ANNUAL REPORT 2019

THE NATURE OF LEADERSHIP 2019 ANNUAL REPORT PJSC TransContainer | Annual report 20191 1 1 3 Contents

STRATEGIC MARKET CORE SOCIAL CORPORATE FINANCIAL REPORT OVERVIEW ACTIVITIES RESPONSIBILITY GOVERNANCE REPORT

8 Company Profile 24 Global Container 38 Services 60 Human Resources 80 Corporate Governance 140 Financial Results Shipping Market System 10 Business Model 50 Client Service 69 Environmental 152 Statement of the Audit 26 Russian Rail Container and Sales Management 102 Corporate Governance Committee 12 Strategy Transportation Model 153 Market 56 Quality Control 73 Procurement Directors’ Responsibility 117 Key Performance Indicator Statement 33 The Company’s Position 75 Charity System 154 in the Industry Consolidated Statement of 118 Remuneration Report Financial Position under IFRS

120 Control System

127 Risk Management

131 Disclosure of Information and APPENDICES Interaction with Shareholders and Investors

228 Report on Compliance 298 The Structure of Remuneration with the Corporate for the Members of Executive Governance Code Bodies and Management

261 Major and Interested Party 300 GRI Content Index Transactions 304 Administrative Details 268 Corporate Risk Map

PJSC TransContainer | Annual report 2019 1 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

PRELIMINARILY APPROVED BY THE BOARD OF DIRECTORS Disclaimer OF TRANSCONTAINER ON 9 April 2020.

Meeting Minutes No. 20. This Annual Report (the “Annual Report”) has been and other forward-looking statements may prove prepared using the information available to the Public unjustified. In light of these risks, uncertainties, APPROVED BY THE ANNUAL GENERAL SHAREHOLDERS Joint Stock Company Center for Cargo Container Traffic and assumptions, the Company warns that actual MEETING OF TRANSCONTAINER ON 14 May 2020. TransContainer (“TransContainer”, the “Company”) results may differ significantly from those expressed and its subsidiaries (the “Group”) at the time of its either directly or indirectly in such forward-looking Meeting Minutes No. 44. preparation, including information obtained from statements, which are only valid as of the date that third parties. The Company reasonably believes that this Annual Report was drafted. The Company does the information in the Annual Report was complete not represent or warrant that the results specified in and accurate as of the time of its publication. the forward-looking statements will be achieved. The About the Report However, it does not represent or warrant that the Company does not assume any liability for damages information will not be further refined, revised or that may be incurred by persons or legal entities acting Reporting period from 1 January 2019 to 31 December 2019. otherwise changed. This Annual Report may contain on the basis of forward-looking statements. Such certain forward-looking statements regarding the forward-looking statements in each case represent The Report of the Public Joint Stock Company TransContainer (“TransContainer”, the “Company”) operations, economic performance, financial condition only one of many possible outcomes and should for the year 2019 includes the outcomes of TransContainer and its subsidiaries (the “Group”). The and results of economic and industrial activities of not be considered as the most probable outcomes. composition of the Group and its equity interest in TransContainer are shown in the Consolidated the Company and the Group, its plans, projects and In particular, other factors that could influence the Financial Statements for 2019. expected results, policies in respect of dividends and financial and operational performance of the Company capital expenditures, as well as trends relating to or the Group, its plans, projects, capital expenditure The data in our Annual Report for 2019 is consolidated in accordance with the Federal prices, rates, transportation volumes, terminal handling and other aspects of its operations include changes Law No. 208-FZ On Joint-Stock Companies dated 26 December 1995; the Bank of ’s volumes, production and consumption volumes, costs, to macroeconomic or market conditions, actions of Regulation No. 660-P On Shareholders Meetings dated 16 November 2018; the Bank of Russia’s anticipated expenses, development prospects, useful the state bodies of the Russian Federation and other Regulation No. 454-P On Information Disclosure by the Issuers of Issue-Grade Securities dated service life of assets and other similar factors, the jurisdictions where the Group studies, develops or 30 December 2014; Letter of the Bank of Russia No. 06-52/2463 dated 10 April 2014 On the economic outlook for the industry and markets, dates uses assets, including changes to tax, environmental Code of Corporate Conduct; the Procedure for Submission of Information and Reports to Public for beginning and end of individual projects, as well as and other laws and regulations. This list of material Joint-Stock Company “ Exchange MICEX-RTS” dated 24 July 2015; the Bank of Russia’s acquisition, closing, conservation or disposal of certain factors is not exhaustive. When taking into account the Information Letter No. IN-06-52/8 On Disclosure of the Corporate Governance Code Compliance entities (including related costs). The words “intends”, forward-looking statements, the above factors, and in Report in the Public Joint Stock Company’s Annual Report dated 17 February 2016; the FRC’s “strives”, “projects”, “expects”, “estimates”, “plans”, particular the economic, social, and legal environment Guidance on the Strategic Report (2014) and Guidance on Risk Management, Internal Control and “believes”, “anticipates”, “may”, “should”, “will” and “will in which the Company or the Group operates, Related Financial and Business Reporting (2014); the Guidelines on Non-financial Reporting under continue”, as well as similar expressions, generally should be carefully considered. Except as explicitly Directive 2014/95/ EU; and the GRI’s Sustainability Reporting Guidelines. indicate forward-looking statements. Forward-looking required by applicable law, the Company assumes no statements, by their nature, involve inherent risks and obligation to publish updates or changes to forward- The information provided in the Report has been subjected to an internal audit and reviewed by uncertainties, both general and specific, and there is looking statements based on any new information or the Audit Committee and the Nominations and Remuneration Committee of the Company’s Board a danger that assumptions, forecasts, projections, subsequent events. of Directors.

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Message from the Chairman of the Board of Directors of PJSC TransContainer

2019 turned out to be one of the most I would like to express my gratitude to the management of important in the corporate life of PJSC PJSC TransContainer and the Company’s former shareholders, TransContainer. Over the course of this whose efforts allowed us to create and develop this valuable 13 period, the Company joined Delo Group, asset on the transport market for over 13 years, which has a a major transport and logistics holding unique fleet, a terminal network and a range of years in Russia, which manages sea container competencies in the field of container transportation. PJSC TransContainer terminals in the Azov-Black Sea, Baltic is the most valuable and Far Eastern basins, along with a network of railway container terminals, asset of the transport I know for sure that TransContainer won’t become just market and a fleet of containers and . another of Delo’s assets, but will contribute to strengthening the transport and logistics sector of the Group. By combining the holding’s capabilities with those of our Company as the leading operator in the post-Soviet region, we can achieve unprecedented synergy. This will be instrumental in meeting our most ambitious goals: to create a national leader in the transport and logistics sector, to enhance the role of Delo Group and all its member companies on the international transportation market, to improve work efficiency, and to ensure a high level of social responsibility and fulfillment of the country’s development objectives, which the government sets for business. Sergey SHISHKAREV Chairman of the Board of Directors of PJSC TransContainer Sincerely yours, Sergey Shishkarev

PJSC TransContainer | Annual report 2019 4 5 STRATEGIC REPORT

+23% 17,257 Net profit growth compared Total investments, to 2018 RUB mln PJSC TransContainer | Annual report 2019 6 7 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Company Profile SUBSIDIARIES AND JOINT VENTURES OF PJSC TRANSCONTAINER PJSC TRANSCONTAINER

Subsidiaries Joint Ventures PJSC TransContainer (hereinafter, the “Company”) is the LLC SpecTransContainer, a Company subsidiary, major Russian intermodal container operator of the provides the opportunity to transport cargo in largest fleet across the 1520-gauge railway containers designed for liquid and chemical goods: tank network. containers and flexitanks. TRANSCONTAINER LOGISTIC SYSTEM FVKS LLC The Company’s has a unique experience of effective The Company’s core services: EUROPE GMBH MANAGEMENT B.V. (Austria) (Russia) (Netherlands) fleet management of over 300,000 routes in Russia h rail container transportation; 100% 30% 50% and abroad along with introduction of integrated transportation and logistics solutions from door to h road container transportation; door, enabling to deliver cargo to any destination point h sea/river container transportation; TRANSCONTAINER- in Russia, the CIS countries, Europe and Asia, using JSC FVK JSC KTZ in-house transport assets and or/ involving partner h terminal handling of cargo; , A.S. (Slovakia) (Russia) () companies. h freight forwarding and logistics services 100% 70% 50%

The Company provides the opportunity to transport h customs clearance; cargo in specialised containers: h services at customs temporary storage TRANSCONTAINER JSC KEDEN- h thermos containers — for perishable cargo; JSC BAZIS warehouses. ASIA PACIFIC LTD. TRANSSERVICE (Russia) h bulk containers — for bulk cargo; (South Korea) (Kazakhstan) 100% 100% 100% h open top containers — for oversized cargo.

TOO “TRANSPORT SPECTRANS- JSC TASKOM KAZAKHSTAN CONTAINER LLC (Russia) HOLDING” (Russia) (Kazakhstan) 100% 100% Full trade name of the Company in Russian Публичное акционерное общество «Центр по перевозке грузов 100% в контейнерах «ТрансКонтейнер»

CHINESE-RUSSIAN Short trade name of the Company in Russian ПАО «ТрансКонтейнер» OY CONTAINER JSC LOGISTICS- RAIL-CONTAINER TRANS TERMINAL INTERNATIONAL SCANDINAVIA LTD Full trade name of the Company in English Public Joint Stock Company Center for Cargo Container Traffic (Russia) FREIGHT () FORWARDING TransContainer 100% 50% (BEIJING) 49% CO., LTD (China) Short trade name of the Company in English PJSC TransContainer TRANSCONTAINER FREIGHT The Company’s location Moscow FORWARDING VR-YHTYME (SHANGHAI) CRMT The Company’s postal address 19 Oruzheynyi Lane, Moscow, 125047 CO., LTD (China) 100% (Finland) (China) Primary state registration number, date of registration 1067746341024 50% 51% 04 Mar 2006

Internet homepage www.trcont.com TRANSCONTAINER Other MONGOLIA LLC Operator shareholders E-mail [email protected] (Mongolia) 100% Financial Multichannel phone-line +7 (495) 788-17-17 (holding) +7 (499) 262-77-00 company

PJSC TransContainer | Annual report 2019 8 9 Business Model ASSETS PERFORMANCE A target business model is a vertically integrated transport and logistics holding, containerised cargo shipper and 90 sales offices in Russia, connected The adjusted revenue from integrated provider of logistics services in Eurasia. by a single information system freight forwarding services totals Presence overseas in 29 countries RUB 31,371 million. 4 representative offices Share in the adjusted revenue amounts 4 joint ventures to 85.1%

The volume 7 subsidiaries of imports Domestic INTEGRATED FREIGHT accounted for Transshipments shipments FORWARDING AND LOGISTICS +17.9% -12.5% +3.2% SERVICES RAIL CONTAINER 30,676 flatcars Total containers transported using the Exports Revenue TRANSPORTATION Company's rolling stock: +4.4% RUB 86,179 mln TERMINAL AND AGENCY SERVICES, 83,684 high-capacity containers +12.0% AND SERVICES OF TEMPORARY thousand TEUs STORAGE WAREHOUSES 2,050 Operating profit Net profit RUB 15,771 mln RUB 11,750 mln TRUCKING +36.4% +23.6% The Company's own container terminals at 38 railway stations in Russia

Terminals, controlled by SMART TERMINAL iSALES the Company's subsidiaries and joint ventures: 19 rail freight terminals across Handled at the Company's terminals: Truck handling time is more than Simple order placement procedure Kazakhstan; 5 times faster 3 container terminals in Russia; Competitive rates in the cargo 1 container terminal in Slovakia 1,320 thousand TEUs in Russia Comprehensive information on all containers transportation market placed at a terminal Lifting equipment: 207 units of lifting Delivery as quickly as possible equipment in Russia The number of high-speed container trains handled went up Integrated approach to customer by over 25% service

Accurate positioning of each container Fast order negotiation Trucks: 284 thousand TEUs were transported, Automatic placement of containers Monitoring of order fulfillment process 411 units in Russia: including by the Company's at a terminal 151 tractor units; own vehicles: Order fulfillment control 260 semi-trailers 85 thousand TEUs 96.7% of orders have been placed through iSALES RESULTS ACHIEVED 9 out of 10 of our customers come through iSALES

88.5% of TEUs ordered via iSALES Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Strategy

The Company's mission is to effectively The market and strategic investors highly support businesses of our customers appreciate the Company’s production and by promptly and comprehensively meeting financial performance, as well as the potential their needs in logistics and delivery of cargo from for its further growth. Since 2013, the value 4,010 of PJSC TransContainer has increased 2.1 in containers. times from RUB 4,010 to 8,365 a share; dividends are paid on a regular basis. The Company's strategic goal is to enhance its value by raising the business volume and to In November 2019, an auction was organised improving efficiency. 8,375 for the sale of a stake (50% + 2 shares) of PJSC TransContainer (6,947,391 units), held RUB per share by JSC Russian Railways’ subsidiary — JSC PJSC TransContainer’s development strategy was United Transportation and Logistics Company. approved by the Board in 2013; it sets goals until OOO “Delo-Center”, part of Delo Group, won 2020 and rests on three pillars: Increase in the cost in the auction. The total stake price amounted h the mission; of PJSC TransContainer to RUB 60.3 billion, at the initial price of RUB 36.16 billion. h strategic objectives;

h the vertically integrated business model of the major national container operator, allowing to provide a wide range of customers with all kinds of transport and logistics services in the field of container transportation across Russia and the CIS countries.

In 2019, a special emphasis The expansion and deepening of long-standing was given to the intensification cooperation with partners in the key trading Strategic partner countries of Russia make it possible to of development and integration come up with sophisticated logistics products at a Priorities of the projects launched required level of service across the entire Eurasian in 2017–2018: continent. At the same time, the efficiency enhancement tools that ensure financial stability and competitiveness is of priority to the Company, along with the tools The Company's strategic vision is to maintain its position as h freight forwarding companies in China and of extensive development (rolling stock buildup, Mongolia; the major player in the segment of rail container transportation geographical expansion, etc.). The Company invest market in the 1520 space and as the network container h LLC SpecTransContainer — in the sector of in the development of information technology in operator, owner of a flatcar and container fleet. For the development of liquid cargo shipments, and terms of customer service, optimisation of logistics purpose of organising and improving the efficiency of rail and terminal hubs in large transport hubs; arrangements and greater efficiency of production intermodal container transportation, the Company continues to h CJSC Logistics-Terminal in St. Petersburg; assets use. upgrade its terminal network facilities. h LLC Freight Village Kaluga North in the Moscow Region.

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Transportation volumes gaining the maximum synergy effect for the parent MTK No. 5 route will be performed on the basis centred on work with customers and partners company. of TransContainer Europe subsidiary and in broad who operate in the northern provinces of China: As a strategic objective for the period up to 2025, cooperation with the existing network of partners Shandong, Shanxi, Hebei, Tianjin, Liaoning, the the Company considers ensuring the growth rate At present, an extensive customer base has been in Slovakia, Austria, Hungary and Italy. Inner Mongolia Autonomous Region and others. of container shipping volumes using its own assets formed in the segment of transportation using China’s share in the Company’s revenue more than (flatcars and containers) on a level comparable the own fleet of tank containers. The step-by-step As an additional alternative to the key route doubled at the end of 2019, and prospects for to the average growth on the rail container building of long-term relationships with customers China–Europe through Brest, the Company further growth remain. transportation market. does the groundwork for a dynamic and sustainable plans to boost traffic through Kaliningrad: business growth. On the market, the Company has PJSC TransContainer and the Government of On the sidelines of the Eastern Economic Forum, become to be known as a reliable partner, while its the Kaliningrad Region signed a cooperation PJSC TransContainer and Korean company Fleet renewal customer-focused approach now helps to attract agreement for the construction of a transport and Pantos Logistics entered into a memorandum new customers. logistics centre on the territory of industrial park of cooperation in the field of South Korea/China Following the adopted key areas of strategic Chernyakhovsk. intermodal container transportation — Uzbekistan, development, the Company carried out activities to Russia, European countries, and Kazakhstan. upgrade its rolling stock fleets, high-capacity (ISO) Terminal business On the east direction, PJSC TransContainer also containers, trucks, lifting equipment, and computer strengthens its presence through partnerships At the St. Petersburg International Economic hardware: in 2019, 5,374 pcs. of rolling stock were Throughout 2019, the works on the Company’s with local market participants: on 20 November Forum, PJSC TransContainer and COSCO SHIPPING bought (4,006 pcs. – 40-foot flatcars; 1,368 pcs. – terminal network upgrading were continued, 2019, the Company and REGION Group concluded signed a memorandum on strategic cooperation. 80-foot flatcars) and 15,430 pcs. of ISO containers including maintenance of lifting machinery, trucks, an agreement providing for the synchronisation The parties agreed to establish a joint venture (6,750 pcs. – 20-foot ISO containers; 8,680 pcs. – and equipment. of customs and logistics terminal Kanikurgan that will allow companies to pool resources and 40-foot ISO containers). (Amur Region) and the container terminal in to offer the market effective and quality logistics This year, the Company has increased its activities Blagoveshchensk. REGION Group is an investor services. Within the cooperation framework, aimed at introducing the Intelligent Container in the construction of the largest customs and the companies also intend to offer each other Specialised container Terminal technology, by means of expanding logistics terminal in the — Kanikurgan, competitive rates for transportation, mutually use transportation the coverage of its prospective testing ground which will become an important element of the the container fleet, develop multimodal services with CJSC Logistics-Terminal. The Intelligent complex infrastructure of the Blagoveshchensk– and attract new cargo traffics. The results of 2019 confirmed that the Container Terminal, being a new-generation Heihe bridge across Amur, allowing to increase decision, taken in 2017, to lead the business for system of terminal activity management, allows the volume of Russian–Chinese cargo traffic In addition, in the reporting period, PJSC transportation of goods in specialised containers as to reduce the role of human factor in performance through Blagoveshchensk by 10 times until 2030. TransContainer signed the following agreements: separate legal entity LLC SpecTransContainer, was of technological operations and reliability of h a three-party agreement between DB Cargo a right thing to do. information support, and to raise the level of Logistics Gmbh and the Belarusian Railway efficiency and quality of management decision Geographic priorities to maintain the conditions of a stable and In the reporting year, LLC SpecTransContainer was making, as well as rationality of use of wagon and successful partnership;1 in top 25 major customers of PJSC TransContainer. container fleets, terminal equipment and human The Company actively develops its international At the end of the reporting year, the volume of LLC resources, thus cutting terminal costs. shipments through the expansion and deepening h a strategic partnership agreement with Global SpecTransContainer’s traffic made up 20 thousand of partnerships and its own sales network. Ports Group for joint development of foreign TEUs. To date, the fleet of tank containers in The realisation of geopolitical risks associated trade and Eurasian transit traffic based on the operation numbers 800 units. with the events in Ukraine would not let us In October 2019, TransContainer Freight Russian transport infrastructure; to convert the investments in TransSontainer Forwarding (Shanghai) Co., LTD. opened a branch The strategy implemented by LLC Slovakia (TCS) project into a stable profitable in Qingdao of Shandong Province of the People’s h a memorandum of cooperation in container SpecTransContainer keeps a balance between commercial product: in December 2019, TCS Republic of China. It is the third office along transport between JSC Railway Company Cargo rapid growth rates and maintaining profitability stopped leasing the Dobra terminal on the with those already operating in Shanghai and Slovakia and JSC Metrans. of the business. The business model is focused on Slovakia-Ukraine border. Further activities on the Shenzhen cities. The new office’s efforts will be

1 This agreement supplements the signed freight forwarding agreement between PJSC TransContainer and DB Cargo Logistics Gmbh, under which the companies provide container transportation of car assembly components to plants in Kaluga and Nizhny Novgorod.

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Strategic Risks

Our strategic development priorities are exposed Geopolitical issues to a number of key risks that may adversely affect delivery on the Company’s strategic goals and Since 2014, Russian entities and individuals financial and operational targets. have been subject to both individual and sectoral sanctions imposed by the US, the EU and a number of other countries, with effects Deterioration of global economic including limited debt and equity financing, environment and restricted technology transfers. In August 2017, the US Congress passed the Countering Actual macroeconomic performance depends America’s Adversaries Through Sanctions Act, on a number of external interrelated factors, which identifies, inter alia, state-owned entities specifically: operating in the railway, metals or mining sector h restrictions imposed by most countries related as potential subjects of the US sectoral sanctions, to the COVID-19 pandemic; as well as provides for potential sanctions against Russian sovereign debt, public officials, and h decreasing prices of oil and other commodities; entrepreneurs. h China’s economic slowdown; In 2018, the US new sanctions came into effect, h the trade war between China and the United but they do not directly concern Russian individuals States; or legal entities. Goods and technologies h the UK’s exit from the EU. considered by American authorities as relating to national security were forbidden for export Realisation of these risks may slow down the to Russia (for example, avionics, submersible global economy and trade, which would have a vessels, some kinds of gas turbines, gaging negative knock-on effect on Russia’s GDP, national equipment, etc.). The only exclusions were goods currency and international transportation volumes. and technologies required for the security of civil aviation. The most important of the mentioned risks to the global economy was an outbreak of pneumonia In 2019, the US policy to expand and impose caused by a new type of coronavirus1. At the end new sanctions was strengthened. At the same of February 2020, the World Health Organization time, the US shifted from direct sanctions raised the threat level of the coronavirus epidemic to those affecting Russia’s partners in to “very high” (the highest risk level). As of late international investment projects. The most April, most countries will maintain quarantine significant ones were the sanctions against Nord measures until at least mid-May 2020. Stream 2 and Turkish Stream, provided for in the country’s defense budget (NDAA) for 2020. Should any of such risks realise, the Company Sanctions may be imposed on companies involved would consider a review of its investment in the construction of gas pipelines as well as programme to factor in new demand patterns, on top managers of such companies. Despite while also adjusting its pricing policy and some relief, the EU has not lifted sanctions implementing a cost optimisation programme against Russia yet and linked their removal to along with other measures to improve its the full implementation of the so-called Minsk competitive position in the domestic and global agreements. markets.

1 The disease was first recorded in December 2019 in the Chinese city of Wuhan, and later spread beyond China, affecting hundreds of countries and areas around the world, including Russia.

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New sanctions may still be imposed against Deterioration of railway operating for container transportation growing at above In February–December of the reporting year, the Russia’s economy or transportation companies, environment average rates, additional limitations introduced Shanghai Containerized Freight Index (SCFI) remained with the Company and the industry at risk of being for container trains, shutdown of terminal between 750–825 due to negative news background severely affected, should they materialise. In recent years, increasing containerisation has capacities used for container processing (in terms relating to the trade war between the US and China. been the key driver behind the growth of the of policy implementation of local authorities at Since mid-September 2019 (after the announcement To manage the risk, the Company monitors the rail container transportation market, which has large metropolises on commissioning of cargo of approval of the first set of documents under the sanctions environment and adjusts its debt and also been supported by a prudent tariff policy processing outside the urban area), as well as other US-China trade deal), the SCFI Index remains solidly financial policy with regard to potential adverse for container shipments, easier access to the restrictive technical measures may have a material above 900. effects from new or revised sanctions. rail infrastructure, developing technology for adverse effect on the competitiveness of the entire high-speed container trains, construction and railway industry and, therefore, on the performance However, long-term sea freight trends associated reconstruction of container terminals at large of the railway container transportation market. with a sustained supply-and-demand imbalance; transportation hubs etc. Infrastructure fees a shift towards super-large container ships, and The Company will continue working together with decreased per unit costs of a TEU container cargo Russian Railways and other railway administrations are creating a systemic risk of a renewed decline to promote further development of containerisation in freight rates, which may have an adverse impact processes and container shipment practices. on the competitive strength of international rail container transportation.

Chinese government reducing To minimise the impact, the Company takes or terminating support measures to bolster the competitive edge of existing for rail container services, expand the network of international routes, transportation develop the sales network in China and Europe on the base of subsidiaries and optimise its logistics. The Chinese government supports international rail transportation, including transit routes. Government subsidies are a strong driver of the Stronger competition pricing attractiveness of rail shipments from China in the rail container in comparison to sea freight. Cancellation of, or transportation market reductions in the government support may have an adverse effect on rail container transportation on Increase in the market demand usually leads relevant routes. to a mid-term competition growth driven by existing companies actively purchasing rolling To minimise the impact, the Company takes stock and new players entering into the market. measures to bolster the competitive edge of existing In the near term, it pushed rolling stock prices services, expand the network of international routes, significantly higher. In the mid- or long-term, at and optimise its logistics. the cyclical downturn, it may push rail container transportation downward pressure from the growing supply-and-demand imbalance. Competition from alternative transportation The Company plans to minimise the impact of this risk by taking measures to improve The rail container transportation market strongly the price competitiveness, client service, and depends on the alternative transportation rolling stock efficiency, as well as by a prudent markets. Overall, the pricing environment in rival flatcar purchasing policy ensuring an adequate transportation segments has been favourable for the supply-and-demand balance. rail container business.

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Message from the President of PJSC TransContainer

Dear shareholders,

The Russian shipping container We believe that during a crisis, all companies market, whose leading player is PJSC should focus on safety, ensuring income, and TransContainer, continues to demonstrate sustainable development. To our customers, growth according to the results of the we propose concentrating precisely on these first four months of 2020 against the main tasks, entrusting logistics issues to the same period in the reporting year. professionals.

Based on our professional expertise and unique assets, PJSC TransContainer offers customers the Yet, due to the COVID-19 pandemic, the global most effective end-to-end transport and logistics economy as a whole and the transport business solutions for each specific case. as an important component of such economy are experiencing strong fluctuations. This high We strive to be the best of the best in the sphere volatility requires us to constantly monitor the of service provision. To that end, we adopt a situation and respond rapidly to any changes targeted approach in driving service quality, that arise. enhancing our IT systems, and developing new IT products that increase the Company’s Given the circumstances of the pandemic and competitiveness and efficiency. quarantine restrictions, the management at PJSC TransContainer was able to organise safe working conditions for its employees throughout the country and abroad, ensuring an uninterrupted transportation process and the Company’s stable operation. Alexander ISURIN President Alexander Isurin of PJSC TransContainer President of PJSC TransContainer

PJSC TransContainer | Annual report 2019 20 21 MARKET +12.4% 41.1% Growth rate of the Russian rail Market share of container transport market in the Company OVERVIEW the reporting year

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Market leaders in Asia continued to grow. Over TRENDS IN SHANGHAI CONTAINERIZED FREIGHT INDEX Global Container the past year, Shanghai transshipped 43.3 million TEUs of containers and remained the leader of the Shanghai Containeried Freight Index Shipping Market global container market. However, growth rates slowed from 4.4% to 3%. The port of Singapore, ranked second in the global container port ranking, transshipped 37.2 million TEUs in 2019, i.e. reduced the growth rate from 8.7% to 1.6%. Container According to Drewry, in 2019, the global container COMPARATIVE TRENDS IN THE WEIGHTED AVERAGE turnover of the Chinese port of Ningbo-Zhoushan SCFI SPOT INDEX FOR 2016–2019 shipping market grew by 2.3%. However, throughout (ranking third) amounted to 27.53 million TEUs in the year, Drewry repeatedly adjusted its forecast for 2019, which is 4.6% higher y-o-y. decline: 3.9% in July, 2.6% in October, etc. The rates on container shipping according to the SCFI Fleet Spot Rate Index were about 3.3% lower on average than in the previous year. At the same time, amid a As of the end of 2019, Alphaliner estimates the rapid growth in Trans-Pacific transportation in late capacity of the global fleet of container ships at 2018, when importers sought to get as many goods 23.23 million TEUs, and a growth of 3.5% is forecast recognise that the railway transportation corridor from China as possible, in 1Q 2019, the average rate for 2020 — to 24.05 million TEUs. has become a full-fledged delivery option which is was above the level of the previous year. preferable for certain categories of freight owners. an eb ar apr ay n l ag sep oct no dec Factors which influenced the market in the reporting In general, one of the most significant factors that year and continue to influence it in 2020 are as was driving the development of the market in the past 2019 2018 2017 2016 follows: Outlook for 2020 year was the trade war between China and the United h trade war between the US and China and the States. It resulted in a decrease in the total volume of strengthening of protectionist sentiment in All analysts are very careful in their forecasts. 1 container shipping from Asia to North American ports by 2.5% in the last year . Six largest ports on the general; Despite the reached compromise in the trade war west coast reduced turnover to 13.2 million TEUs (in between China and the , experts 2018, 13.7 million TEUs) in the past year. h IMO 2020: preparation of the operators to note that the reached truce is very fragile, and the introduce new sulphur restrictions (withdrawal of DYNAMICS OF THE SCFI SPOT INDEX probability of resumption of “hostilities” is very FOR MAIN TRANSPORTATION ROUTES In terms of trade between Asia and Europe, the a significant part of the fleet to install scrubbers) high — the existing contradictions are almost significantly reduced capacity, which supported Mediterranean ports continued to accumulate irreconcilable. rates despite weak demand; the increase in rates influence — for most of the year rates on at the end of the year was largely due to the Mediterranean trade were higher than on the North introduction of fuel surcharges; Analysts of Oxford Economics believe that even in ports. However, the port turnover trends were mixed. the case of positive developments, we should not h Brexit; expect an energetic recovery similarly to the previous The main container terminal of the Greek port of crises, as the global economy slowdown factor is h “Vertical competition”: Amazon & Co. freight Piraeus increased transshipment by 17% (to 5.16 also imposed by the factor of China’s deep economic owners compete with freight forwarders; Maersk million TEUs). The turnover of the Barcelona port, & Co. lines — with freight forwarders, warehouse restructuring. which by the end of 2017 became the fastest growing and terminal operators; DP World and Co. port container port in Europe with a growth rate of 32% operators — with freight forwarders, warehouse Oxford Economics forecasts a gradual recovery of and, in 2018, increased volume by 15%, fell by 2% in operators and line carriers, etc.; all develop the global container market from 2H 2020, as well as the reporting year. Container turnover of Rotterdam — on-shore intermodal logistics; an increase of 2.5% in 2021 and 3% in 2022. the largest port in Europe, which is responsible for h development of rail container shipping; almost a third of all containers transshipped through For 2020, Drewry also forecasts a slight acceleration an eb ar apr ay n l ag sep oct no dec an Northern European ports — amounted to 11.2 million h trends in the ocean container shipping market — of demand growth compared to 2019, noting the TEUs over the three quarters of 2019 (against aggregation of ships, strengthening of alliances, high probability of worsening market imbalances Global rate West coast of the US 10.8 million TEUs for the same period in 2018). The weakening of demand, increase in environmental towards excess capacity, rate growth (with taking Europe East coast of the US turnover of the second largest port in Europe — pressure, etc., lead to deterioration of service — into account bunker surcharges) and a small Mediterranean Sea Persian Gulf/Red Sea Antwerp — increased by 6.4% for the three quarters of containers are delivered longer and late; regarding reduction in already low profit of carriers. 2019 (to 8.9 million TEUs). the Asia–Europe trade, all market participants

1 According to Alphaliner.

PJSC TransContainer | Annual report 2019 24 25 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

MONTHLY CONTAINER SHIPMENTS IN THE RUSSIAN RAILWAY NETWORK IN 2016–2019, ‘000 TEU

459 444 Russian Rail Container 436 426 416 424 421 413 397 404 386 Transportation Market 360 14.5 13.0 12.2 12.5 11.6 9.7 8.9 10.6 9.9 10.3 9.6 17.4 17.5 12.1 9.6 17.7 15.5 17.0 14.1 13.1 16.5 15.7 16.9 13.0 In the reporting year, the Russian rail container The annual trend in the market was also that of strong transportation market continued to grow steadily — growth against 2018. an eb ar apr ay n l ag sep oct no dec while at the end of 2018, its growth rate was 14.2%, 2019 2017 2019/2018, % 2018/2017, % in 2019, the market grew by 12.4% and reached a new 2018 2016 historical high of 5.0 million TEUs. Market growth rates Transportation breakdown significantly exceeded the initial forecasts of industry analysts. The reporting year enjoyed growth in all types of The leaders in terms of international transportation With the rapid growth of international transportation railway transportation: domestic shipments increased were import (the growth amounted to 24.1%, or 206 in 2019, the share of domestic transportation declined In 2019, the Russian Federal State Statistics Service by 9.1% year-on-year, while the share of container thousand TEUs) and export shipments (the growth from 42.8% in 2018 to 41.5%, while the imports rose (Rosstat) recorded the real GDP increase of 1.3%, an transportation on international routes was up by 14.9%. amounted to 12.7%, or 144 thousand TEUs). from 19.2% to 21.2%. The exports grew slightly as uptick in the manufacturing industry of 2.3%, and a 1.6% compared to 2018 and amounted to 25.6%, with the growth in retail trade. Amid moderate macroeconomic RUSSIAN RAIL CONTAINER TRANSPORTATION MARKET share of transits falling from 12.5% to 11.7%. trends, the following factors determined the strong RUSSIAN RAIL CONTAINER TRANSPORTATION MARKET BY TRAFFIC TYPE, % 1 growth of the rail container transportation market in the PERFORMANCE BY TRAFFIC TYPE, ‘000 TEU The share of loaded container transportation in reporting period: 100 the Russian Railways network declined by 0.4 p.p. h the continuing increase in the international trade 6,000 and amounted to 67.7%. Transportation of loaded 80 of the Russian Federation against the backdrop of 5,000 containers in the reporting period grew by 13.0%, the Russian economy growth and adaptation of and transportation of empty containers — by 11.2% 4,000 60 businesses to the geopolitical conditions; 3,000 year-on-year. 40 h the transfer of freight volumes to the rail container 2,000 transportation segment; 1,000 20 Domestic traffic h the improvement of the rail container transportation 0 0 service quality by speeding up the delivery, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Domestic container transportation totalled meeting the delivery terms, and simplifying the Domestic Import 2.1 million TEUs in 2019, up 9.1% year-on-year. client-and-operator interaction; Domestic Import Export Transit Domestic shipments were supported by more intense Export Transit h the ongoing growth of transit transportation through import substitution and the shift to container the territory of the Russian Federation in the China – Europe – China corridor as part of the Silk Road CONTAINERISATION IN THE RUSSIAN RAILWAYS NETWORK, % Chinese project with high containerisation rate. TRANSPORTATION IN THE RUSSIAN RAILWAYS NETWORK, 8.2 ‘000 TEU 1,611 By the end of 2019, the containerisation rate of cargoes 7.2 1,448 6.6 transported via the Russian Railways network reached 5.9 1,255 5.3 5.6 5.4 5.0 1,122 3 ,375 8.2% against 7.2% in 2018. 4.6 993 1,029 4.0 992 1,034 2,986 888 802 2,628 2,186 2,139 Loaded containers In 2019, the import transportation continued to see a 1,952 2,104 1,926 rapid growth (24.1% compared to 12.4% on the whole 1,504 1,779 market). As a result, the share of import transportations Empty containers equalled 21.2% in 2019, exceeding the previous year’s value of 19.2%. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1 Source from this point on: Russian Railways corporate data

PJSC TransContainer | Annual report 2019 26 27 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

DOMESTIC CONTAINER TRANSPORTATION IN THE RUSSIAN DOMESTIC CONTAINER TRANSPORTATION IN THE IMPORT CONTAINER TRANSPORTATION IN THE RUSSIAN IMPORT CONTAINER TRANSPORTATION IN THE RUSSIAN RAILWAYS NETWORK, ‘000 TEU RUSSIAN RAILWAYS NETWORK BY KEY COMMODITY GROUP RAILWAYS NETWORK, ‘000 TEU RAILWAYS NETWORK BY KEY COMMODITY GROUP

360 1.20 1,066 2.20 1.30 1.90 0.70 956 232 899 4.40 0.60 835 2.30 586 638 718 4.90 26.10 164 697 122 129 619 3.20 22.20 1,006 908 943 5.30 563 153 150 534 788 861 780 843 488 350 376 7.30 12.70 2013 2014 2015 2016 2017 2018 2019

2013 2014 2015 2016 2017 2018 2019 Loaded containers Empty containers 8.40 16.30 22.20 Loaded containers Empty containers 16.40

10.80 12.90 18.60 transportation, as well as by global logistics Import transportation Timber products operators and sea shippers still returning to Chemicals Machinery and equipment Food products the Russian market. Food products Other In 2019, import rail container transportation had Car parts Paper and pulp Metalware Paper and pulp an increase of 24.1% to 1.1 million TEUs due to Chemicals Timber products In 2019, loaded containers accounted for Construction materials Nonferrous metals the growing international trade, including via Other Nonferrous metals 48.5% of the Russian domestic rail container Machinery and equipment Car parts online services. Metalware Petroleum products transportation, down 1.2 p.p. year-on-year. Petroleum products Construction materials In the reporting period, transportation of loaded In the reporting period, loaded containers containers grew by 6.6%, and transportation accounted for 66.0% of import rail container of empty containers — by 11.5% year-on-year. DOMESTIC CONTAINER TRANSPORTATION IN THE RUSSIAN transportation, down 6.7 p.p. on the back of IMPORT CONTAINER TRANSPORTATION IN THE RUSSIAN RAILWAYS NETWORK BY KEY COMMODITY GROUP higher growth rates of empty traffic. Empty RAILWAYS NETWORK BY KEY COMMODITY GROUP Russian domestic rail container transportation container traffic grew by 54.8% to 360 thousand has traditionally been more diversified than 252,640 TEUs as compared with an increase in the loaded 129,995 1 1 international shipments. Among commodity 262,759 container traffic by 12.6% amid the growing 155,390 groups, chemical products (26.1%) and food 152,791 loaded container exports. 141,033 2 products (16.3%) accounted for the highest 2 163,883 141,009 shares of transportation in 2019. In domestic Containerised imports were dominated by 121,420 104,821 3 loaded container rail transportation, metal 3 129,570 machinery and equipment (22.2%), car parts 129,689 products amounted to 13%, construction (20.2%), and chemicals (18.6%). 99,860 105,059 materials stood at 11%, machinery and 4 4 108,626 114,622 equipment — 8%, petroleum products — 7%, Across all commodity groups, the highest increase timber products, paper and pulp — 5% each. 78,910 in 2019 was observed in the import container 81,004 5 5 84,840 1 Chemicals transportation of nonferrous metals (+155.8%), 88,946 1 Machinery and equipment Across all commodity groups, the highest 67,591 2 Food products food (+32.8%), timber products (+25.1%), and 25,711 6 6 2 Car parts increase in 2019 was seen in the container 73,749 3 Metalware chemical goods (+23.7%). 22,685 3 Chemicals transportation of nonferrous metals (+17.7%), 4 Construction materials 49,371 12,075 4 Other 7 5 Machinery and equipment 7 car parts (+11.4%), and petroleum products 52,809 The main import container flows came from 16,040 5 Metalware (+9.1%). 6 Petroleum products Southeast Asia and Central and Eastern Europe. 48,548 10,674 6 Construction materials 7 Timber products 8 8 49,382 13,042 7 Food products The main domestic rail container flows were 8 Other 8 Paper and pulp 45,283 6,584 between the Central Russia and Siberia, as well 9 Paper and pulp Export traffic 9 Timber products 9 44,395 9 8,240 as within European Russia. 10 Nonferrous metals 10 Nonferrous metals 19,062 1,823 10 11 Car parts In 2019, export rail container transportation grew 10 11 Petroleum products 22,440 by 12.7% to reach 1.3 thousand TEUs. The share 4,663 11,322 of export loaded containers raised to 91.5% from 4,360 11 12,614 2018 2019 88.7% year-on-year due to the strong growth in 11 4,447 2018 2019

PJSC TransContainer | Annual report 2019 28 29 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

EXPORT CONTAINER TRANSPORTATION IN THE RUSSIAN EXPORT CONTAINER TRANSPORTATION IN THE RUSSIAN RAIL- TRANSIT CONTAINER TRANSPORTATION IN THE RUSSIAN TRANSIT TRANSPORTATION IN THE RUSSIAN RAILWAYS NET- RAILWAYS NETWORK, ‘000 TEU WAYS NETWORK BY KEY COMMODITY GROUP, % RAILWAYS NETWORK, ‘000 TEU WORK BY KEY COMMODITY GROUP, %

109 0.80 0.70 128 77 1.50 1,167 1.20 0.10 132 124 2.30 1.00 0.10 506 194 88 1,003 1.30 0.60 216 106 68 840 6.00 420 3.50 653 712 588 635 346 4.20 30.60 67 50 9.30 69 57 209 166 184 160 12.30 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 Loaded containers Empty containers 42.10 17.40 Loaded containers Empty containers 13.10 16.00 exports of loaded containers (+16.3%) in relation 20.90 to empty ones (–15.1%). The share of export decreased by 13% (from 153.4 thousand TEUs 14.70 empty containers dropped by 2.8 p.p. in 2018 to 132.9 thousand TEUs in 2019). Thus, Timber products Food products the container transit transportation showed a Machinery and equipment Timber products In 2019, the Russian rail container export was Paper and pulp Construction materials reduction of imbalance on the East–West route. Car parts Nonferrous metals dominated by timber products (42.1%), paper and Chemicals Petroleum products Other Paper and pulp pulp (20.9%), and chemicals (17.4%). Metalware Machinery and equipment In 2019, transit transportation was dominated Metalware Construction materials Nonferrous metals Other by machinery and equipment (30.6%), car parts Chemicals Petroleum products Among commodity groups, export container Car parts (16.0%), and metalware (13.1%). Food products transportation of food (+124.2%), timber products (+37.0%), petroleum products (+27.5%) accounted Timber products (+57.3%), cars and car parts for the highest share of transportation in 2019. (+42.9%), food (+43.3%), and chemicals (+25.1%) EXPORT CONTAINER TRANSPORTATION IN THE RUSSIAN TRANSIT TRANSPORTATION IN THE RUSSIAN RAILWAYS RAILWAYS NETWORK BY KEY COMMODITY GROUP were the key contributors to the transit rail NETWORK BY KEY COMMODITY GROUP In 2019, the majority of export containers in container transportation. the Russian Railways network was transported 360,084 135,134 1 1 to the North-western and Far Eastern ports, as 493,451 Most of the rail container transit flows go between 154,678 well as to Eastern and Western Europe (Germany, Central and Eastern Europe (including the Baltic 248,845 56,684 Switzerland, Belgium, the Netherlands, Slovakia, 2 states) and Central Asia, as well as Southeast and 2 244,774 80,985 the Czech Republic). Central Asia. 180,683 68,436 3 3 203,673 74,297

Transit transportation 107,815 Outlook for 2020 60,115 4 4 108,786 1 Timber products 66,364 In 2019, transit rail container transportation 2 Paper and pulp Despite the slowdown of the global economy 65,934 49,872 1 Machinery and equipment 5 3 Chemicals 5 slowed the growth rate compared to 2018. The 70,414 expected by most analysts, Russia’s economy 62,369 2 Car parts 4 Metalware share of empty containers increased to 5.3% may recover as a result of the implementation 3 Other 16,601 5 Nonferrous metals 14,886 6 6 4 Metalware compared to the previous year and amounted to 15,491 6 Car parts of structural economic policy measures aimed at 21,335 5 Chemicals 582 thousand TEU. In 2018, the share of empty 7 Food products increasing investment activity, increasing personal 6,455 11,263 6 Food products containers decreased to 13.2% compared to 7 8 Construction materials incomes, and implementing national projects. 7 14,469 17,719 7 Timber products 23.9%. 9 Petroleum products Against this background, the development of 8 Nonferrous metals 8,258 10 Machinery and equipment containerisation processes will continue, including 9,334 8 8 9 Paper and pulp 9,462 11 Other 11,498 In 2019, transit transportation between China through the introduction of container technologies 10 Construction materials 6,068 and Europe continued to grow. The total volume 9 by manufacturers of industrial products, the 8,883 11 Petroleum products of transit container transportation in the China– 7,738 use of specialised containers, geographical 9 7,668

EU–China segment amounted to 399.8 thousand 1,692 transformation of distribution networks of large 4,576 10 10 TEUs that is 6% more year-on-year. The China– 1,669 retail operators. In relation to this, the Company 5,191 EU traffic increased by 19% (from 223.9 to expects to maintain the positive dynamics in the 1,603 3,631 11 2018 2019 266.9 thousand TEUs), while the EU–China traffic 1,253 market in 2020. 11 3,241 2018 2019

PJSC TransContainer | Annual report 2019 30 31 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The Company’s Position in the Industry

In 2019, the Company reaffirmed its leadership in the domestic railway container transportation market 41% supplying flatcars and containers to its customers. market share of the Company in 2019

The Company performs transportation using own rolling stock and involving third parties engaged through the agency agreements. Thus, transportation operated by the In 2019, the Company confirmed Company includes third-party container shipments using its leadership in the Russian railway the rolling stock of the third parties engaged through container transportation market. the agency agreements. Such shipments do not involve the transport assets of Public Joint Stock Company TransContainer. In this case, the Company acts as an agent of the rolling stock owner. DYNAMICS OF CONTAINER TRANSPORTATION UNDER THE COMPANY’S MANAGEMENT, ‘000 TEU The overall volume of traffic operated by the Company amounted to 2.1 million TEUs in 2019. 2018 2019 At the same time, the growth rates may slow down due These events may have an adverse impact on the Russian to the market reaching the fixed-ratio growth rates economy and international trade, and, accordingly, on the TransContainer’s market share went down by 4 p.p. Domestic 904 933 after the outpacing rates of 2017–2019, which are Russian container transportation market. year-on-year to 41.2%. Including by Company’s assets 887 918 associated with overcoming the crisis of 2014–2015. Export 498 520 Given the expected slowdown of the market growth THE COMPANY’S SHARE OF TOTAL CONTAINER TRAFFIC The Company expects high growth rates of transit traffic rates and taking into account the significant growth IN THE RUSSIAN RAILWAYS NETWORK BY TRAFFIC TYPE, % Including by Company’s assets 477 506 to be maintained on the back of the development of of the flatcars at the Russian Railways Network in Import 364 429 existing transit services and the emergence of new ones, 2018–2019, the Company expects to maintain tough 2018 2019 along with increasing competitiveness with sea freight. competition both among rolling stock operators and Including by Company’s assets 355 420 Domestic 48 45 between the railway and motor segments of the Russian Transit 192 168 Export and import transportation will be largely driven transportation market. Export 44 41 Including by Company’s assets 167 169 by the rouble exchange rate performance, the Russian Import 43 41 export market environment, and expansion of Russian The key factors for successful competition of the rail All routes 1,958 2,050 Transit 35 29 export geography. container transportation segment with other transport Including by Company’s 1,886 2,013 market segments are as follows: All routes 44 41 assets Among the key risk factors for the market, the Company h a balanced tariff policy of the Russian Railways with considers: regard to container traffic; h possible negative impacts on economy due to the h simplified documentation and procedures for railway spread of coronavirus; infrastructure access; h possible decisions of the Chinese government to h developing the container train traffic technologies; eliminate subsidies for international rail container transportation; h other measures increasing the appeal of this type of transportation. h greater geopolitical tensions; h imposition of the new ones and expansion of the Sea shippers will proceed to exert competitive pressures economic sanctions, and trade barriers that can in the international container transportation market, cause the downside risks in the global economy. especially in terms of imports and transit, as well as the supply of shipping lines containers for domestic and export traffic.

