SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly

Presented by: VTB Bank, Custody

March 15, 2018 Issue No. 2018/09

Company News

Transneft says no plans to sell controlling stake in NCSP On March 2, 2018 Nikolai Tokarev, CEO of Russian oil pipeline monopoly , said that the company did not plan to sell a controlling stake in Novorossiysk Commercial Sea Port (NCSP) and would develop a new strategy for the port’s development. The deal to buy the stake in NCSP could be closed within a month and a half and its value was currently being discussed. In February, the Federal Antimonopoly Service cleared Transneft’s affiliate Fenti Development Ltd to acquire a 50.1% voting stake in NCSP. He also said the situation with the collapse of oil product transshipment in the port of Novorossiysk would be fully settled in two-three days. Igor Dyomin, adviser to Tokarev, said earlier that actions of the captain of the port of Novorossiysk led to a collapse of oil product exports, as loading of six tankers was suspended and about 2,400 railway tank wagons were waiting to be unloaded. Tokarev also said that Transneft plans to apply to the government due to the situation with a shortfall of income from transportation of oil to China through Kazakhstan. On March 1, KazTransOil notified Transneft of more than doubling the transit tariff.

Sistema board appoints former MTS CEO Dubovskov as new president On March 2, 2018 the board of directors of Russian multi-industry holding appointed Andrei Dubovskov, the former CEO of the country’s major mobile operator MTS, controlled by the holding, as a new president.

Beluga Group buys back, cancels 5.55 mln shares On March 5, 2018 it was reported that Russian spirits producer Beluga Group, earlier known as Synergy, bought back and cancelled 5.554 mln shares, or 22.26% of its charter capital. The buyback price was earlier set at RUB 600 per security. The buyback was aimed at optimization and simplification of the structure of the shareholder equity.

NCSP cancels EGM due to lack of quorum On March 6, 2018 it was announced that Russia’s Novorossiysk Commercial Sea Port (NSCP) cancelled an extraordinary general meeting (EGM) of shareholders scheduled for March 5 due to the lack of quorum. Shareholders were to elect a new board of directors. Previously, a representative of multi-industry holding Summa Group stated that Novoport Holding Ltd - a joint venture between Summa and oil pipeline monopoly Transneft, which owns 50.1% in NCSP - did not appoint its representatives to the board of directors of the port due to a government ruling to sign a new shareholder agreement of NCSP. In February, the Federal Antimonopoly Service allowed Fenti Development Ltd, Transneft’s affiliate, to acquire a 50.1% voting stake in NCSP under a condition that all tariffs of the port should be calculated in rubles. Besides ownership of the 50.1% stake in NCSP on a parity basis with Summa, Transneft also directly controls a 10.5% stake in the port. Other shareholders of NCSP include the Federal State Property Management Agency with a 20% stake, and subsidiaries of Russian Railways with a 5.3% stake. The rest is free-float.

CEO says may offer quasi-treasury shares On March 6, 2018 Mikhail Oseyevsky, President of Russian state-controlled telecom operator Rostelecom, stated that the company did not rule out a secondary public offering (SPO) of quasi-treasury shares that were kept on the balance of its unit, Mobitel. Senior Vice-President and Chief Financial Officer Kai-Uwe Mehlhorn said the company could consider this scenario if the market situation improves. Mobitel holds 10.49% of common shares of the parent company and 30.79% of preferred shares.

1

MegaFon board suggests shareholders re-elect existing board On March 7, 2018 the board of directors of Russian mobile operator MegaFon approved a list of candidates- existing members to the board to be elected at an annual meeting of shareholders. The board was fully revamped in January, when it was joined by two people from Gazprombank, the operator’s new shareholder -- Alexei Antonyuk, general director of Gazprombank Asset Management, and Alexander Ushkov, head of the bank’s project financing department. There are also two independent directors and five members put forward by MegaFon’s main shareholder, USM Holdings. The previous board’s Chairman Ivan Streshinsky explained the new lineup of the board by new challenges related to toughening competition and the need for digital transformation. USM Holdings owns 56.32% of MegaFon, and Gazprombank Group has 18.79%, the operator’s unit, MegaFon Investments, holds 3.92%, and 20.97% are in free float.

