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Vimpel-Communications” (A Wholly-Owned Subsidiary of VEON Ltd.)

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Vimpel-Communications” (A Wholly-Owned Subsidiary of VEON Ltd.) Consolidated financial statements Public Joint Stock Company “Vimpel-Communications” (a wholly-owned subsidiary of VEON Ltd.) as of 31 December 2017 and for the year ended 31 December 2017 Public Joint Stock Company "Vimpel-Communications" (a wholly-owned subsidiary of VEON Ltd.) Consolidated financial statements as of 31 December 2017 and for the year ended 31 December 2017 Contents Independent Auditor’s Report Consolidated income statement for the year ended 31 December 2017 ...................................................... 1 Consolidated statement of comprehensive income for the year ended 31 December 2017 ........................ 2 Consolidated statement of financial position as of 31 December 2017 ........................................................ 3 Consolidated statement of changes in equity for the year ended 31 December 2017 ................................. 4 Consolidated statement of changes in equity for the year ended 31 December 2016 ................................. 4 Consolidated statement of cash flows for the year ended 31 December 2017 ............................................ 5 Notes to the consolidated financial statements as of 31 December 2017 and for the year ended 31 December 2017: 1. General information ............................................................................................................................. 6 2. Basis of preparation of the consolidated financial statements ............................................................ 6 3. Significant accounting policies that relate to the financial statements as a whole .............................. 7 4. Financial risk management ............................................................................................................... 11 5. Significant transactions ..................................................................................................................... 15 6. Segment information ......................................................................................................................... 16 7. Revenue ............................................................................................................................................ 18 8. Selling, general and administrative expenses................................................................................... 20 9. Impairment ........................................................................................................................................ 20 10. Other non-operating loss, net ........................................................................................................... 24 11. Income taxes ..................................................................................................................................... 24 12. Investments ....................................................................................................................................... 28 12.1. Information about subsidiaries .......................................................................................................... 28 12.2. Material partly-owned subsidiaries .................................................................................................... 29 12.3. Investments in joint ventures............................................................................................................. 30 13. Property and equipment .................................................................................................................... 32 14. Intangible assets ............................................................................................................................... 34 15. Financial assets and liabilities ........................................................................................................... 36 16. Other assets and other liabilities ....................................................................................................... 42 17. Inventories ......................................................................................................................................... 42 18. Trade and other receivables ............................................................................................................. 43 19. Cash and cash equivalents ............................................................................................................... 43 20. Issued capital .................................................................................................................................... 44 21. Dividends........................................................................................................................................... 45 22. Provisions .......................................................................................................................................... 45 23. Related parties .................................................................................................................................. 46 24. Risks, commitments, contingencies and uncertainties ..................................................................... 50 25. Events after the reporting period ....................................................................................................... 55 Independent Auditor’s Report To the Shareholders and Board of Directors of Public Joint Stock Company “Vimpel-Communications”: Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects the consolidated financial position of Public Joint Stock Company “Vimpel-Communications” (a wholly- owned subsidiary of VEON Ltd. hereinafter referred to as “the Company” or “PJSC VimpelCom”) and its subsidiaries (hereinafter collectively referred to as “VimpelCom”) as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. What we have audited VimpelCom’s consolidated financial statements comprise: the consolidated income statement for the year ended 31 December 2017; the consolidated statement of comprehensive income for the year ended 31 December 2017; the consolidated statement of financial position as at 31 December 2017; the consolidated statement of changes in equity for the year ended 31 December 2017; the consolidated statement of cash flows for the year ended 31 December 2017; and the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the ‘Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements’ section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of VimpelCom in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru Our audit approach Overview and context PJSC VimpelCom is a telecommunications company providing voice and data services through a range of mobile and fixed-line technologies as well as selling subscriber equipment and accessories. The group comprises of seven components and therefore we considered our group audit scope and approach as set out in the scope of our group audit section. We paid specific attention to the areas of focus driven by the operations of the company, as set out below. Materiality Overall materiality: RUB 3,000 million, which represents 2.5% of Earnings Before Interest, Taxes, Depreciation and Amortisation (“EBITDA”) Audit scope We conducted our work at the corporate headquarters in Russia and at the most significant subsidiaries, located in Russia, Uzbekistan, Kazakhstan and Kyrgyzstan. The work consisted of full scope audits for those significant subsidiaries and risk assessment procedures for less significant subsidiaries in Georgia and Armenia. Subsidiary in Laos, which was presented as an asset held for sale as of 31 December 2017, was out of scope. Since some of the functions of VimpelCom, like accounting policies and methodology, valuation, treasury and tax are centralised at the level of VEON Ltd. in the Netherlands our work also included those functions to the extent they are managing, approving and monitoring the related balances and transactions of VimpelCom. The group engagement team visited Kazakhstan to review the work of the component team covering subsidiaries in Kazakhstan and Kyrgyzstan while the component team covering subsidiaries in Uzbekistan visited Moscow to enable us to review their work. Audit coverage of 99% of consolidated EBITDA, 98% of consolidated revenue and 99% of consolidated total assets was obtained. Key audit matters Revenue recognition - accuracy of revenue recorded given the complexity of systems
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