PJSC TransContainer | Annual report 2019 32 33 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Message from the CEO of PJSC TransContainer

Dear shareholders and investors, In the reference year, we concluded a number of For PJSC TransContainer, 2019 was important partnership agreements with Russian a period of successfully tapping into shipping companies (in particular with PJSC SIBUR opportunities. In a growing container Holding for the transportation of polymer products) transport market, the Company once and international transportation companies (including again achieved record high financial and COSCO SHIPPING, one of the biggest Chinese performance indicators; the net profit shipping companies). The strategic cooperation totalled RUB 11,750 million at the end that began last year with Korean company Pantos Logistics has already delivered results in the form of the year, representing an increase of of new regular transit services. Together with the 23.6% on the previous year. The container company Maersk, we launched a high-speed train transportation volume by the fleet under from the Chinese city of Dalian to the Kaluga Region. the Company’s management rose by 4.7% These are just some examples of cooperation between in 2019 to 2,050,000 TEUs. PJSC TransContainer and leading players on the international transport market.

Favourable market conditions were a contributing The end of the reporting year was marked by the most factor, which PJSC TransContainer skillfully took important event for the Company — its controlling advantage of by responding to market demands in stake was acquired by Delo Group. time and competently optimising the Company’s resources. By being part of the Delo transport holding company and combining our unique assets, we can gain a For the purpose of meeting the growing demand synergistic effect in our joint activities and increase for rail container transportation, we developed the Company’s efficiency, which is especially important new types of services, boosted terminal processing in the current situation as one that is extremely volumes, and continued to modernise and expand complicated for the global economy as a whole. Viktor our fleet of containers and flatcars. Last year, MARKOV PJSC TransContainer more than doubled its CEO of PJSC investment volume to RUB 17,257 million. The TransContainer majority of this was allocated to updating the flatcar and container fleet. Warmest regards, Viktor Markov

PJSC TransContainer | Annual report 2019 34 35 Corporate Governance

CORE +4.7% 47% Increase in traffic volume The Company’s share ACTIVITIES by the Company’s fleet under in the fleet of Russian management to the level of 2018 flatcar owners

PJSC TransContainer | Annual report 2019 36 37 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

DYNAMICS OF THE COMPANY’S MARKET SHARE Services 4.4% BY SEGMENT, % the increase of the Company’s transport volume in export traffic in 2019 44.2 44 41.1 40.8 42.8 40.6 34.7 28.9 Rail container transportation The Company’s transport volume in export traffic saw an increase of 4.4% in 2019 due to the development of new multimodal services that are popular among In 2019, the Company continued to develop its DYNAMICS OF RAIL CONTAINER TRANSPORTATION exporters, as well as by applying a flexible pricing VOLUMES UNDER THE COMPANY’S MANAGEMENT, core business in line with the strategic priorities, policy and ensuring reliable services. The decrease Domestic Export Import Transit THOUSANDS TEUs1 increasing the scale and efficiency of its activity. in the Company’s market share in the export

+4.7% transportation segment to 40.8% in 2019 compared 2018 2019 Growth of container transportation volumes is 1,958 2,050 to 44.0% a year earlier was due to an acute shortage achieved by the Company by implementing new 1,873 of equipment. 1,613 192 168 138 in-demand services, actively developing operations 1,434 429 77 337 364 on growing market segments, improving customer 86 255 The Company’s transportation volume in transit Transportation of client containers (including 228 498 389 465 520 service quality, and providing competitive pricing. 323 traffic went down by 12.3%. The decrease in transit empty ones) using the Company’s rolling stock, as 892 932 904 933 797 traffic volumes is caused by the cancellation of well as transportation of freight in the Company’s The volume of railway container transportation by subsidies for railway transportation of empty containers (regardless of who owns the rolling flatcar fleet under the management of the Company containers in the China — Europe — China stock) is paid for by the clients and generates increased to 2,050,000 TEUs, which is 4.7% higher 2015 2016 2017 2018 2019 corridor by the Chinese government, as well as revenue. than in 2018. the redistribution of subsidies between land Domestic Import transit corridors in favour of the corridor through In case of transportation of empty Company The growth of volumes was mainly due to the Export Transit Kazakhstan. With this in mind, the Company’s share containers, the railway tariff of Russian Railways active development of operations in international in the transit segment decreased in 2019 to 28.9% and other railway administrations is paid for by the traffic (including to China and Asia-Pacific countries (34.7% in 2018). Company. This type of transportation generates through the border crossing of Transbaikalsk), costs for the Company. which grew by 6.0% on the previous year and (41.6% in 2018). The decrease in the Company’s share As a result of these factors, the Company’s amounted to 1,117,000 TEUs. The volume of is due to an acute shortage of new rolling stock. share in the Russian market of railway container transit transport by flatcar fleet under the transportation (in terms of rolling stock under STRUCTURE OF RAIL CONTAINER TRANSPORTATION management of the Company in 2019 decreased by The Company maintains a strong presence in the Company’s management) at the end of 2019 BY ROLLING STUCK UNDER THE COMPANY’S MANAGEMENT 12.3% against 2018 due to a number of subsidies the Russian domestic market, making use of its amounted to 41.1%, compared to 44.2% the previous BY AFFILIATION OF CONTAINERS AND for railway transportation being cancelled by the competitive advantages, which include an expansive year. ROLLING STOCK, THOUSANDS TEUs Chinese government for China — Europe — China. geographic footprint, network coverage, competitive The increase in import volumes amounted to prices and quality of service. JSC UTLC ERA actively operates in the segment of 36.9 95.3 72.9 20.2 17.8%, and for exports — 4.4%. transit transport development for China-Europe 27.0 39.4 70.2 41.2 52.9 661.1 45.0 71.0 599.4 The Company’s transport volume in import traffic grew (mainly in the corridor through Kazakhstan). 17.5 544.3 11.5 72.3 In 2019, the volume of domestic traffic amounted by 17.8% and stood at 429,000 TEUs. This was the 15.3 502.7 314.5 354.3 to 933,000 TEUs, up 3.1% from the 2018 level. result of the Company’s targeted efforts in working 519.2 309.9 347.1 304.9 891.8 938.0 This is due to the transfer of transport equipment with clients and partners in the Asia-Pacific region and Stucture of operator service 810.9 to international routes, ensuring high efficiency of Europe, as well as active interaction with sea lines 618.2 523.5 its use and rapid growth in business volumes. on international routes. However, amid a shortage of In 2019, in response to changes in the container rolling stock, the Company focused on the routes that market, the Company continued to provide The Company’s share of the rail container provided the greatest increase in terms of efficiency transportation and logistics services to its 2015 2016 2017 2018 2019 transportation market reached 41.1% in 2019, of use of the fleet. As a result, the Company’s market customers using both its own and third-party up from 44.2% in 2018. In domestic traffic, the share in the import transport segment was down from rolling stock. Empty container shipments Loaded container ship- by the Company’s rolling ments by third-party rolling Company’s share amounted to 45.0% (47.6% in 42.8% in 2018 to 40.6% in 2019. stock stock 2018), and in international transport — 38.3% In 2019, the transport volume of the Company’s Loaded container ship- Empty container shipments rolling stock went up by 8.2% on last year’s level, ments by the Company’s by third-party rolling stock rolling stock and amounted to 1,953,000 TEUs, compared to Client container shipments Client container shipments by third-party rolling stock 1 Hereinafter the source is the Company data (unless otherwise indicated). 1,806,000 TEUs in 2018. by the Company’s rolling stock

PJSC TransContainer | Annual report 2019 38 39 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The volume of profitable container transportation products (14.3% and 12.0% respectively). Compared MAIN TYPES OF SPECIALISED CONTAINERS USED BY THE COMPANY involving the Company’s transport assets (rolling to 2018, the share of wood processing products, stock and/or containers) grew by 6.1% in 2019 to chemical industry products, and food cargo Container type Characteristics Types of cargo transported 1,639,000 TEUs. This reflects the optimisation of increased in the structure of transportation by the Thermal insulated containers Dimensions: 20 ft Perishable cargo empty runs. At the same time, the share of revenue Company’s transport assets, and the share of metal Capacity: up to 24 gross tonnes transportation in the total volume of transportation products and pulp and paper products decreased. by means of the Company’s transport assets Tank containers Dimensions: 20 ft Liquid cargo (including dangerous) decreased slightly due to the growth of the share Capacity: up to 36 gross tonnes of services involving provision of the Company’s Rail container transportation using containers, which are more expensive but require an specialised containers Soft top containers Dimensions: 20, 40 ft For transportation of large, heavy and Capacity: up to 30 gross tonnes difficult cargoes empty container. Specialised container transportation is viewed as a Hard top containers Dimensions: 20 ft For transportation of large, heavy and The volume of transportation of empty Company prospective area of activity, as it can considerably Capacity: up to 24 gross tonnes difficult cargoes containers (including transportation by third- expand the range of containerised cargo and improve party rolling stock) increased by 9.7% in 2019 and the containerisation of rail transportation. Bulk containers Dimensions: 20 ft For transportation of bulk cargoes Capacity: up to 30 gross tonnes (including food) amounted to 374,000 TEUs. The main constraint factors with regard to the growth of transport The largest fleet of specialised containers in the volume of empty containers of the Company were management of PJSC TransContainer consists of the optimisation of container fleet management thermal insulated containers. The segment of this type to 14,000 TEUs. The fleet in operation of the and the application of a flexible tariff policy for the of containers was actually created by the Company in Company grew from 200 units in 2018 to 800 units directions of empty transport. Favourable factors 2007–2012. The thermally-insulated 22H5 thermos by 14% by the start of 2020. include the gradual recovery of import freight flows container model is designed for transportation of the volume of liquid cargo and gas amid the revival of business and consumer activity in unventilated packaged (crate) perishable cargo with transportation in tank containers The Company’s business model is focused on Russia, which partially offset the existing imbalance deadlines for delivery by automobile, rail and water increased in 2019 gaining the maximum synergy effect for parent container cargo flows in export — import transport. transport. The main product range includes juices, company TransContainer. LLC SpecTransContainer, beer, canned food, wine, fish, and meat. At present, in addition to the target business model, which At the end of 2019, the ratio of transport volumes the fleet consists of 1,072 units. The remaining regulations lack a number of restrictions regarding provides for the development of transportation using of empty and loaded containers of the Company service life limit as of 31 December 2019 is no more the conditions of the activities of participants in the the own fleet of tank containers (medium-capacity was 53.5%, compared to 52.3% in 2018. The factors than three years. transport services market, which may facilitate a shift containers), is actively developing sales of the parent listed had a positive effect on the Company’s of the cargo base to other modes of transport. company’s services in the tank container segment spending dynamics and financial result in 2019. As the fleet is written off, traffic volumes are also when transporting cargo in client containers. The declining. In 2019, the loading volume amounted to In 2019, the Company continued to actively develop acquired competencies and partnerships allow us In 2019, the Company transportation structure by 8,097 TEUs (-10.5% YoY). An additional factor in transportation in the most capacious segment to switch customers to the Company’s flatcars. LLC commodity group is dominated by wood processing reducing the competitiveness of this type of container of specialised containers based on its subsidiary SpecTransContainer was in top 25 major customers products (19.1% of the total volume of shipments of are the new regulations for the rail transportation company LLC SpecTransContainer. The results of of PJSC TransContainer. loaded containers), and chemical industry and metal of perishable goods that entered into force. These 2018–2019 confirmed that this was the correct decision. At present, an extensive customer base has been formed in the segment of transportation using By the end of 2019, the volume of liquid cargo the own fleet of tank containers. The step-by-step STRUCTURE OF LOADED CONTAINER TRANSPORTATION USING THE COMPANY’S ROLLING STOCK BY CARGO TYPE, % and gas transportation in tank containers grew by building of long-term relationships with customers 14% and totalled 510,000 TEUs. The traffic growth does the groundwork for a dynamic and sustainable 14.30 19.10 12.00 6.20 8.30 4.50 5.50 7.70 22.40 forecast for 2020 is 565,000 TEUs (11% on 2019). business growth. On the market, the Company has 2019 become to be known as a reliable partner, thus By the end of 2019, the volume of transportation attracting new customers. 13.90 16.70 12.10 8.20 8.20 4.70 4.80 9.70 21.80 2018 of LLC SpecTransContainer amounted to 20,000 TEUs, or 33% more than the level of last year, which The strategy implemented by LLC is 2.8 times higher than the market growth rate. At SpecTransContainer keeps a balance between rapid the same time, the volume of transportation by the growth rates and maintaining profitability of the Chemicals Pulp & paper Food Company’s own fleet of tank containers increased business. At the end of 2019, revenue from the core Timber products Machinery & equipment Car parts almost 2 times — from 3,100 TEUs to 6,000 business amounted to RUB 606 million, and net Metalware Non-ferrous metals Other TEUs. The volume of cargo transportation in client profit — RUB 5.8 million. containers increased by 17% — from 12,000 TEUs

PJSC TransContainer | Annual report 2019 40 41 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Rail container transportation JSC Kedentransservice flatcars in the China – Trucking Services in Kazakhstan and Central Asia Europe – China direction due to their limited capacity ( 40, 60 ft.). The Company’s container deliveries by truck — amounted to 30.0% (vs 33.6% in 2018). This resulted In 2019, JSC Kedentransservice together with the so-called last mile services — are focused from a lesser use of own trucks. JSC KTZ-Express continued to participate in In accordance with the Minutes of the Board on container transportation between its the development of integrated transport and of Directors of PJSC TransContainer dated 26 terminals and the cargo’s final destination DYNAMICS OF CONTAINER DELIVERY VOLUMES BY THE COM- PANY’S OWN TRUCKS AND THIRD-PARTY TRUCKS IN RUSSIA logistics services for the delivery of container November 2019, a decision was made to cease (or the container loading site). For truck (HIGH-CAPACITY CONTAINERS + MEDIUM-CAPACITY CONTAIN- cargo in Kazakhstan and Central Asia. In 2019, operations of PJSC TransContainer in Logistic deliveries, the Company uses both its own fleet ERS), THOUSAND TEUs JSC Kedentransservice operated on average System Management B.V., which owns 100% and services of third-party transport companies 3,619 flatcars, including 300 units of own fleet of the share capital of JSC Kedentransservice. on a contractual basis. The Company is also 41.2% 39.3% 34.4% 33.6% and 3,319 units of third parties. The closing of the transaction on the sale of JSC authorised to perform trucking under customs 32.4% 30.0%

Kedentransservice’s shares (indirectly) is planned control. –14.1% The volume of container transportation carried out for Q2 2020; however, in accordance with the terms 415 388 382 382 331 244 284 by JSC Kedentransservice in 2019 amounted to of the aforementioned transaction, the Company will In 2019, 284 thousand TEUs were transported 232 255 258 220 219.4 thousand TEUs — 7% below the last year’s have to obtain the right to conduct free activities by the Company’s own fleet and third-party 199 171 150 level. The dynamics of JSC Kedentransservice and non-discriminatory access to infrastructure in trucks, which is 14.1% lower than in the 133 124 111 85 transportation was influenced by the reduction the Republic of Kazakhstan. previous year. 2014 2015 2016 2017 2018 2019 in the operating fleet of flatcars, the activity of competitors (with a fleet of 80-foot flatcars) in In 2019, the share of the Company’s truck Own trucks Third-party Own trucks the market, the lack of applications for attracting fleet in the total volume of road transportation trucks

Container Terminal Handling Freight village is a modern and most common logistics format in the world, which includes manufacturing, logistics (industrial real estate), Container handling services provided by the Company at CONTAINER HANDLING VOLUMES AT TERMINALS its own rail terminals include loading to and unloading COMPANIES IN RUSSIA (HIGH-CAPACITY CONTAINERS + transport infrastructure and value-added infrastructure, that is, from and motor vehicles, as well as MEDIUM-CAPACITY CONTAINERS), THOUSAND TEUs customs services, service areas, and retail. container sorting and storage, which is complemented by additional container and containerised cargo terminal services (such as preparing containers for loading, +3.2% loading/unloading cargo to/from containers, container sealing, specialised container handling, etc.). 1,294 1,320 1,219 1,230 1,279 45 48 61 47 31 560 547 549 549 575 In July 2017, PJSC TransContainer acquired a 30% one of the Top 3 leading companies in the Moscow stake in the authorised capital of LLC Freight Village market of container cargo terminal handling. 614 635 684 684 714 Kaluga North which owns and operates terminal assets in Vorsino and Rosva industrial parks. The In September 2018, PJSC TransContainer acquired Terminal activities terminal is the largest terminal hub for the reception 100% shares of CJSC Logistics Terminal, which in the Russian Federation and distribution of imported containers arriving owns and operates the largest rear terminal in from all directions: St. Petersburg, Novorossiysk, St. Petersburg railway junction. Export shipments are being formed at the terminal, which are The volume of container handling at the Company's 2015 2016 2017 2018 2019 Dostyk, Naushki, Zabaikalsk and ports of the Far delivered as part of shuttle trains to the ports terminals in the Russian Federation in 2019 grew by East. At this terminal, cargo is consolidated and of St. Petersburg, Bronka and Ust-Luga. As part 3.2% and amounted to 1,319.9 thousand TEUs , of which Loading Unloading Sorting transported as part of expedited container trains of the same shuttle trains, empty containers are 1,319.5 thousand TEUs1 accounted for large containers to the largest cities of Siberia: Krasnoyarsk, Irkutsk, removed from ports. handling. The volume of handling of medium-tonnage Blagoveshchensk and Chita. containers in the total volume of terminal services was The federal-level freight village of Vorsino is located At the end of 2019, the volume of container insignificant due to the almost complete disposal of this on the border of New Moscow and the Kaluga handling at the terminal of CJSC Logistics type of equipment in the Russian Railways network. Region, along the federal highway M3 Moscow – Terminal in communication with railway grew by 15% and amounted to 160 thousand TEUs. The lower dynamics of large containers handling at the Kiev, 67 km from MKAD. The project is part of Regular container trains with imported and Company's terminals compared with the dynamics of the Vorsino industrial park. local cargo depart from the terminal to large container market as a whole is associated with increase At the end of 2019, the volume of container handling cities of Russia: Krasnoyarsk, Yekaterinburg, in the share of domestic and export shipments carried out 1 At the Company’s own terminals, excluding the volumes at the at the terminal of LLC Freight Village Kaluga North and Novosibirsk. Linear empty containers are directly from the driveways of manufacturing enterprises, subsidiaries’ terminals. in communication with railway grew by 10% and consolidated and shipped for loading to industrial as well as the sale of the St. Petersburg-Vitebsky terminal amounted to 140 thousand TEUs. The terminal is enterprises of the pulp and paper industry. at the end of 2018.

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Logistics and Freight Forwarding Capital expenditures were devoted to updating the CAPITAL EXPENDITURES OF THE COMPANY, RUB BLN flatcar fleet, the container fleet, and expanding the 18.9 terminal infrastructure. 0.1 The service quality is an important competitive Our business model facilitates integrated 0.1 3.1 strength in the market of transport and logistics transportation and freight forwarding services to By increasing the volume of container services, and especially in the segment of clients on an “all-inclusive” basis using both our transportation using its own and third-party 15.6 containerised cargo transportation. Those who own assets (flatcars, containers, terminals, and transport assets, PJSC TransContainer strives to 7.4 6.6 offer integrated and economically efficient door- trucks) and services of subcontractors (the Russian provide customers with an integrated transport 0.3 0.2 0.3 2.9 2.4 0,9 to-door transport solutions have the edge. As Railways, foreign railway administrations, agent and logistics service with an optimal price-quality 1.3 0.8 1.0 5.4 a highly standardised and intermodal process, companies, customs brokers, freight forwarders, ratio. The actual ratio of own and third-party 0.6 4.9 container transportation is a perfect match for the ports, sea lines, etc.). assets is determined by economic considerations 1.0 0.7 1.0 existing market trends and a key containerisation on the back of the prevailing market conditions. 0.9 driver. As historical experience shows, the demand for integrated transportation and freight forwarding Pursuant to its development strategy, the services from clients is steadily growing. This type 2015 2016 2017 2018 2019 Company expands the range of these services and of service provides: Rolling Stock builds up the portfolio of integrated transport and Flatcars purchasing Terminals h high quality(the Company’s commitment to development logistics solutions for clients to boost the added deliver the cargo); – High-capacity containers Other CapEx value of its services and lay the ground for long- h simplicity(a single price for the whole range of The Company’s fleet is purchasing term cooperation. services);

h reliability(every key stage of container 47% Company to satisfy the growing demand for DYNAMICS OF ADJUSTED REVENUE FROM INTEGRATED transportation can be covered by the Company’s container transportation. TRANSPORTATION AND FREIGHT FORWARDING own assets). of the total fleet of Russian flatcar SERVICES, RUB BLN owners (by capacity). At the same time, integrated transportation and At the end of 2019, the total number of flatcars in 81.5% 83.4% 76.5% 6.28 freight forwarding services imply a higher degree the Company’s fleet saw an increase of 5,374 units 61.6% 64.2% of responsibility of the Company to customers, to 30,676 units, including the leased flatcars. Over 5.80 31.6 Flatcar fleet 6.54 as well as more sophisticated performance the reporting year, 238 units of 40-foot and 1,090 25.5 7.86 technologies compared to the provision of As of 31 December 2019, the Company’s fleet units of 60-foot flatcars were retired, while 4,006 7.79 21.2 transport services separately. numbered 30,676 units of rolling stock (flatcars) for units of 40-foot and 1,368 units of 80-foot flatcars 14.1 12.5 container transportation, which is about 47% of the purchased from manufacturers, as well as 173 units In 2019, the adjusted revenue from integrated total fleet of Russian flatcar owners (by capacity). of leased flatcars leased, joined the Company’s fleet. transportation and freight forwarding services 2015 2016 2017 2018 2019 amounted to RUB 31.6 billion, which is 24.0% Following the strong demand for container Following the above changes, the share of 40-foot higher y-o-y. In 2019, the share of adjusted transportation, the Company purchased new flatcars in the Company’s fleet (by capacity) Adjusted revenue Other revenue revenue from integrated transportation and flatcars, as well as leased and used third- designed mostly for transportation of heavy cargo from integrated Share of integrated logistics services freight forwarding services in the Company’s total party rolling stocks to transport its containers grew from 21.5% in 2018 to 27.5% by the end of logistics services in revenue reached 83.4% from 81.5% in 2018. throughout 2019. Supported by measures to 2019, approaching an optimum level that fits into the adjusted revenue increase rolling stock efficiency, this helped the the average container cargo mix transported via

Assets BREAKDOWN OF THE COMPANY’S FLATCAR FLEET AS OF 31 DECEMBER

Flatcar 40 ft 60 ft 80 ft Total Following the Strategy, PJSC TransContainer in In 2019, the Company’s investment policy was aimed Owned 12,398 7,038 11,067 30,503 2019 took measures to increase the productivity at using the opportunities available for business of its fleet of flatcars and containers. The Company growth. In the reporting year, the investment Leased 0 38 135 173 has optimised the network of container terminals programme was fully implemented: RUB 18.9 billion Total 12,398 7,076 11,202 30,676 and actively introduced sophisticated information were invested (in 2018 — RUB 8.5 billion), including technologies to improve labour productivity and RUB 0.07 billion allocated for financial investments Capacity, TEU 24,796 21,228 44,808 90,832 asset utilisation. (in the project to increase the authorised capital of Average age, years 7.0 30.0 8.2 12.7 TransContainer — Slovakia, a.s.).

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the Russian Railways network. The proportion of containers and 8,680 units of 40-foot containers, The driver behind the improved efficiency of EMPTY RUN RATIO OF THE COMPANY’S CONTAINERS 80-foot platforms that are optimal for transporting as well as 1,725 units of 20-foot and 161 units transport equipment utilisation and the enhanced AND FLATCARS, % 40-foot containers, according to the results of of 40-foot containers were retired. The fleet quality of client’s service is the transportation 2019, increased to 49.3% compared to 48.2% at the of leased containers decreased by 338 units of of containers as part of block container trains. beginning of the reporting period (by capacity). 40-foot containers. This type of service boosts the delivery speed 21.7 21.5 19.2 by 2.5—3 times as compared with the sending 17.6 17.2 Due to changes in the mix and size of the fleet, its Thus, according to the results of 2019, the fleet of small consignments of containers shipment capacity has increased over the year by 12.9% and of containers of the Company increased by 13,206 of way-freight trains and also guarantees the 3.9 4.2 reached 90,800 TEUs. The average age of the flatcar units, and, as of 31 December 2019, numbered observance of the cargo delivery terms for 2.0 2.7 3.0 fleet was 12.7 years against 14.3 years in 2018. 83,684 units: a client. Transporting the Company’s empty h 46,587 units of 20-foot containers (including 46,158 containers as part of container block trains is 2015 2016 2017 2018 2019 own and 429 leased); also very effective since it allows reducing the relocation time of empty containers to the place Container fleet h 37,097 units of 40-foot containers (including 37,014 Flatcars Containers own and 83 leased). of loading and getting a discount to the Russian In 2019, the entire fleet of the Company consisted Railways’ infrastructure tariff applied for this of high-capacity containers of the international The average age of the Company’s fleet is 8.8 years. transport mode. THE COMPANY’S TRANSPORTATION VOLUME AS PART ISO standard. The Company continued expanding The Company plans to continue its fleet replacement OF CONTAINER TRAINS1 its container fleet amid the growing container guided by the market demand. In 2019, the Company sent 9,986 container trains, 56.7% transportation. which is 11.5% more than in 2018. 54.5% 43.4% 49.7% The tank containers fleet managed by LLC 42% +8.8% In the reporting year, the Company’s container SpecTransContainer, a subsidiary of PJSC The container traffic (including empty ones) 1,162 1,068 fleet increased by 6,750 units of 20-foot TransContainer, operates 800 tank containers. as part of container trains of the Company’s 946 rolling stock amounted to 1,162 thousand TEUs 931 834 775 compared to 1,168 thousand TEUs in 2018. The 700 share of containers transported by the Company 602 575 in container trains from the total traffic operated 482 Operational Performance by the Company grew to 56.7% in 2019 compared Indicators to 54.5% a year earlier. 234 120 125 156 216

2015 2016 2017 2018 2019 In 2019, turnover of the Company’s flatcars in the TURNOVER OF THE COMPANY’S’ CONTAINERS AND FLATCARS, DAYS1 Russian Railways network increased to 12.3 days compared to 11.9 days a year earlier, which was the Terminal Assets High-capacity con- High-capacity con- 37.8 tainers transported by tainers transported by result of extended average flatcar run (3,217 km 35.4 36.2 32.5 34.1 and Vehicles the Company’s trains the Company’s trains compared to 3,178 km in 2018), as well as (empty, ‘000 TEUs) (loaded, ‘000 TEUs) infrastructure restrictions on the Russian Railways 14.9 network since May 2019. For the same reasons, the 13.5 12.1 11.9 12.3 Share in shipments by the Company’s flatcars and containers container turnover rate of the Company increased As of 31 December 2019, the Company owned 38 to 34.1 days compared to 32.5 days in 2018. railway container terminals located in all the key Russian industrial areas and transportation hubs2. 2015 2016 2017 2018 2019 Containers empty run ratio decreased from 17.6% in The Company also operates two terminals through border crossings (Kazakhstan-China border). The

2018 to 17.2% in 2019 on the back of the measures Flatcars Containers joint venture LLC Freight Village Kaluga North base of terminal assets of JSC Kedentransservice taken to optimise the management of the container and one terminal through its subsidiary CJSC as of 31 December 2019 amounts to 132 units of fleet, including through tariff decisions aimed at Logistics-Terminal. lifting equipment. streamlining the loaded container flows. At the same time, the imbalance between loaded container The empty flatcar run in 2019 increased and In 2019, the Company’s largest asset outside In general, the existing terminal network of the imports and exports persisted throughout 2019 amounted to 4.2% against 3.0% y-o-y. The key Russia was a stake in JSC Kedentransservice who Company meets the strategic goals of maintaining restricting our ability to load containers running factor was the increase in the geographical operates 19 freight terminals across Kazakhstan its business scale. backwards from export routes and optimise empty imbalance of container flows in Siberia and the Far and transshipment facilities at Dostyk and Altynkol container runs. East.

1 An average number of days between the initial date of a loaded run and initial date of the next loaded run (the same container). 1 Loaded and empty high-capacity containers 2 The reduction in the number of terminals is associated with the closure of St. Petersburg Vitebsky container terminal.

PJSC TransContainer | Annual report 2019 46 47 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The Company’s terminals located in Russia host the reconstruction of a container terminal at six temporary storage warehouses with a total Zabaikalsk station, which will reduce the time area of 14.5 thousand square metres to provide of container reloading between railway tracks additional services for international, particularly of various gauge from 270 to 180 minutes and inbound, transportation. The number of such increase the processing capacity of the terminal warehouses at the Company’s terminals in 2019 from 220 thousand to 280 thousand TEUs/year. decreased. The reconstruction projects of Blochnaya, In 2018, the Company also had the opportunity Bazaikha, Kleshchikha and Khabarovsk-2 container to offer its customers services of two warehouses terminals have also been launched/are being at Vorsino and Shushary stations in connection worked on. with the acquisition of shares in the companies who operate these terminals. In 2019, PJSC TransContainer launched a programme to provide all container terminals All Russian terminals owned by the Company with equipment for axial weighing of cars with have a “Site of Common Use” status in containers. This will allow for observing the accordance with the Federal Law on Rail traffic rules, requirements prescribed by road Transport in the Russian Federation. In its signs prohibiting the movement of vehicles whose terminals, the Company provides services total actual mass or axle load exceeds those categorised as “rail infrastructure services” indicated on a road sign, if the movement of such (container loading/unloading operations, vehicles is carried out without special permission container sorting, etc.) acting as an agent (Article 12.21.1, Part 11 of the Administrative of Russian Railways, as well as other terminal Code of the Russian Federation). In 2019, for this services at clients’ requests. purpose scales were purchased and installed on AKP Batareynaya and AKP Bazaikha. In addition During 2019, the Company continued its efforts to scales, four semi-trailers equipped with axle in upgrading its terminal network. Thus, PJSC weighing equipment were purchased at the As the road transportation market develops and regions underpenetrated by rivals. The fleet in TransContainer has launched a project for Northern Branch. the number of companies offering competitive these regions was renewed and expanded. In road container transportation services grows, total, 4 trucks were registered in the reporting the Company is pushing forward its road period: four specialised semi--container Lifting equipment Freight trucks transportation outsourcing, focusing its fleet on ships.

2017 2018 2019 2017 2018 2019

Lifting 212 212 190 Number of 491 496 444 Optimisation of Non-Core Assets equipment, unit trucks, unit

According to the Non-Core Asset Identification website, on the website of Russian Railways in At the end of 2019, the fleet of lifting equipment The Company’s truck fleet to transport high- and Sale Guidelines by the decision of the Board the Property Transactions section at property.rzd. included 190 units. For the indicated period, 22 units capacity containers as of 31 December 2019 of Directors of the Company (Minutes No. 3 ru, and in PJSC TransContainer’s property shop at were ruled out at the Company’s branches due amounted to 444 units, including 145 tractor units, dated 18 October 2017), the Non-Core Asset avito.ru. The Company’s Commission for Sale of to the implementation of the container terminal 259 specialised semi-trailers, and 40 special- Disposal Programme of PJSC TransContainer Immovable Assets Not Used in Production reviews St. Petersburg-Tovarny-Vitebsky. The lifting purpose trucks (utility trucks, high-sided trucks). was approved. The Plan of Non-Core Assets the implementation of its non-core asset disposal equipment that had fulfilled the standard service life In total, 52 trucks were retired /sold in 2019 (fleet Sale and the Register of Non-Core Assets are plan on a quarterly basis, and information was retired, as its further operation was unprofitable. renewal). approved on an annual basis. Information on the is provided to the Board of Directors of the Company’s non-core assets is available on its Company.