MTS buys 3 mln shares from Sistema for RUB 930 mln under buyback On March 12, 2018 it was reported that Stream Digital, a wholly-owned subsidiary of major Russian mobile operator MTS, purchased 3,053,716 shares of MTS common stock, or 0.15% of share capital, from Sistema Finance, a Luxembourg-based subsidiary of MTS core shareholder, multi-industry holding Sistema, for RUB 930 mln. Stream Digital acquired the shares of common stock from Sistema Finance under a sale and purchase agreement concluded prior to the launch of MTS’s repurchase plan. The agreement stipulates that Stream Digital acquire a number of shares from Sistema Finance proportional to the number of MTS shares of common stock, including shares of common stock represented by American depositary shares (ADSs) Stream Digital acquires through the open market repurchase, such that Sistema’s, together with its affiliated entities, aggregate percentage ownership and voting power in MTS remained substantially equal to its ownership as at the date of the commencement of the repurchase plan on September 6, 2017. Upon results of the buyback program in February, Sistema’s stake in MTS remained unchanged at 50.004%.

NLMK owners elect Grigory Fedorishin as new president of company On March 12, 2018 it was announced that the shareholders of Russian steelmaker (NLMK) terminated powers of the company’s President Oleg Bargin ahead of schedule and elected Senior Vice President Grigory Fedorishin as the new president. Bagrin, who has been CEO and president of the company since 2012, decided to resign after election to a new term in office in June 2017. He will remain a member of the board of directors of NLMK and of the board’s committee on strategic planning. Fedorishin has been NLMK’s senior vice president since March 2017. Before that, he had been the company’s vice president for finance and a director for strategic development of the company.

Government nominates Rosseti CEO to RusHydro board On March 13, 2018 it was reported that the Russian government nominated power grid holding Rosseti’s CEO Pavel Livinsky to the board of directors of hydropower giant RusHydro. The list of candidates also includes Deputy Economic Development Minister Mikhail Rasstrigin and current members of the board. The government also nominated Deputy Finance Minister Alexei Moiseyev to the supervisory board of uncut diamond giant ALROSA.

VimpelCom’s board of directors may stay unchanged after AGM On March 13, 2018 the board of directors of Russian mobile operator VimpelCom, working under the Beeline brand, approved a list of candidates for a new board to be elected at an annual general meeting (AGM) of shareholders, which fully copies the one for an extraordinary meeting scheduled for April 27. In both cases, the list contains five candidates for five seats. The board could be joined by the company’s ex-CEO Kjell Johnsen and Trond Westlie, chief financial officer of VEON, the Amsterdam-based sole owner of VimpelCom. The candidates do no comprise the current members of the board Andrew Davies, former CFO of VEON, and Mikhail Gerchuk, former general director for Eurasia at VEON, who earlier quit VEON.

Uralkali buys back 1.77% of shares on March 7, 2018 On March 13, 2018 Russian fertilizer producer Uralkali bought back a 1.768% voting stake. The current buyback program covers the shareholders who voted against delisting from the Exchange, approved by the shareholders in December 2017. The buyback price was set at RUB 135.95 per share. Uralkaly could spend RUB 7.1 bln on the March 7 deal.

Sovcombank, Rosevrobank to merge to become one of top Russian banks On March 13, 2018 it was reported that Sovcombank and Rosevrobank would merge to create one of Russia’s three largest banks by assets and capital. Assets of the merged banking group will exceed RUB 1 tln, while its capital will exceed RUB 100 bln. As of January 1, Rosevrobank was Russia’s 44th largest bank by assets, while Sovcombank was 17th largest bank. Currently, Sovcombank controls 45% in Rosevrobank, and it will acquire at least 35% more in the bank from REG Holding. Rosevrobank Chairman of the

2

Management Board Ilya Brodsky will convert the bulk of his shares in the bank into shares of the merged bank and will become a member of the bank’s management and supervisory boards. Sovcombank’s CEO Dmitry Gusev said in the statement that the banks would continue working on their own without significant organizational changes until the end of 2018.

