and suppliers at significant risk for incidents of child labor 71 uncertainties that the Company faces. and anticipated results, as well as the trends relating to tariffs, costs, anticipated GRI 409 Forced or compulsory labor expenses, development prospects, economic forecasts for the industry and The consolidated financial statements markets, certain projects, and other factors do not contain actual facts, but are 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor 71 of JSC GTLK for 2019, prepared in line of a forward-looking nature.

GRI 412 Human rights assessment with International Financial Reporting Standards, give a true and fair view The forward-looking statements that GTLK might occasionally make (but that 412-1 Operations that have been subject to human rights reviews or impact assessments 71 of the assets, liabilities, financial are not included in this document) may also contain planned or expected data position, and financial results of GTLK. on revenue, profit (loss), dividends and other financial indicators and ratios. The Significant investment agreements and contracts that include human rights clauses or that underwent human rights 412-3 71 screening words “intends,” “strives,” “projects,” “expects,” “estimates,” “plans,” “believes,” “anticipates,” “might,” “should,” “will” and other similar expressions usually GRI 415 Public policy indicate the forward-looking nature of the statement. However, this is not the only way of indicating the forward-looking nature of a given information. 415-1 Political contributions by country and recipient/beneficiary 47

GRI 418 Customer privacy Е.I. Ditrikh, Forward-looking statements, by their very nature, are associated with an General Director inherent risk and uncertainty of both a general and specific nature, and there 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data 107 exists a risk that assumptions, forecasts, projections and other forward-looking statements will not actually materialize. GRI 419 Socioeconomic compliance

419-1 Non-compliance with laws and regulations in the social and economic area 55 Chief Accountant In light of these risks, uncertainties and assumptions, GTLK warns that the T.A. Plastinina actual results might differ from those that are expressed directly or indirectly in the specified forward-looking statements under the influence of a whole range of significant factors and are valid only as of the date of this Annual Report. GTLK does not assert or guarantee that the business performance implied in the forward-looking statements will be achieved. GTLK shall not be liable for the losses that might be incurred by individuals or legal entities acting in reliance on forward-looking statements.

Such forward-looking statements in every specific case represent only one of the many possible scenarios and should not be considered as the most likely ones. Except where required by applicable law, GTLK disclaims any obligation to publish updates or amendments to the forward-looking statements based on either new information or subsequent events.

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Contacts

Address: Leningradsky Prospekt, 31A, building 1, Moscow, 125284 Registered office: Respubliki str, 73, room 100, Salekhard, Yamalo-Nenets Autonomous District, 629008 Phone: +7 (495) 221-00-12 +7 (800) 200-12-99 E-mail: [email protected]

Investor relations service: Phone: +7 (495) 221-00-12 +7 (800) 200-12-99 [email protected]

Press service: Phone: +7 (495) 221-00-12 [email protected] gtlk.ru

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