PJSC TransContainer | Annual report 2019 48 49 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

COMPANY’S CLIENT BASE BREAKDOWN BY INDUSTRY Client Service and Sales IN 2019, %

Timber, 7.5 Metalware, 4.5 17.9 thousand Shippers customers 27.4 Chemicals, 4.4 Non-ferrous metals, 3.4 got the services of PJSC TransContainer Petroleum products, 1.2 h actively developed integrated “turnkey” intermodal in 2019 Freight forwarders IN 2019, THE COMPANY: Others, 6.5 transport services and transportation on new routes 72.6 not only in Russia, but also abroad (in particular through Mongolia and China); With increasing market h launched a number of new transport and logistics services; competition, PJSC TransContainer continues h afforded new opportunities for the clients operating with the Company through the Internet portal. Sales and Client Service to improve transport In 2019, online orders had come to account for 89% of and logistics services for total transportations against 79% in 2018. its customers, following The Company is Russia's only rail container operator the strategy of continuous with a footprint across all of the country's major TransContainer’s sales network covers the framework of the contract, TransContainer will administrative centres offering services throughout entire territory of Russia and key transport hubs provide SIBUR with services for transportation efficiency improvement. the Russian network of railways. Our business model is geared towards serving a wide range of clients, varying in Europe and Asia. The Company maintains of ZapSibNeftekhim enterprise products in in size, transportation geography, location, and industry. its traditional footprint through sales offices, universal 40-foot containers to South-East Asia, representative offices and joint ventures, which mainly to China. To ensure continuous shipment are complemented by e-commerce channels. of products, TransContainer arranged permanent TransContainer provides services to clients stock of containers at the SIBUR terminal located based on a standard freight forwarding services in Tobolsk. The first mass cargo shipments in contract. This ensures consistent quality container trains from ZapSibNeftekhim enterprise standards across the 1520 gauge railway network were organised in October 2019. Client Base and beyond, regardless of where the client and our points of sale are located. In June 2019, within the framework of Transport logistic 2019 in Munich, PJSC TransContainer, DB TransContainer’s client base comprises tens of THE COMPANY’S 10 LARGEST CLIENTS IN TERMS As of 31 December 2019, the Company operated Cargo Logistics Gmbh and Belarusian Railway OF REVENUE IN 2019, % thousands of clients ranging from global major 90 sales offices across Russia. The sales network signed an agreement of intent that maintains the companies to small businesses and individuals. relies on the central office in Moscow, key freight conditions for a continued stable and successful traffic clusters, regional administrative centres, partnership until 30 April 2021 with the aim to In 2019, the Company provided services to 17,900 Тоp-10 and transport hubs. The international network of create an attractive logistics package for the 29.6 clients. presence includes 7 subsidiaries, 4 joint ventures, coming years. This agreement complements the and 4 representative offices, and covers CIS transport expedition agreement signed between The top 10 clients accounted for 29.6% of client countries, Central and Eastern Europe, as well as PJSC TransContainer and DB Cargo Logistics payments. At the same time, the Company’s Other Clients the Asia-Pacific region. Gmbh. As part of this agreement, the companies 70.4 largest customer, Unico Group, which is a partner provide container transportation of components of the Company for import and transit projects for automotive assembly to factories in Kaluga from Korea and China (Samsung, GM, Hyundai, Client service development and Nizhny Novgorod. Ssang Young, etc.), provided 6.8% of all customer payments. UNICO Group, 6.8% Volkswagen, 2.2% In April 2019, as part of the Agreement concluded Moreover, in June 2019, PJSC TransContainer Russian Railways Logistics, Voskhod, 2.2% with PJSC SIBUR Holding at the TransRussia 24th and COSCO SHIPPING signed a memorandum 4.0% Transport and logistics services are provided to Lesofond, 2.0% International Exhibition of Transport and Logistics on strategic cooperation as part of SPIEF 2019. both freight forwarding companies and directly TransContainer FF Services and Technologies, PJSC TransContainer The Russian rail operator and the Chinese (Shanghai), 3.3% Vladivostkok Sea Container to end customers (27.4% of the Company’s total Terminal, 1.9% signed a three-year contract for the organisation shipping services provider agreed to create a Rusal, 3.1% revenue in 2019). UMMC, 1.3% of export shipments of polymer products joint venture that will allow both companies Ilim Group, 2.7% of ZapSibNeftekhim enterprise. Within the to pool resources to offer the market efficient

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and high-quality logistics services. Within the was launched on a new route from Xi’an (China) During 2019, new regular container services were Online service functionalities allow any client (even cooperation framework, the companies also to Sławków (Poland) through the territories also launched: having no expertise in the field of transportation and intend to offer each other competitive rates for of Kazakhstan, Russia and Ukraine. The total h Once a month — on the route Shushary — logistics business) to independently do the following: transportation, mutually use the container fleet, of 45 units of 40-foot containers made the Blagoveshchensk (branch of Oktyabrskaya h Calculate the cost of services; develop multimodal services and attract new 9,477 km long route in 12 days. The train was Railway)1; cargo traffics. made up of rolling stock of PJSC TransContainer h Place an order without leaving their home or and JSC Kedentransservice (Kazakhstan), and h Once a month — on the route Penza — Mys office; In September 2019, PJSC TransContainer and the co-organisers of the dispatch were KTZ Churkin and on to Chongqing with the cargo “sunflower oil” (branch of Kuybyshev Railway); h Pay for the ordered services (including by credit Korean company Pantos Logistics signed a Express JSC (a subsidiary of JSC NC Kazakhstan card); memorandum of cooperation at the Eastern Temir Zholy) and operator of Polish Broad h Twice a week — on the route Kuntsevo-2 — Economic Forum. The Russian and Korean Gauge Metallurgy Line PKP Linia Hutnicza Yekaterinburg-Tovarniy with the cargo h the status of orders; companies have expressed their intention to Szerokotorowa (PKP LHS, a subsidiary of the “consumer goods” (branch of Moscow Railway); h Check the location of containers in real time; actively develop joint projects in accordance with state railway company PKP SA). h Twice a month — on the route Pidacha — the current legislation of South Korea and Russia h Get access to documentation under the contract. Novorossiysk (exp.) and on to China with the and on the basis of mutually beneficial principles. In addition, in December 2019, PJSC cargo “rapeseed oil” (branch of South Eastern The parties plan to actively cooperate in the TransContainer organised a new container In order to meet the requirements of all client Railway). organisation of intermodal container transport in service for the delivery of dangerous cargo categories, two versions of iSales have been South Korea/China — Uzbekistan, Russia, Europe, (9th hazard class) in refrigerated containers developed: and Kazakhstan. The companies’ joint plans from South Korea to Poland. The test container h Lite. Clients can register independently and make also include developing transport and logistics train was sent from the piers of Vostochnaya Online services orders without visiting the office: the forwarding products for the automotive industry of the Stevedoring Company LLC (VSC, part of Global service contract is concluded in electronic format Republic of Uzbekistan, opening up new routes Ports) to the port of Vostochny, proceeded PJSC TransContainer actively develops its online for each new shipment. for container transport, as well as attracting new through the territory of Russia and Belarus, sales, which have already become the Company’s customers to their joint services. crossed the Belarusian-Polish border in Brest, core client interaction channel. Using the iSales h Pro. The client can conclude a contract at the and arrived at the destination station of online service, the customer can order container nearest office and access an extended version that provides a wide range of additional useful In October 2019, TransContainer Freight Małaszewicze (Poland). transportation services from PJSC TransContainer options. Forwarding (Shanghai) Co., LTD. opened a in just a few clicks across almost the entire Euro- branch in Qingdao, in China’s Shandong province. The VSC LLC terminal, which has become a Asian continent. The service provides the customer In 2019, iSales continued to be the core channel Along with the offices already operating in port of cargo transshipment, has a license for with quick and easy access to a wide range of for internet sales: more than 88% of TEU were Shanghai and Shenzhen, the new branch will sell handling goods classified in the 9th hazard class. services, as well as information about costs. transported under orders made using the online TransContainer Group services, fulfill customer To ensure the safety of their transshipment at service. transportation orders in connection with China the terminal, a set of measures was approved via land and sea border crossings, as well as in accordance with national and international monitor equipment of PJSC TransContainer standards for technical loading and unloading SHARE OF TEU ACCEPTED FOR TRANSPORTATION UNDER property in nearby regions and interact with conditions. THE E-COMMERCE ORDERS,% local carriers. The new office’s efforts will be centred on work with customers and partners The composition, loaded with lithium ion 91.5 90.5 91.3 91.5 91.5 92.5 who operate in the northern provinces of China: batteries for LGChem, is made up of refrigerated 88.2 89 91.5 91.2 89.3 86.6 90.2 87.2 82.3 81.6 83.4 84.4 Shandong, Shanxi, Hebei, Tianjin, Liaoning, containers connected to the installation of 77 76.4 78 70.9 73.3 the Inner Mongolia Autonomous Region and uninterrupted power supply en route, allowing 63.1 others. These regions generate 18% of trade customers to transport cargo that requires turnover between China, Russia and countries temperature maintenance to Europe even faster in Europe. In the north of China there is a and safer. The travel time for the first test train number of manufacturing enterprises, including from Busan to Malaszewicze was 19 days, which of electronics, equipment used in mechanical is twice as fast as delivery by sea. engineering, pharmacology, chemical, automotive and other industries, as well as construction The Company implements the new service January February March April May June July August September October November December materials exported to Russia, the CIS and the together with Korean company Pantos Logistics European Union. as part of the memorandum concluded at the 2018 2019 Eastern Economic Forum 2019. The forwarder in In December 2019, a test container train with the port was the company FNS CIS. automobile components and consumer products 1 This service made it possible to reduce delivery time.

PJSC TransContainer | Annual report 2019 52 53 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Feedback

Feedback is a key element of interaction between the unit is located, containing working algorithms Service quality survey the Company and its clients. The feedback system and scripts. The deployment of the knowledge base comprises: on the site has improved the quality and speed of Each year, the Company conducts a service h A 24/7 call centre; the customer service process, allowing operators to quality survey by interviewing clients on the find the necessary information more quickly when following key metrics: h Dedicated e-mail accounts (with automatic processing requests. AVERAGE TERMINAL OPERATION QUALITY SCORE generation of electronic messages sorted by h Service quality; subject and sender and addressed to the relevant Yugo- h Performance of managers; 8.9 corporate teams); Vostochnaya 9.0 Client Meetings Railway h Electronic client feedback form on the Company’s h Performance of terminals; website; Gorkovskaya 8.7 Ongoing communication with clients and partners h Information on the corporate website; Railway 8.9 h Regular round table discussions with clients and ensures prompt response to changes in the market h Changes clients would like to see in the Company; partners; environment and helps to shape a competitive Privolzhska- 8.9 ya Railway 8.9 h Regular customer surveys on service quality. service offer, taking into account the needs and h Preferences and needs of clients and additional preferences of market players. services they would like to see. Severo-Ka- 8.9 vkazskaya 8.7 Call centre Throughout the year, PJSC TransContainer held In 2019, 2,600 respondents participated in Railway Kuyby- round table discussions with representatives of the survey. The total percentage of completed 8.2 shevskaya 8.7 In 2019, the Call Centre processed 133,853 transport and logistics companies, market experts, questionnaires filed was 48% against 37% Railway requests (56% of them by telephone), which is shippers and cargo owners, along with clients and y-o-y, which indicates increasing client 8.6 Ural Branch 2,000 (or 9%) more than in 2018. partners from various industries. loyalty (the average rate in similar surveys 8.5 is above 10%). Overall, the average score of The Call Centre’s service level averaged 91.5% In 2019, representatives of the Company took the index of customer satisfaction with PJSC Severnaya 7.8 (compared to 89% in 2018), which indicates part in major international transport and logistics TransContainer services was 8.6 (the same Railway 8.4 the increased efficiency of responding to the exhibitions, as part of which meetings with indicator in 2018 was 8.4). Vostoch- 8.4 no-Sibirska- customers: the average waiting time decreased major current partners and potential clients were 8.1 ya Railway from 14.5 sec in 2018 to 12.7 sec in 2019. organised: Positive dynamics in terms of the quality of Common Use 7.7 h TransRussia 2019 (Moscow, Russia); services provided is noted throughout the The independent work ratio of operators on Company: in particular, respondents of the Centre 7.9 targeted topics has increased from 94% in 2018 Northern and Far Eastern branches note Dalnevo- h TransRussia 2019 (Novosibirsk, Russia); 7.2 stochnaya to 97% in 2019. A larger number of applications significant improvement in the service level 7.9 Railway began to be processed online at the Call Centre h Transport Logistic 2019 (Munich, Germany); compared to the previous year. level without switching to the Company’s internal Moskovskaya 7.9 divisions. The customer service quality level h INNOPROM-2019 (Ekaterinburg, Russia); Clients also noted positive changes in the Railway 7.8 reached 94.3% - 1% higher than in 2018. competence and efficiency of managers at the h TransKazakhstan Translogistica 2019 (Almaty, Oktyabrska- 7.5 Northern branch, as well as the Far Eastern and Kazakhstan); ya Railway 7.6 Improvements in the speed and quality Kuibyshev branches. Kras- 6.9 performance of the Call Centre process in 2019 h Transport and Logistics (Minsk, Republic of noyarskaya 7.6 allowed 2,000 more requests than in 2018 to be Belarus); The average quality score of the Company’s Railway received and processed within target subjects terminals increased by 0.1 points and amounted Zabaikalska- 7.7 convertible to orders. The result of qualitative h China (Shenzhen) International Logistics Fair 2019 to 8.2 points in 2019. Clients of the West ya Railway 7.4 changes in working procedures, which were aimed (Shenzhen, China); Siberian (7.3), Zabaikalsky (7.4), and Krasnoyarsk Zapadno-Si- 7.4 at promptly resolving problems experienced (7.6) branches were the least satisfied with the birskaya 7.3 by clients, was a reduction in the number of h China (Chengdu) International Supply Chain and operation of terminals. The best results were Railway complaints from 162 in 2018 to 70 in 2019. Smart Logistics (Chengdu, China); achieved at the South-East (9.0), Gorkovsky (8.9) and Volga branches (8.9). The operation of h China International Import Expo 2019 (Shanghai, 2018, average score 2019, average score In the reporting year, an internal site was created China); terminals at the Far East branch (7.9) showed for the Call Centre, where the knowledge base of marked improvement. h Transport of Russia 2019 (Moscow, Russia).

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Quality Control

TransContainer exercises quality control on a comprehensive and multi-level basis with all business units involved within their respective remit.

TransContainer regularly assesses the efficiency СЕРТИФИКАТ of its quality management system and takes the

Орган по сертификации necessary steps to eliminate any identified gaps. общества TÜV SÜD Management Service GmbH The performance assessment also includes annual удостоверяет, что предприятие process audits and internal audits conducted at the Company’s executive and branch offices. Corrective measures are developed based on the ПАО «ТрансКонтейнер» results of the inconsistencies identified. Оружейный переулок 19 125047 Москва Российская Федерация PJSC TransContainer offers high-quality включая отделения и области действия transportation and forwarding services, согласно Приложению which includes providing prompt, safe and внедрило и применяет comprehensive cargo transportation solutions систему менеджмента качества. В результате аудита, номер заказа 707056868 to clients. Quality management falls within получено подтверждение, что требования the responsibility of the Head of the Process ISO 9001:2015 Management Division. выполнены. Данный сертификат действителен с 07.10.2019 г. по 24.05.2022 г. Регистрационный номер сертификата: 12 100 52096 TMS.

The integrated quality management system is to management processes and technologies, of the carriage about any deviations or possible based on the principles established by the Quality taking into account the analysis results of deviations during the process of executing the

Product Compliance Management Management Policy of PJSC TransContainer, Мюнхен, 08.10.2019 г. applications and requests from clients, partners order. In this way, the employees involved in the which are uniform across all stages of the Страница 1 из 3 and supervisory authorities. execution of the order are able to react more production chain. These uniform principles are quickly and contact the corresponding divisions underpinned by a set of core values that guide the One of the main criteria for executing the order of Russian Railways in a timely manner so that Company’s employees in their workplace pursuits. to a high level of quality is the safe delivery of they can take necessary action to eliminate such In particular, the Company focuses on creating PJSC TransContainer has implemented standards cargo to the recipient within the prescribed time deviations. In addition, the customer service new value (transportation services) for clients in for providing services to the Company’s divisions, frame. For the purpose of control and monitoring, manager always possesses information on their response to their needs and expectations with partners and external clients, as well as a system Oracle Transportation Management has developed transportation, which means that the customer regard to cargo transportation services. that makes it possible to quickly make changes a special functionality. The system contains can be notified as soon as possible in order to information about all containers/wagons on the prevent possible complaints. journey, and automatically informs the participants QMS AUDITS IN 2019

Audit Type Audited Target Purpose Outcome

Certification audit West Siberian, East Siberian, Evaluation of the Certificate of compliance of Northern and Krasnoyarsk efficiency of processes of the QMS with the requirements branches the order execution unit. of international standard ISO 9001:2015

PJSC TransContainer | Annual report 2019 56 57 SOCIAL +11% 63,778 Growth of labour Spent on measures to improve RESPONSIBILITY productivity in TEU per working conditions and safety person (+15% by 2018), RUB mln

PJSC TransContainer | Annual report 2019 58 59 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Human Resources

Personnel Headcount and Structure

As of 31 December 2019, the Company’s headcount HEADCOUNT DYNAMICS, SPECIALISTS BY GENDER, PEOPLE WORKERS BY GENDER, PEOPLE was down by 4.3% to 3,492 employees versus the PEOPLE previous year. 1,346 370 303 3,784 1,390 1,497 329 LABOUR PRODUCTIVITY 3,648 3,492 657 618 609 2017 2018 2019 606 Labour shipping 549 559 621 414 438 productivity, TEU/people 2017 2018 2019 2017 2018 2019 Labour productivity from 8,191 8,772 11,162 2017 2018 2019 the adjusted revenue, Men Women Men Women RUB ths./people

OCCUPATIONAL COMPOSITION In 2019, the average age of employees was STAFF BREAKDOWN BY AGE, In 2019, structural adjustments took place in the 41.1 years old (39.2 in 2018). The number of TOTAL HEADCOUNT, % branches of PJSC TransContainer at October and 15 12 working pensioners was 170 people, i.e. 16 people 1,952 Moscow Railways. 1,865 Workers less than in 2018. 535 Managers 407 The personnel structure remained unchanged 497 478 Specialists 271 against the previous year in terms of occupational 734 704 STAFF BREAKDOWN BY EDUCATIONAL BACKGROUND, 1,242 PEOPLE 1,145 361 composition. Employees 947 911 1,050

The personnel structure by gender also remains stable: 2017 2018 2019 1,436 1,588 2018 2019 1,281 there are 39% of men and 61% of women working in the Company. Higher 2,490 2,464 2,386 742 professional 642 529 Two higher educations 180 181 155 2017 2018 2019 TOP EXECUTIVES BY GENDER, MANAGERS BY GENDER, PEOPLE PEOPLE Academic degree 21 15 15 Secondary vocational 590 541 614 up to 30 51-55 education, initial 31-40 55+ vocational education 314 246 290 41-50 30 31 26 Secondary (complete) 704 643 491 general education, 87 90 75 367 basic general education 301 239 (incomplete secondary)

2017 2018 2019 2017 2018 2019

Men Women Men Women

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Staff Recruitment and Onboarding Training, Development and Personnel Assessment

h The current market situation requires a greater STAFF TURNOVER RATE, % Internal training activities are carried out based training of business coaches in various areas; attention to the quality of employees hired by the on the TransContainer Academy—a modern HR h development of coaching and personal Company. platform for adaptation, training and development competencies of employees. 5.9 of employees. The Company’s recruitment and retention policy By results of competitive selection, 12 internal 4.7 5 allows to attract employees who meet personal, The TransContainer Academy is guided by trainers were instructed, among which were heads business and value criteria of PJSC TransContainer, advanced, time-proved principles of employee and specialists of different structural divisions. as well as fully satisfy the professional development. The 70-20-10 model of learning requirements for performing their duties upon suggests three elements, together being the drivers In 2019, the team of internal trainers prepared adaptation. of development of both the Company and its staff: 10 practical courses in the Customer Focus and

2017 2018 2019 h 70% — I develop in the workplace; Quality Services, and Personal and Managerial The Company’s 12-year stability guarantees that Effectiveness areas, along with 4 workshops h 20% — I learn from others; only skilled employees are involved. In 2019, the HR dedicated to professional issues. specialists processed more than 13,000 applications h 10% — I learn by myself. to 66 jobs at the Company. Over 500 CVs expressing adaptation of an employee to a new position As part of the training plan, the internal trainers the desire to build a professional career with means the recruitment went as it is supposed to. In 2019, the Training Centre module’s functionality held over 30 practical courses and taught more PJSC TransContainer, which were sent to the HR It is the adaptation period when the Company was successfully implemented, which allows for the than 400 employees of the executive office and department directly, underpin that the Company assesses the correspondence of the level of following things: branches in 2019. has been retaining the status of an employer of professional knowledge of hired employees to the h organising the compilation of training needs; choice and leader in its field for years. The Index established requirements. For the purpose of advanced training, ongoing h planning, organising and coordinating the full- of Politeness in work with applicants exceeds 80%, learning and skill development of Company time internal training; indicating how considerate the Company is about In 2019, the indicator “Quality of personnel employees, more than 50 external events were applications and CVs. This increases applicants’ trust. recruitment and adaptation”, which determines h analysing the results of training and assessing arranged. 2,501 people underwent advanced the ratio of enrolled employees to employees who its efficiency. training and took part in information and advising In 2019, staff turnover made up 5.9%. successfully passed adaptation, reached 97% in activities. the reporting period. In the reporting period, the TransContainer Adaptation is one of the elements of the recruitment Academy’s library of e-courses was updated with In the reference year, the Leaders of Change process. A successful probation and trouble-free new developed in-house courses: project was carried out, aiming at: h Lean Production — 6S; h gaining knowledge in project management, leadership and strategy; h Time Management; h studying industry best practices in term of h Manager’s Efficiency; Youth Policy processes and business models; h Annual Assessment of Employee’s Performance; h strengthening the functional expertise of h Google G Suite Services. The Youth Policy is an integral part of the Company’s 5 people were trained in Transport Logistics on an participants and necessary skills; work with the talent pool. In 2019, the systematic intramural basis with their educational expenses h forming a new ready-for-challenges leader work continued to attain and maintain PJSC reimbursed by PJSC TransContainer. The most popular course in 2019 was Lean profile; TransContainer’s status of an employer of choice who Production - 6S, completed by 2,689 people. Every h personal transformation—shaping of the keeps the rising generation’s interest in rail container PJSC TransContainer has a mentoring programme quarter, the CEO’s Cup is awarded to The Best leadership position of participants. shipments. Traditionally, a number of activities in place for students graduating from universities Structural Division for the 6S System Application were carried out, including public meetings with without any work experience. In 2019, mentors amid the Company branches’ and executive office’s The training programme includes 200 academic students of specialised universities at the facilities, were appointed, as well as detailed internship departments. hours and 50 hours of project work between participation of PJSC TransContainer managers in programmes were prepared for 20 new young modules. The practical component consists of state examination boards of specialised universities, employees and then implemented. In 2019, a School of Internal Trainers was opened, work in a team to introduce strategic initiatives joint work with students during the internship, and whose key objectives are as follows: together with the Company’s top management. mentorship for young specialists. In 2019, the Company held Open Days for the h staff training for them to be competent to management and students of the Russian University provide training of any complexity for Company PJSC TransContainer welcomed 92 interns in 2019. of Transport (MIIT). employees;

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PERSONNEL TRAINING TOTAL NUMBER OF EMPLOYEE TRAINING HOURS, H RUB 49.5 mln AND DEVELOPMENT COSTS, RUB MLN total investment in employee training 2017 2018 2019 %, 2019 to 2018 in 2019 — 2.4 times more than in 2018 49.5 Management 37,284 30,514 37,953 102

Specialists 26,273 19,597 19,513 99

24.3 20.9 Workers 29,492 36,283 51,515 142 Men 53,184 55,835 79,012 142 The programme participants were employees Women 40,222 30,603 29,985 98 with high potential (42 experts and managers of various functional units), mentors and project 2017 2018 2019 Total 98,948 86,438 108,997 126 team leaders (7 functional managers), the Management Board members and directors of PJSC TransContainer’s functional divisions. AVERAGE ANNUAL NUMBER OF TRAINING HOURS PER EMPLOYEE, H Everyone who took part in the programme received Moreover, strategic sessions and training of top diplomas of professional retraining, certifying management were organised to create a team the right to conduct professional activities in vision of the Company’s strategy, as well as to 2017 2018 2019 %, 2019 to 2018 the area of control of changes in the Company. coordinate the areas of work and projects, which Management 75.2 53.88 57.43 107 Furthermore, 12 internal movements took place — can be elaborated within the framework of a the people were either promoted or switched the single project integrated programme. The three Specialists 16.7 41.96 51.93 124 area of competence: sessions resulted in the development of strategic Men 38.8 59.16 66.5 112 h 5 participants were transferred and initiatives and priorities of the Company along Women 18.6 48.56 57.16 118 relocated; with a 90–110-day action plan on strategic projects, also agreed by the participants. Total 28 53.87 61.88 115 h 3 participants switched the area of competence; Investments in employee training totalled RUB h 4 participants became internal trainers. 49.5 million — 2.4 times more compared to 2018.

As a pilot project, an annual assessment of In 2019, the employee training and development plan Employee Motivation employee individual performance was automated was fulfilled by 100%. The total number of employee and held, where 42 employees—participants of training hours was up by 126% versus 2018. the personnel pool development and preparation PJSC TransContainer builds an The award system provides for remuneration programme Leaders of Change—were assessed. employee remuneration system depending on the achievement of production and financial indicators by the Company and on focusing on a fair assessment of employees’ personal contribution. The bonus DISTRIBUTION OF BUDGET FUNDS FOR DIRECTIONAL TRAINING their work and contribution to the system has been developed and is being improved. achievement of strategic goals. Bonuses are paid depending on the achievement Training direction Budget share for Number of set KPIs. There is also a one-time payment for training of employees loyalty to the Company that depends on the length trained of employment. Staff remuneration terms and procedure are set Advanced and development training 90% 903 out in the Regulations on PJSC TransContainer’s PJSC TransContainer has been actively developing Staff Remuneration. Salaries are defined on the the additional (non-financial) motivation system Mandatory training 9% 1,592 basis of approved personnel charts and indexed for employees. There is an official awarding of the in accordance with the Collective Agreement: In best employees twice a year with the participation Obtaining the second higher education by employees and higher 1% 11 2019, all salaries were indexed by 4.9%. of the CEO and top management of the Company. education in specialised universities by students In 2019, 119 employees were awarded.

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Type of award Employees awarded, people The non-state pension payments are carried out in Social securities for retirees accordance with the Regulation on Non-State Pension Certificate of Appreciation and Commendation by Russian Railways 15 Provision for Company Employees. In order to improve the standard of living for retirees, Commendation by the Minister of Transport 2 the Collective Agreement of the Company provides for Honorary Railway Employee 3 The basic principles of the NPP corporate system: the following social securities: h ensuring dependence of the corporate pension size h reimbursement of the costs for expensive Honorary Worker of PJSC TransContainer 1 on the work results; treatment; Certificate of Appreciation and Commendation by PJSC TransContainer 40 h ensuring a unified approach to the assessment of h reimbursement of the costs for health resort Best in Profession: Acceptance/Delivery Agent 4 an employee’s right to a corporate pension, the treatment; calculation of its size and the payment procedure; Best Specialist 28 h reimbursement of domestic fuel costs; h involving the Company and the employee in the h reimbursement of the transportation costs; Best Manager 26 establishment of the corporate pension; h financial support in relation to the death of a TOTAL 119 h participating in the corporate NPP system on a retiree; voluntary basis. h financial support in emergency circumstances. The number of retirees receiving the corporate pension Social Programmes as of 31 December 2019 is 773 persons (48.5% of the The number of retirees as of 31 December 2019 RUB 49.3 mln total number of non-working pensioners). amounted to 1,594 people. were spent on voluntary health Social programmes are an important tool for insurance in 2019 The costs for social securities amounted to RUB attracting and retaining Company employees, as RUB 4.8 ths. 4.8 thousand per retiree. well as improving labour efficiency and productivity. amount of costs for social securities per one retiree in 2019 On the basis of the Collective Agreement and local regulations, a system of social securities and The voluntary health insurance costs amounted to RUB benefits is implemented on top of those established 49.3 million in 2019. by the labour legislation of the Russian Federation. Trade Union Organisation In 2019, the Company was awarded the Diploma of Health resort treatment High Level of Social Partnership for its significant contribution to the development of social Company Employees and their family members 97% of the Company’s employees are members the results of the annual progress review of the partnership, unconditional fulfilment of obligations are provided with tickets for treatment and of the primary trade union organisation under Collective Agreement and the Industry Agreement on of the Industry Agreement on Railway Transport rehabilitation. Over 15% of employees took that the Russian Trade Union of Railway Workers and Railway Transport Organisations, it was noted that Organisations, absence of collective labour disputes benefit in 2019. Transport Builders (ROSPROFZHEL). Relations with labour disputes on the obligations included in the and effective systemic interaction with social the employer are based on the principle of social Agreement had not been recorded. partners. partnership. Reimbursement of expenses In accordance with the Collective Agreement, in order Throughout the year, the following programmes The tasks of the Trade Union Organisation include: to develop and support mass physical culture and were developed. The Company provides reimbursement of the h representation of employees’ interests at the sport, as well as to improve the promotion of healthy costs of railway transportation to and from conclusion of the Collective Agreement and lifestyles and reduce morbidity, corporate health the workplace, to and from vacation. Costs for control of its execution; events are arranged: sports contests dedicated to the Voluntary health insurance transportation reimbursement amounted to h interaction with the employer on issues of Company Day, football and volleyball tournaments. RUB 6.6 thousand per employee. improving labour discipline, employees’ working Within the framework of promotion of patriotism, a All Company employees participate in the Voluntary and recreation schedule, labour safety and health, tournament devoted to the anniversary of the Victory Health Insurance Programme which includes outpatient growth of real pay, implementation of social in the Great Patriotic War is held. care, hospital service, rehabilitation treatment, Non-state pension provision securities for employees, their family members, preventive vaccination, dental care, therapeutic programme and retirees. Trade union organisations of the branches and the procedures, round-the-clock trauma care, diagnostic management body are engaged in arranging mass tests, home care, ambulance and emergency medical Based on the agreement with the Non-State The Collective Agreement of PJSC TransContainer cultural, sports, excursion and touring events, events care. Pension Fund Blagosostoyanie, the Company uses for 2017–2019 was extended until 31 December for children, provide tickets to health and recreation a corporate system of non-state pension provision 2021 on 22 November 2019. In 2019, according to resorts for trade union members and their families. In (hereinafter, “NPP”).

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2019, PJSC TransContainer employees took an active dedicated to the Children’s Day and the Knowledge part in the touring programmes by ROSPROFZHEL to Day, giving gifts to first-graders. At the expense of Environmental St. Petersburg, Armenia, Uzbekistan, Azerbaijan, Altai the trade organisation budget, Company employees and the Golden Ring of Russia. have the opportunity to receive reimbursements for sports activities or training (occupation of halls, Management It has become a tradition to arrange Christmas playgrounds, pool lanes), social support for marriage events for children of the employees, events registration and childbirth.

Environmental Protection Health and Safety

The Company’s strategic goal in the field of PJSC TransContainer intends to organise its activities EXPENDITURES FOR HEALTH AND SAFETY ACTIVITIES, RUB MLN environmental protection is to ensure the in the field of labour health and safety in such a way environmental safety of the Company’s activities 17.9 as to maintain zero level of severe injuries. In 2019, and minimise the negative impact on the 16.9 16.9 the Company, as in the previous three years, had no 27.1 environment. serious group fatalities. Of the recorded 4 accidents, 17.9 18.1 one was recognised as severe. 19.3 20.4 18.8 Our key environmental protection principles include: RUB 63.8 million were spent on the implementation 2017 2018 2019 h ensuring compliance of the Company’s activities of a set of measures to improve health and safety in with the environmental legislation of the Russian 2019. Personal Improvement Reduction Federation, international regulations in the field protective of working of injury equipment conditions rates of environmental protection and rational use of In accordance with the Collective Agreement, natural resources; TransContainer’s annual health and safety expenses h strict observance of standards and rules ensuring account for at least 0.3% of product costs. In the safety of the personnel and population, as well reporting year, RUB 45 million were allocated for commissions for the acceptance of workwear which as protection of the environment, by every labour health and safety measures (excluding costs monitor the quality of the supplied products and the employee; for personal protection equipment, with an annual timeliness of their delivery. h constantly improving and enhancing our plan of RUB 38.7 million), which is 0.41% of the cost environmental performance and environmental on average. The funds were used to purchase hand- To prevent workplace injuries, TransContainer management system; held radio units, sets of tools with insulated handles organises annual training for managers and skilled h prioritising activities set to reduce the impact for electric works, fire extinguishers, prohibition, employees. In 2019, 239 people were trained in of hazardous operations on people and the information and mandatory safety signs and fireproof labour safety, 57 people were trained in industrial environment; doors; to measure the insulation resistance of electric safety, 68 people — on electrical safety. The equipment, and carry out a number of process control Company spent RUB 3 million for these purposes. h staying alert and taking immediate action to initiatives. prevent and manage any potential environmental accidents, incidents, occurrences, disasters or In 2019, a special assessment of working conditions other emergencies; RUB 27.1 million, almost 1.5 times more than was carried out at 306 workplaces in the Company in 2018, was spent on the measures to improve branches as a result of which working conditions h taking a consistent and holistic approach to health and safety, and reduce morbidity. For better were improved at 80 workplaces. In particular, ensuring environmental safety. microclimatic conditions, the Company installed modern tools, machines and other production In the reporting period, the Company certified heaters, air conditioning systems, ionisers, and equipment were purchased. Also, we installed new air In 2019, a number of regulatory documents its Environmental Management System for window blinds. TransContainer also purchased labour- filters and air conditioning systems to improve the were developed, including projects of maximum the compliance with GOST R ISO 14001-2016 saving devices to reduce workload and physical microclimate in our premises. permissible emissions (MPE) to the atmosphere (ISO 14001:2015), applied in the area of effort. As part of its efforts to enhance employee for a period of five years, projects of maximum transportation and logistics services for cargo welfare, the Company furnished individual lockers, Pursuant to the Collective Agreement and the special permissible discharges (MPD) for a period of three delivery and forwarding. The compliance certificate electrical appliances, and bottled water. The Company assessment results, personnel exposed to harmful years, projects of waste generation standards and registration number is OLIMP.RU.0001.C000090 pays great attention to providing employees of and/or hazardous environment factors receive waste disposal limits. dated 26 July 2019. structural units with modern and high-quality compensations (additions to the tariff grid and personal protection equipment; there are specialised vacation time).

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Total expenditures for the environmental activities BREAKDOWN OF ENVIRONMENTAL EXPENDITURES, % Solid Waste carried out at the Company’s container terminals amounted to RUB 6.001 million in 2019. 17 Solid waste is collected and stored in sealed generated, accumulated and transported industrial containers in compliance with Sanitary Rules and and consumer waste. For the timely removal and Social securities for retirees Regulations (SanPiN) 2.1.7.1322-03 on Hygienic disposal of hazardous waste, contracts were Prevention of Requirements for the Storage and Disposal of concluded with specialised organisations, certified RUB 6.001 mln exposure 15 Industrial and Consumer Waste; areas of temporary to remove and dispose of mercury lamps, household amount of expenditures made on all External services for waste storage were prepared for use. Solid waste, scrap metal, and oil rags. the environmental environmental activities at the container waste control is ensured by keeping record of terminals of PJSC TransContainer in 2019 management system

68 Energy Efficiency

KEY ENVIRONMENTAL ACTIVITIES IN 2019 In 2019, general analysis of the sustainable energy ENERGY CONSUMPTION IN 2019 use was performed by the Company. Measurements Activity Target area Expenditures, of lighting of container yards and insulation Type of energy Physical Volume (container terminal) RUB ths. resistance of electrical installations, equipment, resource volume in monetary and buildings were made across the terminals. The terms Gorky Branch (RUB ths.) inconsistencies identified were addressed. Cleaning up and repair of the storm drainage Kostarikha 400.00 Electricity, total 17,231.8 98,220.98 In order to save energy sources and eliminate the (ths. kWh) West Siberian Branch need to use electric boilers in the heating system, Diesel fuel (t) 3,456.5 157,682.34 Examination of the gas analyser Omsk-Vostochny 1.5 a modular gas boiler house was purchased for Petrol (t) 194.0 989.3 the Ural Branch of AKP Magnitogorsk. Savings on Repair (painting) of containers for temporary waste storage Kleshchikha, Barnaul, no expenditures Omsk-Vostochny heating of real estate at this terminal amounted to Natural gas 118.4 532.8 3 8%. (ths. m ) Privolzhskaya Branch Heat (Gcal) 28,761.0 16,537.58 Purchase of containers for temporary waste storage Trofimovsky-2 4.00

Preparation of a site for temporary storage of scrap metal Trofimovsky-2 10.00

Krasnoyarsk Branch BREAKDOWN OF ENERGY EXPENDITURES BREAKDOWN OF ENERGY CONSUMPTION IN MONETARY TERMS, % (IN TONNES OF REFERENCE FUEL), % Preparation of sites for temporary storage of scrap metal Bazaikha 5.00

Cleaning up of the storm drainage Bazaikha 5.00 0 Maintenance of waste treatment facilities Bazaikha 12.00 6 0 36 Replacement of filters of the administration building’s supply and extract Bazaikha 12.00 27 38 ventilation

Electricity Electricity Diesel fuel Diesel fuel Petrol 1 Petrol Natural gas 2 Natural gas Heat Heat 58 32

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Procurement

h no restrictions on the participation in procurement Over the reporting year, the Company carried out in the form of non-measurable requirements for procurement activities in line with Federal Law participants; No. 223-FZ On Procurement of Goods, Works and Services by Certain Types of Legal Entities dated h сompliance with Russian legislation, including the 18 July 2011. After the transfer of rights for the antitrust law. majority stake in PJSC TransContainer to OOO “Delo-Center” in December 2019, the Company’s To generate market-based prices for products procurement activities are not subject to regulation of purchased by customers and provide a reasonable the said law anymore. reduction of customer costs, the Company established a Categorical Procurement Service. The service is The Regulations on the Procedure for Procurement of responsible for analysis, needed to reveal the potential Goods, Works and Services for PJSC TransContainer’s for improvement in various procurement categories Needs, prepared in accordance with this law and of products, analysis of cost data and historical price approved by the Company’s Board, sets main trends by category of procurement, determination of objectives and principles of procurement activities factors that affect pricing, market reviews, etc. and continues to work with new procurements. ENERGY SAVINGS FOR 2019 IN PHYSICAL TERMS Procurement announced before December 2019 will In 2019, the Company published information about be completed following the regulations in force at the 432 procurements (lots) worth RUB 44.9 billion Type of energy resource 2017 2018 2019 time of their announcement. (hereinafter, net of VAT). Electricity, total (ths. kWh) 107.3 114.6 56.75 Main procurement objectives include: Based on the results of procurement procedures,2 Diesel fuel (t) 55.66 34.2 218.3 h creation of conditions for timely and complete contracts totalling over RUB 41 billion, which is 43% Petrol (t) 1.578 1.2 17.52 satisfaction of the Company’s needs for products more year-on-year, were signed. Contracts for the with the required indicators of price, quality and supply of rolling stock and containers accounted for 3 Natural gas (ths. m ) 20.08 5 12.4 reliability; the most part (more than RUB 35 billion in total). h effective use of funds allocated for the purchase of such products. The Company systematically follows the principle of competitive procurement: In 2019, the share of non- ENERGY SAVINGS FOR 2019 IN MONETARY TERMS, RUB THS. The key objectives are to establish market-based competitive procurement (form a single supplier) product prices, to provide a reasonable reduction of in monetary terms accounted for 3.5% of the total Type of energy resource 2017 2018 2019 customer costs, to increase opportunities and promote number of announced purchases. Electricity, total 418.47 630.3 3,134.23 participation in procurement, as well as to ensure fair competition and procurement transparency. Diesel fuel 1,830.100 1,504.80 4,008.86 NUMBER OF COMPLETED PROCUREMENTS Petrol 63.91 57.6 25.9 Procurement principles: Natural gas 109.22 20.5 77 h availability of procurement information; 591 524 513 496 h equality and fairness, with no discrimination or 432 unreasonable restrictions on competition among participants; ENERGY SAVINGS FOR 2019 IN TONNES OF REFERENCE FUEL h cost-effective expenditure of monetary funds for the procurement of goods, work and services1, and Type of energy resource 2017 2018 2019 for cost-cutting arrangements in the Company; Electricity, total 13.16 38.39 144.69 2015 2016 2017 2018 2019 Diesel fuel 64.7 49.6 316.53

Petrol 2 1.8 26.11 1 If necessary, the cost of their life cycle is taken into account. 2 Natural gas 23.4 5.7 15.79 Including procurements announced in prior periods.

PJSC TransContainer | Annual report 2019 72 73 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Charity

According to the results of procurement procedures, the The total volume of contract execution in 2019, PJSC TransContainer’s charity activities are aimed total savings amounted to RUB 215 million in 2019. The considered for the purpose of determining the volume at providing targeted assistance to vulnerable RUB 55 mln fall in savings against 2018 was due to the Categorical of purchases from small and medium-sized enterprises social groups and improving the quality of life in donated to charity in 2019 Procurement Service’s work, as a result of which the (SMEs), stood at RUB 3.6 billion. Target values of general. guaranteed maximum price (GMP) of procurement was procurement from SMEs, established by Russian set at a level close to the current market value of procured legislation, were achieved. Key elements of the Company’s charitable goods, works and services at the very beginning. activities are as follows: h focus on long-term projects; Programme), the Company provides sponsorship to h targeted approach; COST OF CONTRACTS WITH SMES, RUB MLN children’s social and healthcare institutions, sports h transparency; RUB mln schools and clubs, and supports physically disabled 215 2,744.14 h control over the use of funds allocated for the children with serious health problems. Since the total savings according provision of support; programme launch in 2015, RUB 200 million have to the results of procurement procedures in 2019 h partnership with governmental authorities, been allocated for assistance in the following fields: business representatives and charitable non- h education, science, culture, and art; profit organisations. h patriotic, spiritual and moral guidance of children TOTAL SAVINGS BASED ON THE RESULTS OF PROCUREMENT PROCEDURES, RUB MLN1 and young people; The Company’s priority areas of charity work include: 656.92 (18%) 550.37 h prevention and health-care of children; 547.44 (15%) h helping children; 561 h promotion of healthy lifestyles, physical education h sports and healthy lifestyle promotion; and mass sports among children; h preservation of Russia’s cultural heritage; Value of SME Value of SME contracts h social rehabilitation of orphans and disabled 343 contracts pertaining to SME-only 324 h aid to victims of emergencies; children, as well as children left without parental h support to Company employees and their care or in difficult life situations. 215 Target values of procurement from SMEs, established by 152 families. Federal Law No. 223-FZ On Procurement of Goods, Works and In 2019, RUB 55 million was donated to charity under Services by Certain Types of Legal Entities, and Resolution of the Russian Government No. 1352 On Peculiarities As part of the Long-Term Targeted Charity the Programme. of Participation of Small and Medium Enterprises in the Programme TransContainer to Children (the Procurement of Goods, Works and Services by Certain Types 2015 2016 2017 2018 2019 of Legal Entities dated 11 December 2014.

CHARITY EXPENSES IN 2019

Item Activity Amount, No. RUB mln 1 Support for treatment and rehabilitation of children (targeted payment of medical 29 treatment in Russian and foreign healthcare institutions and rehabilitation facilities)

2 Support for purchase of special-purpose medical equipment for sustaining children’s 10 life at home (equipment for children with ICP, diabetes, serious genetic diseases)

3 Material and welfare support of children’s healthcare and social institutions (furniture 16 and equipment for children’s social and healthcare facilities under the patronage), as well as support to the families of TransContainer’s employees having disabled children or families with many children

4 Charitable assistance to Lokomotiv Hockey Club (Yaroslavl) for support of two youth sports 45.7 schools 1 Framework contracts where saving is achieved by the choice of optimal unit price rates (supply of fuel, rendering of transportation and forwarding services, provision of office supplies, consumables for office machines and equipment, etc.) have not been taken into account.