Sistema, RCIF cancel SPO of On March 13, 2018 it was announced that Russian multi-industry holding Sistema and the Russia-China Investment Fund (RCIF) cancelled their plans to hold a secondary public offering (SPO) of children goods retailer Detsky Mir. In December 2017, Sistema and the Russia-China Investment Fund cancelled an SPO of Detsky Mir, as the company’s shares were arrested under on an oil major ’s suit against Sistema. The sides planned to sell 6.3% in Detsky Mir for RUB 4.185 bln. Later, the arrest was lifted in line with an amicable deal of Rosneft and Sistema. In early February 2018, Sistema’s core owner Vladimir Yevtushenkov said that the company may hold the SPO of Detsky Mir in March and raise the offering from 6.3% to 25%.

Owners of Post Bank approve RUB 6.2 bln additional share issue On March 13, 2018 shareholders of Post Bank approved an issue of RUB 6.2 bln worth of shares for the current owners of the bank. In February, the bank’s supervisory board recommended that the shareholders approve an issue of 1,967,754 mln shares worth a total of RUB 6.2 bln. In September 2017, CEO Dmitry Rudenko said that the bank would most likely need a capital injection in 2018. In 2017, Post Bank issued RUB 6.7 bln of additional shares. Russian Post and the country’s second largest bank VTB own 49.999988% in the bank, while Rudenko owns two shares.

En+ Group expects conversion of Glencore’s stake in by May 2018 On March 15, 2018 it was stated that Russia’s En+ Group, owned by businessman Oleg Deripaska, expects the conversion of Glencore’s 8.75% interest in aluminum producer UC RUSAL into global depositary receipts (GDRs) of the group to be completed by the end of April. Glencore and En+ Group agreed on the transaction in October 2017.

Executive says Russia’s Sistema eyes IPO of Segezha Group in 2020 On March 15, 2018 Ali Uzdenov, Senior Vice President of Russian multi-industry holding Sistema, stated that the company plans to hold an initial public offering (IPO) of its pulp and paper subsidiary Segezha Group in 2020. In November, the then-President of Sistema Mikhail Shamolin said that the company might float Segezha Group in 2019, but in February, Sistema’s core owner Vladimir Yevtushenkov said that the IPO might happen even earlier. Earlier in March, a source close to Sistema said that Shamolin would become Segezha Group’s CEO and a minority owner.

Dividends/coupons may pay RUB 5.47 per share in final dividends for 2017 On March 2, 2018 the supervisory board of the Moscow Exchange recommended paying RUB 5.47 per share, or a total of RUB 12.45 bln in final dividends for 2017. The record date for the dividends is May 15. The bourse paid RUB 2.49 per share, or RUB 5.67 bln in interim dividends for 2017. The final dividends will drive the combined dividend payout for the year to RUB 18.12 bln, or RUB 7.96 per share, which accounts for 89% of the net profit of the Moscow Exchange for the year as calculated under International Financial Reporting Standards (IFRS). The Moscow Exchange’s major shareholders include Russia’s central bank with an 11.8% stake, top bank Sberbank with 10%, Vnesheconombank (VEB) with 8.4%, and the European Bank for Reconstruction and Development (EBRD) with 6.1%, and a subsidiary of the Russian Direct Investment Fund (RDIF) with a 5% stake.

Detsky management suggests paying all 2017 RAS net profit in dividends On March 5, 2018 it was reported that the management of Russia’s largest children goods retailer Detsky Mir would recommend paying the whole 2017 net profit under Russian Accounting Standards in dividends. The company’s shareholders approved paying RUB 2.195 bln or RUB 2.97 per share in dividends for January- September 2017.