PJSC TransContainer | Annual report 2019 74 75 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Item Activity Amount, No. RUB mln

5 Assistance to the Charitable Foundation of St. Mary Magdalene 10 CHARITY SCHEME 6 Assistance to the State Budgetary Institution of Culture of Moscow The Stanislavski and 10 Nemirovich-Danchenko Moscow Academic Music Theatre

7 Assistance to the Charitable Foundation of St. Seraphim of Sarov 7

8 Assistance to the religious organisation Residence of the Patriarch of Moscow and All Russia 3 at the Church of the Three Hierarchs in Ramenki in Moscow of the Russian Orthodox Church DEDICATED CHARITY THE BOARD OF DIRECTORS (Moscow Patriarchate) COMMISSION OF PJSC TRANSCONTAINER 9 Assistance to the local religious organisation Stauropegic Monastery of St. Sergius of 10 Radonezh’s Church in Mytishchi in the Moscow Region of the Moscow Eparchy of the Russian Orthodox Church Approval 10 Assistance to the local religious organisation Saint Spyridon Church’s Parish in Fili- 5 Davydkovo in Moscow of the Moscow Eparchy of the Russian Orthodox Church (Moscow Patriarchate) Checking for 11 Support to Company employees and their families for medical treatment and social 7.7 compliance with Annual budget under the rehabilitation the Company's charity programme 12 Other 0.6 policy

TOTAL 154.0

BREAKDOWN OF EXPENDITURES FOR CHARITABLE PURPOSES, %

5 RECIPIENT

12 19 Payment for medical treatment Purchase of medical equipment Material and welfare support 6 11 Assistance to youth schools Assistance to cultural institutions RECIPIENT

10 Assistance to charitable foundations 7 Assistance to religious organisations Support to Company employees and their families Assistance 30 RECIPIENT Requests for aid

Signing of agreements RECIPIENT

PJSC TransContainer | Annual report 2019 76 77 CORPORATE GOVERNANCE

+86.8% 89% Growth of quotations Corporate on the Moscow Exchange governance quality

PJSC TransContainer | Annual report 2019 78 79 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

h the official website containing up-to-date Russian Corporate Governance Code. The Company information about the Company is regularly is characterised by rather low risks of loss for Corporate Governance 1 updated and expanded; owners due to the quality of corporate governance . h the Company’s annual report for 2018 was System prepared in strict compliance with legislative Internal evaluation of corporate requirements, it also reveals a substantial amount governance quality in 2019 of additional information in accordance with the recommendations of the Corporate Governance The Company’s internal audit service regularly Code and Global Reporting Initiative (GRI) for conducts independent evaluation of corporate h leadership, efficiency and responsibility of the Board The corporate governance system of the Company sustainable development; governance quality in accordance with the Corporate of Directors; is based on the recommendations of the Corporate h the Company implements numerous social Governance Quality Self-Assessment Method in Governance Code approved by the Board of h monitoring and accountability of the Board of programs for its workers and their families, and Companies with State Participation, developed by Directors of the Bank of Russia on 21 March Directors and executive bodies; takes an active part in charity work. the Federal Agency for State Property Management. 2014, as well as on the best international practice h an effective, transparent and fair system of in corporate governance, including corporate remuneration; However, due to changes in the structure of the In 2019, the corporate governance quality was governance principles of the Organisation for Company’s shareholders’ capital and a significant assessed as 89% (in 2018 — 88%), which indicates h transparency and responsible corporate disclosure Economic Cooperation and Development (OECD), policies; reduction in the public float, the shares of PJSC a high level of compliance with the principles and and is based on the following principles: TransContainer were transferred from the first recommendations of the Corporate Governance h social responsibility and interaction with h equal and fair treatment of the shareholders; level Quotation List to the third level list. In this Code. stakeholders. connection, the Company has been awarded a National Corporate Governance Rating (NCGR) of The results of the evaluation of the corporate 7+, “Developed Practice of Corporate Governance”. governance quality are used by the Company in In accordance with the NCGR scale, this means determining the main steps for further improvement Corporate Governance Quality compliance with the requirements of Russian of activities in this direction. corporate governance legislation and adherence to a significant number of recommendations of the External evaluation of corporate h the Company has a good dividend history; governance quality h most of the important issues recommended by the Corporate Governance Code for consideration In March 2019, the Russian Institute of Directors in face-to-face meetings are considered by the Components Number Weight Score Maximum Compliance conducted an evaluation of the corporate governance Company’s Board of Directors in face-to-face of questions of the achieved score level (%) component practices of PJSC TransContainer. The following meetings, and the corresponding requirement is (%) key strong points are observed in the corporate stipulated for in the Charter of the Company; governance practice of the Company: Shareholder rights 22 14 73 79 92 h the Company has procedures for regulating h storage and maintenance of the shareholder conflicts of interest of members of the Board of Board of Directors 56 37 168.5 202 83 register is performed by an independent registrar, Directors and executive management; which has a high reputation and uses reliable Executive leadership 5 7 36 38 95 technologies; h the Board of Directors of PJSC TransContainer performs annual self-evaluation of its work, h the powers of the Company’s Board of Directors and at least once every three years hires an Transparency and disclosure 15 25 125 135 93 have been expanded in respect of decisions on independent expert organisation to conduct the Risk management, internal control 16 11 62 63 98 significant transactions; evaluation; and internal audit h The Company complies with the numerous h PJSC TransContainer has elaborate systems of recommendations of the Russian Code of Corporate social responsibility, 6 6 23 31 74 internal control, audit and risk management, business ethics Corporate Governance concerning the provision of and the Board of Directors evaluates their shareholder rights in the preparation and holding effectiveness on a regular basis; Overall assessment 120 100 487.5 548 89 of the General Meeting of Shareholders; h the Company has a developed function of h PJSC TransContainer approved a Policy of Corporate Secretary; interaction with the external auditor, which provides for competitive selection of an external h the Company provides all interested persons with auditor at least once every five years, as well as easily available free access to the Company’s approval by the Audit Committee of the provision financial and accounting statements prepared in 1 For more information on the Company’s Corporate Governance Ranking, please visit http://rid.ru/news/press-reliz-podtverzhdenie-nrku-pao-transkontejner. of non-audit services by the external auditor; accordance with the RAS and IFRS;

PJSC TransContainer | Annual report 2019 80 81 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Corporate governance In 2019, the following measures were implemented to General Meeting of Shareholders enhancement improve the corporate governance system: h the Extraordinary General Meeting of Shareholders The Company traditionally continues its systematic approved a new version of the Charter of the The General Meeting of Shareholders is the supreme h possibility to familiarise with the list of persons work to improve corporate governance standards in Company (Minutes No. 38 of 18 January 2019); management body of PJSC TransContainer. Equal entitled to participate in the General Meeting of Shareholders; the field of enhancing the efficiency of the Board of h the Company has passed certification of and fair treatment of shareholders is one of the Directors and its committees, ensuring the rights and compliance with the environmental management basic principles of corporate governance of the h the right to nominate candidates to the legitimate interests of all shareholders in exercising system in relation to its activities in the field of Company, guaranteeing all shareholders equal, fair governance bodies of the Company and make their right to participate in the management of the transportation and logistics services for the delivery and favorable conditions for the implementation of proposals to the agenda of the General Meeting of Company, sustainable development, corporate social and forwarding of goods based on international their rights to manage the Company and to participate Shareholders; responsibility and business ethics. standard ISO 14001:2015 (see section 4.2 for in the Company’s profits through the distribution of h the right to call for the General Meeting of details). dividends. Shareholders;

The scope of competencies, the procedure for h the opportunity to exercise the right to vote on the agenda of the General Meeting of Shareholders in convening, preparing and holding the General Meeting the way that is the simplest and most convenient of Shareholders, as well as the rights of shareholders for the shareholder; STRUCTURE OF GOVERNANCE AND CONTROL BODIES are regulated by the Russian legislation and by the following internal regulatory documents of the h equal opportunities for all persons present at the Company: General Meeting of Shareholders to express their opinion and ask questions to the members of the h the Charter; GENERAL MEETING Company’s management and control bodies; OF SHAREHOLDERS h the Corporate Governance Code, h involvement of the Registrar of the Company in the h the Regulations on the Procedure for Preparation performance of the counting commission functions and Holding of the General Meeting of Shareholders; in order to ensure the reliability of the voting AUDIT AUDITOR results; COMMISSION h the Code of Business Ethics. h to announce the results of the vote before the conclusion of the General Meeting of Shareholders. BOARD OF DIRECTORS Shareholder rights Equal and fair terms of participation in the Company’s The Company strives to engage in a meaningful profits through dividends are also provided for all CORPORATE COMMITTEES dialogue with all its shareholders, including minor shareholders, including: SECRETARY ones, and refrains from preferential satisfaction of the h transparent and understandable mechanism for interests of any shareholder or group of shareholders determining the size of dividends and their payment; to the detriment of the interests of remaining Audit h payment of dividends in cash only; Committee shareholders. This approach helps the Company to h excluding the possibility for shareholders to receive GENERAL INTERNAL earn the trust of the investment community. MANAGER/ AUDIT profit (income) at the expense of the Company, Strategy except dividends and liquidation value. PRESIDENT SERVICE Committee All shareholders are given equal and favourable conditions for the exercise of their rights in managing GOVERNANCE Nominations the Company, including: In addition, the following equal conditions have and Remuneration h the right to participate in the General Meeting of been created for all shareholders, including minority Committee Shareholders; and foreign shareholders, which are treated by the Company as equal: h timely information about the date, place and time of the General Meeting of Shareholders, as well h fair treatment of each shareholder by the as the documents that are to be presented to management bodies and supervisors of the register for participation in the General Meeting of Company; Management Committees Officials and divisions Not a body Shareholders; and control of the under the functional of the h the inadmissibility of abuse of power by major bodies of the Company's authority of the Company h unhindered access to the premises in which the shareholders against minority shareholders; Company Board of Company's Board General Meeting of Shareholders is held; h providing reliable and effective ways to account for Directors of Directors h unimpeded and timely retrieval of information and the shareholders’ share rights; materials relating to the agenda of the General h the possibility of free and unencumbered divestment Meeting of Shareholders; of shares.

PJSC TransContainer | Annual report 2019 82 83 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

In order to ensure the rights of shareholders to Holding of General Meetings for or against the proposed draft resolution or abstain Since 2010, the Company’s registrar, Registrar Society receive profit in the form of dividends, the Company of Shareholders from voting. The voting results are announced before STATUS, Joint-Stock Company (STATUS), has been approved the Regulation on the Dividend Policy the end of the meeting and disclosed as required by acting as the counting board during General Meeting of PJSC TransContainer, which defines the basic Shareholders who own a material quantity of shares the Russian laws. of Shareholders. principles of the payment of dividends, and the (at least 2% of the share capital) are entitled to decision making procedure in respect of dividends submit proposals to the agenda of the General payment, the procedure for calculating, accruing Shareholders Meetings, and also to nominate and paying dividends. The decision to pay dividends candidates to the management and control bodies of General Meetings of Shareholders in 2019 allows shareholders to obtain exhaustive information the Company. Proposals concerning the agenda of the regarding the amount of dividends on shares, and Annual General Shareholders Meeting, including any Three General Meetings of Shareholders were held in 2019.1 the order and timing of dividend payments. annexes thereto, shall be accepted in writing within 60 days after the end of the calendar year. ISSUES CONSIDERED AT GENERAL MEETINGS OF SHAREHOLDERS IN 2019 Informing shareholders on the At the Annual General Meeting, shareholders have General Meeting of Shareholders the opportunity to personally meet the members of Meeting format Date of the Issues considered Quorum the Company’s management and control bodies and meeting An important guarantee of the shareholders’ ask questions of interest. The annual meeting held on Extraordinary General 18 January 2019 1. Early termination of powers of the members of 99.572307% right to participate in the management of PJSC 21 May 2019 was attended by the Chairman of the Meeting of Shareholders in the Board of Directors of the Company. TransContainer is the right of access to documents Board of Directors, the CEO, the Deputy CEO/the CFO, the form of joint presence 2. Election of the members of the Board of which the Company is obliged to provide in representatives of the External Auditor, the Head of with voting ballots Directors of the Company. distributed in advance accordance with the Regulations on the Information the Internal Audit Service and the Chief Accountant of 3. Approval of the new edition of the Charter of Policy of the Company. the Company, and the Head of Business Cooperation PJSC TransContainer. and International Relations Department. Annual General Meeting 21 May 2019 1. Approval of the Company’s annual report for 99.5729% The Company publicly reveals: of Shareholders 2018. h reports on the holding of the General Meeting TransContainer is among the first businesses in in the form of joint 2. Approval of the Company’s annual accounting of Shareholders and materials on the agenda, Russia to have adopted telecommunications solutions presence with voting (financial) statements for 2018. ballots distributed in including the publication of ballot papers;1 to provide remote access for shareholders wishing 3. Distribution of the Company’s profit and loss advance according to the results of the 2018 report. h recommendations of the Company’s Board of to attend general meetings (streamed live on its Directors on the agenda of the General Meeting website) and give an opportunity to ask questions in 4. Payment (declaration) of dividends according to the results of the 2018 report. of Shareholders in the form of press releases, real time. material facts, and statements from the minutes 5. Payment of remuneration and compensation to members of the Company’s Board of Directors. of the Board of Directors meetings; In the run-up to the general meeting of shareholders, the Company creates a forum for shareholders on 6. Payment of remuneration and compensation to h the date on which persons entitled to participate members of the Company’s Audit Commission. its official website, which, among other things, gives in the General Meeting of Shareholders are 7. Approval of the Company’s auditor for 2019. 2 an opportunity to ask the Company’s management determined; 8. Participation of PJSC TransContainer in non- questions about the general meeting of shareholders. h minutes of the General Meeting of Shareholders profit organisations. On top of that, the Company provides a dedicated and minutes of the Counting Commission on the 9. Adoption of a new edition of the Regulations on hotline to answer questions on preparation and Company’s corporate website. the Board of Directors of PJSC TransContainer. holding of the General Meeting of Shareholders. The 10. Election of members of the Company’s Audit If necessary, shareholders may exercise the right above communication channels become available at Commission. to obtain additional information and materials least 30 days prior to the date of the meeting. 11. Election of members of the Board of Directors. by sending a written request to the Company’s corporate secretary. The procedure for granting At the General Meeting, shareholders are invited to Extraordinary General 23 September 1. Payment of dividends according to the results of 99.5719% Meeting of Shareholders 2019 the first half of 2019. access and the contact details of the responsible vote on proposed draft resolutions for each item of in the form of absentee person of the Company are posted on the corporate the agenda. The voting ballots enable shareholders to voting with voting ballots website. express their opinions on the agenda items and vote distributed

1 At least 30 days before the date of the General Meeting of Shareholders. 1 All materials relating to the General Meeting of Shareholders are available on the Company’s website at https://trcont.com/en/investor-relations/ 2 At least seven days before that date, in accordance with the recommendations of the Corporate Governance Code.

PJSC TransContainer | Annual report 2019 84 85 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board of Directors

The Board of Directors is an efficient and professionally run governance body In this Report, the information on the members of the Board of Directors capable of making decisions that benefit the Company and its shareholders. and its committees is valid as of 31 December 2019. The Board of Directors ensures the long-term sustainable development of the Company by performing strategic management: defining the vision, mission and strategy of the Company, and setting strategic objectives and key performance indicators.

The Board of Directors monitors the activities 6) Aleksey Taycher; of executive bodies of the Company, defines First elected to the Company’s Board of Directors 7) Sergey Tugarinov; principles and approaches to the organisation of in 2017. the risk management system and internal control 8) Viktor Shendrik; system, and provides improvement of the corporate 9) Lea Verni; Born in 1969. governance system of the Company.1 10) Maksim Gavrilenko; Education: In 1992 he graduated from the the Kosygin Moscow 11) Evgeny Zaltsman. Textile Institute with a degree in thermal power engineering. In 2008 Members of the Board of Directors he graduated from Moscow State University of Economics, Statistics The Board of Directors of the Company was elected at and Informatics with a Master of Business Administration (MBA). The Board of Directors is comprised of 11 members. the Annual General Meeting of Shareholders of 21 May Members of the Board of Directors are elected 2019 as follows: Professional experience: at the General Meeting of Shareholders for the 1) Andrey Starkov; period until the next Annual General Meeting 2017 – present — Deputy СEO, Russian Railways; of Shareholders. The Chairman and the Deputy 2) Sergey Ludin; Andrey Chair are elected by the members of the Board 3) David Davidovich; STARKOV 2016–2017 — Vice President, Russian Railways; of Directors in accordance with Clause 17.1 of 4) Aleksey Belsky; Chairman of the Board TransContainer’s Сharter. of Directors 2016 — Senior Advisor to the President, Russian Railways; 5) Vladimir Gaponko; Chairman of the Strategy The Board of Directors of the Company was 2011–2015 — Corporate Secretary, Russian Railways. 6) Aleksey Taycher;2 Committee elected at the Extraordinary General Meeting of Non-Executive Director Shareholders dated 18 January 2019 as follows: 7) Aleksandr Hatyanov; Chairman of the Board of Directors of JSC UTLC ERA, JSC Federal 1 1) Andrey Starkov; 8) Viktor Shendrik; Freight Company , JSC Russian Railways Logistics, member of the Board of Directors of Gefco S. A., JSC Investment Company RZD-Invest, 2) Sergey Ludin; 9) Lea Verni; and JSC Institute of Transport Economics and Development (IERT). 3) David Davidovich; 10) Maksim Gavrilenko; Citizenship: Russian Federation. 4) Aleksey Belsky; 11) Evgeny Zaltsman. 5) Vladimir Gaponko; Does not hold any shares or other securities of the Company.

1 The competencies of the Board of Directors are defined in the Company’s Charter. All materials relating to the Charter are available on the Company’s website: https://trcont.com/en/investor-relations/charter-and-bylaws/charter. 2 Mr Taycher is a former member of the Board of Directors on the basis of written notification to PJSC TransContainer on the refusal of the powers of a member of the Board of Directors of PJSC TransContainer, dated 11 July 2019 (incoming No. 3722). 1 Until 2019.

PJSC TransContainer | Annual report 2019 86 87 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board of Directors

First elected to the Company’s Board of Directors First elected to the Company’s Board of Directors in 2018. in 2018.

Born in 1979. Born in 1981.

Education: In 2001 he graduated from the Moscow State University Education: In 2003 he graduated from Lobachevsky State of Railway Engineering with a degree in Finance and Credit. PhD in University of Nizhny Novgorod, majoring in economics and enterprise Economics. management (Mechanical Engineering); in 2006 he graduated from State University Higher School of Economics with a Master Professional experience: of Economics; in 2011 he graduated from Moscow School of Management SKOLKOVO with an Executive Master of Business 2020 – present — Director of Russian Railways for operational Administration. Expert of the SKOLKOVO Independent Directors’ Club. efficiency, Head of the economics department, Russian Railways; Vladimir Sergey Professional experience: GAPONKO 2017–2020 — Head, Economics Department, Russian Railways; LUDIN 2017–2018 — CEO, LLC Magic World; Non-Executive Director Deputy Chairman 2015–2017 — Head, Department of Management Accounting and of the Board of Directors Chairman of the Nominations Reporting, Russian Railways; 2017 – present — Managing Director, LLC CIS Investment Advisors; and Remuneration Committee Senior Independent Director Member of the Audit Committee 2010–2015 — Head, Management Accounting and Reporting Chairman of the 2014–2016 — Director of Investments, LLC CIS Investment Advisors; Administration, Russian Railways. Audit Committee Deputy Chairman 2013–2016 — Senior Vice-President, LLC CIS Investment Advisors. Member of the Board of Directors of JSC Federal Passenger Company, of the Strategy Committee JSC Federal Freight Company, JSC Institute of Transport Economics Member of the Nominations Chairman of the Board of Directors of LLC Kanchalano-Amguemskaya and Development (IERT), CJSC South Caucasus Railway. and Remuneration Committee Area, LLC Mine Valunistiy, JSC EVRAZ Nakhodka Sea Trade Port, member of the Board of Directors of LLC Regional Mining Company1 Citizenship: Russian Federation. Citizenship: Russian Federation. Does not hold any shares or other securities of the Company. Does not hold any shares or other securities of the Company.

1 Until 2019.

PJSC TransContainer | Annual report 2019 88 89 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board of Directors

First elected to the Company’s Board of Directors First elected to the Company’s Board of Directors in 2019. in 2018. Born in 1975. Born in 1962. Education: In 1997, he graduated from the Moscow State University Education: In 1989 he graduated from the All-Union Polytechnic of Railway Engineering with a degree in Economics and Transport Institute. Administration (Engineer-Economist).

Professional experience: Professional experience:

2006 – present — Deputy СEO, LLC Millhouse. 2019 – present — Fisrt Deputy Head of the Centre (for Transport Service) for Corporate Transport Service, a branch of Russian Citizenship: Russian Federation. Railways; David Aleksandr DAVIDOVICH Does not hold any shares or other securities of the Company. HATYANOV 2018–2019 — Deputy Head of the Centre for Corporate Transport Service, a branch of Russian Railways (in marketing and tariffs); Independent Director Non-Executive Director Member of the Audit Committee Member of the Audit Committee 2016–2018 — Deputy CEO of the Centre for Corporate Transport Member of the Nominations Member of the Strategy Service, a branch of Russian Railways (in marketing and tariffs); and Remuneration Committee Committee 2015–2016 — Deputy Head of the tariff policy implementation department in the Field of Rail of Russian Railways.

Citizenship: Russian Federation.

Does not hold any shares or other securities of the Company.

PJSC TransContainer | Annual report 2019 90 91 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board of Directors

First elected to the Company’s Board of Directors in 2019. First elected to the Company’s Board of Directors in 2019.

Born in 1975. Born in 1973.

Education: In 1997 he graduated from the Far Eastern State Education: In 1995 he graduated from the Golitsyn Military Institute Transport University, majoring in economics and enterprise of the Border Service of the Russian Federation, specialising in management (economist-manager). Tactical and Special Troop Communications.

Professional experience: Professional experience:

2019 – present — Chairman of the supervisory board of Razvitie TLC, 2016 – present — Head of the security department, Russian LLC; Railways.

Aleksey 2017 – present — Head of the Central Directorate for Terminal and Viktor Member of the Board of Directors of TransFin-M, PJSC. BELSKY Warehouse Complex Management, a branch of Russian Railways; SHENDRIK Citizenship: Russian Federation. Non-Executive Director Non-Executive Director 2015–2017 — First Deputy Head of the department management Member of the Strategy of the business block “Railway Transportation and Infrastructure” of Member of the Audit Does not hold any shares or other securities of the Company. Committee Committee Russian Railways. Member of the Nominations Member of the boards of directors of JSC TsK MTC and OJSC and Remuneration Committee “Management Company “Murmansk Transport Hub”.

Citizenship: Russian Federation.

Does not hold any shares or other securities of the Company.

PJSC TransContainer | Annual report 2019 92 93 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board of Directors

First elected to the Company’s Board of Directors. First elected to the Company’s Board of Directors in 2019. in 2019. Born in 1988. Born in 1965. Education: Graduated from Lomonosov Moscow State University Education: In 1985 she graduated from Hebrew University with in 2010 (Bachelor of Economics) and 2012 (Master of Economics). а Bachelor of Science in statistics and international relations. In 1989, she graduated from INSEAD with a Master of Business Professional experience: Administration. 2015 – present — Vice President of CIS Investment Advisers LLC. Professional experience: Member of the Board of Directors of Freight Village Kaluga North LLC. 2008–2015 — advisor to the chairperson of the Board of SP ANGEL LEA (investment bank). Maksim Citizenship: Russian Federation. VERNI GAVRILENKO Chairwoman of the Boards of Directors of Zoltav Resources, Does not hold any shares or other securities of the Company. Independent Director Independent Director Cleveland BioLabs Inc (CBLI). Deputy Chairman of the Nominations and Citizenship: France. Remuneration Committee Does not hold any shares or other securities of the Company. Member of the Audit Committee Member of the Strategy Committee

PJSC TransContainer | Annual report 2019 94 95 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Efficiency of the Board Chairperson of the Board of Directors of Directors and their responsibilities

Board of Directors The operating efficiency of the Board of Directors is The Chairperson organises the work of the Board of ensured by the following parameters. Directors, monitors the implementation of decisions of the Board of Directors and the General Meeting Annual planning of the Board of Directors of Shareholders. The Chairperson of the Board of Directors is personally responsible for operational During the corporate year’s first meeting, the Board efficiency and provides a focus on the strategic of Directors approves its work schedule for a period management of the Company. extending until the convocation of the Annual General First elected to the Company’s Board of Directors in 2019. Meeting of Shareholders. The Board’s performance under such work schedule is reviewed at the last Independent Directors and their role Born in 1982. meeting of the corporate year. Independent directors, using their knowledge, Education: In 2003 graduated from the Finance University under Budget approval experience and qualifications, bring a detached the Government of the Russian Federation with a degree in “World view to the activities of the Board of Directors. The economics”. Annual budgets approved by the Company include Company highly appreciates their contribution to expenses to support activities of the Board of enhancement of the operational efficiency of the Professional experience: Directors. This gives Directors an opportunity to Board of Directors. seek professional advice on relevant matters at the 2018 – present — Managing Partner of Inventure Partners; Company’s expense. The Board of Directors annually reviews the issue of compliance of members of the Board of Directors 2017–2018 — Managing Partner of Marathon Group; Rollout of an automated information with independence criteria. This issue is previously Evgeny system (AIS) discussed in the framework of the Human Resources ZALTSMAN 2017–2018 — Adviser on investment development of Sintez JSC; and Remuneration Committee, which provides the The preparation and conduct of Board and committees Board of Directors with an opinion regarding the Non-Executive Director 2014–2017 — Chief strategy officer of Management meetings are carried out with the use of an automated compliance with the independence criteria of each Member of the Strategy LLC. information system that is available to each member of member of the Board of Directors. Committee the Board of Directors on an individual electronic device. Member of the Nominations Citizenship: Russian Federation. Due to the fact that PJSC TransContainer is a public and Remuneration Committee Induction programmes for newly company the shares of which are admitted to trading Does not hold any shares or other securities of the Company. elected Board members on the Moscow Exchange, the Board of Directors and the Nominations and Remuneration Committee A one-day course is arranged for newly elected taking a decision regarding the independence level members of the Board of Directors, in terms of which of the members of the Board of Directors are the key managers introduce the activities of the guided by the criteria established by the Listing Company in a presentation form. Rules of Moscow Exchange PJSC, as well as of the Corporate Governance Code of the Bank of Russia, Presence of non-executive directors (see below) recommended for use by joint stock companies by letter of the Bank of Russia No. 06-52/2463 dated Balanced composition (see below) 10 April 2014.

Active participation of members in activities of the Board of Directors and its committees (see Balanced composition of the Board below) of Directors and its committees

Regular job assessment of the Board of Directors The balanced composition of the Board of and its committees (see below) Directors of the Company in terms of experience, competencies, age and gender allows members of Liability insurance for members of the Board of the Board of Directors to discuss agenda issues in a Directors and the management (see below) comprehensive way, taking into account different

PJSC TransContainer | Annual report 2019 96 97 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

socio-cultural experiences. Decisions made as a result The Board performance report Appointments and remunerations: of such a discussion take into account the interests 93.2% h the powers of CEO were extended; of a wide range of parties concerned and contribute In 2019, the Board of Directors met in 15 sessions: h the candidates for top positions of the Executive to the long-term sustainable development of the made up the average quorum 9 — in person, and 6 — in the form of absentee voting. of meetings of the Board of Directors Office were agreed; Company. of PJSC TransContainer in 2019 144 issues have been treated at these meetings. The Board of Directors paid special attention to review of h the number of members of the Executive Board the following issues: was increased to 8 persons and members of the EDUCATIONAL BACKGROUND OF THE MEMBERS STRUCTURE OF THE BOARD OF DIRECTORS ON COMPLIANCE Executive Board were elected. OF THE BOARD OF DIRECTORS WITH INDEPENDENCE CRITERIA Strategy: h reports on the progress of the matched project of Social responsibility: 2 7 5 “TransContainer” PJSC in Freight Village Kaluga h issues related to the provision of charitable North LLC and the progress of the project of assistance to children (implementation of the “TransContainer” PJSC associated company start-up “TransContainer to Children” charity programme), in the PRC; the Company’s employees (for expensive Finance, economics Non-executive treatment), support for children and youth sports, Industry specific Independent h the report “On updating the Company’s matching project in Freight Village Kaluga North LLC in terms preservation of the cultural heritage of Russia, Business of its sustainable development”; support of industry-specific charity programmes 2 and emergency relief have been reviewed. h agreement of the basic conditions for the sale 6 of the Company’s equity investments in JSC Kedentransservice; Members of the Board of Directors of the Company act in the interests of the Company and all its shareholders, h the report “On the progress Kuntsevo-2 container taking into account the interests of employees, terminal reconstruction project”; GENDER AND AGE STRUCTURE OF THE BOARD OF DIRECTORS customers, partners and other parties concerned. The h the adjustment of the investment programme conscientious and efficient performance of duties by of TransContainer PJSC for 2019 was approved 1 1 members of the Board of Directors implies, among in terms of increasing the budget for capital 7 other things, the availability of a sufficient amount of investments in the rolling stock fleet and ISO time devoted to work on the Board of Directors and containers. Men committees of the Company. The contribution of each Below 35 Women member of the Board of Directors is significant for the 35–50 Monitoring and reporting activities: best practice of the Board of Directors. Over 50 h the policy of interaction with the external auditor of 3 PJSC TransContainer was approved; The average quorum of meetings of the Board of Directors of PJSC TransContainer in 2019 was 93.2%. 10 h company 2018 Performance Statement, the Report on execution of decisions of the Board of Directors and Annual General Meeting of Shareholders was KEY ISSUES REVIEWED BY THE BOARD OF DIRECTORS approved; IN 2019, IN THE FOLLOWING DIRECTIONS, % KEY COMPETENCIES OF MEMBERS OF THE BOARD OF DIRECTORS h coordination of positions in the management bodies IN PROFESSIONAL FIELDS AND EMPLOYMENT HISTORY of other organisations by the members of the 12 22 Executive Board and the top management of PJSC Full name Company's Board Transport Finance, Strategy Risk Corporate Transport Human TransContainer was agreed; employment industry economics, management management and logistics resources 10 history employment audit and legal (industry- management h issues related to the performance of key subsidiaries history issues specific) based on the results of 2018 were reviewed. Andrey Starkov 2 year 11 months More than 5 years + + + + Sergey Ludin 1 year 11 months - + + + + Corporate management: Vladimir Gaponko 1 year 11 months More than 5 years + + + + h the Records of the Board of Directors and its David Davidovich 1 year 11 months - + + + 26 committees for the 2018–2019 corporate years Alexey Belsky 11 months More than 3 years + + + + were summed up; 30 Viktor Shendrik 11 months More than 3 years + Aleksandr 11 months More than 5 years + + + h compliance of members of the Board of Directors Khatyanov with the criteria for independence was reviewed; Strategy Nominations and remuneration Lea Verni 11 months - + + + + Oversight and reporting h the job evaluation of the Corporate Secretary for Social responsibility Maksim 11 months - + + + + 2018–2019 corporate years was carried out. Corporate Governance Gavrilenko Evgeny Zaltzman 11 months More than 10 years + + +

PJSC TransContainer | Annual report 2019 98 99 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

INFORMATION1 ON PARTICIPATION OF MEMBERS OF THE BOARD OF DIRECTORS IN 2019 IN MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES2

Full name Board of Directors Audit Committee HR and Remuneration Strategy Committee Committee Andrey Starkov 14 / 15 - - 9 (1) / 11

Sergey Ludin 15 / 15 11 (1) / 12 10 (4) /10 11 (1) /11

Vladimir Gaponko 15 (2) /15 11 (2) /12 9 / 10

David Davidovich 15 (9) / 15 12 (7) /12 10 (7) / 10

Aleksandr Khatyanov 9 / 15 - -

Alexey Belsky 9 (2) / 15 - - 10 (1) / 11

Lea Verni 9 / 15 - - -

Maksim Gavrilenko 9 (1) / 15 11 / 12 10/10 11/11

Evgeny Zaltzman 9 (1) / 15 - 6 (3) /10 11 (3) / 11

Viktor Shendrik 6 / 15 10 (3) /12 9 (1) / 10 7 (1) / 11

Work assessment of the Board “the assessment of the activities of the Board of Directors of Directors and its committees is carried out in order to determine the level of efficiency of these In accordance with best practices, in order to obtain management bodies, their compliance with the objective information about the activities of the Board development needs of the Company, intensification of of Directors and lay down the guidelines for corporate the efforts of the Board of Directors and identification management practice enhancement, the work of of areas in which its actions can be improved.” Self- h adherence by the Board of Directors in terms of The D&O1 policy covers the costs of a legal defense the Board of Directors is regularly evaluated: self- assessment is carried out remotely by an anonymous number of members to the requirements of the for the directors and expenses from any claims assessment is carried out on an annual basis and a questionnaire, in which members of the Board of Company and interests of the shareholders; made against the directors in connection with their separate external assessment is conducted every three Directors participate on a voluntary basis. According h efficacy of the work of the Chairperson of the Board performance of their responsibilities. years. to the estimation procedure, members of the Board of of Directors; Directors give an opinion regarding the activities of The Company selects the insurer based on the h individual attendance at meetings of the Board of Separate external job evaluation of the Board of the Board of Directors and committees of the Board results of competitive procedures, the terms of Directors and of the committees, and time devoted Directors was conducted by the Association of of Directors according to the grading scale of 1 to 5. to preparing for the meetings. which are approved by the Committee on Personnel Supervisory Directors in 2017.3 The next separate and Remuneration. In 2019, based on the results of external evaluation of the Board of Directors will be Main areas of evaluation: competitive procedures, the Company signed a liability conducted in the autumn of 2020. h role and functions of the Board of Directors and Directors' liability Insurance insurance policy covering the directors, officials, and committees; companies with IPJSC Ingosstrakh. The amount of Self-assessment of the work of the Board of Directors Every year since 2009, the Company has provided insurance (liability limit) is USD 100 million. The policy h credentials of the members of the Board of and its committees following the results of the 2019– Directors; liability insurance for members of the Board of is effective everywhere in the world. 2020 corporate year is scheduled for May 2020. Directors and the management of the Company. h analysis of the composition of the Board of The insurance provides material protection to the The D&O policy terms of PJSC TransContainer are According to the Regulations on the Assessment of the Directors based on their own requirements in the Company, its directors and managers, from possible in accordance with the best Russian and foreign field of professional qualifications, experience and Activities of the Board of Directors and Committees claims by third parties which may arise as a result practices of liability insurance for directors and business skills; of the Board of Directors of PJSC TransContainer,4 of unintentional and/or erroneous actions on the part company managers. of the officials.

1 As of the composition of the Board of Directors as of 31 December 2019. 2 The data in the table are presented in the format “8 (1) / 10” — this means that the director took part in eight out of ten meetings of the Board of Directors / Committee, including one participation in the form of a written opinion or questionnaire (in case of an absentee meeting). 3 The results of this assessment are represented in the Company’s 2017 Annual Report. 1 Directors’ and officers’ liability insurance. 4 Approved by the decision of the Company’s Board of Directors dated 18 November 2015, Record No. 5.

PJSC TransContainer | Annual report 2019 100 101 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Period Composition of the Audit Committee Corporate Governance 29 May 2019– S. Ludin — Chairman of the Audit Committee, independent director; 31 December 2019 D. Davidovich — member of the Audit Committee, independent director; M. Gavrilenko — member of the Audit Committee, independent director; Model V. Gaponko — member of the Audit Committee, non-executive director; V. Shendrik — member of the Audit Committee, non-executive director; A. Hatyanov — member of the Audit Committee, non-executive director Committees of the Board of Directors

ISSUES CONSIDERED BY THE AUDIT COMMITTEE IN 2019, % Secretary of the Audit Committee — D. Knyazhev Three committees operate under the Company Board The committees’ operations, competence and functions, 11 of Directors, established by the Company’s Board of the procedure for convening and holding meetings and In 2019, seven meetings of the Audit Committee were 15 Directors for preliminary consideration of the most taking decisions, as well as the rights and responsibilities held in person and five meetings were held in the form significant issues of the Company’s activities. of the committee members are stipulated in the of absentee voting; 65 issues were considered. Regulations on committees of the Board of Directors of PJSC TransContainer1. The agenda of the Audit Committee meetings was 25 15 formed in accordance with the Audit Committee’s Work Plan, approved at the first meeting after the election, Name of committee Functions as well as in accordance with the orders of the Board Audit Committee Plays a key role in facilitating the completeness, accuracy and reliability of financial statements, the of Directors. According to the Audit Committee’s reliability and efficacy of the risk management system, internal control and corporate governance, as well as in ensuring the independence and objectivity of internal and external audits work plan, 47 issues were considered pertaining to 2 HR and Remuneration It aims to provide preliminary consideration of issues related to the formation of effective and accounting (financial) reports, risk management, internal 32 Committee transparent remuneration policies and practices, as well as issues related to implementation of monitoring, corporate governance, internal and external personnel planning, professional composition and efficiency of the Board of Directors, executive auditing, countering unscrupulous actions of employees Accounting (financial) Combating misconduct by bodies, and other key management employees of the Company and third parties, and organisational issues of the statements the Company’s employees Strategy Committee Considers issues involving the development and implementation of the Company’s Development Audit Committee. The unplanned issues related to the Risk management, or third parties Strategy, and the identification of priority directions and strategic objectives; controls conclusion of contracts for non-audit services with internal control, corporate Organisation issues of the implementation of the Company’s Strategy; works out recommendations to correct the existing governance Audit Committee Joint Stock Company PricewaterhouseCoopers Audit, Development Strategy Internal and external audit Other the agreement of the main terms of the purchase and sale agreement of PJSC TransContainer’s share in JSC Kedentransservice, the terms of provision of services Report on the Activities of the Audit Committee for the analysis of container transport in the Russian Federation, and investment projects affecting the growth of transport loads of PJSC TransContainer. Cooperation with external auditors and Period Composition of the Audit Committee the Internal Audit Service until 26 February 2019 S. Ludin — Chairman of the Audit Committee, independent director; Cooperation with the Audit Commission T. Orlova — Deputy Chairwoman of the Audit Committee, non-executive director; In order to improve the efficacy of cooperation, at the D. Davidovich — member of the Audit Committee, independent director; When considering issues related to the results of invitation of the chairperson of the Audit Committee, S. Tugarinov — member of the Audit Committee, non-executive director; audits of the Company’s financial and economic representatives of the Company’s external auditor and M. Garber — member of the Audit Committee, non-executive director; activities, the Chairperson of the Audit Committee the head of the Internal Audit Service are present at A. Panchenko — member of the Audit Committee, non-executive director invites representatives of the Audit Commission meetings that include reporting and auditing issues. 26 February 2019– S. Ludin — Chairman of the Audit Committee, independent director; to the meetings. In this way, the Audit Committee Thus, members of the Audit Committee have the 28 May 2019 D. Davidovich — member of the Audit Committee, independent director; facilitates an environment conducive to constructive and opportunity to receive auditors’ opinions and comments S. Tugarinov — member of the Audit Committee, non-executive director; meaningful discussion of the results of the audit and on issues discussed at the Audit Committee meetings in M. Gavrilenko — member of the Audit Committee, independent director; any violations discovered. The Audit Committee hears a timely manner. Moreover, the maximum transparency V. Gaponko — member of the Audit Committee, non-executive director; the opinions of the members of the Audit Commission and openness of information on the Company’s activities V. Shendrik — member of the Audit Committee, non-executive director on the degree of gravity of the detected violations, and is ensured to all participants. hears the comments of the management regarding the causes of the detected violations, as well as proposed The Audit Committee holds meetings with the 1 Link to the document: https://trcont.com/documents/20143/69792/180621-%D0%9F%D1%80%D0%B8%D0%BB.+%E2%84%96+5_%D0%9F%D0%BE measures to eliminate them. The Audit Committee external auditor and the head of the Internal %D0%BB%D0%BE%D0%B6%D0%B5%D0%BD%D0%B8%D0%B5-%D0%BE-%D0%BA%D0%BE%D0%BC%D0%B8%D1%82%D0%B5%D1%82%D0%B0 monitors the elimination of violations identified by the Audit Service in a confidential format, without %D1%85-%D0%A2%D0%9A.pdf/a3b0e8eb-c6ca-0c94-bd54-1b2d8bd17241 Audit Commission. management involvement.

PJSC TransContainer | Annual report 2019 102 103 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

In order to ensure the independence and objectivity of TransContainer, for auditing the Company’s financial Interviews with candidates for interviews with candidates for these positions. the external audit in 2019, the Audit Committee invited (accounting) statements for 2019 according to RAS appointment to key positions of the Along with the review of education and experience, the Company’s Board of Directors to recommend to the and IFRS, and recommended to the Board of Directors Company the practice of face-to-face interviews with Annual General Meeting of Shareholders to approve the amount of remuneration to be paid to the external candidates conducted by members of the Personnel the company JSC PvK Audit as the auditor of PJSC auditor. In 2019, the Personnel and Remuneration Committee, and Remuneration Committee allows us to develop when considering issues related to agreement of a better understanding of the professional and appointments to key positions of the Company, personal qualities of candidates and their fitness for Report on the Activities of the Personnel continued the practice of conducting personal appointment to key positions of the Company. and Remuneration Committee Report on the Activities of the Strategy Committee Period Composition of the Personnel and Remuneration Committee until 26 February 2019 V. Gaponko — Chairman of the Personnel and Remuneration Committee, non-executive director; Period Composition of the Strategy Committee E. Charkin — Deputy Chairman of the Personnel and Remuneration Committee, non-executive director; D. Davidovich — member of the Personnel and Remuneration Committee, independent director; until 26 February 2019 S. Tugarinov — Chairman of the Strategy Committee, non-executive director; I. Koval — member of the Personnel and Remuneration Committee, non-executive director; S. Avseikov — Deputy Chairman of the Strategy Committee, non-executive director; A. Panchenko — member of the Personnel and Remuneration Committee, non-executive director V. Gaponko — member of the Strategy Committee, non-executive director; I. Koval — member of the Strategy Committee, non-executive director; 26 February 2019– V. Gaponko — Chairman of the Personnel and Remuneration Committee, non-executive director; S. Ludin — member of the Strategy Committee, independent director; 28 May 2019 M. Gavrilenko — Deputy Chairman of the Personnel and Remuneration Committee, independent A. Panchenko — member of the Strategy Committee, non-executive director director; D. Davidovich — member of the Personnel and Remuneration Committee, independent director; 26 February 2019– A. Starkov — Chairman of the Strategy Committee, non-executive director; V. Shendrik — member of the Personnel and Remuneration Committee, non-executive director; 28 May 2019 S. Ludin — Deputy Chairman of the Strategy Committee, independent director; S. Ludin — member of the Personnel and Remuneration Committee, independent director A. Belsky — member of the Strategy Committee, non-executive director; M. Gavrilenko — member of the Strategy Committee, independent director; 29 May 2019– V. Gaponko — Chairman of the Personnel and Remuneration Committee, non-executive director; E. Zaltsman — member of the Strategy Committee, independent director; 31 December 2019 M. Gavrilenko — Deputy Chairman of the Personnel and Remuneration Committee, independent A. Taicher — member of the Strategy Committee, non-executive director; director; S. Tugarinov — member of the Strategy Committee, non-executive director. D. Davidovich — member of the Personnel and Remuneration Committee, independent director; V. Shendrik — member of the Personnel and Remuneration Committee, non-executive director; 29 May 2019– A. Starkov — Chairman of the Strategy Committee, non-executive director; S. Ludin — member of the Personnel and Remuneration Committee, independent director; 31 December 2019 S. Ludin — Deputy Chairman of the Strategy Committee, independent director; E. Zaltsman — member of the Personnel and Remuneration Committee, independent director A. Belsky — member of the Strategy Committee, non-executive director; M. Gavrilenko — member of the Strategy Committee, independent director; E. Zaltsman — member of the Strategy Committee, independent director; ISSUES CONSIDERED BY THE PERSONNEL A. Hatyanov — member of the Strategy Committee, non-executive director; Secretary of the Personnel and Remuneration AND REMUNERATION COMMITTEE IN 2019, % 1 Committee — M. Nikolaeva. A. Taicher — member of the Strategy Committee, non-executive director

In 2019, seven meetings of the Personnel and Remuneration Committee were held in person and three 27 42 Secretary of the Strategy Committee — D. Knyazhev. The agenda of the Strategy Committee meetings meetings were held in the form of absentee voting; was established in accordance with the Strategy 45 issues were considered. The Strategy Committee’s operations, competence and Committee’s Work Plan, approved at the first meeting functions, the procedure for convening and holding after the election, as well as in accordance with The agenda of the Personnel and Remuneration meetings and taking decisions, as well as the rights and the orders of the Board of Directors. The issues Committee meetings was formed in accordance with responsibilities of the Strategy Committee members are considered included establishing the priority areas the Personnel and Remuneration Committee’s Work stipulated in the Regulations on the Strategy Committee of the Company’s activity, formulating the Company Plan, approved at the first meeting after the election, as 31 of the Board of Directors of PJSC TransContainer. budget and monitoring reports on the execution of the well as in accordance with the orders of the Board of Company’s budget and management of subsidiaries, Directors. The Personnel and Remuneration Committee Remuneration policy and HR planning, nominations In 2019, eight meetings of the Strategy Committee ensuring the Company’s participation in other considered issues related to the policy and practice of practice for the Members and membership of the were held in person and three meetings were held in the organisations, as well as organisational issues of the remuneration of members of the Board of Directors of the Board of Directors Company’s governance form of absentee voting; 35 issues were considered. Strategy Committee. and the management bodies and management of the Company, personnel planning, Other appointments and composition of the management . bodies of the Company. The unplanned issues related to preliminary consideration of the candidates for the 1 He is a former member of the Board of Directors on the basis of written notification to PJSC TransContainer on the refusal of the powers of a Board of the Company and its governing bodies. member of the Board of Directors of PJSC TransContainer, dated 11 July 2019 (incoming No. 3722).

PJSC TransContainer | Annual report 2019 104 105 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Executive Bodies Between January and August 2019, the corporate secretary of the Company was K. Galkina, Deputy Head of the Corporate Governance Department. As of August 2019, the position of corporate secretary of the Company was assigned to A. Bobonin, Head Role of Executive Bodies The scope of competence of the Board and the CEO of the Corporate Governance Department. of the Company are defined in the Charter, as well The Executive Bodies of the Company are the CEO as enshrined in the Regulations on the Board and and the Board, which manage the Company’s ongoing the Regulations on the CEO of PJSC TransContainer. activities and ensure the following: h achievement of strategic goals and objectives as From 29 June 2018 to 14 February 2020, Vyacheslav Corporate Secretary defined by the Company’s Board of Directors; Sarayev was the CEO of the Company. As of 15 February 2020, Viktor Markov was appointed CEO of h implementation of prospective plans and programmes of the Company; the Company. The main tasks of the corporate secretary are to In order to ensure independence, the Company’s ensure effective interaction with shareholders, corporate secretary reports to the Board of Directors of h execution of decisions of the Board of Directors The Board of PJSC TransContainer was established coordinate actions of the Company to protect the the Company in his or her activities. No cases of conflict and the General Shareholders Meeting; in November 2014. On 31 December 2019, the rights and interests of shareholders, and ensure of interest in the work of the corporate secretary of the h establishment and maintenance of an effective Board of the Company consisted of: effective work of the Board of Directors and its Company have been identified. The corporate secretary’s risk management and internal control system; h Vyacheslav Sarayev — Chairman of the Board, committees. working procedure is regulated by the Regulations on the h personnel management, employee incentives and CEO; Corporate Secretary of PJSC TransContainer1. prospective personnel planning; h Vladimir Drachev — Deputy CEO; The Company’s corporate secretary performs the h management of the Company’s affiliates and following functions: h Viktor Markov — Deputy CEO/Director for Legal subsidiaries. Affairs and Property Management; h organising the preparation and holding General ANDREY BOBONIN Shareholder Meetings; h Sergey Kazakov — Deputy CEO; Corporate secretary h coordinating the work of the Company’s Board of h Ekaterina Burtseva — Deputy CEO; Directors and its committees; Accountability of Executive Bodies He was born in 1976. h Alexander Podylov — Deputy CEO; h participating in the implementation of the The CEO and the Board report to the General h Elena Samsonova — Deputy CEO/HR Director. Company’s information disclosure policy; Education: Graduated from the Moscow State Shareholders Meeting and the Board of Directors, h ensuring the storage of the Company’s corporate Institute of Radio Engineering, Electronics and and submit regular reports on their activities to documents; Automatics (Technical University) in 2002. evaluate the results and efficiency of the executive Report on the Board's activities h coordinating interaction with Company bodies of the Company. shareholders; He took skills development courses at the Higher The Board works in accordance with the approved School of Economics in 2007 (course: Corporate In order to ensure accountability of the Company’s half-year work plan, taking into account the h participating in the prevention of corporate Secretary of Joint Stock Company) and 2008 executive bodies, the Board of Directors: work plans of the Board of Directors and the conflicts; (course: Corporate Director). h elects the CEO of the Company; Committees of the Board of Directors, as well as h coordinating the Company’s interaction with the proposals of the Company’s management. h determines the number of members on the regulators, registrar, and other professional Professional experience: Board; participants of the securities market; In 2019, 19 meetings of the Board of the Company h ensuring compliance with the procedures 2008 – ongoing — Head of Corporate Governance h elects the members of the Board on the proposal were held, at which 71 issues were considered. established by the legislation of the Russian Department of PJSC TransContainer; of the CEO of the Company; Federation and the Company’s internal documents h determines the term of powers of executive Taking into account the geography of PJSC that provide for the exercise of the rights 2016 – ongoing — Secretary of the Board of bodies of the Company; TransContainer’s presence, extensive branch and legitimate interests of shareholders, and PJSC TransContainer; network, holding structure and active development monitoring their performance; h determines the terms and conditions of employment contracts with the CEO and of the Company’s process approach to the h informing the Board of Directors about all detected 2016 – ongoing — Specialist on working with members of the Board; organisation of activities, the main priorities for violations of the legislation of the Russian insider information of PJSC TransContainer. the Board of the Company in the reporting year h agrees on the combination of positions in Federation and of the regulations of the Company’s were issues related to monitoring the activities management bodies of other organisations and internal documents whose compliance relates to Citizenship: Russian Federation. of subsidiaries, as well as improving the efficiency the functions of the Company’s secretary; other paid positions of the CEO and members of the Board; of business processes implemented in the spheres h participating in the improvement of the Company’s of Company activity. system and practice of corporate governance. h reviews reports on the activities of executive bodies.

1 Link to document: https://trcont.com/en/investor-relations/charter-and-bylaws/bylaws

PJSC TransContainer | Annual report 2019 106 107 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices Composition of the Management Board

Aleksandr PODYLOV Sergey KAZAKOV Member of the Member of the Management Board Management Board Deputy CEO Deputy CEO

Elena SAMSONOVA Viktor MARKOV Vladimir DRACHEV Ekaterina BURTSEVA Member of the Chairman of the Management Member of the Member of the Management Board Board CEO Management Board Management Board Deputy CEO Deputy CEO Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Board meetings, like those of the Board of Directors, are conducted using AIS designed to ensure maximum convenience for Board members, both in the process of preparing for the Board meeting and during the consideration Information on the Composition of agenda issues. of the Management Board1

First elected to the Board in 2014. In 2019, 7 reports on the activities of companies territory of Kaliningrad region in the form of a Born in 1976. controlled by the Company1 were reviewed, and 100% subsidiary company were considered; Education: In 1998, he graduated from the Gubkin State Academy of 20 issues were considered regarding changes in the h issues related to the mainstreaming of the Oil and Gas with a degree in law. organisational structure of the central office and management system of companies within the branches of the Company aimed at improving the Company group were considered; Professional experience: efficiency of the business processes operating in the 2020 – ongoing — CEO of PJSC TransContainer; Company. Other issues were also considered by the h the conclusion of transactions on the provision Board, in particular: of bank guarantees in favour of the Federal 2017–2020 — Deputy CEO — Director for Legal Affairs and Property Customs Service authorities in 2020 was Management of PJSC TransContainer; h the Company’s Budget and Investment approved; Programme for 2020 were provisionally 2017–2017 — CEO of TransContainer Finance LLC; approved; h a number of investment projects aimed at 2006–2017 — Director for Legal Affairs and Property Management improving the efficiency of the Company’s h issues related to the establishment of a freight activities and improving the quality of services Viktor of PJSC TransContainer; forwarding company in the field of container rendered by the Company were considered; MARKOV 2014–2016 — Vice President, member of the Board of JSC UTLC; transportation in the Republic of Belarus in the form of a 100% subsidiary company were h the extension of the Collective Agreement of Chairman of the Board 2003–2006 — First Deputy Head of the Legal Department of Russian considered; PJSC TransContainer until 31 December 2021 CEO Railways; was approved. h issues related to the establishment of a company 2002–2003 — Deputy Head of the Legal Department of the Ministry in the field of information technology in the З of Transport of the Russian Federation/Head of the Legal Support Department of Railway Transport Reform; 2000–2002 — Head of the Department of Legal Support of Cooperation with the Federal Assembly and Railway Transport Reform of the Legal Department of the Russian Ministry of Transport. Chairman of the Board of Directors of JSC UTLC ERA, JSC Federal Freight Company2, and JSC Russian Railways Logistics, member of the Board of Directors of Gefco S. A., JSC Investment Company RZD- Invest, JSC Institute of Transport Economics and Development (IERT), and JSC Kedentransservice. Citizenship: Russian Federation. Does not hold any shares or other securities of the Company.

1 At the invitation of the Chairman of the Board, the heads of subsidiaries participate in the meetings of the Board at which the activities 1 As of 15 February 2020. of subsidiaries are considered, both in person and via video conference. 2 Until 2019.

PJSC TransContainer | Annual report 2019 110 111 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Information on the Composition of the Management Board

First elected to the Board in 2014. First elected to the Board in 2018.

Born in 1951. Born in 1980.

Education: In 1982, he graduated from the Irkutsk Institute Education: In 2002, he graduated from St. Petersburg University of of Railway Engineers with a degree in railway operation. the Russian Ministry of Internal Affairs with a degree in law.

Professional experience: Professional experience:

2019 – ongoing — Deputy CEO of PJSC TransContainer; 2017 – ongoing — Deputy CEP of PJSC TransContainer;

2008–2018 — First Deputy CEO of PJSC TransContainer; 2017–2017 — Advisor to the CEO of PJSC TransContainer;

Vladimir 2006–2008 — Deputy CEO for Production of PJSC TransContainer. Sergey 1997–2017 — Civil servant of the Main Directorate of the Russian DRACHEV KAZAKOV Ministry of Internal Affairs in St. Petersburg and Leningrad Oblast. Citizenship: Russian Federation. Member of the Management Member of the Management Board Board Citizenship: Russian Federation. Does not hold any shares or other securities of the Company. Deputy Chief Executive Deputy Chief Executive Does not hold any shares or other securities of the Company. Officer Officer

PJSC TransContainer | Annual report 2019 112 113 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Information on the Composition of the Management Board

First elected to the Board in 2018. Firstly elected to the Board in 2019.

Born in 1964. Born in 1981.

Education: She graduated from the Torez Moscow State Institute Education: In 2003, he graduated from the International Independent of Foreign Languages in 1988 with a degree in English and University of Environmental and Political Sciences with the following German. In 2001, she graduated from the Institute of Business and degree in Management. In 2011, graduated from the All-Russian Administration of the Russian Presidential Academy of National Academy of Foreign Trade with the following degree in Global Economy and Public Administration under the President of the Russian Economy. In 2006–2007, studied supply chain management, finance Federation with a degree in economics and finance. and marketing at Cranfield School of Management (Crenfield, UK) and Management Center Europe (Brussels, Belgium). In 2017, completed Professional experience: the education at Harvard Business School (General Management Program). Ekaterina 2018 – ongoing — Deputy CEO of PJSC TransContainer; Aleksandr BURTSEVA PODYLOV Professional experience: 2018 – ongoing — Member of the Supervisory Board of Member of the Management Deputy Chief Executive Officer Board TransContainer-Slovakia, a.s.; 2019 – ongoing — Deputy Chief Executive Officer, Member of the Management PJSC TransContainer. Deputy Chief Executive Board 2018 – ongoing — Advisor to the CEO of PJSC TransContainer; Officer 2017 – ongoing — Member of the Supervisory Board of 2000–2018 — Head of the Land Transportation Department of TransСontainer -Slovakia, a.s.; CJSC MAERSK. 2016–2019 — Chief Business Officer, Chief Sales Officer, Chief Chairman of the Board of Directors of LLC Rail-Container, member of Customer Service Officer; the Board of Directors of Oy ContainerTrans Scandinavia Ltd. 2009–2016 — Deputy Chief Sales Officer, Deputy Chief Commercial Citizenship: Russian Federation. Officer.

Born not own any shares or other securities of the Company. Member of the Board of Directors of Rail-Container LLC.

Citizenship: Russian Federation.

Does not hold any shares or other securities of the Company.

PJSC TransContainer | Annual report 2019 114 115 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Information on the Composition Key Performance of the Management Board Indicator System

First elected to the Board in 2019. The KPI system has been used in the Company since The management KPIs are set by the Chief Executive Born in 1976. 2011 and annually confirms its efficiency as a tool Officer based on the approved development strategy. for improving the basic processes of production, management, and development. The target values of the KPI are set in accordance with Education: In 1998, she graduated from Perm State University with the Company's budget at the reporting date approved a degree as Philologist. Translator. English Language & Literature It is developed with the aim of the most accurate and by the Board of Directors. complete evaluation of the implementation of the short- Teacher. In 2000, she obtained the Master’s degree in management in and medium-term tasks by the Company's management the University of Durham. In 2012, graduated from the International (according to the budget planning), as well as the Management Institute of St. Petersburg with a degree in Master of achievement of the long-term strategic objectives set Ranking of branches by the Board of Directors. Business Administration. The KPI system includes three groups of indicators: Since 2013, the KPI system also includes the ranking of branches aimed at the following: Professional experience: 1) Corporate-wide KPIs — Describe the performance of the Company as a whole; h Provision of the incentives for the activities of all 2019 – ongoing — Deputy Chief Executive Officer — Chief Human employees of the Company’s branch regarding the 2) Process KPIs — Measure the results of the efficient use of human resources and production Resources Officer, PJSC TransContainer; Company's functional area or any process; Elena assets (primarily terminals and rolling stocks); SAMSONOVA 2019–2019 — Advisor to the Chief Executive Officer, 3) Project KPIs — Indicators of any fixed validity h Fair evaluation to motivate the management and period that measure the degree of achievement of the staff of the Company’s branches; PJSC TransContainer; objectives of the projects (or project stages) of the Deputy Chief Executive Company/functional area. h Increase in the efficiency of the Company’s Officer — Chief Human 2017–2018 — Chief Human Resources Officer, JSC EuroChem Mineral branches in achieving the relevant budget For each KPI, it is necessary to prepare the relevant indicators and implementing all production tasks; Resources Officer and Chemical Company; certificate including the methodology for determining Member of the Management the target and achieved values of the indicator. h Distribution of the best practices of agencies, Board 2015–2017 — Chief Human Resources Officer, Global Ports terminals and branches to all subdivisions of the According to the decision of the Board of Directors Company; Management Company LLC; of PJSC TransContainer, the activities of the Chief Executive Officer are evaluated according to two h Improvement of the Company’s processes. 2003–2014 — Deputy Chief Human Resources Officer, Chief Human indicators characterising the efficiency of the current The ranking is based on the comparison of all planned Resources Officer, Vice President of Human Resources of OJSC Uralkali. activities of the Company and influencing its market targets with the results, which are actually achieved, as capitalisation: well as the results achieved by the branch — with the h Net profit; results of the Company as a whole. Citizenship: Russian Federation. h EBITDA. Does not own any shares or other securities of the Company.

KEY COMPETENCIES OF THE MEMBERS OF THE MANAGEMENT BOARD FINAL RANKING OF BRANCHES FOR 2019 1 Krasnoyarskaya Railway 2 Vostochno-Sibirskaya Item Full name Finance, Strategy Risk Corporate Transport Human Railway 3 Zabaikalskaya Railway No. economics, management management and and logistics resources 1.37 audit legal issues (industry-specific) management 1.27 4 Dalnevostochnaya Railway 1.18 5 Moskovskaya Railway 1.03 1.0 0.97 0.95 6 Severnaya Railway 1. V. Markov + + + + 0.95 0.90 0.88 0.85 0,81 7 Zapadno-Sibirskaya Railway 0.73 2. V. Drachev + + + 0.69 8 Oktyabrskaya Railway 9 Severo-Kavkazskaya 3. S. Kazakov + Railway 10 Yugo-Vostochnaya Railway 4. E. Burtseva + + + 11 Ural Branch 12 Kuybyshevskaya Railway 5. A. Podylov + + + 1 2 3 4 5 6 7 8 9 10 11 12 13 14 13 Gorkovskaya Railway 14 Privolzhskaya Railway 6. E. Samsonova + +

PJSC TransContainer | Annual report 2019 116 117 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

System for the remuneration of the h Competitiveness in the level and structure of Remuneration Report members of the Company's executive remuneration; bodies and management h Maintenance of the balance of interests of the Company’s shareholders and management. The Regulations on the Labour Motivation of the The objective of the remuneration system for the The members of the Board of Directors of PJSC Company’s management determines the remuneration The total remuneration (motivation package) for the members of the Board of Directors, Chief Executive TransContainer do not participate in any retirement procedure (amount and payment procedure) for the Company’s management consists of the constant part Officer, members of the Management Board, as well as programmes, insurance programmes (excluding the Company’s management, including the Chief Executive of the remuneration (official salary or fixed salary) the Company’s management, is to attract, motivate and D&O insurance), option programmes, investment Officer, First Deputy Chief Executive Officers, Deputy established by the relevant employment contract, and retain (in the long-term) the professionals who have all programmes, as well as are not the beneficiaries of Chief Executive Officers, First Deputy Chief Financial the variable part of the remuneration including various necessary competences and qualifications to effectively other privileges. In the reporting period, the members Officer, Chief Administrative Officers, as well as the Chief bonuses and long-term motivation (shareholding manage the Company and execute the established of the Board of Directors did not obtain any loans from Accountant1. programme), as well as other payments stipulated strategic goals and objectives. the Company. by the labour legislation of the Russian Federation, The motivation of the Company’s management is collective employment agreements or local regulations. The remuneration is calculated according to the base In order to compare the level of the remuneration for aimed at improving the efficiency of the management (maximum) amount and depends on the number of the members of the Board of Directors, the Company of the Company, achieving the strategic objectives of The level of remuneration for the Company’s meetings participated by the member of the Board of entered into the agreement with JSC VEKTOR the Company and retaining the qualified staff in the management is formed considering the levels of Directors in the reporting period. The final decision LIDERSTVA in 2019 in order to provide the services Company according to the following basic principles: remuneration prevailing in the labour market for on the payment of the annual remuneration to the for the study of the level, conditions and structure of h Transparency in determining the amount and comparable positions. In the reporting period, the members of the Board of Directors is made by the the remuneration for the members of the Boards of structure of the total remuneration; members of the Board of Directors did not obtain any General Meeting of Shareholders. Directors of various joint-stock companies. loans from the Company. h Simplicity of calculating the amount of the total remuneration; System for the Remuneration of the Members of the Board of Directors and its Committees1 Indicator Annual remuneration for the membership Compensation payments 621,076,017.87 in the Board of Directors 276,092,467.9 535,409,637.31 Purpose Competitive remuneration to attract highly Compensation for the expenses 485,647,300.16 qualified professionals to the Board of Directors. related to the participation in 219,549,874 Provision of the incentives for the personal the meetings of the Board of 227,819,792.6 Total remuneration paid to the CEO participation in the meetings of the Board Directors and the committees and members of the Company’s Management Board of Directors of the Board of Directors 344,983,550 Amount of the Remuneration and 73,106,150.00 583,109.30 315,859,763.3 Total remuneration paid to the Compensation Paid to the Members of management (excluding the CEO 257,827,507.6 and members of the Company’s the Board of Directors in 2019 (RUB) Management Board) Total (RUB) 73,689,259.30

PAYMENT OF THE REMUNERATION TO THE MEMBERS OF THE BOARD OF DIRECTORS IN 2015–2019 2017 2018 2019

73,106,150.00 68,186,535.93 66,740,000.00

56,910,918.15 51,698,700.00 Remuniration

Compensations

2,572,918.15 3,738,524.22 3,342,311.08 1,290,935.26 583,109.30

2015 2016 2017 2018 2019

1 According to the Regulations on the Payment of the Remuneration and Compensation to the Members of the Board of Directors of PJSC 1 25 key managers of the Company, while considering any staff changes. TransContainer approved by the Annual General Meeting of Shareholders on 15 May 2018.

PJSC TransContainer | Annual report 2019 118 119 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Born in 1977. Control System Education: In 1999, she graduated from Rostov Institute for Entrepreneur Protection with a degree in Legal Counsel. Qualification: the Auditor’s Qualification Certificate in the Field Internal Control System of the General Audit No. 012 761 dated 25 January 2001 and the Auditor’s Qualification Certificate in the Field of the Unified Audit No. 01-000 802 dated 10 September 2012. According to the Internal Control Policy of PJSC h Collegial bodies established by the executive bodies TransContainer, the efficient management of the of the Company to perform specific functions; Qualification Certificate of the Chamber of Tax Advisers No. 001 850 Company’s internal control system is achieved through h Heads of the Company’s subdivisions; (Tax Adviser) dated 9 February 2004. Since 2016 — Member of the the efficient and prompt interaction of all participants h Company’s employees whose official duties include Institute of Internal Auditors. in the process, including: the implementation of various control procedures; Professional experience: h Board of Directors; h Audit Commission. Elena h Committees of the Board of Directors; USTINOVA 2009 – ongoing — Head of the Internal Audit Service of PJSC h Executive bodies of the Company (Management TransContainer. Head of the Internal Audit Board and the Chief Executive Officer); Service 2007–2009 — Head of the Control and Internal Audit Department of PJSC TransContainer; Internal Audit Department 2006–2007 — Deputy Head of the Control and Internal Audit Department of PJSC TransContainer. Member of the Audit Commission of Russian Railways Logistics JSC, The Internal Audit Service was established in order to The Head of the Internal Audit Service is appointed member of the Audit Committee of JSC Kedentransservice1. assist the Board of Directors and all executive bodies in and dismissed by the Chief Executive Officer of the increasing the efficiency of the Company’s management Company on the basis of the relevant decision of the Citizenship: Russian Federation. and improving its financial and economic activities. The Board of Directors of the Company. The Head of the tasks of the Internal Audit Service include the systematic Internal Audit Service is E. Ustinova. Does not own any shares or other securities of the Company. and consistent approach to the analysis and evaluation of the risk management system and the internal control The Head of the Internal Audit Service reports to system, as well as the corporate governance, as the the Audit Committee and the Board of Directors relevant tools to ensure reasonable confidence in (in particular, on the performance of the Internal Audit Commission achieving the objectives set for the Company. Audit Service for the quarter and year, status of the Company’s internal control system and the risk In its activities, the Internal Audit Service is guided management system, and the implementation of the The Audit Commission is a permanent body of the The Audit Commission was elected at the Annual by the Regulations on the Internal Audit Service of Internal Audit Service’s annual plan of activities and internal control of the Company that performs the General Meeting of Shareholders on 21 May 2019 and PJSC TransContainer1, legislation of the Russian its budget). monitoring of the Company’s financial and economic composed of: Federation, Regulations on the Audit Committee of activities, including its branches and representative h Oksana Firsova (Chairwoman); PJSC TransContainer, decisions of the General Meeting Main Activities of the Internal Audit Service in 2019: offices, for compliance with the legislation of the h Sergey Davydov; of Shareholders and the Board of Directors of the h Evaluation of the corporate governance practices; Russian Federation, as well as the Company’s Charter Company, internal regulatory documents of the Company and any internal documents. h Elena Yudina; h Evaluation of the management system of the Company’s and various standards for the activities of the internal subsidiaries; h Tatyana Tarynina; auditors defined by the International Standards for the The Audit Commission acts in the interests of h Vladimir Kiselev. Professional Practice of Internal Auditing and the Code h Analysis of the measures to comply with the comments the Company’s shareholders and reports to the of Ethics of the Institute of Internal Auditors. of the Audit Commission on the results of the audit General Meeting of Shareholders. In performing its of the financial and economic activities of PJSC activities, the Audit Commission is independent of However, the Audit Commission was re-elected at the TransContainer in 2018; The key principles of the Internal Audit Service are the the officials of the Company’s management bodies, Extraordinary General Meeting of Shareholders on principles of independence and fairness ensuring that h Evaluation of the efficiency of the risk management and its members are not the Company’s officials or 26 March 2020 as follows: it is functionally subordinate to the Board of Directors system and the internal control system; employees. h Mikhail Ponyavkin — Head of the Internal Control and administratively subordinate to the Chief Executive h Verification of the financial and economic activities of and Audit Service, Delo Management Company LLC, Officer of the Company. 4 branches of the Company. Chairman of the Audit Commission;

1 The Regulations are available on the Company’s website: https://trcont.com/documents/20143/69792/Regulations-Internal-Audit-160517-rus. 1 Until 2019. pdf/80622eaf-4686-d9e5-efb8-aa28bc26192e.

PJSC TransContainer | Annual report 2019 120 121 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

h Roman Antipov — Chief Technical Officer, DeloPorts Secretary of the Audit Commission — S. Pavlovsky. Company’s Employees), by the Board of Directors The set of measures taken by the Company to identify LLC; of the Company. The activities aimed at minimising and prevent various conflicts of interest helps to this risk include the measures to verify the h Sergey Pavlovsky — Chief Accountant, Delo The audit of the financial and economic activities of significantly minimise the likelihood of any negative Company’s key employees and candidates for such Management Company LLC, part-time — Chief the Company for 2019 was performed by the Audit consequences for the Company. positions for any possible conflicts of interest. The Accountant, Lukomorye LLC, Chief Accountant, Delo Commission during the period from 27 March 2020 report on the realisation of this risk is considered by Center LLC; to 3 April 2020. The Company has adopted the documents applied the Audit Committee on a quarterly basis; h Rustam Safin — Head of the Investment Analysis to all employees of the Company and posted on the h Consideration of the report on the cases of any Department, Delo Management Company LLC; The remuneration is paid to the members of the Audit internal corporate website: violation of the Code of Ethics, including the Commission in accordance with the Regulations on h Corporate Governance Code; h Aleksandr Fominov — Head of the Corporate the Payment of the Remuneration and Compensation situations related to the conflict of interest, Governance Service, Delo Management Company prepared by the Internal Audit Service of the h Code of Ethics; to the Members of the Audit Commission of PJSC LLC, Head of the Management Activities Company by the Audit Committee on an annual TransContainer. h Anti-Corruption Policy; Department, Delo Management Company LLC. basis. h Anti-Corruption, Corporate Fraud and Theft There were no conflicts of interest among the REMUNERATION PAID TO THE MEMBERS OF THE AUDIT COMMISSION IN 2019 Programme of PJSC TransContainer (available members of the Board of Directors and the members on the corporate website to all employees of the of the Management Board in the reporting period. Company); Position Full name Annual remuneration, RUB h Regulations on Insider Information; Chairwoman of the Audit Commission O. Firsova - In order to protect the interests of the Company in the h The Regulations on the Procedure for Considering Member of the Audit Commission S. Davydov 150,000 case of any possible conflict of interest, the Company has implemented the set of measures aimed at the the Situations Related to the Conflict (or Possible Conflict) of Interests in PJSC TransContainer in a Member of the Audit Commission* Yu. Fedosov 150,000 consideration of related-party transactions by the new edition (available on the corporate website to Board of Directors: monitoring all transactions made Member of the Audit Commission V. Kiselev - all employees of the Company). by the Company for the presence of any interest Member of the Audit Commission E. Yudina 150,000 of the parties, maintenance and keeping of the These documents determine the principles and Member of the Audit Commission O. Zorina 225,000 information on the persons interested in the relevant procedure for preventing, identifying and minimising Member of the Audit Commission* T. Tarynina 150,000 transactions up to date. potential risks of any conflicts of interest, including the obligation of an employee to disclose the Total 825,000 The Company also pays special attention to dealing information about a real or potential conflict of

* Before the Annual General Meeting of Shareholders on 21 May 2019. with insider information, which is also an element of interest, compliance with the balance of interests of the system for the settlement of the issues related to the Company and the employee, and the protection of the possible occurrence of any conflict of interest. the employee from any prosecution in relation to the statement on the conflict of interest. Settlement of Potential Conflicts of Interest Anti-Corruption The prevention and settlement of any conflicts of of the Company) in the Regulations on the Chief interest is an important mechanism for protecting the Executive Officer and the Regulations on the interests of the Company and its shareholders. The Management Board of the Company, as well as According to the high ethical standards of conduct administrative, bureaucratic and other formalities Board of Directors plays a key role in the prevention, in the labour contracts with the Chief Executive approved by the Company, PJSC TransContainer in any form from any persons/organisations identification and settlement of the internal conflicts Officer and the members of the Management fully shares the approach to create an environment or to any persons/organisations, including the Board; between the Company’s management bodies, of no tolerance for any form of corruption. representatives of the state, public organisations, shareholders, and employees. h Reference of the approval of the overlapping of private companies, and politicians. This point several positions in the management bodies of The Company does not accept any activities directly of view is confirmed by the Anti-Corruption The Company has taken the measures aimed at other organisations, as well as other paid positions or indirectly contributing to the proposal, giving, Statement of the Chief Executive Officer available preventing the situations related to any possible in other organisations, by the Chief Executive promise, extortion or receiving of bribes, mediation on the Company’s official website1. conflict of interests of the executive bodies, as well as Officer and the members of the Company’s in bribery, making the payments to simplify any Management Board to the competence of the the key managers of the Company, including: Board of Directors of the Company; h Inclusion of the obligation to refrain from any activities that may lead or potentially lead to a h Approval of the Corporate Risk Map, which provides conflict of interest (and, in the case of such a the implementation of the measures aimed at 1 The Anti-Corruption Statement of the Chief Executive Officer is available on the Company’s website: https://trcont.com/en/the-company/stop-corruption. situation, immediately notify the Board of Directors the prevention of risks (Unlawful Activities of the

PJSC TransContainer | Annual report 2019 122 123 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The Company is a member of the Anti-Corruption h List of Functions when the occurrence of Major transactions In 2019, no major transactions were made by Charter of the Russian Business, which confirms corruption, corporate fraud and theft is most the Company. the appropriate measures to prevent any likely; The main feature of the major transaction is its corruption in accordance with the requirements transcendence in relation to the Company’s ordinary of Article 13.3 of the Federal Law No. 273-FZ h Register of Corruption Risks and the List of economic activities. The Board of Directors of the Other transactions under the Charter “On Combating Corruption” dated 25 December Positions related to any corruption risks. Company approves the conclusion on the major 2008. transaction, which should include the information on In 2019, the Board of Directors of the Company the expected consequences for the activities of the considered 7 transactions within its competence The Company organises and regularly conducts Hotline Company as a result of the major transaction and the in accordance with Article 15.1 of the Charter of the relevant training for its employees in evaluation of the appropriateness of its conclusion. the Company, and the Management Board of the combating corruption and internal corporate The hotline ([email protected]) is available on the This conclusion is included in the information Company considered 6 transactions referred to its fraud. All regulatory documents in this area are internal corporate website of the Company, and the (materials) of the General Meeting of Shareholders competence according to Article 22.1 of the Charter provided to all employees by e-mail and posting Stop Corruption hotline may be accessed via the considering the issue of the consent to make or of the Company. them in the appropriate sections of the corporate official website. All appeals received on both lines subsequently approve the major transaction. website. are directed to the Head of the Economic Security Department and the Head of the Internal Audit According to the Anti-Corruption, Corporate Service. External Audit Fraud and Theft Program of PJSC TransContainer approved by the Management Board, the working In 2019, 260 appeals were registered, while group was established to perform the activities 187 appeals were received via the hotline (all belong In order to ensure the independence and fairness of candidacy of JSC PwC Audit for performing the audit under such programme. to the category of advertising of various goods and the audit of the financial statements, the Company has of the accounting (financial) statements according services). approved the Policy for the Interaction with the External to RAS and the consolidated financial statements All anti-corruption activities are regulated by the Auditor of PJSC TransContainer1. according to IFRS of PJSC TransContainer for 2019. In following internal documents: No call of 73 appeals received by the call centre and May 2019, the Annual General Meeting of Shareholders through other channels was related to any signs of The candidacy of the external auditor of the accounting of PJSC TransContainer, upon the recommendations h Anti-Corruption, Corporate Fraud and Theft corruption and/or conflict of interest. The relevant (financial) statements in accordance with RAS and of the Board of Directors of the Company, approved Programme of PJSC TransContainer; inspections were performed on all appeals. They the consolidated financial statements in accordance PwC Audit as the auditor of the Company regarding revealed no facts of corruption and corporate fraud. with IFRS of PJSC TransContainer is approved by the the audit of the accounting (financial) statements General Meeting of Shareholders of the Company upon according to RAS and the consolidated financial the recommendations of the Board of Directors of the statements according to IFRS for 2019. Company. The external auditor is selected among the 1 Extraordinary Transactions Big Four auditors at least once every 5 years. Moreover, According to the Contract for the Provision of Audit the Company considers it appropriate to select a single Services, the auditor has performed the following types auditor to ensure the audit of the financial statements of works: Interested party transactions In 2019, 20 notices were sent (2 notices were addressed of the Company in accordance with RAS and IFRS. The h Review of the interim and condensed consolidated to the Company’s shareholders). Company organises the request for proposals according financial statements of the Company as of 30 June According to the current procedure for notifying the to the procedure specified in the Regulations on the 2019, as well as for 3 and 6 months ending on such members of the management bodies of any upcoming According to Clause 1 of Article 83 of the Federal Procedure for Procurement of Goods, Works and Services date, prepared in accordance with IFRS 34; related party transaction (as defined in Article 83 of the Law No. 208-FZ “On Joint-Stock Companies” dated for PJSC TransContainer’s Needs and submits the Federal Law No. 208-FZ “On Joint-Stock Companies” 26 December 1995, a member of the Board of proposals for their consideration by the Audit Committee. h Review of the special financial information of dated 26 December 1995), the Board of Directors of the Directors and a member of the Management Board The Audit Committee evaluates all candidates for the the Company as of 30 June 2019, as well as for 3 and 6 months ending on such date, prepared in Company approved the procedure and form for sending of the Company are entitled to require the consent Company’s auditors and selects the best proposal and accordance with the instructions and accounting the electronic copies of all notices of such transactions of the Board of Directors or the General Meeting of makes the decision on the recommendations on the policies of Russian Railways; by the Company (from the e-mail address of the Shareholders to make any interested party transaction auditor to the Board of Directors. Corporate Secretary of the Company) to the e-mail before its completion. If necessary, the request is sent h Audit of the consolidated financial statements of addresses of the members of the Board of Directors to the e-mail address of the Company’s Corporate In March 2019, the Audit Committee proposed the the Company and its subsidiaries for the reporting and the members of the Management Board, as well Secretary. Board of Directors to recommend to the General year ending on 31 December 2019 prepared in as the Company’s shareholders (Minutes No. 10 dated Meeting of Shareholders of the Company to approve the accordance with IFRS; 17 March 2017). In total, the Company made 18 related-party transactions in 2019. 1 The Policy is available on the Company’s website: https://trcont.com/documents/20143/0/190307_%D0%BF%D1%80%D0%B8%D0%BB%D0%BE%D0 1 The detailed information on the transactions made in the reporting period is presented in the relevant Annex (Major and Related Party %B6%D0%B5%D0%BD%D0%B8%D0%B5_%D0%9F%D0%BE%D0%BB%D0%B8%D1%82%D0%B8%D0%BA%D0%B0+%D0%B2%D0%B7%D0%B0%D Transactions). 0%B8%D0%BC%D0%BE%D0%B4%D0%B5%D0%B9%D1%81%D1%82%D0%B2%D0%B8%D1%8F+%D1%81+%D0%92%D0%90_%D0%BD%D0%B0+ %D1%81%D0%B0%D0%B9%D1%82.pdf/c59bcaf6-f62e-ce24-b7f8-09e45fd35664.

PJSC TransContainer | Annual report 2019 124 125 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

REMUNERATION PAID TO THE COMPANY’S AUDITOR PWC AUDIT JSC IN 2019 (RUB)

Type of audit services Amount of remuneration Risk Management (including VAT) Audit of the consolidated financial statements in accordance with IFRS for 2018 3,980,800 The corporate risk management system of PJSC TransContainer (hereinafter referred to (payment of the remaining actual cost of the services) as CRMS) is one of the key components of the corporate governance system. Its goal is Audit of the accounting (financial) statements in accordance with RAS for 2018 3,450,000 to identify in a timely manner, evaluate, prevent and monitor risks that may affect the (payment of the remaining actual cost of the services) Company's capitalisation, performance and reputation. Review of the interim financial statements in accordance with IFRSfor 6 months 1,116,000 of 2019 The CRMS is based on universally recognised Approaches to risk management are formulated in the Advance payment for the audit of the consolidated financial statements in accordance 4,800,000 with IFRS for 2019 international standards: CRMS Concept and the CRMS Policy, approved by the Board of directors of the Company on 18 November Advance payment for the audit of the accounting (financial) statements in accordance 5,400,000 h the Enterprise Risk Management Integrated 2013. with RAS for 2019 Framework standard (COSO ERM, 2004, The Total 18,746,800 Committee of Sponsoring Organisations of the Risk managment principles: Type of the non-audit services Remuneration (including VAT) Treadway Commission); h a systematic and balanced approach; h continuity, depth, and completeness of the process; Provision of the non-audit services 0 h ISO 31000:2009 — Risk management. Principles Total 0 and guidelines (ISO 31000:2009, 2009, International h division of powers and levels of decision-taking; Organisation for Standardisation). h integration with the internal control system. h Audit of the special financial information of the of the non-audit services by the auditor is possible only Company for the reporting year ending on 31 after the prior approval of the Audit Committee, with December 2019 prepared in accordance with the the exception of the provision of the services in the field instructions and accounting policies of Russian of staff training, seminars and corporate training under RISK MANAGEMENT PROCESS Railways; the training programmes for various qualifications, h Audit of the accounting (financial) statements of the accounting and reporting and other training for the Company for 2019, according to RAS. Company’s employees and the members of the Board of Directors, as well as the provision of the consulting services regarding the accounting and reporting. Such RISK Cost of the Auditor's services non-audit services are considered to be approved in IDENTIFICATION advance by the Audit Committee provided that the The amount of the payment for the auditor’s services was amount of the non-audit services does not exceed RUB determined by the Board of Directors in May 2019 — 5 million (separately, for each service). If there is any RUB 15.8 million (excluding VAT and overhead expenses). excess in the cost of the non-audit services is more than RUB 5 million, the prior approval of the Audit Committee ASSESSMENT OF is required. MONITORING THE THE PROBABILITY Monitoring of the provision of the RISK STATUS AND SCALE OF THE non-audit services The Audit Committee firstly reviews the reasonableness IMPACT OF RISKS of attracting the audit organisation, type and amount In order to ensure the independence of the external of the non-audit services, and the amount of the auditor, the Company seeks not to attract the auditor for remuneration to the auditor for the provision of such the provision of the non-audit services. In the exceptional services. cases, when it seems appropriate, according to the RISK Policy on the Interaction with the Auditor, the provision In 2019, no agreements were concluded with JSC PwC MANAGEMENT ACTIVITIES Audit for the provision of the non-audit services.