NLMK board offers RUB 3.36 per share in final 2017 dividends On March 7, 2018 the board of directors of Russian steelmaker NLMK recommended paying RUB 3.36 per share in final dividends for 2017. The shareholder register for dividends will be closed on June 20. Under the dividend policy updated in 2015, NLMK can pay from 50% of the net profit to 50% of free cash flow under International Financial Reporting Standards (IFRS) in dividends if a net debt/EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is up to 1. The payment will amount to 30% if the ratio is

3 higher. NLMK’s net profit amounted to USD 1.45 bln in 2017 under IFRS. The total amount of dividends can make RUB 14.04 per share. Businessman Vladimir Lisin owns around 84% in the company.

Polymetal may pay USD 0.3 per share in final dividends for 2017 On March 12, 2018 the board of directors of Russian gold producer Polymetal recommended paying USD 0.3 per share, or a total of around USD 129 mln, in final dividends for 2017. The payment will account for 50% of the company’s adjusted net profit for July-December. The combined amount of dividends for 2017 thus amounted to USD 189 mln. ICT Group of tycoon Alexander Nesis owns about 27% in Polymetal, while PPF Group NV of Petr Kellner owns 13%, and tycoon Alexander Mamut and his family owns 10%. More than 50% in Polymetal is free-float.

TCS Group board approves USD 56.6 mln interim dividends in 2018 On March 13, 2018 the board of directors of Russia’s TCS Group Holding PLC, including and Tinkoff Insurance, recommended paying USD 56.6 mln, or USD 0.31 per share or global depositary receipts (GDR), in interim dividends in 2018. The shareholder register for the dividends will be closed on March 29. The dividend payment is scheduled for April 4. TCS Group’s board of directors approved payment of USD 0.2 per share or GDR, or a total of about USD 31 mln, in interim dividends for January-March 2017. The dividend policy of TCS Group encompasses payment of 50% of the net profit for a quarter calculated under International Financial Reporting Standards (IFRS) in dividends. Tycoon Oleg Tinkov owns 54.77% in TCS Group, while free float stands at 30.41%.

Mosenergo sees 2017 dividends not below 2016 level On March 13, 2018 a top executive stated that Russian power producer Mosenergo expects that its dividend payments for 2017 would not be below the amount paid for 2016. The board of directors will consider dividend recommendations for 2017 at the end of April. In 2017, Mosenergo’s net profit soared 84.6% to RUB 24.802 bln, as calculated under International Financial Reporting Standards (IFRS). Controlled by Energoholding, Mosenergo paid RUB 3.36 bln in dividends for 2016.

Novatek board recommends RUB 8 per share in final dividends for 2017 On March 13, 2018 the board of directors of Russian independent gas producer recommended paying RUB 8 per share, or RUB 24.29 bln, in final dividends for 2017. The amount does not include dividends of RUB 6.95 per share, or RUB 21.102 bln, paid for January-June 2017. The shareholders will consider the board’s recommendations at an annual general meeting on April 20. The company paid RUB 6.9 per share, or a total of RUB 21.2 bln, in dividends for January-June 2016 and RUB 7 per share, or RUB 21.2 bln, in final dividends for 2016. Novatek’s major shareholders are its CEO Leonid Mikhelson with a 24.75% stake, businessman Gennady Timchenko’s Volga Group with 23.49%, France’s Total with 18.9%, and gas giant Gazprom with a 9.99% stake.

En+ Group board approves USD 0.119 per share in extra interim dividends for 2017 On March 15, 2018 the board of directors of Russia’s En+ Group, owned by businessman Oleg Deripaska, approved paying USD 0.119 per share in additional interim dividends for 2017. The payout will be made no later than on March 28. The total amount of dividends for 2017 will amount to USD 394 mln, including USD 193 mln after an initial public offering (IPO). Dividends from the energy segment will amount to USD 250 mln. Dividends from aluminum giant UC RUSAL are USD 144 mln for 2017, the company will pay no additional dividends for the period. En+ Group raised USD 1.5 bln in the IPO held in London in November.