PJSC TransContainer | Annual report 2019 126 127 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Development of the Risk Management System Corporate Risk Roadmap1

Depending on the likelihood of a risk and the extent of possible damage, PJSC At PJSC TransContainer, we are continuously results are identified, and stress-testing on TransContainer identifies three risk groups: critical, acceptable and minor. identifying risks and monitoring identified risks. A basic financial and production indicators is risk roadmap is approved every year. The work is conducted); carried out using an automated risk management h completion of the updating of the CRMS on Category Management control Risk assessment depending on the amount of material damage system developed by PJSC TransContainer’s IT the basis of changes in international standards and probability of realisation specialists in 2016. (COSO ERM 2017 and ISO 31000:2018); Critical risks2 Board of Directors Exceeds RUB 400 million with any probability; or exceeds RUB 200 million with a probability of more than 5%; h In 2019, the Company continued to improve the sequential enhancement of the role of or exceeds RUB 100 million with a probability of more than 80% quantitative methods in the Risk Management CRMS, focusing its main efforts on the following Acceptable risks Audit Committee From RUB 100 to 400 million with a probability from 0 to 5%; System; areas: or RUB 50 to 200 million with a probability of 5 to 80%; or less than RUB 50 million with a probability of more than 50% h introduction of elements of risk-oriented h deeper integration of risk management into the budgeting (using the financial model, the drivers Company’s business processes system. Minor risks Risk Committee Less than RUB 100 million with a probability of less than 5%; that most affect the achievement of financial or less than RUB 50 million with a probability of less than 50%

ORGANISATIONAL STRUCTURE OF RISK MANAGEMENT CORPORATE RISK ROADMAP

70

60 BOARD 50 OF DIRECTORS 40

30 Critical risks

AUDIT 20 Acceptable risks COMMITTEE 10 Minor risks

0 2015 2016 2017 2018 2019 SOLE EXECUTIVE Under generally accepted standards, risks are classified into four categories: strategic, operational, BODY INDEPENDENT regulatory, and financial. EXTERNAL INTERNAL AUDIT AUDITOR GOVERNANCE SERVICE DYNAMICS OF THE STRUCTURE OF THE CORPORATE RISK ROADMAP

COMMITTEE 70 AUDIT ON RISKS COMMISSION 60

50 Strategic risks THE OWNERS 40 Division for the Division for the Operational risks RISKS 30 coordination of the (MANAGEMENT) coordination of the risk Regulatory risks risk management management process 20 Financial risks process 10 0 WORKERS SOCIETIES 2015 2016 2017 2018 2019

1 For a detailed risk report, take a look at our Corporate Risk Roadmap 2019 appendix. 2 The Critical Risk Report was delivered to the Board of Directors on a quarterly basis throughout 2019.

PJSC TransContainer | Annual report 2019 128 129 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Disclosure of Information and Interaction with Shareholders and Investors

Information Policy

Transparency is one of the key principles h timely and complete disclosure of reliable and of corporate governance, ensuring timely, objective information about the Company, sufficient for shareholders, potential investors and other regular, complete and accurate disclosure interested parties to be able to make investment and of information about the Company's management decisions related to their participation in the Company; The following changes have been made to the Corporate 5) risks with corrected names: activities. h compliance with the requirements of the legislation Risk Roadmap for 2019: h “Increased return times on investments / of the Russian Federation, as well as the rules impairment of investments in subsidiaries and Key objectives of the Company’s information policy: established by the organisers of the securities 1) excluded risks: associated companies” (critical risk) has been h ensure protection of the rights and legal interests of markets on which the Company’s securities are h “Failure of PJSC TransContainer’s quality changed to “Increased return times / impairment the Company’s shareholders; traded. management system to comply with ISO 9001 of investments in subsidiaries and associated requirements” (minor risk); companies / failure to achieve project objectives” (critical risk); h “A change in the cost of transport in specialised PRINCIPLES OF THE INFORMATION POLICY containers” (minor risk); h “Negative influence of political factors on the financial and economic activity of the h “Exceeding the standards of mileage between h company” (acceptable risk) has been changed Regularity Timely disclosure of information through coordination of all subdivisions connected with repairs” (acceptable risk); Sequence information disclosure. to “Deteriorating or negative change of political Responsiveness h “Failure to comply with the provisions of the conditions” ( acceptable risk); h Synchronous and equivalent disclosure of significant information in Russia and abroad in legislation governing the Company’s activities in connection with the circulation of the Company’s securities on the Moscow and London respect to wagon and container repair” (acceptable h “Change in prices for services of co-performers stock exchanges. risk); during transportation” (acceptable risk) has been h Prompt presentation of the Company’s position with respect to rumors or unreliable data changed to “Dependence on price and conditions which may form a distorted view of the value of the Company or its securities. of co-performers” (acceptable risk); 2) included risks: h Disclosure of information that may significantly affect the Company’s value and the value h “Untimely acquisition of wagon and container fleet” h “Risk of deviation from planned Company of its securities as soon as possible. performance in terms of sales of services through (acceptable risk); Accessibility h Use of channels and information disclosure methods available to most stakeholders. e-commerce channels” (acceptable risk) has been h “The credit risk of the counterparty bank” changed to “Change of share of sales of services h Provision of free and unencumbered access of interested parties to the information (acceptable risk); through e-commerce channels” (acceptable risk); disclosed by the Company. Completeness h Disclosure of understandable, non-contradictory and comparable information. 3) combined risks: h “Setting tariffs that do not meet the level of Reliability h “Violation of the requirements of the bidders” h Provision of objective and balanced information, without avoiding disclosure of negative prices in the market of transport services” Comparability information that is significant to shareholders and investors. (acceptable risk) and “Violation of the requirements (acceptable risk) has been changed to “Setting Objectivity of corporate law” (acceptable risk); non-competitive tariffs” (acceptable risk); h Ensuring the neutrality of financial and other disclosed information, independence of representation from the interests of any party. 4) a corrected level of risk: h “Key employees leaving the Company” (acceptable risk) has been changed to “Insufficient provision of h “Reducing the Company’s capitalisation” was qualified personnel” (acceptable risk). changed from “acceptable” to “minor” due to the decrease in probability of this event;

PJSC TransContainer | Annual report 2019 130 131 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The Company complies with the disclosure including presentations for investors, releases and Shareholders' Equity and Securities requirements of the Federal Law “On Joint-Stock announcements on operating and financial results, Companies” and the Bank of Russia, as well as the as well as other important events. The corporate site COMPANY EQUITY STRUCTURE1, % applicable requirements of the Financial Control also provides additional communication capabilities Authority and regulation (FCA) and stock exchanges of for stakeholders — hotlines and a feedback system. 0.43 Russia and the UK. The Company is also guided by the principles of the Corporate Governance Code and the In 2019, the Company continued its practice of video 24.47 provisions of the ESG-Factors Disclosure Guide of the broadcasts of General Meetings of Shareholders. Delo-Center London Stock Exchange.1 Enisey Capital The Company maintains a regular dialogue with VTB Bank The Board of Directors monitors the timeliness of institutional investors and financial analysts, disclosure of reliable information on all essential providing feedback between the Company’s Other matters of the Company’s activities.2 The Corporate management and the investment community. Secretary participates in disclosure procedures, Representatives of the Company take part in implementing the Company’s information policy and investment conferences and forums organised by the 25.10 50 keeping it up to date, and submitting to the Board of Moscow Exchange, the London Stock Exchange, and Directors a report on compliance with it. Russian and foreign investment banks and companies. Moreover, the Company’s management holds The Company actively engages with the media, quarterly conference calls with financial analysts and maximising the realisation of the rights of interested investors on the results of the publication of IFRS Ordinary registered shares parties to receive information. However, the Company reporting. protects its interests in terms of restricting access to insider and confidential information, including The authorised capital of PJSC TransContainer amounts INFORMATION ABOUT EACH CATEGORY (TYPE) OF SHARES information constituting commercial or other secrecy Quality of information disclosure to RUB 13,894,778,000 and consists of 13,894,778 protected by law. in the Company's Annual Reports ordinary registered shares of the Company, with a Type and category of shares Ordinary registered nominal value of RUB 1,000. Form of issuance Uncertified According to Russian legislation and the requirements The level of information disclosure in the Annual of regulators in the securities market, the Company Reports of PJSC TransContainer is traditionally highly As of 31 December 2019, ordinary registered shares of Issue volume, pcs. 13,894,778 3 has adopted documents aimed at protecting the appreciated by Russian and international experts: the Company are allowed to be traded on the Moscow Nominal value of 1 (one) security, 1,000 rights and interests of the Company’s shareholders in h since 2013, at the Yearly Annual Report Exchange (MOEX) in the third level quotation list, ticker: in roubles transactions with securities of the Company, as well TRCN. Competition of PJSC Moscow Exchange, the Information on state registration No. 1-01-55194 as prevention and suppression of cases of misuse of Company’s Annual Reports have been regularly of securities issue Е dated 11 May insider information. The company carries out a set of shortlisted among companies with a capitalisation 2006 measures to maintain an up-to-date list of insiders on of RUB 40 to 200 billion; Global Depositary Receipts a continuous basis. Compliance with the requirements (GDR) h of insider information control is monitored by an the international rating organisation ReportWatch 2014, by order of CJSC Stock Exchange MICEX, global gave the Company’s Annual Report a B+ and insider information specialist who reports to the Global Depositary Receipts were issued on the shares depositary receipts for shares of the Company are ranked it among the best annual reports; Company’s Board of directors. of PJSC TransContainer at the rate of 10 GDR = 1 share included in the section “List of off-list securities” h the Company’s Interactive Annual Report and of the Company. Since 2010, the depositary bank has of the list of securities admitted to trading on the The company uses all possible channels of the Printing Version were the winners of the been BNY Mellon () Nominees Limited, part of Moscow Exchange. communication, including information systems ARC Awards 2019 Annual Reports Award among The Bank of New York Mellon financial group. Since www.e-disclosure.ru (for Russia) and the RNS companies in the logistics industry; 2015, the depositary bank’s functions under the Global page of the London Stock Exchange website www. Depository Receipts Program have been transferred h in 2019, the Interactive Annual Report and Changes in the structure of londonstockexchange.com (as required by FSA, EU the Printing Version were included in the list directly to the New York division of The Bank of New shareholder capital in 2019 Transparency Directive and LSE). of finalists (second place) of the international York Mellon. Corporate & Financial Awards competition. As of 31 December 2019, LLC Enysei Capital All relevant information is available on the Company’s Global Depositary Receipts are traded on the main consolidated the Company’s shareholding in the official website (https://www.trcont.com/en/web/guest), London Exchange (LSE) market, ticker: TRCN. Since amount of 25.10% of the share capital, as well

1 Ecological, social and managerial factors. 1 According to PJSC TransContainer’s register of shareholders as of 31 December 2019, the capital was formed on the basis of long-term 2 This includes financial results and operating results, equity structure, lists of affiliates, reports of significant facts, and other information in accordance investments. These data reflect the information available to the Company on the basis of the register of shareholders formed by the registrar of with the requirements of the legislation of the Russian Federation and Great Britain. the Company, as well as on the basis of the information publicly disclosed by the Company’s shareholders. 3 https://trcont.com/en/investor-relations/charter-and-bylaws/bylaws.

PJSC TransContainer | Annual report 2019 132 133 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

as VTB Bank (PJSC) in the amount of 24.47% of the rights of ordinary registered undocumented London Exchange (LSE) USD Moscow Exchange (MOEX) RUB Company’s share capital. The Company’s free float shares of PJSC TransContainer from JSC OTLK Quote at the end of the previous year 9.50 Quote at the end of the previous 4,335 share is 0.43%. to OOO “Delo-Center” took place. Based on this, (31 December 2018) (29 December 2018) OOO “Delo-Center”, as of 31 December 2019, owns On 27 November 2019, an auction for JSC OTLK’s 50,00000014% of the authorised capital of the Annual minimum (9 April 2019) 9.40 Annual minimum (8 January 2019) 4,370 block of shares (50% + 2 shares) of PJSC Company. Annual maximum (25 April 2019) 9.65 Annual maximum (10 September 2019) 9,025 TransContainer was held. OOO “Delo-Center” Quote at the end of the year 9.65 Quote at the end of the year 8,275 (Delo Group of Companies) was recognised as the The fact that the Company’s equity includes private (31 December 2019) (30 December 2019) winner of the auction. long-term investors confirms the fundamental investment attractiveness of the Company’s business, On 13 December 2019, in the register of shareholders and is expected to have a positive impact on its In the medium term, the dynamics of quotations of The total income of the Company’s shareholders of PJSC TransContainer, the transfer of ownership prospects for future development. the Company’s securities corresponds to the trends from the date of the IPO was 12.0% per annum for of the Russian stock market as a whole and is ahead ordinary shares and 2.7% per annum regarding the of the dynamics of quotations of any comparable global depositary receipts. companies in the transport sector. Listing and Dynamics of Quotes

DYNAMICS OF THE GLOBAL DEPOSITARY RECEIPTS DYNAMICS OF THE PRICES OF THE COMPANY’S SHARES (TRCN) THE COMPANY’S SHARES (TRCN GDR) ON THE LONDON STOCK TRADED ON THE MOSCOW STOCK EXCHANGE Since 2010, shares of PJSC TransContainer have Company’s share prices increased significantly, while EXCHANGE FROM THE DATE OF THE IPO TO 31 DECEMBER 2019 FROM THE DATE OF THE IPO TO 30 DECEMBER 2019 been admitted to trading on the Moscow Exchange. the increase in the price of depositary receipts for the Depositary receipts for the Company’s shares are year was negligible: traded on the main site of the London Exchange. h on the Moscow Exchange, quotations rose by 86.8% with the growth of the MICEX index by 28.2%; h on the London Exchange, quotations rose by 1.6% Dynamics of the Company's share when the RTS index rose by 42.5%. quotes and depositary receipts Accordingly, the total income of holders of ordinary The growth of the railway container transportation shares for 2019 increased by 28.0%, and the total market has a positive impact on the dynamics of income of depository receipts holders increased by the Company’s securities quotations. In 2019, the 42.5%. ov ov ec ec ov Feb n Sep ec

TRCN: +24.5% RTS Index: –6.7% TRCN: +224.6% MICEX Index: +96.6% DYNAMICS OF THE GLOBAL DEPOSITARY RECEIPTS DYNAMICS OF THE PRICES OF THE COMPANY’S ON COMPANY SHARES (TRCN GDR) SHARES (TRCN) WHICH WERE TRADED ON THE MOSCOW ON THE LONDON EXCHANGE IN 2019 EXCHANGE IN 2019 Liquidity maintenance measures Exchange PJSC, the Company ensures the maintenance of two-way quotes using the market- In 2019, the Company continued to take the steps making mechanism. In the reporting year, JSC in the interests of the market participants to FINAM brokerage company acted as the market maintain the relevant liquidity of its securities, maker in relation to the Company’s ordinary shares although the main reason for a decrease in liquidity traded on the Moscow Stock Exchange. was outside the control of the Company. In addition, the Edison international research Despite the transfer of the Company’s shares to company provided independent analytical support the Third Level section of the List of Securities for all shares and depositary receipts of the approved for their trading by Moscow Stock Company. an May Sep ec an May Ag ec

TRCN: +1.6% RTS Index: +42.5% TRCN: +86.8% MICEX Index: +28.2%

PJSC TransContainer | Annual report 2019 134 135 Corporate Governance Financial Report Appendices

Dividend Policy

According to the Regulations on the Dividend Policy h aiming at increasing the Company’s market of PJSC TransContainer,1 the target level of the capitalisation and investment attractiveness; share of the Company’s net profit payable in the h observance of the rights of the Company’s form of dividends is 25% of the Company’s net profit shareholders stipulated by the legislation of the calculated in accordance with RAS2. However, the Russian Federation and best corporate governance actual share of the Company’s net profit payable in practices; the form of dividends may differ from 25% depending h transparency of the procedures for determining on the Company’s business plan, as well as the the amount of dividends and their payment. recommendations of the Board of Directors of the Company. The Annual General Meeting of Shareholders on 21 May 2019 (Minutes No. 39 dated 23 May 2019) The Company’s Dividend Policy is based on the made the decision to transfer 75% of the net profit following principles: based on the results of the Company’s activities for h if there is any net profit, the Company annually 2018 for paying dividends, which amounted to RUB transfers a part of such profit for paying dividends, 6,674.63 million. while using the remaining profit at the disposal of the Company mainly for the implementation of The Extraordinary General Meeting of Shareholders the Company’s investment program, as well as the on 23 September 2019 (Minutes No. 40 dated 25 repayment of the Company’s liabilities payable for September 2019) made the decision to transfer 35% the next period; of the net profit based on the results of the Company’s h compliance with the balance of interests of the activities for the 1st half of 2019 for paying Company and its shareholders; dividends, which amounted to RUB 2,147.72 million.

AMOUNT OF THE DIVIDENDS ACCRUED AND PAID BY THE COMPANY IN THE PERIOD FROM 2015 TO 2019

Dividends 2015 2016 2017 2018 2019 (for 2014) (for 2016) (for 2017) (for 2018) From For the 1st For the 2nd For the 1st undistributed half of 2016 half of 2016 half of 2019 profits for the previous years Total amount of 985.97 3,499.26 1,330.56 650.41 4,071.73 6,674.63 2,147.72 dividends, mln. RUB Amount of dividend 70.96 251.84 95.76 46.81 293.04 480.37 154.57 per share, RUB Dividends (% of the 25.0 100 100 50 75 75 35 net profit) Declaration date 24 Jun 2015 9 Sep 2016 9 Sep 2016 22 Jun 2017 15 May 2018 21 May 2019 23 Sep 2019 Actual payment date 23 Jul 2015 4 Oct 2016 4 Oct 2016 24 Jul 2017 8 Jun 2018 6 Jun 2019 10 Oct 2019 Unpaid dividends3, 141.92 503.68 191.52 1,017,602.09 [.-.] [.-.] [.-.] RUB

1 The Regulations are available on the Company’s official website: https://trcont.com/documents/20143/69792/140219-Polozhenie_o_dividendnoi_ politike__novaja_redakcija_.pdf/17585a5e-2bda-f9e1-a102-ec59038b334d. 2 Excluding any income from the revaluation of financial investments. 3 All dividends were fully transferred to the registrar of the Company. No dividends were paid to the Company’s shareholders due to the lack of the relevant data in accordance with Clause 5 of Article 44 of the Federal Law No. 208-FZ “On Joint-Stock Companies” dated 26 December 1995.

PJSC TransContainer | Annual report 2019 136 137 FINANCIAL +21.1% +36.4% Growth of adjusted revenue Growth of operating profit REPORT relative to 2018 relative to 2018

PJSC TransContainer | Annual report 2019 138 139 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Financial Results An overview of the Company’s financial indicators is presented in the table below: 2019 2018 Change y-o-y

Overview of Operational and Financial Results RUB mln % Revenue 86,179 76,959 +9,220 +12.0

Adjusted Revenue1 37,896 31,288 +6,608 +21.1 General information The Company managed to achieve record high financial and operational results throughout its Adjusted Operating Expenses2 23,286 21,215 +2,071 +9.8 PJSC TransContainer is the major Russian intermodal history due to the implementation of its strategic EBITDA3 19,987 15,790 +4,197 +26.6 container operator. As of 31 December 2019, the goals aimed at boosting the capitalisation. Taking 4 Company owned and leased 30,676 flatcars and into account favourable market conditions, the EBITDA Margin , % 52.7 50.5 2.2 p.p. 83,684 high-capacity containers (ISO containers), Company swiftly responded to the dynamics of Adj. EBITDA 18,560 13,342 5,218 39.1 while the share of rolling stock car transportation demand and allocated its resources in the best EBITDA Margin4, % 49.0 42.6 6.3 p.p. under the Company’s control on the market of possible way. Special attention was paid to upgrade rail container transportation accounted for 41%. and expansion of the container and flatcar fleet, Profit for the period 11,750 9,509 +2,241 +23.6 TransContainer owns 38 terminals in Russia and improvement of the services structure, and cost Net profit margin4 31.0 30.4 0.6 p.p. through its subsidiaries and joint ventures operates optimisation. one terminal in Slovakia under a long-term lease, Debt 22,352 11,306 +11,046 +97.7 two terminals through a joint venture LLC Freight As a result, in 2019, the volume of containers Net debt5 15,872 1,779 +14,093 +792.2 Village Kaluga North, one terminal through a transported by the Company’s fleet grew by 4.7% LTM EBITDA6 19,987 15,790 +4,197 +26.6 subsidiary CJSC Logistika-Terminal; a joint venture year-on-year to 2,050 thousand TEUs. The share between TransContainer and Kazakhstan Temir of revenue-generating container shipments by Net debt / LTM EBITDA, % 79.4 11 68 p.p. Zholy – JSC Kedentransservice – operates 19 railway the Company’s assets (flatcars and/or containers) terminals in Kazakhstan. The Company’s sales had a 6.1% increase year-on-year, totalling network comprises about 90 sales offices in Russia, 1,638 thousand TEUs. The Company’s adjusted providing the footprint in the CIS, as well as in revenue increased by 21.1% year-on-year to Considering the on-going rise in the customer As of 31 December 2019, the Company’s Europe and Asia. RUB 37,896 million, operating profit surged by demand for the Company’s services, TransContainer’s total debt was RUB 22,352 million with net 36.4% year-on-year to RUB 15,771 million, and net Investment Plan for 2019 was increased more than debt of RUB 15,872 million, bringing the In 2019, the Russian rail container transportation profit grew by 23.6% year-on-year amounting to twofold. Thereat, the total investment amounted to Net Debt to EBITDA ratio to 79.4%. market stood at 12.4% year-on-year and achieved RUB 11,750 million. RUB 17,257 million in the reporting period. Major 4,986 thousand TEUs (twenty-foot equivalent investments were spent on purchasing containers and units). The growth was observed in all types of The Company’s key indicators of economic flatcars. transportation: domestic shipments were up by 9.1% efficiency, namely the profitability of net profit and year-on-year, the share of export transportation return on equity, corresponded to the indicators set grew by 12.7% year-on-year, and import and in the strategy: 31.0% and 20.6%, respectively. transit traffic had an increase of 24.1% and 5.3%, respectively.

1 Adjusted Revenue is calculated as total revenue less cost of integrated freight forwarding and logistics services. 2 Adjusted Operating Expenses are calculated as operating expenses less cost of integrated freight forwarding and logistics services. 3 EBITDA is calculated as profit for the period before income tax, interest expense, depreciation and amortisation. 4 EBITDA Margin is defined as EBITDA divided by Adjusted Revenue. 5 Net Debt is calculated as long-term debt, finance lease obligations, short-term debt and current portion of the long-term debt less cash and cash equivalents and short-term investments. 6 LTM EBITDA is calculated as EBITDA for the past 12 months.

PJSC TransContainer | Annual report 2019 140 141 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Overview of Current Situation and Trends Indicator 2019 2018 Change y-o-y RUB mln %

In Q1 2020, the Russian rail container transportation containers and flatcars. Moreover, the Company Other comprehensive income -555 312 -867 -277.9 market continues to grow at a 14% rate on a year- will take steps to further improve the efficiency of Remeasurements and other reserves -131 117 -248 -212.0 over-year basis. Based on the market dynamics in the existing fleet management. for post-employment benefit plans Q1 2020 and taking into account the challenges we Exchange differences on translating -75 49 -124 -253.1 face (limitations due to the COVID-19 pandemic, Despite the existing risks and negative factors, foreign operations (TransContainer) volatility of oil prices and stock market indices), the Company is of the view that the Russian the Company assumes that in the current year the container transportation market maintains a Exchange differences on translating -349 146 -495 -339.0 growth rate of the rail container transportation significant potential of future long-term growth foreign operations (subsidiaries market may slow down and come up with through higher containerisation level, development and JVs) approximately 5–10% year by year. The Company of logistics technology and services, Russia’s Other comprehensive income 11,195 9,821 +1,374 +14.0 keeps paying close attention to current market economic advance in the medium term, as trends and developments. well as further development of the land transit transportation between China and European Following market trends and the aim of countries. In the current situation, TransContainer Adjustments and additional presented in the revenue as a separate line strengthening market position, the Company will is going to further expand and optimise the financial information “Third-party charges related to integrated freight continue to invest in upgrading of the container and production assets base, advance the business forwarding and logistics services”. In the reporting flatcar fleet. Bearing in mind the existing risks, the operational and management performances, The majority of the Company’s services are provided period, this revenue component is not emphasised Company will also consider the possibility of using expand the range of transportation and logistics through third-party entities. Accordingly, third-party due to its irrelevancy; it is part of the revenue from containers and flatcars under lease or other terms, services, and enhance the client experience in order charges for such services are presented within the other activities (see the Revenue section for more depending on the market condition and prices of to attract new customers. Company’s revenues and expenses. In particular, details). such charges include the value of railway tariffs and third-party charges related to core activities. All third-party services are presented as “Third- party charges related to core activities”. Key financial results Third-parties’ services not related to integrated freight forwarding and logistics services are

KEY FINANCIAL RESULTS OF THE COMPANY

Indicator 2019 2018 Change y-o-y SUMMARY OF THIRD-PARTY CHARGES INCLUDED IN THE COMPANY’S REVENUE

RUB mln % Indicator 2019 2018 Change y-o-y Revenue 86,179 76,959 +9,220 +12.0 RUB mln % Other operating income 1,161 1,486 -325 -21.9 Third-party charges related to core activities 48,283 45,671 +2,612 +5.7 Operating expenses -71,569 -66,886 -4,683 +7.0

Operating profit 15,771 11,559 +4,212 +36.4 For analytical purposes, the Company includes the share of third parties, who assist in providing transportation and Interest expenses -1,118 -885 -233 +26.3 logistics services, in revenues and expenses: Interest income 368 465 -97 -20.9 ADJUSTED REVENUE Foreign exchange gain, net -229 417 -646 -154.9

Share of result of associates and JVs 583 268 +315 +117.5 Indicator 2019 2018 Change y-o-y

Other financial results, net 21 154 -133 -86.4 RUB mln % Profit before Income Tax 15,396 11,978 +3,418 +28.5 Revenue 86,179 76,959 +9,220 +12.0

Income Tax Expenses -3,646 -2,469 -1,177 +47.7 Third-party charges related to core activities -48,283 -45,671 -2,612 +5.7

Profit for the period 11,750 9,509 +2,241 +23.6 Adjusted revenue 37,896 31,288 +6,608 +21.1

PJSC TransContainer | Annual report 2019 142 143 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

INTEGRATED FREIGHT FORWARDING AND LOGISTICS SERVICES REVENUE ADJUSTMENT Shown below is the revenue structure for 2019 and 2018, respectively:

Indicator 2019 2018 Change y-o-y Indicator 2019 2018 Change y-o-y

RUB mln % RUB mln % Integrated freight forwarding and logistics 79,895 71,158 +8,737 +12.3 Integrated Freight Forwarding and Logistics 79,895 71,158 +8,737 +12.3 services Services

Third-party charges related to integrated freight -48,283 -45,671 -2,612 +5.7 Agency Services 3,217 2,988 +229 +7.7 forwarding and logistics services Other activities 3,067 2,813 +254 +9.0 Adjusted revenue related to integrated freight 31,612 25,487 +6,125 +24.0 Total revenue 86,179 76,959 +9,220 +12.0 forwarding and logistics services

OPERATING EXPENSES ADJUSTMENT The Company’s revenue for 2019 increased by parties, increase in terminal handling volumes, RUB 9,220 million or 12.0% year-on-year, to RUB and favourable market conditions which affected Indicator 2019 2018 Change y-o-y 86,179 million versus RUB 76,959 million in 2018. the market tariffs dynamics. The increase in revenue was caused by the growth RUB mln % in revenue-generating transportation, service The table below shows the structure of adjusted Operating expenses 71,569 66,886 +4,683 +7.0 development with the involvement of third- revenue for 2019 and 2018, respectively. Third-party charges related to core -48,283 -45,671 -2,612 +5.7 activities

Adjusted operating expenses 23,286 21,215 +2,071 +9.8 STRUCTURE OF ADJUSTED REVENUE

Indicator, RUB mln 2019 2018 Change y-o-y

RUB mln share % RUB mln share % RUB mln %

Some items used, such as Adjusted Revenue, value of noncurrent effects, is calculated to more Adjusted revenue from integrated 31,612 83.4 25,487 81.5 +6,125 +24.0 Adjusted Operating Expenses, EBITDA, Adjusted accurately reflect the Company’s performance. freight forwarding and logistics EBITDA Margin, and Adjusted Net Profit Margin services are not IFRS financial metrics and constitute Revenue from agency 3,217 8.5 2,988 9.5 +229 +7.7 supplementary indices of the Company’s Revenue services operating activities. They are used as additional Revenue from other 3,067 8.1 2,813 9.0 +254 +9.0 analytical tools with limited applicability, so they The revenue consists of three main components: activities shall be used neither separately nor together revenue from integrated freight forwarding and instead of IFRS metrics. logistics services, agency remuneration, and Total adjusted revenue 37,896 100 31,288 100 +6,608 +21.1 revenue from other activities. The period under review and the comparable period (2018) were characterised by a significant Revenue from other activities includes: revenue nonrecurrent effects related to revenue from the from rail container transportation, revenue from Adjusted revenue grew by 21.1% Integrated freight forwarding and sale and disposal of fixed assets. In this regard, services of cargo transportation and handling with year-on-year to RUB 37,896 million logistics services the Adjusted EBITDA indicator, adjusted for the involvement of third parties, revenue from trucking, in 2019, compared to RUB 31,288 and other income. Revenue from integrated freight forwarding and million in 2018. This is mainly due logistics services was up by 12.3% year-on-year to RUB to the increase in the volume of 79,895 million in the reporting year. integrated logistics services amid greater volumes of revenue-generating Adjusted revenue from integrated freight forwarding transportation and favourable price and logistics services grew by 24.0% year-on-year conditions. and totalled RUB 31,612 million in 2019, as a result of higher revenue-generating transportation volumes and continued shift of demand for integrated logistics services.

PJSC TransContainer | Annual report 2019 144 145 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Agency services Revenue from other services in 2019 was up by 9.0% to Adjusted operating expenses 23,286 million in 2019 from RUB 21,215 million RUB 3,067 million against RUB 2,813 million in 2018. This in 2018. This is mainly due to increased cargo Revenue from agency services increased by 7.7% year- is associated with the growth in the volume of services, Adjusted operating expenses (as defined in the transportation and handling costs, depreciation and on-year to RUB 3,217 million in 2019, compared to RUB partially offset by the shift in customer demand in favour Adjustments and Additional Financial Information amortisation, and other expenses. 2,988 in the year before. This growth was provoked by of integrated freight forwarding and logistics services. section) grew by 9.8% year-on-year to RUB increased volumes of terminal services, tariff indexation, as well as changes in the structure of services under the STRUCTURE AND DYNAMICS OF ADJUSTED OPERATING EXPENSES FOR 2019 AND 2018, RESPECTIVELY agency agreement with Russian Railways. Other operating income

2019 2018 Changes for Other operating income in 2019 totalled RUB 1,486 the period Revenue from other activities million (RUB 839 million in 2018). Furthermore, other income for the previous year included a one-time effect RUB mln % RUB mln % RUB mln % Revenue from other services included revenue related to the sale of St. Petersburg Vitebsk terminal in Cargo transportation and handling 6,492 27.9 6,422 30.3 +70 +1.1 components previously considered separately: rail December 2018. services container transportation, trucking, cargo transportation Payroll charges 6,202 26.6 5,407 25.5 +795 +14.7 and handling services provided together with third parties, and other freight forwarding and logistics Operating expenses Materials and repair costs 3,692 15.9 3,427 16.2 +265 +7.7 services. Shown below is the structure of the Company’s operating Depreciation and amortisation 3,473 14.9 2,927 13.8 +546 +18.7 expenses for 2019 and 2018, respectively: Taxes other than income tax 383 1.6 725 3.4 -342 -47.2

Rent 149 0.6 410 1.9 -261 -63.7 Indicator 2019 2018

RUB mln % of % of RUB mln % of % of Other expenses 2,895 12.4 1,897 8.9 +998 +52.6 operating revenue operating revenue Total adjusted operating 23,286 100.0 21,215 100.0 +2,071 +9.8 expenses expenses expenses Third-party charges related to core 48,283 67.5 56.0 45,671 68.3 59.3 activities

Cargo transportation and handling 6,492 9.1 7.5 6,422 9.6 8.3 services Cargo transportation and handling was driven by salary indexation and bonus payments Payroll charges 6,202 8.7 7.2 5,407 8.1 7.0 services related to financial and operational performance, as well as partially offset by a 5.7% drop in the average Depreciation and amortisation 3,692 5.2 4.3 3,427 5.1 4.5 In 2019, cargo transportation and handling costs grew headcount from 3,502 to 3,301 people and the Materials and repair costs 3,473 4.9 4.0 2,927 4.4 3.8 by RUB 795 million or 14.7%, to RUB 6,202 million. pension provision reserve adjustment. Taxes other than income tax 383 0.5 0.4 725 1.1 0.9 This is based on a number of reasons:

Rent 149 0.2 0.2 410 0.6 0.5 1) due to the Company’s efforts to optimise fleet Depreciation and amortisation Other expenses 2,895 4.0 3.4 1,897 2,8 2,5 management, cost savings on empty runs partially offset the impact of Russian Railways tariff In 2019, depreciation and amortisation expenses Total operating expenses 71,569 100.0 83.0 66,886 100.0 86.9 indexation; for property, plant and equipment grew by RUB 546 million or 18.7% year-on-year, to RUB 3,473 million 2) the increase in the volume of integrated freight versus RUB 2,927 million in 2018, which reflected the The Company's operating expenses Third-party charges related to core forwarding and logistics services provided by the increase in capital expenditures made in 2018, as well saw an increase of RUB 4,683 million activities Company led to changes in the structure of expenses as the contribution from the consolidation of CJSC or 7.0% year-on-year, to reach RUB in terms of cargo transportation and handling Logistics-Terminal and LLC SpecTransContainer. 71,569 million in 2019 from RUB Expenses on third-party services related to core activities services. surged by 5.7% year-on-year and amounted to RUB 66,886 million in the previous year. 48,283 million in 2019 versus RUB 45,671 million in Materials and repair costs This was due to a significant growth 2018. This item’s dynamics is driven by the growth in Payroll charges in the cost of services of third-parties the Company’s operating volumes, tariff indexation of Materials and repair costs grew 7.7% year-on-year to related to core activities. Russian Railways and subcontractors, along with the Payroll charges were up by RUB 70 million or 1.1% RUB 3 billion 692 million in 2019 versus RUB 3 billion growth in international transportations carried out in year-on-year, to RUB 6,492 million in 2019 from 427 million in 2018. The main reason was the cooperation with third parties RUB 6,422 million in the previous year. The increase increased number of repairs, caused by a greater

PJSC TransContainer | Annual report 2019 146 147 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

intensity of the fleet use. Another factor was the Interest income Liquidity and Capital Resources higher average repair price due to increased prices of flatcar components and spare parts, driven by the Interest income went down by RUB 97 million or growing demand in the Russian market. 20.9% year-on-year, from RUB 465 million in 2018 As of 31 December 2019, the Company’s net cash assets. Over the reporting period, the Company’s to RUB 368 million in the reporting year, which was and cash equivalents amounted to RUB 3,580 million, operations and capital expenditures were financed conditioned by an increase in the balances in deposit while its current assets exceeded current liabilities by from its own cash flows. Taxes other than income tax accounts due to the lag of actual capital expenditures RUB 998 million. from the target ones. Taxes other than income tax were down by 47.2% The Company’s business is asset and capital-intensive Cash flows year-on-year to RUB 383 million in 2019 from RUB and requires substantial capital expenditure for 725 million in the previous year, mainly due to the Profit before income tax the purchase of flatcars and containers, for the The Company’s cash flows structure for 2019–2018, VAT calculation dynamics. development and modernising its terminals and other respectively, is presented below. Due to the above-mentioned reasons, the Company’s profit before income tax grew by RUB 3,418 million or Rent 28.5% year-on-year, from RUB 11,978 million in 2018 Indicator, RUB mln 2019 2018 to RUB 15,396 million in 2019. Net cash provided by operating activities 12,122 11,390 Rental payments fell by RUB 261 million or 63.7% year-on-year, to RUB 149 million in 2019 from Net cash used in investing activities -18,818 -7,197 RUB 410 million in the previous year, in relation to Income tax expenses Net cash provided by financing activities 1,052 663 the optimisation of the Company’s management structure and lower payments for premises rental. . Income tax expenses had an increase of RUB 1,177 Net increase in cash and cash equivalents -5,644 4,856 million or 47.7% year-on-year, from RUB 2,469 Foreign exchange effect on cash and cash equivalents -303 500 million in 2018 to RUB 3,646 million in 2019, caused Net cash and cash equivalents at the end of the period 3,850 9,527 Other operating expenses by increase in taxable profit.

Other operating expenses include security, Effective income tax rate went up from 20.6% in consulting services, fuel and energy, purchase of 2018 to 23.7% in the reporting period. licences and software, communication fees, changes Cash flow generated by operating Cash flow used in financing in reserve charges, etc. Over the reporting year, activities activities other operating expenses grew by 52.6% year-on- Total profit and comprehensive year to RUB 2,895 million from RUB 1,897 million in income for the period Cash flow generated by operating activities saw an Cash flow used in financing activities was up by RUB the previous year. This increase was mainly driven increase of RUB 732 million or 6.4% year-on-year, 389 million or 58.7% year-on-year, and reached RUB by the growth in expenses under the following As a result of the factors discussed above, the profit from RUB 11,390 million in 2018 to RUB 12,122 1,052 million in 2019, compared to RUB 663 million items: depreciation reserve changes and consulting for the full year of 2019 grew by RUB 2,241 million or million in 2019, mainly due to increase in operating in 2018. This was mainly due to the issue of RUB- services, and partially offset by the decrease in 23.6% year-on-year, and reached RUB 11,750 million profit. denominated bonds in the amount of RUB 10 billion expenses under purchase of licences and software. compared to RUB 9,509 million for the same period in October 2019. in 2018. Taking into account the exchange rate differences relating to foreign operations and other Cash flow used in investing Interest expenses effects, the total comprehensive income of the activities Capital expenditure Group for the reporting period increased by 14.0% Interest expenses grew by RUB 233 million or 26.3% and totalled RUB 11,195 million, against RUB 9,821 Cash flow used in investing activities grew by RUB Capital expenditure grew by RUB 10,225 million or year-on-year, from RUB 885 million in 2018 to RUB million in 2018. 11,621 million or 161.5% year-on-year, from RUB 145.4% year-on-year, from RUB 7,032 million in 2018 1,118 million in 2019, mostly due to an increase in 7,197 million in 2018 to RUB 18,818 million in 2019. to RUB 17,257 million in 2019. The majority of the principal. This primarily resulted from an increase in capital capital expenditure was spent on acquiring new ISO expenditures from RUB 7,032 million to RUB 17,257 containers and flatcars. million, respectively.

PJSC TransContainer | Annual report 2019 148 149 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Planned capital expenditure for 2020 The total capital expenditure of the Company for to RUB 4,987 million. The annual coupon rate of of RUB 2,500 million and the accrued coupon income 2020 is budgeted at RUB 22.7 billion (excluding VAT), the bonds for five years is 9.45% with interest paid of RUB 133 million. The short-term portion of the The Company’s capital expenditure programme is but the real volume of investments will depend on semi-annually. long-term bond issue and the coupon income were aimed at maintaining its position as a market leader market conditions. The 2020 investment programme reflected in the consolidated statement of financial in the Russian container sector, strengthening its is focused on the acquisition of flatcars and Bonds series BO-02 are to be redeemed in four position as part of the short-term portion of long- competitive advantages, as well as optimising its containers and further improvement of the terminal equal instalments within the fourth and fifth years, term bond issues. asset structure and key operational metrics. infrastructure. respectively. Thus, these bonds are classified as long-term borrowings as at the reporting date, excluding the first and the second stages of principal Working capital repayment in March and September 2020 for a total Capital Resources amount of RUB 2,500 million. The Company’s working capital is defined as the difference between its current assets and As of 31 December 2019, the bonds carrying value current liabilities. Working capital structure as of The Company’s current operations and capital The coupon income was reflected as the short- amounted to RUB 5,128 million, including the short- 31 December 2019 and 2018 are given in the table expenditure have historically been financed by term portion of long-term bond issues in the term portion of long-term bond issue in the amount below. the Company’s own cash flow and proceeds from consolidated statement of financial position. issuing domestic debt. As of 31 December 2019, the Company’s financial indebtedness mainly consisted of three outstanding bond issues in an RUB-denominated bonds series Indicator, RUB mln 31 December 2019 31 December 2018 aggregate amount of RUB 22,352 million compared BO-01 to RUB 11,306 million as of 31 December 2018. Current assets The Company’s net debt as of 31 December 2019 On 25 January 2018, the Company issued non- Inventory 630 222 totalled RUB 15,872 million. convertible five-year bonds for a total amount Trade and other receivables 1,799 1,744 of RUB 6,000 million at a par value of RUB 1 As of 31 December 2019, almost all the Company’s thousand each. Proceeds from the issuance after Prepayments and other current assets 7,641 4,480 financial indebtedness was unsecured. The the deduction of related offering costs amounted Short-term financial investments 2,900 0 Company’s debt is rouble-denominated and has a to RUB 5,985 million. The annual coupon rate of fixed interest rate. the bonds for five years is 7.55% with interest paid Cash and cash equivalents 3,580 9,527 semi-annually. Non-current assets for sale 2,972 0

Total current assets 19,522 15,973 RUB-denominated bonds series The series BO-01 bonds will be redeemed in four PBO-01 equal semi-annual instalments within the fourth Current liabilities and fifth years. As a result, these bonds are included Trade and other payables 4,590 4,510 On 23 October 2019, the Company issued non- in the long-term bond issue at the reporting date. convertible five-year bonds for a total amount Accounts payable for main activities and 3,133 1,072 other payables of RUB 10,000 million at a par value of RUB 1 As of 31 December 2019, the bonds carrying thousand each. Proceeds from the issuance after value amounted to RUB 6,187 million, including Short-term credits and loans 2,967 326 the deduction of related offering costs amounted the accrued coupon income of RUB 196 million. Income tax payable 139 440 to RUB 9,975 million. The coupon income was reflected as the short- term portion of long-term bond issues in the Taxes other than income tax payable 410 491 The annual coupon rate of the bonds for five years consolidated statement of financial position. Finance lease obligations current part 274 0 is 7.34% with interest paid semi-annually. Accrued and other current liabilities 1,731 1,407 The series PBO-01 bonds will be redeemed in four RUB-denominated bonds series Total current liabilities 13,244 8,246 equal semi-annual instalments within the fourth BO-02 Working capital 6,278 7,727 and fifth years. As a result, these bonds are included in the long-term bond issue at the reporting date. On 22 September 2016, the Company issued non- convertible five-year bonds for a total amount of As of 31 December 2019, the bonds carrying RUB 5 billion at a par value of RUB 1 thousand Working capital was down by RUB 1,449 million, from RUB 7,273 million as of 31 December 2018 to RUB 6,278 million value amounted to RUB 10,113 million, including each. Net proceeds from the issuance after the as of 31 December 2019. the accrued coupon income of RUB 138 million. deduction of related offering costs amounted

PJSC TransContainer | Annual report 2019 150 151 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Having examined the conclusions of the reflection, in all material respects, of the Statement of the Audit Company’s Auditor, the Audit Committee believes Company’s financial position as at 31 December the audit provides a reasonable basis for the 2019, and the results of its financial and auditor’s opinion that the Company’s financial economic activities for 2019. Committee (accounting) statements are an accurate Audit Committee, PJSC TransContainer

Statement of the Audit Committee on the Evaluation of the Company’s Auditor Performance and the Conclusions Drawn from the Audits of Financial (Accounting) Statements and the Consolidated Financial Statements in Accordance with International Financial Reporting Standards (IFRS) Directors’ Responsibility h market value determination according The Audit Committee of PJSC TransContainer to international standards of valuation is confident that JSC PricewaterhouseCoopers Statement of the 50% stake of the Logistic System Audit, the auditor of financial statements of PJSC Management B.V. share capital. TransContainer (hereinafter — the Company) for 2019 prepared under the Russian legislation 4. The Audit Committee monitored the audit and the consolidated financial statement with a view to early identification and prepared under International Financial Reporting prevention of problems in the relationship Directors’ Responsibility Statement (b) the management report for 2019 includes a Standards, acted independently, professionally between the parties to the audit process. fair review of the development and performance and objectively, based on the following: The relationship between the Auditor and Sergey Ludin, Senior Independent Director, of the business and the position of the Group, the Company’s management was very Deputy Chairman of the Board of Directors together with a description of the principal risks 1. The Audit Committee was directly involved in constructive. The Audit Committee did not and Chairman of the Audit Committee of and uncertainties that it faces. tender procedures for selecting the Auditor. identify any facts, which might have affected TransContainer, confirms on behalf of the Board the Auditor’s objectivity. of Directors to the best of its knowledge as of Neither TransContainer nor the Directors 2. When selecting the Auditor, all the procedures the date of the Responsibility Statement that: accept any liability to any person in relation to provided for in the Company’s internal 5. The audit was conducted in accordance with the management report except to the extent documents were followed. the terms and conditions of the audit services (a) taking into account the Independent Auditor’s that such liability could arise under English contract and complied with the agreed Report produced by JSC PricewaterhouseCoopers law. Accordingly, any liability to a person who 3. The amount of remuneration paid to the schedule and audit procedures. Audit on 17 March 2020, the consolidated has demonstrated reliance on any untrue or Auditor corresponded to the volume of statement of financial position for 2019, misleading statement or omission shall be services provided and current market 6. In the course of the audit, the Audit prepared in accordance with International determined in accordance with Section 90A of rates. In 2019, PricewaterhouseCoopers Committee received from the Company’s Financial Reporting Standards (IFRS) as issued the Financial Services and Markets Act 2000. Consulting LLC, a part of the Auditor’s group, auditor all necessary information, by the International Accounting Standards provided the following non-audit services clarifications and answers to its questions in Board, give a true and fair view of the assets, to the Company as agreed with the Audit a timely manner. liabilities, financial position and profit or loss Committee: of PJSC TransContainer and its joint ventures Sergey Ludin h market value of the 50% stake + 2 shares of 7. The auditor promptly informed the Audit and subsidiaries (hereinafter referred to as the Senior Independent Director PJSC TransContainer, as well as one share Committee of its opinion on any risks that the Group); Deputy Chairman of the Board of Directors within the specified stake, as of 30 September Company might face in connection with its Chairman of the Audit Committee 2018; financial and economic activities. h consulting services on analysis of container traffic in the Russian Federation and 8. The Audit Committee believes that the investment projects affecting the growth of audit was conducted in accordance with PJSC TransContainer transportation; the Russian laws on auditing and the International Standards on Auditing.

PJSC TransContainer | Annual report 2019 152 153 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Independent Auditor's Report Consolidated Statement of Financial Position under IFRS1 Independent Auditor’s Report

Consolidated Financial Statements in accordance IndependentTo the Shareholders andAuditor’s Board of Directors Report of Public Joint Stock Company Center for Cargo Container Traffic TransContainer: with International Financial Reporting Standards and Auditor's Report To the Shareholders and Board of Directors of Public Joint Stock Company Center for Cargo ContainerOur opinion Traffic TransContainer: In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Public Joint Stock Company Center for Cargo Container Traffic Statement of management’s responsibilities for the preparation Our opinion and approval of the consolidated financial statements for the year TransContainer (the “Company”) and its subsidiaries (together – the “Group”) as at 31 December In20 1our9, andopinion, its consolidated the consolidated financial financial performance statements and present its consolidated fairly, in allcash material flows respectsfor the year, the then ended 31 december 2019 endedconsolidated in accordance financial with position International of Public Financial Joint Stock Reporting Company Standards Center for (IFRS) Cargo. Container Traffic WhatTransContainer we have audited (the “Company”) and its subsidiaries (together – the “Group”) as at 31 December Management is responsible for the preparation of 2019, and its consolidated financial performance and its consolidated cash flows for the year then The Group’s consolidated financial statements comprise: consolidated financial statements that present fairly Management is also responsible for: ended in accordance with International Financial Reporting Standards (IFRS). the financial position of PJSC TransContainer (the h Designing, implementing and maintaining an •What the we consolidated have audited statement of financial position as at 31 December 2019; “Company”) and its subsidiaries (the “Group”) as at effective system of internal controls throughout •The the Group’s consolidated consolidated statement financial of profit statements or loss andcomprise: other comprehensive income for the year then the Group; ended; 31 December 2019 and the results of its operations, • the consolidated statement of financial position as at 31 December 2019; cash flows and changes in equity for the year then • the consolidated statement of cash flows for the year then ended; and h Maintaining adequate accounting records that • ended, in compliance with International Financial the consolidated statement of profit or loss and other comprehensive income for the year then are sufficient to show and explain the Group’s • ended;the consolidated statement of changes in equity for the year then ended; and Reporting Standards (“IFRS”). transactions and disclose with reasonable • the notesconsolidated to the consolidated statement of financial cash flows statements, for the year which then include ended; significant and accounting policies accuracy at any time the consolidated financial and other explanatory information. In preparing the consolidated financial statements, position of the Group, and which enable them to • the consolidated statement of changes in equity for the year then ended; and management is responsible for: ensure that the consolidated financial statements •Basis the fornotes opinion to the consolidated financial statements, which include significant accounting policies h Properly selecting and applying accounting of the Group comply with IFRS; We andconducted other explanatory our audit in information.accordance with International Standards on Auditing (ISAs). Our policies; h Maintaining statutory accounting records in responsibilities under those standards are further described in the Auditor’s responsibilities for the aBasisudit of forthe ocpiniononsolidated financial statements section of our report. h Presenting information, including accounting compliance with local legislation and accounting We conductedbelieve that our the audit audit in evidence accordance we havewith Internationalobtained is sufficient Standards and on appropriate Auditing (ISAs). to provide Our a basis policies, in a manner that provides relevant, standards in the respective jurisdictions in which responsibilitiesfor our opinion. under those standards are further described in the Auditor’s responsibilities for the reliable, comparable and understandable the companies of the Group operate; audit of the consolidated financial statements section of our report. Independence information; h Taking necessary steps to safeguard the Group’s We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis We are independent of the Group in accordance with the International Ethics Standards Board for h Providing additional disclosures when compliance assets; for our opinion. Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements with the specific requirements in IFRS are h Preventing and detecting fraud and other ofIndependence the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our insufficient to enable users to understand the irregularities. auditWe are of independentthe consolidated of the financial Group statementsin accordance in the with Russian the International Federation Ethics. We haveStandards fulfilled Board our other for impact of particular transactions, other events and ethicalAccountants’ responsibilities Code of Ethicsin accordance for Professional with these Accountants requirements (IESBA and Code)the IESBA and Codethe ethical. requirements conditions on the Group’s consolidated financial of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our position and financial performance; The consolidated financial statements of the Group audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other for the year ended 31 December 2019 were approved ethical responsibilities in accordance with these requirements and the IESBA Code. h Making an assessment of the Group’s ability to on 17 March 2020 by: continue as a going concern.

V. N. Markov M. V. Usenko General Director Chief Accountant

AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047 1 The financial statements prepared in accordance with RAS can be found on the Company’s website: https://trcont.com/ T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru documents/20143/678776/200211-TransContainer_RAS_report_2019_rus.pdf/641d0104-e461-7e92-71da-598b0d5b2297. AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047 T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru PJSC TransContainer | Annual report 2019 154 155 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Our audit approach Key audit matters Overview Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our Overall Group materiality: Russian Roubles (“RUB”) 770 million, which opinion thereon, and we do not provide a separate opinion on these matters. represents 5% of profit before income tax. Materiality Key audit matter How our audit addressed the key audit matter • We conducted audit work at the Company, considered to be the only significant component of the Group based on individual share Group Timing of revenue recognition scoping in revenue of the Group (94%). See notes 3 and 6 to the consolidated financial Our audit procedures for verifying appropriateness • Our audit scope addressed 94% of the Group’s revenue and 96% statements for relevant disclosures, accounting of the cut-off assumption for revenues from Key audit of the Group’s total carrying value of property, plant and matters policies and judgments. integrated freight forwarding and logistics services equipment. included the following: The Group’s revenue for the year ended • Timing of revenue recognition 31 December 2019 was RUB 86,179 million, • analysis of the average duration of including RUB 79,895 million of revenue from transportation, resulting in confirmation of As part of designing our audit, we determined materiality and assessed the risks of material integrated freight forwarding and logistics sufficiency of the period of services rendered misstatement in the consolidated financial statements. In particular, we considered where services. by the Group that was used by the Group management made subjective judgements; for example, in respect of significant accounting estimates management in its estimates of progress in In practice, the above type of services is performing those services; that involved making assumptions and considering future events that are inherently uncertain. As in all carried out over a long time and the Group has of our audits, we also addressed the risk of management override of internal controls, including among not completed its performance obligations • recalculation of revenue related to outstanding other matters consideration of whether there was evidence of bias that represented a risk of material under some of those services at the reporting transportation services at the reporting date misstatement due to fraud. date. based on acts of services rendered and Materiality applicable appendices signed in the following For integrated freight forwarding and logistics accounting period to assess the amount of The scope of our audit was influenced by our application of materiality. An audit is designed to obtain services acts of works performed are prepared revenue recognised in the Group’s reasonable assurance whether the consolidated financial statements are free from material at the date of waybill issuance (i.e. on the date consolidated financial statements in misstatement. Misstatements may arise due to fraud or error. They are considered material if when the cargo is provided to the consignee at accordance with management’s estimations; individually or in aggregate, they could reasonably be expected to influence the economic decisions of the destination point, delivered to a temporary users taken on the basis of the consolidated financial statements. storage warehouse, transferred to a foreign • analysis of the Group’s operating expenses, railroad, or transferred for further and accounts receivable and payable Based on our professional judgement, we determined certain quantitative thresholds for materiality, transportation by other means of transport). balances related to outstanding transportation including the overall Group materiality for the consolidated financial statements as a whole as set out services recognised in the Group’s in the table below. These, together with qualitative considerations, helped us to determine the scope In accordance with IFRS 15, Revenue from consolidated financial statements in Contracts with Customers, an entity of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of accordance with the management’s recognises revenue over time if the customer misstatements, if any, both individually and in aggregate on the consolidated financial statements as a estimations; whole. simultaneously receives and consumes the benefits provided by the entity’s performance • sample testing of the documents used by Overall Group materiality RUB 770 million as the entity performs. management in estimating the stage of transportation services completion, for The Group’s management estimates the stage example, acts on the services rendered and How we determined it 5% of profit before income tax of completion in respect of transportation appendices to them that were issued in the services that are outstanding at the reporting following accounting period and confirm Rationale for the materiality We chose profit before income tax as the benchmark because, date on the basis of information available at services rendered in prior accounting period; benchmark applied in our view, it is the benchmark against which the performance the date of the consolidated financial of the Group is most commonly measured by users, and is a statements’ authorisation. The accuracy of • obtaining written representations from generally accepted benchmark. We chose 5% which is management's estimates depends on the management on correctness of the completion consistent with quantitative materiality thresholds used for profit- analysed period, level of details used in stage determined for transportation services oriented companies in this sector. calculations and on a number of judgments outstanding as at the reporting date and used. correctness of corresponding revenue calculations. We paid special attention to determining the timing of recognition of revenue from integrated freight forwarding and logistics

2 3

PJSC TransContainer | Annual report 2019 156 157 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

When we read the Company’s and the Group’s Annual report for 2019 and the Issuer’s Report Key audit matter How our audit addressed the key audit matter (quarterly report) of the Company for the 1st Quarter of 2020, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. services due to the fact that the process of assigning revenue from these services to the Responsibilities of management and those charged with governance for the current period is complex and involves management's judgment. consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial How we tailored our Group audit scope statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material We tailored the scope of our audit in order to perform sufficient work to enable us to provide an misstatement, whether due to fraud or error. opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going The Group’s reporting process is based on the financial information of its components - individual concern and using the going concern basis of accounting unless management either intends to Group companies. If a component was considered to be significant, we performed an audit of its liquidate the Group or to cease operations, or has no realistic alternative but to do so. financial information, based on the level of materiality, set for such component. Those charged with governance are responsible for overseeing the Group’s financial reporting Similar to the overall materiality determination, materiality of the components was estimated on the process. basis of their individual share in the Group's profit before income tax. The Company was considered to be the only significant component. Auditor’s responsibilities for the audit of the consolidated financial statements In case if procedures performed at the level of a significant component, in our view, did not provide us Our objectives are to obtain reasonable assurance about whether the consolidated financial with sufficient evidence to express our opinion on the consolidated financial statements, we performed statements as a whole are free from material misstatement, whether due to fraud or error, and to issue analytical procedures in respect of other Group components at the Group level and audited individual an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is account balances and types of operations, subject to materiality. not a guarantee that an audit conducted in accordance with ISAs will always detect a material Our choice of other components of the Group for the audit of individual balances and types of misstatement when it exists. Misstatements can arise from fraud or error and are considered material operations was carried out separately for each line of the Group consolidated financial statement if, individually or in the aggregate, they could reasonably be expected to influence the economic included in the scope of the audit, and depended on such factors as level of audit evidence obtained decisions of users taken on the basis of these consolidated financial statements. from a significant component and concentration of balances and types of operations in the Group's As part of an audit in accordance with ISAs, we exercise professional judgment and maintain structure. professional scepticism throughout the audit. We also: In general, audit procedures that we performed at the level of significant and other components of the • Identify and assess the risks of material misstatement of the consolidated financial statements, Group, including sample-based detailed testing, in our view, have provided sufficient coverage in whether due to fraud or error, design and perform audit procedures responsive to those risks, and respect of individual amounts of the consolidated financial statements of the Group. obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk Procedures were performed by the audit team with involvement of tax specialists, and experts in IFRS of not detecting a material misstatement resulting from fraud is higher than for one resulting from methodology, property, plant and equipment valuation and accounting for employee benefit liabilities. error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Based on the results of our procedures carried out on a sampling basis at the level of the Group components, our analytical procedures at the Group level, as well as procedures with regard to the • Obtain an understanding of internal control relevant to the audit in order to design audit consolidation reporting process, we believe to have obtained sufficient appropriate audit evidence to procedures that are appropriate in the circumstances, but not for the purpose of expressing an form our opinion on the consolidated financial statements of the Group as a whole. opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Other information • Conclude on the appropriateness of management’s use of the going concern basis of accounting Management is responsible for the other information. The other information comprises the Company’s and, based on the audit evidence obtained, whether a material uncertainty exists related to events and the Group’s Annual report for 2019 and the Issuer’s Report (quarterly report) of the Company for or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. the 1st Quarter of 2020 (but does not include the consolidated financial statements and our auditor’s If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report thereon), which are expected to be made available to us after the date of this auditor’s report. report to the related disclosures in the consolidated financial statements or, if such disclosures are Our opinion on the consolidated financial statements does not cover the other information and we will inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to not express any form of assurance conclusion thereon. the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the • Evaluate the overall presentation, structure and content of the consolidated financial statements, other information is materially inconsistent with the consolidated financial statements or our knowledge including the disclosures, and whether the consolidated financial statements represent the obtained in the audit, or otherwise appears to be materially misstated. underlying transactions and events in a manner that achieves fair presentation. 4 5

PJSC TransContainer | Annual report 2019 158 159 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Consolidated Statement of Financial Position (Amounts in millions of Russian Roubles) Notes 2019 2018 ASSETS Non-current assets Property, plant and equipment 7 62,630 47,453 Advances for acquisition of non-current assets 7 382 590 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or Right-of-use assets 17 873 - business activities within the Group to express an opinion on the consolidated financial Investment property 395 390 statements. We are responsible for the direction, supervision and performance of the Group audit. Intangible assets 8 219 269 We remain solely responsible for our audit opinion. Investments in joint ventures 9 283 3,370 We communicate with those charged with governance regarding, among other matters, the planned Other non-current assets 55 67 scope and timing of the audit and significant audit findings, including any significant deficiencies in Total non-current assets 64,837 52,139 internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant Current assets ethical requirements regarding independence, and to communicate with them all relationships and Inventory 10 630 222 other matters that may reasonably be thought to bear on our independence, and where applicable, Trade and other receivables 11 1,799 1,744 related safeguards. Prepayments and other current assets 12 7,641 4,480 From the matters communicated with those charged with governance, we determine those matters Short-term investments 13 2,900 - that were of most significance in the audit of the consolidated financial statements of the current Cash and cash equivalents 14 3,580 9,527 period and are therefore the key audit matters. We describe these matters in our auditor’s report 16,550 15,973 unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the Non-current assets held for sale adverse consequences of doing so would reasonably be expected to outweigh the public interest 9 2,972 - benefits of such communication. Total current assets 19,522 15,973 TOTAL ASSETS 84,359 68,112 The certified auditor responsible for the audit resulting in this independent auditor’s report is Alexey Yakovlevich Fegetsyn. EQUITY AND LIABILITIES Capital and reserves Share capital 15 13,895 13,895 Reserve fund 15 703 703 Translation reserve (697) (273) Other reserves 15 (1,949) (1,946) Retained earnings 36,482 33,682 Total equity attributable to the Company’s owners 48,434 46,061

Non-current liabilities Long-term debt 16 18,461 10,980 Lease obligations, net of current maturities 17 650 - Employee benefit liability 18 988 889 Deferred tax liability 27 2,431 1,782 Financial guarantee for investment in joint venture 9 151 154 Total non-current liabilities 22,681 13,805

Audited entity: Independent auditor: Public Joint Stock Company Centre for Cargo Container Traffic AO PricewaterhouseCoopers Audit Current liabilities TransContainer Registered by the Government Agency Moscow Registration Chamber Contract liabilities 19 4,590 4,510 Record made in the Unified State Register of Legal Entities on 4 March on 28 February 1992 under Nо. 008.890 2006 under State Registration Number 1067746341024 Trade and other payables 20 3,133 1,072 Record made in the Unified State Register of Legal Entities on Taxpayer Identification Number 7708591995 22 August 2002 under State Registration Number 1027700148431 Current portion of long-term debt 16 2,967 326

Russian Federation, 125047, Moscow, Oruzheiniy pereulok, 19 Taxpayer Identification Number 7705051102 Lease obligations, current maturities 17 274 - Income tax payable 139 440 Member of Self-regulatory organization of auditors Association «Sodruzhestvo» Taxes other than income tax payable 21 410 491 Principal Registration Number of the Record in the Register of Auditors Other current liabilities 30 421 66 and Audit Organizations – 12006020338 Settlements with employees 22 1,310 1,341 Total current liabilities 13,244 8,246 TOTAL EQUITY AND LIABILITIES 84,359 68,112

6 17 March V. N. Markov M. V. Usenko 2020 General Director Chief Accountant

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Consolidated Statement of Profit or Loss and Other Consolidated Statement of Cash Flows Comprehensive Income (Amounts in millions of Russian Roubles) (Amounts in millions of Russian Roubles, unless otherwise stated below)

Notes 2019 2018 Notes 2019 2018 Revenue 23 86,179 76,959 Other operating income 24 1,161 1,486 Cash flows from operating activities: Operating expenses 25 (71,569) (66,886) Profit before income tax 15,396 11,978 Foreign exchange (!oss)/gain, net (229) 417 Adjustments for: Interest expense 26 (1,118) (885) Interest income 368 465 Depreciation and amortisation 25 3,473 2,927 Share of result of joint ventures 9 583 268 Change in provision for impairment of receivables 11 23 Excess of the fair value of net assets of subsidiary over - 154 cost of its acquisition Gain from disposal of property, plant and equipment 24 (705) (1,144) Gain from disposal of lease rights 14 - Share of result of joint ventures 9 (583) (268) Remeasurements of investment property 7 - Profit before income tax 15,396 11,978 Excess of the fair value of net assets of subsidiary over - (154) cost of its acquisition Income tax expense 27 (3,646) (2,469) Interest expense, net 750 420 Profit for the year attributable to the Company’s owners 11,750 9,509 Foreign exchange loss/(gain), net 229 (417)

Other comprehensive (loss)/ income (net of income tax) Loss on impairment of property, plant and equipment 7, 25 644 2

Items that will not be reclassified to profit or loss: Change in provisions 409 51

Remeasurements of post-employment benefit plans liabilities 18 (128) 38 Other expenses, net 16 117 Remeasurements of investment property upon transfer from - 79 Operating profit before working capital changes, paid income tax and 19,640 13,535 property, plant and equipment interest and changes in other assets and liabilities Share of other comprehensive loss of joint venture (3) - Working capital changes: Items that may be reclassified subsequently to profit or loss: Decrease in inventory 417 494

Share of translation of financial information of joint ventures 9 (349) 146 Increase in trade and other receivables (739) (366) to presentation currency Exchange differences on translating of other foreign operations (75) 49 Increase in prepayments and other assets (2,914) (450) Decrease in employee benefit liabilities (60) (150) Other comprehensive (loss)/ income for the year (555) 312 Increase in trade and other payables and contract liabilities 162 712 Total comprehensive income for the year attributable 11,195 9,821 to the Company’s owners (Decrease)/increase in taxes other than income tax (81) 101

Earnings per share, basic and diluted (in Russian Roubles) 846 684 (Decrease)/increase in settlements with employees (34) 391 and other current liabilities Weighted average number of shares outstanding 15 13,894,778 13,894,778 Net cash from operating activities before income tax and interest 16,391 14,267 Interest paid (976) (733)

Income tax paid (3,293) (2,144) 17 March V. N. Markov M. V. Usenko 2020 General Director Chief Accountant Net cash provided by operating activities 12,122 11,390

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Notes 2019 2018 Consolidated Statement Cash flows from investing activities: of Changes in Equity Purchases of property, plant and equipment (17,257) (7,032) (Amounts in millions of Russian Roubles) Proceeds from disposal of property, plant and equipment 679 950

Sale of short-term investments - 2,550 Notes Share Reserve Translation Other Retained Total equity capital fund reserve reserves earnings attributable Purchases of short-term investments (2,865) (2,550) to the Company’s Acquisition of subsidiary, net of cash acquired of RUR 32 million - (1,868) owners

Purchases of intangible assets (33) (84) Balance at 31 December 13,895 703 (468) (2,025) 28,262 40,367 2017 Dividends received from joint ventures 325 372 The impact of the new 9 - - - - (55) (55) Interest received 333 465 standard IFRS 9

Net cash used in investing activities (18,818) (7,197) Total restated at 1 January 13,895 703 (468) (2,025) 28,207 40,312 2018 Cash flows from financing activities: Profit for the year - - - - 9,509 9,509 Dividends 15 (8,822) (4,072) Other comprehensive income - - 195 79 38 312 Proceeds from issuance short-term loans 2,560 - for the year

Proceeds from issuance of long-term bonds 16 9,974 5,985 Total comprehensive - - 195 79 9,547 9,821 Repayments of lease obligations 17 (100) - income for the year

Principal payments on short-term part of long-term bonds 16 - (1,250) Dividends 15 - - - - (4,072) (4,072)

Principal payments on short-term loans (2,560) - Balance at 31 December 13,895 703 (273) (1,946) 33,682 46,061 2018 Net cash provided by financing activities 1,052 663 Profit for the year - - - - 11,750 11,750 Net (decrease)/increase in cash and cash equivalents (5,644) 4,856 Other comprehensive loss for - - (424) (3) (128) (555) Cash and cash equivalents at beginning of the year 9,527 4,171 the year

Foreign exchange effect on cash and cash equivalents (303) 500 Total comprehensive (loss)/ - - (424) (3) 11,622 11,195 income for the year Net cash and cash equivalents at end of the year 14 3,580 9,527 Dividends 15 - - - - (8,822) (8,822)

Balance at 31 December 13,895 703 (697) (1,949) 36,482 48,434 2019

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Notes to the Consolidated Financial Statements for the Name of Entity Type Country Activity Interest Voting Year Ended 31 December 2019 held, % rights, % 2019 2018 2019 2018 (Amounts in millions of Russian Roubles, unless otherwise stated below) LLC Freight Village Kaluga Joint venture Russia Terminal 30 30 50 50 Sever (FVK Sever Group) operations (Note 9)

1. NATURE OF THE BUSINESS 991 million, in exchange for the ordinary shares LLC SpecТransContainer Subsidiary Russia Special container 100 100 100 100 transportation of the Company. Furthermore, certain employees Public Joint Stock Company Center for Cargo previously employed by RZD were hired by the Logistic System Joint venture Netherlands Investment 50 50 50 50 Container Traffic TransContainer (the “PJSC Company. The Company assumed related employee Management B.V. activity TransContainer” or “Company” or “TransContainer”) benefit liabilities from RZD. Pursuant to this spin- was incorporated in Moscow, Russian Federation off, RZD maintained the functions of the carrier, on 4 March 2006. whilst the Company assumed the functions of a freight forwarding agent. PJSC TransContainer has ownership in the The consolidated financial statements are The Company was formed as a result of a spin- following major entities: presented in millions of Russian Roubles off by Open Joint Stock Company “Russian The Company’s principal activities include (hereinafter RUR million), except where specifically Railways” (“RZD”), which is 100% owned by the arrangement of container shipping and other The consolidated financial statements of PJSC stated otherwise. Russian Federation, of some of its activities and logistics services including terminal services, TransContainer and its subsidiaries (the “Group”) certain assets and liabilities related to container freight forwarding and intermodal delivery using as at 31 December 2019 and for the year then transportation into a separate legal entity. In rolling stock and containers. The Company owns ended were authorised for issue by the General 3. SIGNIFICANT ACCOUNTING connection with this spin-off RZD contributed and operates 38 container terminals along the Director of the Company on 17 March 2020. POLICIES to the share capital of the Company containers, Russian railway network. As at 31 December 2019, flatcars, buildings and constructions in the amount the Company operated 14 branches in Russia. The The significant accounting policies adopted in of RUR 13,057 million, VAT receivable related to Company’s registered address is 19 Oruzheiniy 2. BASIS OF PREPARATION the preparation of these consolidated financial these assets of RUR 104 million, and cash of RUR pereulok, Moscow, 125047, Russian Federation. statements are set out below. These consolidated financial statements have been prepared in accordance with International The accounting policies have been applied Name of Entity Type Country Activity Interest Voting Financial Reporting Standards (“IFRS”). consistently by all entities of the Group. held, % rights, % The Group’s consolidated financial statements Consolidated financial statements. The 2019 2018 2019 2018 have been prepared using the historical cost consolidated financial statements incorporate JSC TransContainer-Slovakia, a.s. Subsidiary Slovakia Container 100 100 100 100 convention, except for the effects of assets the financial statements of the Company shipments acquired and liabilities assumed at the formation and entities controlled by the Company (its TransContainer Europe GmbH Subsidiary Austria Container 100 100 100 100 of the Company, which were recorded at the subsidiaries) prepared as at 31 December of each shipments estimated fair value at the date of transfer, initial year. Subsidiaries are those investees, including ТransContainer Asia Pacific Ltd. Subsidiary Korea Container 100 100 100 100 recognition of financial instruments based on fair structured entities, that the Group controls shipments value and revaluation of investment properties. because the Group (i) has power to direct relevant activities of the investees that significantly TransContainer Freight Subsidiary China Container 100 100 100 100 Forwarding (Shanghai) Co., Ltd. shipments The entities of the Group maintain their affect their returns, (ii) has exposure, or rights, accounting records in accordance with laws, to variable returns from its involvement with LLC TransContainer Mongolia Subsidiary Mongolia Container 100 100 100 100 accounting and reporting regulations of the the investees, and (iii) has the ability to use its shipments jurisdictions in which they are incorporated power over the investees to affect the amount Oy ContainerTrans Scandinavia Joint venture Finland Container 50 50 50 50 and registered.The accompanying consolidated of investor’s returns. The existence and effect of Ltd. shipments financial statements differ from the financial substantive rights, including substantive potential Chinese-Russian Rail-Container Joint venture China Container shipments 49 49 50 50 statements issued for statutory purposes in that voting rights, are considered when assessing International Freight Forwarding they reflect certain adjustments, not recorded whether the Group has power over another entity. (Beijing) Co, Ltd. in the statutory books, which are appropriate to For a right to be substantive, the holder must JSC Kedentransservice Joint venture Kazakhstan Container 50 50 50 50 present the financial position, results of operations have practical ability to exercise that right when (Note 9) shipments and cash flows of the Group in accordance with decisions about the direction of the relevant IFRS. activities of the investee need to be made. The JSC Logistika-Terminal Subsidiary Russia Terminal 100 100 100 100 operations Group may have power over an investee even when

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it holds less than majority of voting power in an of the business combination are deducted from is recorded in the consolidated profit or loss at the date of the transaction. Non-monetary investee. In such a case, the Group assesses the the carrying amount of the debt; and all other for the period as the share of financial result of assets and liabilities denominated in foreign size of its voting rights relative to the size and transaction costs associated with the acquisition associates (joint ventures), (ii) the Group’s share currencies that are measured at fair value are dispersion of holdings of the other vote holders are expensed. of other comprehensive income is recognised translated to Russian Rouble at foreign exchange to determine if it has de-facto power over the in other comprehensive income and presented rates ruling at the dates the fair value was investee. Protective rights of other investors, Intercompany transactions, balances and separately, (iii) all other changes in the Group’s determined. such as those that relate to fundamental unrealised gains on transactions between group share of the carrying value of net assets of changes of investee’s activities or apply only in companies are eliminated. Unrealised losses associates (joint ventures) are recognised in When the functional currency of an entity of the exceptional circumstances, do not prevent the are also eliminated unless the cost cannot be consolidated profit or loss within the share of Group is not the presentation currency of the Group from controlling an investee. Subsidiaries recovered. financial result of associates (joint ventures). Company’s consolidated financial statements, the are consolidated from the date on which control results and financial position of the entity are is transferred to the Group (acquisition date) Non-controlling interest is that part of the When the Group’s share of losses in an associate translated into the presentation currency using and are deconsolidated from the date on which net results and of the equity of a subsidiary (joint venture) equals or exceeds its interest in the following procedures: control ceases. attributable to equity interests which are not the associate (joint venture), including unsecured h all assets and liabilities are translated at the owned, directly or indirectly, by the Group. Non- receivables, the Group does not recognise further closing rate at the date of each presented The acquisition method of accounting is used to controlling interest forms a separate component losses, unless it has incurred obligations or statement of financial position; account for the acquisition of subsidiaries (other of the Group’s equity.. made payments on behalf of the associate (joint h income and expenses for each statement than those acquired from parties under common ventures). of profit or loss and other comprehensive control). Identifiable assets acquired and liabilities Investments in associates and joint ventures. income are translated at average exchange and contingent liabilities assumed in a business Joint venture is a joint activity which implies Unrealised gains on transactions between the rates for the period if fluctuation of exchange combination are measured at their fair values at that the parties, that have joint control over Group and its associates (joint ventures) are rates during the period was insignificant. the acquisition date, irrespective of the extent of the activity, have the rights to the net assets eliminated to the extent of the Group’s interest Otherwise exchange rates at the dates of the any non-controlling interest. of the activity. Joint control occurs in the case in the associates (joint ventures); unrealised transactions are used for translation to the when decisions relating to the relevant activities losses are also eliminated unless the transaction presentation currency; Goodwill is measured by deducting the net require the unanimous consent of the parties provides evidence of an impairment of the asset h components of equity are translated at assets of the acquiree from the aggregate of sharing joint control in accordance with the transferred.. historical rates; the consideration transferred for the acquiree, contract. h all resulting exchange differences are the amount of non-controlling interest in the Foreign currency transactions and translation. recognised as other comprehensive income. acquiree and the fair value of an interest in Associates are entities over which the Group Functional currency of each of the Group’s the acquiree held immediately before the has significant influence (directly or indirectly), consolidated entities is the currency of the When control over a foreign operation is lost, acquisition date. Any negative amount (“negative but not control, generally accompanying a primary economic environment in which the entity the exchange differences recognised previously goodwill”) is recognised in profit or loss, after shareholding of between 20 and 50 percent of operates. The Russian Rouble is the functional in other comprehensive income are reclassified management reassesses whether it identified the voting rights. currency of the Company and is also the currency to profit or loss for the year as part of the gain all the assets acquired and all the liabilities and in which these consolidated financial statements or loss on disposal. On partial disposal of a contingent liabilities assumed and reviews the Investments in associates and joint ventures are are presented. Transactions in currencies other subsidiary without loss of control, the related appropriateness of their measurement. accounted for by the equity method of accounting than the functional currency are initially recorded portion of accumulated currency translation and are initially recognised at cost, and the at the rates of exchange prevailing on the dates differences is reclassified to non-controlling The consideration transferred for the acquiree carrying amount is increased or decreased to of the transactions. Monetary assets and liabilities interest within equity. is measured at the fair value of the assets given recognise the investor’s share of the profit or denominated in such currencies at the balance up, equity instruments issued and liabilities loss of the investee after the date of acquisition. sheet date are translated into the functional Property, plant and equipment. Property, plant incurred or assumed, including the fair value of currency at exchange rate as at the end of the and equipment are recorded at acqusition or assets or liabilities from contingent consideration Dividends received from associates (joint reporting period. Exchange differences arising from construction cost, less accumulated depreciation arrangements, but excluding acquisition related ventures) reduce the carrying value of the such translation are included in consolidated profit and provision for impairment. The costs of day to costs such as advisory, legal, valuation and investment in associates (joint ventures). Other or loss. day servicing of property, plant and equipment, similar professional services. Transaction costs post-acquisition changes in the Group’s share including repairs and maintenance expenditure, is related to the acquisition and incurred for issuing of an associate’s (joint ventures’) net assets are Non-monetary assets and liabilities that are expensed as incurred. equity instruments are deducted from equity; recognised as follows: (i) the Group’s share of measured in terms of historical cost in a foreign transaction costs incurred for issuing debt as part profits or losses of associates (joint ventures) currency are translated using the exchange rate

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Where parts of an item of property, plant and Depreciation appreciation, or both and which is not occupied by amount of the property is recognised in profit or equipment have different useful lives, they are the Group. loss for the year to the extent that it reverses accounted for as separate items of property, Owned land plots and construction in progress are a previous impairment loss, with any remaining plant and equipment. not depreciated. Depreciation on other items of Investment property includes assets under increase credited directly to other comprehensive property, plant and equipment is charged to the construction for future use as investment income. Any resulting decrease in the carrying Construction in progress consolidated profit or loss so as to write off the property. amount of the property is initially charged cost of assets less their estimated residual values, against any revaluation surplus previously Construction in progress includes, principally, using the straight-line method over the estimated Investment property is initially recognised at cost, recognised in other comprehensive income, with capital expenditure incurred in relation to useful lives of each part of an item of property, including transaction costs, and subsequently any remaining decrease charged to profit or loss the construction of new container terminals plant and equipment. remeasured at fair value updated to reflect for the year as impairment. and the reconstruction of existing terminals. market conditions at the end of the reporting Construction in progress is carried at cost, less The estimated useful lives for property, plant and period. Fair value of investment property is the Subsequent expenditure is capitalised to the any recognised impairment loss. Cost includes equipment are as follows: price that would be received from sale of the asset’s carrying amount only when it is probable capital expenditures directly related to the asset in an orderly transaction, without deduction that future Number construction of property, plant and equipment of any transaction costs. The best evidence of of years including an appropriate allocation of directly fair value is given by current prices in an active economic benefits associated with the attributable variable overheads including Buildings 20-84 market for similar property in the same location expenditure will flow to the Group and the cost capitalised borrowing costs on qualifying assets. Constructions 5-70 and condition. can be measured reliably. All other repairs and Depreciation of these assets, on the same basis maintenance costs are expensed when incurred. Containers 10-20 as for other property assets, commences when Investment property held by the Group as a right- the assets are ready for their intended use. Flatcars 28-32 of-use asset is measured in accordance with IFRS Intangible assets. Intangible assets that Cranes and loaders 5-31 16 Leases. are acquired by the Group represent mainly Subsequent costs purchased software and are recorded at cost Vehicles 3-15 Market value of the Group’s investment property less accumulated amortisation and provision for The cost of replacing a part of property, plant Other equipment 2-25 is determined based on reports of independent impairment. and equipment is included in the carrying appraisers, who hold recognised and relevant amount when the cost is incurred, only if it is professional qualifications and who have recent Amortisation is charged to the consolidated probable that the future economic benefits The assets’ useful lives are reviewed, and adjusted experience in the valuation of property in the profit or loss on a straight-line basis over the associated with the item will flow to the Group as appropriate, at the end of each reporting same location and category. estimated useful lives of intangible assets. and the cost of the item can be measured period. Intangible assets are amortised from the date reliably. The assets being replaced are written Earned rental income is recorded in profit or loss they are available for use. The estimated useful off immediately. All other costs are recognised in Leased assets improvements for the year within revenue. Gains and losses lives for existing assets vary from 2 to 8 years. the consolidated profit or loss for the year. resulting from changes in the fair value of Operating leasehold inseparable improvements are investment property are recorded in profit or loss Useful lives and amortisation methods for At the end of each reporting period management depreciated over the shorter of the estimated useful for the year. intangible assets are reviewed at each financial assesses whether there is any indication of life of the asset and the lease term. year-end. Changes in the expected useful life impairment of property, plant and equipment. If an investment property becomes owner- or the expected pattern of consumption of If any such indication exists, management Gain or loss on disposal occupied, it is reclassified to property, plant and future economic benefits embodied in the asset estimates the recoverable amount, which is equipment, and its carrying amount at the date are accounted for as changes in accounting determined as the higher of an asset’s fair value The gain or loss arising on the disposal or of reclassification becomes its deemed cost estimates. less costs of disposal and its value in use. The retirement of an asset is determined as the for accounting purposes. If an item of owner- carrying amount is reduced to the recoverable difference between the sales proceeds and the occupied property becomes an investment If impaired, the carrying amount of intangible amount and the impairment loss is recognised in carrying amount of the asset and is recognised in property because its use has changed, any assets is written down to the higher of value in consolidated profit or loss for the year. the consolidated profit or loss. difference resulting between the carrying amount use and fair value less costs of disposal. and the fair value of this item at the date of An impairment loss recognised for an asset in Investment property. Investment property is transfer in another category is treated in the Impairment of non-financial assets. Intangible prior years is reversed where appropriate if property owned or held by the Group as a right- same way as a revaluation of property, plant and assets not ready for use are not subject to there has been a change in the estimates used of-use assets to earn rental income or for capital equipment. Any resulting increase in the carrying amortisation and are tested annually for to determine the asset’s value in use or fair impairment. value less costs of disposal.