Rostelecom to pay at least RUB 5 per share in dividends on new policy On March 15, 2018 it was announced that the new dividend policy of Russian state-controlled telecom operator Rostelecom stipulates paying at least RUB 5 per share. As to the rest, the dividend policy remained unchanged, and the company will continue channeling at least 75% of free cash flow into dividends. The previous dividend policy, which expired in 2017, was adopted in December 2015 and tied dividends to free cash flow instead of the previously used indicator of net profit. The company will decide on the payment of dividends for 2017 in June; its free cash flow for the period amounted to RUB 20.385 bln. Rostelecom paid RUB 15 bln in dividends for 2016. The company said in a statement that the board of directors approved a new dividend policy and a strategy of Rostelecom’s development for 2018-2022, but did not disclose details regarding both documents.

Eurobonds / DRs Minister says Russia to exchange, place Eurobonds simultaneously On March 14, 2018 Anton Siluanov, Finance Minister, stated that Russia would offer new Eurobonds simultaneously with a swap of existing issues. Russia will exchange USD 4 bln worth of 2030 Eurobonds for

4 the Eurobonds maturing in 2027 or 2047 or for the new issues of Eurobonds. VTB Capital will collect bids for the swap until March 15. The Finance Ministry also plans to offer USD 3 bln of new Eurobonds.

Gazprom to place EUR 750 mln 8-year Eurobond at 2.5% On March 14, 2018 a banking source said that Russian gas giant Gazprom would place EUR 750 mln of 8- year Eurobonds with the yield of 2.5%. Demand for the Eurobonds exceeds EUR 2.25 bln. The initial guidance amounted to around 2.875% and was lowered to around 2.75% and further to 2.5-2.7% earlier in the day. Gazprom held meetings with investors in Paris and London on March 12-13. Deutsche Bank, Gazprombank, J.P. Morgan, Renaissance Capital, and VTB Capital act as organizers. In late February, Gazprom placed CHF 750 mln 5-year Eurobonds with a yield of 1.45%.

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

For more information kindly contact: Anna Enfiandzhiants Evgenia Sakr Julia Dombrovskaya T +7 (495) 783 13 91 T +7 (495) 783 13 64 T +7 (495) 783 13 15 F +7 (495) 783 13 89 F +7 (495) 783 13 89 F +7 (495) 783 13 20 E [email protected] E [email protected] E [email protected] This document has been prepared exclusively for internal use of VTB Bank (PJSC) customers. The information should not be further distributed or duplicated in whole or in part by any means without the prior written consent of VTB Bank (PJSC). The information contained herein has been prepared on the basis of information which is either publicly available or obtained from a source which VTB Bank (PJSC) believes to be reliable at the time of publication. Information provided herein may be a summary or translation. The content of the material contained herein is subject to change without notice, and such changes could affect its validity. VTB Bank (PJSC) is not obligated to update the material in light of future events. Furthermore, VTB Bank (PJSC) does not warrant, expressly or implicitly, its veracity, accuracy or completeness. VTB Bank (PJSC) and its affiliates accept no liability whatsoever for any use of this communication or any action taken based on or arising from the material contained herein. Additional information may be available upon request. The material in this communication is for information purposes only. Therefore, this communication should not be interpreted as investment, tax or legal advice by VTB Bank (PJSC) or any of its officers, directors, employees or agents and customers should consult with appropriate professional advisers for these specific matters. Nothing expressed or implied herein is intended to create any obligation of VTB Bank (PJSC) and/or impose any liability on VTB Bank (PJSC) and/or create legal relations between VTB Bank (PJSC) and VTB Bank (PJSC) customers.

5