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Assets that are subject to depreciation and Transaction costs are incremental costs that to market rates. Such premiums or discounts at fair value through other comprehensive amortisation are reviewed for impairment are directly attributable to the acquisition, are amortised over the whole expected life of income and those to be measured at amortised whenever events or changes in circumstances issue or disposal of a financial instrument. the instrument. The present value calculation cost. The classification and subsequent indicate that the carrying amount may not be An incremental cost is one that would not includes all fees paid or received between measurement of debt financial assets depends recoverable. have been incurred if the transaction had not parties to the contract that are an integral part on: (i) the Group’s business model for managing taken place. Transaction costs include fees of the effective interest rate. For assets that the related assets portfolio and (ii) the cash An impairment loss is recognised for the amount and commissions paid to agents (including are purchased or originated credit impaired flow characteristics of the asset. by which the asset’s carrying amount exceeds its employees acting as selling agents), advisors, (“POCI”) at initial recognition, the effective recoverable amount. The recoverable amount is brokers and dealers, levies by regulatory interest rate is adjusted for credit risk, i.e. it is A financial asset shall be measured at the higher of an asset’s fair value less costs of agencies and securities exchanges, and transfer calculated based on the expected cash flows amortised cost if both of the following disposal and value in use. taxes and duties. Transaction costs do not on initial recognition instead of contractual conditions are met: include debt premiums or discounts, financing payments. For the purposes of assessing impairment, costs or internal administrative or holding a) the financial asset is held within a business assets are grouped at the lowest levels costs. Financial instruments — initial recognition. model whose objective is to hold financial for which there are largely independent Financial instruments measured at fair value assets in order to collect contractual cash cash inflows (cash-generating units). Prior Amortised cost is the amount at which the through profit or loss are initially recorded flows and impairments of non-financial assets (other than financial instrument was recognised at initial at fair value. All other financial instruments goodwill) are reviewed for possible reversal at recognition less any principal repayments, are initially recorded at fair value adjusted b) the contractual terms of the financial each reporting date. plus accrued interest, and for financial assets for transaction costs. Fair value at initial asset give rise on specified dates to cash less any allowance for expected credit losses recognition is best evidenced by the transaction flows that are solely payments of principal Financial instruments — key measurement (“ECL”). Accrued interest includes amortisation price. A gain or loss on initial recognition is and interest on the principal amount terms. Fair value is the price that would be of transaction costs deferred at initial only recorded if there is a difference between outstanding. received to sell an asset or paid to transfer recognition and of any premium or discount fair value and transaction price which can be a liability in an orderly transaction between to the maturity amount using the effective evidenced by other observable current market As at 31 December 2019 and 31 December market participants at the measurement date. interest method. Accrued interest income transactions in the same instrument or by 2018 the Group classifies all financial assets as The best evidence of fair value is the price in an and accrued interest expense, including both a valuation technique whose inputs include subsequently measured at amortised cost. active market. An active market is one in which accrued coupon and amortised discount or only data from observable markets. After the transactions for the asset or liability take place premium (including fees deferred at origination, initial recognition, an expected credit losses Financial assets — classification and with sufficient frequency and volume to provide if any), are not presented separately and are allowance is recognised for financial assets subsequent measurement — business model. pricing information on an ongoing basis. included in the carrying values of the related measured at amortised cost and investments The business model reflects how the Group items in the consolidated statement of in debt instruments measured at fair value manages the assets in order to generate cash Valuation techniques such as discounted financial position. through other comprehensive income, resulting flows — whether the Group’s objective is: (i) cash flow models or models based on recent in an immediate accounting loss. solely to collect the contractual cash flows from arm’s length transactions or consideration The effective interest method is a method of the assets (“hold to collect contractual cash of financial data of the investees are used allocating interest income or interest expense All purchases and sales of financial assets flows”,) or (ii) to collect both the contractual to measure fair value of certain financial over the relevant period, so as to achieve a that require delivery within the time frame cash flows and the cash flows arising from the instruments for which external market pricing constant periodic rate of interest (effective established by regulation or market convention sale of assets (“hold to collect contractual cash information is not available. Fair value interest rate) on the carrying amount. The (“regular way” purchases and sales) are flows and sell”) or, if neither of (i) and (ii) is measurements are analysed by level in the effective interest rate is the rate that exactly recorded at trade date, which is the date on applicable, the financial assets are classified as fair value hierarchy as follows: (i) level one are discounts estimated future cash payments or which the Group commits to deliver a financial part of “other” business model and measured at measurements at quoted prices (unadjusted) in receipts (excluding future credit losses) through asset. All other purchases are recognised when fair value through profit or loss. active markets for identical assets or liabilities, the expected life of the financial instrument or the entity becomes a party to the contractual (ii) level two measurements are valuations a shorter period, if appropriate, to the gross provisions of the instrument. Business model is determined for a group techniques with all material inputs observable carrying amount of the financial instrument. of assets (on a portfolio level) based on all for the asset or liability, either directly (that The effective interest rate discounts cash Financial assets — classification and relevant evidence about the activities that the is, as prices) or indirectly (that is, derived from flows of variable interest instruments to the subsequent measurement — measurement Group undertakes to achieve the objective set prices), and (iii) level three measurements next interest repricing date, except for the categories. The Group classifies financial out for the portfolio available at the date of the are valuations not based on solely observable premium or discount which reflects the credit assets in the following measurement assessment. market data (that is, the measurement requires spread over the floating rate specified in the categories: those to be measured at fair value significant unobservable inputs). instrument, or other variables that are not reset through profit or loss, those to be measured

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Financial assets — classification and Debt instruments measured at amortised cost Financial assets — derecognition. The Group modified asset is not substantially different subsequent measurement — cash flow are presented in the consolidated statement of derecognises financial assets when (a) the from the original asset and the modification characteristics. Where the business model financial position net of the allowance for ECL. assets are redeemed or the rights to cash flows does not result in derecognition. The Group is to hold assets to collect contractual cash from the assets otherwise expire or (b) the recalculates the gross carrying amount by flows or to hold contractual cash flows and In accordance with IFRS 9, the Group applied Group has transferred the rights to the cash discounting the modified contractual cash sell, the Group assesses whether the cash a simplified approach to determining ECL flows from the financial assets or entered into flows by the original effective interest rate flows represent solely payments of principal in relation to trade accounts receivable that a qualifying pass-through arrangement whilst (or credit-adjusted effective interest rate and interest (“SPPI”). Financial assets with requires that full life-time ECL are to be (i) also transferring substantially all the risks for POCI financial assets), and recognises a embedded derivatives are considered in their recognised. and rewards of ownership of the assets or (ii) modification gain or loss in profit or loss. entirety when determining whether their cash neither transferring nor retaining substantially flows are consistent with the SPPI feature. In The Group applies a three stage model for all the risks and rewards of ownership but Financial liabilities — measurement making this assessment, the Group considers impairment, based on changes in credit quality not retaining control. Control is retained if categories. Financial liabilities are classified whether the contractual cash flows are since initial recognition. A financial instrument the counterparty does not have the practical as subsequently measured at AC, except for (i) consistent with a basic lending arrangement, i.e. that is not credit-impaired on initial recognition ability to sell the asset in its entirety to an financial liabilities at FVTPL: this classification interest includes only consideration for credit is classified in Stage 1. Financial assets in unrelated third party without needing to impose is applied to derivatives, financial liabilities risk, time value of money, other basic lending Stage 1 have their ECL measured at an amount additional restrictions on the sale. held for trading, contingent consideration risks and profit margin. equal to the portion of lifetime ECL that recognised by an acquirer in a business results from default events possible within the Financial assets — modification. The Group combination and other financial liabilities Where the contractual terms introduce exposure next 12 months or until contractual maturity, sometimes renegotiates or otherwise modifies designated as such at initial recognition and to risk or volatility that is inconsistent with a if shorter (“12 Months ECL”). If the Group the contractual terms of the financial assets. (ii) financial guarantee contracts and loan basic lending arrangement, the financial asset identifies a significant increase in credit risk commitments. is classified and measured at FVTPL. The SPPI (“SICR”) since initial recognition, the asset is If the modified terms are substantially assessment is performed on initial recognition transferred to Stage 2 and its ECL is measured different, the rights to cash flows from As at 31 December 2019 and 31 December of an asset and it is not subsequently based on ECL on a lifetime basis, that is, up the original asset expire and the Group 2018 the Group classifies all financial reassessed. until contractual maturity but considering derecognises the original financial asset and liabilities as subsequently measured at expected prepayments, if any (“Lifetime ECL”). recognises a new asset at its fair value. The amortised cost, except for the financial Financial assets — reclassification. Financial If the Group determines that a financial asset date of renegotiation is considered to be the guarantee. instruments are reclassified only when the is credit-impaired, the asset is transferred to date of initial recognition for subsequent business model for managing the portfolio as Stage 3 and its ECL is measured as a Lifetime impairment calculation purposes, including Financial liabilities — derecognition. a whole changes. The reclassification has a ECL. The Group’s definition of credit impaired determining whether a SICR has occurred. The Financial liabilities are derecognised when prospective effect and takes place from the assets and definition of default is explained in Group also assesses whether the new loan they are extinguished (i.e. when the obligation beginning of the first reporting period that Note 31. Note 31 provides information about or debt instrument meets the SPPI criterion. specified in the contract is discharged, follows after the change in the business model. inputs, assumptions and estimation techniques Any difference between the carrying amount cancelled or expires). used in measuring ECL, including an explanation of the original asset derecognised and fair Financial assets impairment — credit loss of how the Group incorporates forward-looking value of the new substantially modified asset Financial liabilities — modifications. allowance for expected credit losses (ECL). information in the ECL models. is recognised in profit or loss, unless the Modifications of liabilities that do not result The Group measures ECL and recognises net substance of the difference is attributed to a in extinguishment are accounted for as a impairment losses on financial and contract Financial assets — write-off. Financial assets capital transaction with owners. change in estimate using a cumulative catch assets at each reporting date. The measurement are written-off, in whole or in part, when up method, with any gain or loss recognised in of ECL reflects: (i) an unbiased and probability the Group exhausted all practical recovery In a situation where the renegotiation profit or loss, unless the economic substance of weighted amount that is determined by efforts and has concluded that there is no was driven by financial difficulties of the the difference in carrying values is attributed to evaluating a range of possible outcomes, (ii) reasonable expectation of recovery. The write- counterparty and inability to make the a capital transaction with owners. time value of money and (iii) all reasonable off represents a derecognition event. The Group originally agreed payments, the Group and supportable information that is available may write-off financial assets that are still compares the original and revised expected Offsetting financial instruments. Financial without undue cost and effort at the end of subject to enforcement activity when the Group cash flows to assess whether the risks and assets and liabilities are offset and the each reporting period about past events, current seeks to recover amounts that are contractually rewards of the asset are substantially different net amount reported in the statement of conditions and forecasts of future conditions. due, however, there is no reasonable as a result of the contractual modification. financial position only when there is a legally expectation of recovery. If the risks and rewards do not change, the enforceable right to offset the recognised

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amounts, and there is an intention to either relating to a prepayment will not be received, Employee benefits. Remuneration to Upon introduction of a new plan or modification settle on a net basis, or to realise the asset the carrying value of the prepayment is employees in respect of services rendered of an existing plan, past service costs are and settle the liability simultaneously. written down accordingly and a corresponding by employees during the reporting period is recognised in full as they arise in profit or loss.. Such a right of set off (a) must not be impairment loss is recognised in profit or loss recognised as an expense in that reporting contingent on a future event and (b) must for the year. period. be legally enforceable in all of the following Defined contribution plans circumstances: (i) in the normal course of Trade and other payables. Trade and other business, (ii) in the event of default and (iii) in payables are accrued when the counterparty Defined benefit plans In addition to the defined benefit plan the event of insolvency or bankruptcy. performs its obligations under the contract described above, the Group also sponsors and are recognised initially at fair value and The Group operates a defined benefit pension a defined contribution plan for selected Cash and cash equivalents. Cash and subsequently carried at amortised cost using plan. Present value of obligation under the plan employees. The Group’s contributions relating cash equivalents comprise cash in hand, the effective interest method. are determined using the projected unit credit to the defined contribution plan are charged deposits held at call with banks and short- method. This method considers each year of to the consolidated profit or loss in the year to term interest-bearing deposits with original Financial guarantees. Financial guarantees service as giving rise to an additional unit of which they relate. maturities of not more than three months (not require the Group to make specified payments benefit entitlement and measures each unit more than 92 days). to reimburse the holder of the guarantee separately to build up the final obligation. The for a loss it incurs because a specified cost of providing pensions is charged to the State pension plan Trade and other receivables. Trade and debtor fails to make payment when due in consolidated profit or loss, so as to attribute other receivables are recognised initially at accordance with the original or modified terms the total pension cost over the service lives In addition, the Group is legally obliged to fair value and are subsequently carried at of a debt instrument. Financial guarantees of employees in accordance with the benefit make contributions to the retirement benefit amortised cost using the effective interest are initially recognised at their fair value, formula of the plan. This obligation is measured plan run by the Pension Fund of the Russian method. which is normally evidenced by the amount at the present value of estimated future cash Federation. The Group’s only obligation is to of fees received. This amount is amortised flows using a discount rate that is similar pay the contributions as they fall due. As such, Borrowings. Borrowings are recognised on a straight line basis over the life of the to the interest on government bonds where the Group has no legal obligation to pay and initially at fair value, net of transaction costs guarantee. At the end of each reporting period, the currency and terms of these bonds are does not guarantee any future benefits to its incurred and are subsequently carried at the guarantees are measured at the higher of consistent with the currency and estimated Russian employees. The Group’s contributions amortised cost using the effective interest (i) the amount of the loss allowance for the terms of the defined benefit obligation. The are charged to the consolidated profit or loss method. guaranteed exposure determined based on net obligation under this plan is assumed to in the year in which services are provided. the expected loss model and (ii) the remaining be equal to the present value of the liabilities Contributions for each employee to the State Prepayments. Prepayments are carried at cost unamortised balance of the amount at initial less the fair value of the assets under this plan. Pension Fund of the Russian Federation vary less provision for impairment. A prepayment recognition. Remeasurements of the net defined benefit from 10% to 22%, depending on the annual is classified as non-current when the goods liability are recognised in other comprehensive gross remuneration of employee. or services relating to the prepayment are Inventories. Inventories shall be measured income in full as they arise. expected to be obtained after one year, or at the lower of cost and net realisable value. Value added tax. Output value added tax when the prepayment relates to an asset Net realisable value is the estimated selling In addition, the Group provides certain (“VAT”) related to revenues is payable to tax which will itself be classified as non-current price in the ordinary course of business, less retirement benefits, other post-employment authorities on the earlier of (a) delivery of the upon initial recognition. Prepayments to the estimated costs of completion and selling and other long-term benefits to its employees. goods or services to customers, (b) collection acquire assets are transferred to the carrying expenses. These benefits are not funded. of prepayments from customers. Input VAT is amount of the asset once the Group has generally recoverable against output VAT upon obtained control of the asset and it is probable The cost of inventories when release to The obligation and cost of benefits for the other receipt of the VAT invoice. The tax authorities that future economic benefits associated production or other disposal is determined long-term benefits are determined using the permit the settlement of VAT on a net basis with the asset will flow to the Group. Other on the weighted average basis and includes projected unit credit method. Remeasurements (except for input VAT related to export prepayments are written off to profit or expenditure incurred in acquiring the of the net defined benefit liability are services provided which is reclaimable upon loss when the goods or services relating to inventories and bringing them to their existing recognised in the profit and loss in full as they confirmation of export). VAT related to sales the prepayments are received. If there is an location and condition. arise. and purchases is recognised in the consolidated indication that the assets, goods or services statement of financial position on a gross

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basis and disclosed separately as an asset and are represented by advances from customers (a) full-service under a single contract at a (iii) dividend income can be measured with liability. Where provision has been made for the and are included in contract liabilities in the single price or; reliability. ECL of receivables, the provision is recorded for consolidated statement of financial position. the gross amount of the debtor, including VAT. The amounts of contract assets of the Group (b) incomplete set of services. In this case Interest income is recorded on an accrual basis are generally not significant. services rendered by the Company at a single using the effective interest method. Revenue recognition. Revenue is income price represent only a part of the logistic chain arising in the course of the Group’s ordinary There is no variable consideration, while remaining services are provided on a Leases. The determination of whether an activities. Revenue is recognised in the amount consideration of the Group for services that it stand-alone basis separately. arrangement is, or contains, a lease is based on of transaction price. Transaction price is performs under the contracts with customers the substance of the arrangement at inception the amount of consideration to which the is fixed. Transaction price for services is Revenues from integrated freight forwarding and date of whether the fulfilment of the arrangement Group expects to be entitled in exchange for determined in the orders (a standard primary logistics services are recognised in the accounting is dependent on the use of a specific asset or transferring control over promised goods or document detailing the information on period in which the services are rendered based assets and the arrangement conveys a right to services to a customer, excluding the amounts the nature of services and the amount of on the stage of completion of an individual use the identified asset for a period of time in collected on behalf of third parties. Revenue is consideration, authorized by both parties). transaction determined by the actual number exchange for consideration. The Group leases recognised net of discounts, returns and value Each order represents a separate performance of days of transportation spent in the reporting land, flatcars, certain production buildings and added taxes. Services provided in a bundle and obligation of the Group. period relative to the total number of days of office premises, tank-containers and handling recognised as a single performance obligation, transportation. equipment. Rental contracts are typically made as none of them is distinct. No significant financing component is deemed for fixed periods of 1 to 49 years but may have present. In accordance with contracts with extension options. Lease terms are negotiated on The Group provides services under fixed-price customers, payments are primarily made on Agency fees and other an individual basis and contain a wide range of contracts. Revenue from providing services is a prepayment basis that is consistent with services different terms and conditions. recognised in the accounting period in which market practice for the industry. The Group the services are rendered. requires prepayment for the transportation The Group acts as an agent on behalf of RZD Until 1 January 2019, leases of property, plant not for the purpose of obtaining financing but in providing mandatory railroad services for and equipment were classified as either finance or Where the contracts include multiple to mitigate risks associated with the provided all railway users at the Group’s terminals, operating leases. Payments made under operating performance obligations, the transaction price services. The period between the moment when designated as the “sites of common use” by leases (net of any incentives received from is allocated to each separate performance the payment is made and the moment when the the legislation. In this capacity the Group the lessor) were charged to profit or loss on a obligation based on the relative stand-alone service is rendered is less than one year. provides some of its terminal services as a legal straight-line basis over the period of the lease. selling prices. Where these are not directly intermediary (agent) between clients and RZD observable, they are estimated based on The main Group revenues are the following and collects a commission. From 1 January 2019, leases are recognised as a expected cost plus margin. categories of services: integrated forwarding right-of-use asset and a corresponding liability at and logistics services, agency fees and other The Group provides other services, such as: the date at which the leased asset is available for Estimates of revenues, costs or extent of services. handling of rolling stock and container fleet, use by the Group. Each lease payment is allocated progress toward completion are revised if terminal services, other freight forwarding between the liability and interest expenses. circumstances change. Any resulting increases services, truck deliveries. Interest expenses are charged to profit or loss or decreases in estimated revenues or costs are Integrated freight forwarding over the lease period so as to produce a constant reflected in profit or loss in the period in which and logistics services periodic rate of interest on the remaining balance the circumstances that give rise to the revision Dividend and interest income of the liability for each period. become known by management. Integrated freight forwarding and logistics services are service packages including rail Dividends from investments are recognised in Right-of-use assets The customer pays the fixed amount based on container transportation, terminal handling, consolidated profit or loss only if: a payment schedule. If the services rendered truck deliveries, freight forwarding and logistic Assets arising from a lease are initially by the Group exceed the payment, a contract services. By the method of providing, these (i) the Group’s right to receive payment is measured on a present value basis. asset is recognised. If the payments exceed services are provided at an integrated rate established; the services rendered, a contract liability is at a single price Right-of-use assets are measured at cost recognised. When the Group has the right (ii) it is probable that any future economic comprising the following: to consideration that is unconditional, a As parts of the compound rate service the benefit associated with dividends will flow h the amount of the initial measurement of lease receivable is recognised. Contract liabilities following services are available to customers: to the Group; and liability,

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h any lease payments made at or before the h amounts expected to be payable by the underlying asset was new regardless of the age (c) exchange differences arising from commencement date less any lease incentives Group under residual value guarantees; of the asset at inception of the lease. Lease foreign currency borrowings to the extent received, h the exercise price of a purchase option if payments on such leases are recognised as an that they are regarded as an adjustment to h any initial direct costs, and the Group is reasonably certain to exercise expense on a straight-line basis over the lease interest costs. that option; and h costs to restore the asset to the conditions term. required by lease agreements. h payments of penalties for terminating the General and specific borrowing costs directly lease, if the lease term reflects the Group In determining the lease the Group applies the attributable to the acquisition, construction or Right-of-use assets are amortised on a straight- exercising that option. practical expedient of IFRS 16, Leases, which production of assets that necessarily take a line basis over the asset’s useful life or lease term, allows not to separate non-lease components substantial time to get ready for intended use whichever ends earlier. Extension and termination options are included from lease component for such groups of or sale (qualifying assets) are capitalised as in a number of leases across the Group. underlying assets as buildings, constructions part of the costs of those assets. Right-of-use assets are depreciated over the Extension options (or period after termination and vehicles. The Group considers such shorter of the asset’s useful life and the lease options) are only included in the lease term if components as a single lease component. The commencement date for capitalisation is term on a straight-line basis. the lease is reasonably certain to be extended when: (or not terminated). Lease payments to be made If the Group is reasonably certain to exercise under reasonably certain extension options Lessor’s accounting (a) the Group incurs expenditures for the a purchase option, the right-of-use asset is are also included in the measurement of the qualifying asset; depreciated over the underlying assets’ useful liability. The Group as a lessor classifies each of its lives. Depreciation on the items of the right-of-use leases as either an operating lease or a finance (b) it incurs borrowing costs; and assets is calculated using the straight-line method The lease payments are discounted using the lease. A lease is classified as a finance lease if it over their estimated useful lives or lease terms as interest rate implicit in the lease. If that rate transfers substantially all the risks and rewards (c) it undertakes activities that are necessary follows: cannot be determined, the lessee’s incremental incidental to ownership of an underlying asset. to prepare the asset for its intended use or borrowing rate is used, being the rate that the A lease is classified as an operating lease if it sale. lessee would have to pay to borrow the funds does not transfer substantially all the risks and Useful lives necessary to obtain an asset of similar value rewards incidental to ownership of an underlying Capitalisation of borrowing costs continues up in years in a similar economic environment with similar asset. to the date when the assets are substantially terms and conditions. ready for their use or sale. Land, buildings and constructions 1-70 The Group had no finance leases as at 31 Сontainers and flatcars 1-7 The Group leases land on which Group’s December 2019 and as at 31 December 2018. The Group capitalises borrowing costs that could Cranes and loaders 1-2 property is located, the rent for which is have been avoided if it had not made capital determined using the lease rate as a percentage expenditure on qualifying assets. Borrowing Vehicles and other equipment 4-7 of the cadastral value of such land. Under such Operating leases costs capitalised are calculated at the Group’s land lease agreements, the Group recognises average funding cost (the weighted average rents as variable lease payments that are not Where the Group is a lessor in a lease which interest cost is applied to the expenditures included in the assessment of lease obligations. does not transfers substantially all the risks on the qualifying assets), except to the extent Lease liabilities and rewards incidental to ownership to the that funds are borrowed specifically for the Lease payments are allocated between lease lessee (i.e. operating lease), lease payments purpose of obtaining a qualifying asset. Where Liabilities arising from a lease are initially principal and finance costs. The finance costs from operating leases are recognised as other this occurs, actual borrowing costs incurred on measured on a present value basis. Lease are charged to profit or loss over the lease income on a straight-line basis. the specific borrowings less any investment liabilities include the net present value of the period so as to produce a constant periodic income on the temporary investment of these following lease payments: rate of interest on the remaining balance of the Borrowing costs. Borrowing costs include: borrowings are capitalised. h fixed payments (including in-substance liability for each period. fixed payments), less any lease incentives (a) interest expense calculated by the Income taxes. Income taxes have been receivable, The value of the underlying asset. The value of effective interest method; provided for in the consolidated financial h variable lease payment that are based on an the underlying asset is considered to be low statements in accordance with legislation index or a rate, initially measured using the if it does not exceed RUR 350 thousand. The (b) interest in respect of lease obligations; enacted or substantively enacted by the end of index or rate as at the commencement date; value of the underlying asset is valued as if the the reporting period. The income tax charge/ (credit) comprises current tax and deferred tax and is recognised in consolidated profit or loss

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for the year, except if it is recognised in other levied by the same taxation authority on either equity. The difference between the fair value 4. NEW AND REVISED comprehensive income or directly in equity the same taxable entity or different taxable of consideration received and the par value of INTERNATIONAL FINANCIAL because it relates to transactions that are also entities where there is an intention to settle the shares issued is recognised as other reserves in REPORTING STANDARDS recognised, in the same or a different period, balances on a net basis. Deferred tax assets and equity. in other comprehensive income or directly in liabilities are netted only within the individual IFRS 16, Leases (issued in January 2016 and equity. companies of the Group. Earnings per share. Earnings per share effective for annual periods beginning on or are determined by dividing the profit or loss after 1 January 2019). The Group decided to Current tax is the amount expected to be paid At initial recognition the right-of-use asset attributable to the owners of the Company apply the standard from its mandatory adoption to or recovered from the budget in respect of and liability recognised in respect of the lease by the weighted average number of ordinary date of 1 January 2019 using the modified taxable profits or losses for current and prior are considered to be interrelated and deferred shares outstanding during the reporting period, retrospective method, without restatement of periods. Taxable profits or losses are based tax effect in respect of right-of-use asset except treasury shares. The Group does not comparatives and using certain simplifications on estimates if the consolidated financial and liability are presented on a net basis. have any potentially dilutive equity instruments. allowed by the standard. Right-of-use assets statements are authorised prior to filing relevant Accordingly, the net temporary difference is nil. are measured at the amount of the lease tax returns. Taxes other than on income are Dividends. Dividends are recognised as a liability on adoption (adjusted for any prepaid recorded within operating expenses. The Group controls the reversal of temporary liability and deducted from equity in the period or accrued expenses). differences relating to dividends from in which they are declared and approved. Deferred income tax is provided using the subsidiaries or gains upon their disposal. Dividends are disclosed when they are In applying IFRS 16 for the first time, the Group balance sheet liability method for tax loss carry The Group does not recognise deferred tax declared after the reporting date but before has used the following practical expedients forwards and temporary differences arising liabilities on such temporary differences the consolidated financial statements are permitted by the standard: between the tax bases of assets and liabilities except to the extent that management expects authorised for issue. h the use of a single discount rate to a and their carrying amounts in the consolidated the temporary differences to reverse in the portfolio of leases with reasonably similar financial statements. In accordance with the foreseeable future. Provisions for liabilities and charges. characteristics; initial recognition exemption, deferred taxes Provisions for liabilities and charges are non- h the accounting for operating leases with a are not recorded for temporary differences on Uncertain tax positions. The Group’s uncertain financial liabilities of uncertain timing or remaining lease term of less than 12 months initial recognition of an asset or a liability in a tax positions are reassessed by management amount. They are accrued when the Group has as at 1 January 2019 as short-term leases; transaction other than a business combination at the end of each reporting period. Liabilities a present (legal or constructive) obligation h the accounting for operating leases of low- if the transaction, when initially recorded, are recorded for income tax positions that are as a result of past events, it is probable value assets as at 1 January 2019 as leases affects neither accounting nor taxable profit. determined by management as more likely than that an outflow of resources embodying in which the underlying asset has a low Deferred tax liabilities are not recorded for not to result in additional taxes being levied economic benefits will be required to settle value; temporary differences on initial recognition of if the positions were to be challenged by the the obligation, and a reliable estimate of the goodwill, and subsequently for goodwill which tax authorities. The assessment is based on amount of the obligation can be made. h excluding initial direct costs for the measurement of the right-of-use asset at is not deductible for tax purposes. Deferred tax the interpretation of tax laws that have been the date of initial application, and balances are measured at tax rates enacted enacted or substantively enacted by the end Provisions are measured at the present value or substantively enacted at the end of the of the reporting period, and any known court of the expenditures expected to be required to h using hindsight in determining the lease reporting period, which are expected to apply or other rulings on such issues. Liabilities for settle the obligation using a pre-tax rate that term where the contract contains options to to the period when the temporary differences penalties, interest and taxes other than on reflects current market assessments of the extend or terminate the lease. will reverse or the tax loss carry forwards will income are recognised based on management’s time value of money and the risks specific to be utilised. Deferred tax assets for deductible best estimate of the expenditure required the obligation. The increase in the provision There were no onerous lease contracts that temporary differences and tax loss carry to settle the obligations at the end of the due to the passage of time is recognised as an would have required an adjustment to the right- forwards are recorded only to the extent that reporting period. Except for income tax related interest expense. of-use assets at the date of initial application it is probable that the temporary difference interest and fines, adjustments for uncertain 1 January 2019. will reverse in the future and there is sufficient income tax positions are recorded within the Levies and charges, such as taxes other future taxable profit available against which the income tax charge. Income tax related fines are than income tax or regulatory fees based on The Group has also elected not to reassess deductions can be utilised. recognised in operating expenses. information related to a period before the whether a contract is, or contains a lease at the obligation to pay arises, are recognised as date of initial application. Instead, for contracts Deferred income tax assets and liabilities are Share capital and other reserves. Ordinary liabilities when the obligating event that gives entered into before the transition date the offset when there is a legally enforceable right shares are classified as equity. Incremental rise to pay a levy occurs, as identified by the Group relied on its assessment made applying to offset current tax assets against current tax costs directly attributable to the issue of new legislation that triggers the obligation to pay IAS 17, Leases, and IFRIC 4, Determining liabilities and when the deferred income tax shares (other than on a business combination) the levy. If a levy is paid before the obligating whether an Arrangement Сontains a Lease. assets and liabilities relate to income taxes are shown as a deduction from the proceeds in event, it is recognised as a prepayment.

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h Sale or Contribution of Assets between an The weighted average incremental borrowing values leases which both are recognised on a As IFRS 16 substantially carried forward the Investor and its Associate or Joint Venture — rate applied be the Group to the leased liabilities straight-line basis as an expense in profit or loss. lessor accounting requirements in IAS 17, the Amendments to IFRS 10 and IAS 28 (issued on 1 January 2019 was 7.76%. Group did not recognise any significant impact on 11 September 2014 and effective for A reconciliation of the operating lease on the consolidated financial statements in annual periods beginning on or after a date to As at 31 December 2018 the Group had non- commitments disclosed in the consolidated respect of the Group’s activities as a lessor. be determined by the IASB). The amendments cancellable lease commitments of RUR 254m financial statements for the year ended However, an additional disclosure concerning have not been endorsed for application in the (Note 30). Of these commitments, RUR 49m 31 December 2018 to the recognised lease maturity analysis of future undiscounted lease Russian Federation; related to short-term leases and RUR 1m to low liability is as follows: payments receivable was added (Note 17). h Interest rate benchmark reform — The following amended standards became Amendments to IFRS 9, IAS 39 and IFRS 7 In thousands of Russian Roubles effective from 1 January 2019, but did not have (issued on 26 September 2019 and effective any material impact on the Group: for annual periods beginning on or after 1 January 2019 h IFRIC 23 “Uncertainty over Income Tax 1 January 2020). The amendments have not Operating lease commitments as at 31 December 2018 disclosed in the consolidated Treatments” (issued on 7 June 2017 and been endorsed for application in the Russian financial statements of the Group effective for annual periods beginning on or Federation; h Operating lease liabilities recognised as at 31 December 2018 254 after 1 January 2019); h Classification of liabilities as current or non- h Future lease payments that are a result of a different treatment of extension 1,170 h Prepayment Features with Negative current – Amendments to IAS 1 (issued on and termination options Compensation – Amendments to IFRS 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). h Effect of discounting to present value (356) 9 (issued on 12 October 2017 and effective for annual periods beginning on or after The amendments have not been endorsed for h Less short-term leases not recognised as a liability (258) 1 January 2019); application in the Russian Federation; h Less low-value leases not recognised as a liability (30) h Amendments to IAS 28 “Long-term Interests h Amendments to the Conceptual Framework Total lease liabilities recognised as at 1 January 2019 780 in Associates and Joint Ventures” (issued on for Financial Reporting (issued on 29 March 12 October 2017 and effective for annual 2018 and effective for annual periods Of which are: periods beginning on or after 1 January 2019); beginning on or after 1 January 2020); Short-term lease liabilities 147 h Annual Improvements to IFRSs 2015-2017 h Definition of a business — Amendments Long-term lease liabilities 633 cycle – amendments to IFRS 3, IFRS 11, to IFRS 3 (issued on 22 October 2018 and IAS 12 – IAS 23 (issued on 12 December effective for acquisitions from the beginning 2017 and effective for annual periods of annual reporting period that starts on beginning on or after 1 January 2019); or after 1 January 2020). Definition of The change in accounting policy affected the following items in the consolidated materiality — Amendments to IAS 1 and IAS statement of financial position on 1 January 2019: h Amendments to IAS 19 “Plan Amendment, 8 (issued on 31 October 2018 and effective Curtailment or Settlement” (issued on for annual periods beginning on or after In thousands of Russian Roubles 7 February 2018 and effective for annual 1 January 2020). periods beginning on or after 1 January 2019). Notes Impact Unless otherwise described above, these new of New standards and improvements mandatory for standards and interpretations are not expected adopting IFRS 16 annual periods beginning on or after 1 January to affect significantly the Group’s consolidated 2020 or later periods that are applicable for the financial statements. Increase in right-of-use assets 17 780 Group’s activity and approved for adoption in the Increase in lease liabilities 17 780 Russian Federation (unless stated otherwise) and which the Group has not early adopted, are as 5. KEY SOURCES OF ESTIMATION follows: UNCERTAINTY h Definition of materiality — Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 The key assumptions concerning the future and and effective for annual periods beginning on current year as well, and other key sources of or after 1 January 2020); estimation uncertainty at the reporting date, that can cause a material adjustment to the carrying amounts of assets and liabilities within the next reporting year, are discussed below.

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Useful lives of property, plant and equipment. in current replacement costs and other changes in for measurement of the present value of post- The assessment of reasonable certainty is only The estimation of the useful lives of items of circumstances that indicate impairment exists. employment benefit obligations and other long- revised if a significant event or a significant property, plant and equipment is a matter of term obligations to employees and related change in circumstances occurs, which affects this judgment based on the experience with similar Whenever such indications exist management current service cost. This method involves the assessment, and that is within the control of the assets. The future economic benefits embodied makes an estimate of the asset’s recoverable use of demographic assumptions about the lessee. During the year ended 31 December 2019, in the assets are consumed principally through amount to ensure that it is not less than its future characteristics of the current and former the financial effect of revising lease terms to reflect use. However, other factors, such as technical or carrying value. If the asset’s fair value is not employees who are eligible for benefits (mortality the effect of exercising extension and termination commercial obsolescence and wear and tear, often readily determinable or is less than asset’s after employment, rates of employee turnover options was an increase in recognised lease result in the diminution of the economic benefits carrying value plus costs of disposal, management etc.), as well as financial assumptions (discount liabilities and right-of-use assets of RUR 71m. embodied in the assets. The Group assesses the necessarily applies its judgment in determining the rate, future salary and benefits levels, etc.). In the remaining useful lives of items of property, plant appropriate cash generating unit to be evaluated, event that further changes in the key assumptions Discount rates used for determination of and equipment at least at each financial year- estimating the appropriate discount rate and the are required, the amounts of the pension benefit lease liabilities. The Group uses its incremental end and in accordance with the current technical timing and value of the relevant cash flows for the costs may be materially affected (Note 18). borrowing rate as a base for calculation of the conditions of the assets and estimated period value-in-use calculation. Initial recognition of related party transactions. discount rate because the interest rate implicit in during which the assets are expected to earn In the normal course of business the Group the lease cannot be readily determined. benefits for the Group. If expectations differ from As at 31 December 2019 there are no indicators enters into transactions with its related parties. previous estimates, the changes are accounted of impairment of the Group’s property, plant and IFRS 9 requires initial recognition of financial The weighted average rate of additional borrowing for as a change in an accounting estimate in equipment, except for the impairment of part of the instruments based on their fair values. Judgement applied by the Group to lease obligations as at accordance with IAS 8 “Accounting policies, real estate of JSC Logistika-Terminal (subsidiary of is applied in determining if transactions are 1 January 2019 and 31 December 2019 was changes in accounting estimates and errors”. the Group, Note 1) and part of the Company’s real priced at market or non-market conditions, where 7.76% and 7.58%, respectively. A 10% increase These estimates may have a material impact on estate and construction-in-progress (Note 7). As there is no active market for such transactions. in discount rate at 31 December 2019 would the amount of the carrying values of property, at 31 December 2018 there were no indicators of The basis for judgement is pricing for similar result in decrease in lease liabilities of RUR 18m plant and equipment and on depreciation expense impairment of property, plant and equipment. types of transactions with unrelated parties (1 January 2019: RUR 15m). A 10% decrease in for the period. and effective interest rate analyses. Terms and discount rate at 31 December 2019 would result Compliance with tax legislation. Russian tax conditions of related party balances are disclosed in an increase in lease liabilities of RUR 19m As at 31 December 2018 and 31 December 2019 legislation which was enacted or substantively in Note 28. (1 January 2019: RUR 17m).. the Group reassessed the remaining useful lives enacted at the end of the reporting period, is of certain items of property, plant and equipment, subject to varying interpretations when being Depreciation of right-of-use assets. In the ranges of terms for each group of items of applied to the transactions and activities of determining the lease term, management 6. CRITICAL ACCOUNTING property, plant and equipment have not changed the Group. Consequently, tax positions taken considers all facts and circumstances that create JUDGEMENTS significantly. by management and the formal documentation an economic incentive to exercise an extension supporting the tax positions may be challenged option, or not exercise a termination option. In the process of applying the Group’s accounting Were the estimated useful lives to differ by 10% by tax authorities. Russian tax administration Extension options (or periods after termination policies, management has made the following from management’s estimates, the impact on is gradually strengthening, including the fact options) are only included in the lease term if the judgments, apart from those involving estimates, depreciation for the year ended 31 December that there is a higher risk of review of tax lease is reasonably certain to be extended (or not which have the most significant effect on the 2019 would be to increase it by RUR 330m or transactions without a clear business purpose terminated). amounts recognised in the consolidated financial decrease it by RUR 269m (for the year ended 31 or with tax incompliant counterparties. Fiscal statements and may influence carrying amounts December 2018: to increase by RUR 297m or periods remain open to review by the authorities Otherwise, the Group considers other factors of assets and liabilities within the next financial decrease by RUR 244m). in respect of taxes for three calendar years including historical lease durations and the costs year. preceding the year of review. Under certain and business disruption required to replace the Impairment of property, plant and equipment. circumstances reviews may cover longer periods. leased asset. Lease obligations. The Group uses the following The Group reviews at each reporting date the Management believes that it has accrued all judgments in its assessment: carrying amounts of its property, plant and applicable taxes. management believes that it has As at 1 January 2019 and 31 December 2019, equipment to determine whether there is any adequately provided for tax liabilities based on its potential future cash outflows of RUR 258m and Lease term. The lease term corresponds to the indication that assets are impaired. This process interpretations of tax legislation. However, there RUR 603m (undiscounted), respectively, have not non-cancellable period of the contract, except involves judgment in evaluating the cause for exists a possibility that relevant tax authorities been included in the lease liability because it is for the availability for the Group of an option any possible reduction in value, including a may have differing interpretations than those not reasonably certain that the leases will be to extend. The Group takes into account an number of factors such as changes in current of the management, and the effect of such extended (or not terminated). option to extend in the exercise of which it competitive conditions, expectations of growth in differences could be significant. has reasonable confidence, as well as early the industry, increased cost of capital, changes in The lease term is reassessed if an option is termination options, which the Group will the future availability of financing, technological Pension and other non-curerent obligations. actually exercised (or not exercised) or the Group not exercise with reasonable confidence. In obsolescence, discontinuance of service, change The Group uses projected unit credit method becomes obliged to exercise (or not exercise) it.

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considering such options the Group takes into customers for its services including railbased Land, buildings Сontainers Cranes Vehicles Construction Total account the remaining useful life of the property, container transportation, terminal handling, and and flatcars and and other in progress plant and equipment located on the leased land, trucking, etc. and the full third-party charges, constructions loaders equipment the remaining useful life of the leased property, including railway tariff. These services are 31 December 2018 14,502 47,912 3,330 2,925 331 69,000 the strategic development plan of the Group, offered to the client as one service at a single Additions 6 19,001 - 58 134 19,199 taking into account additional factors affecting price and the Group considers them to be a the Group’s management intention to extend or single performance obligation, the performance Transfers 37 57 - 1 (95) - terminate the contract. of which reflects the period in which services Disposals (23) (817) (87) (144) (110) (1,181) are provided based on the number of days of Discount rate. The incremental borrowing rate transportation. 31 December 2019 14,522 66,153 3,243 2,840 260 87,018 is used as a discount rate when calculating the Accumulated depreciation present value of lease payments the discount Management believes that the Group acts as a 1 January 2018 (2,735) (13,705) (1,177) (2,007) - (19,624) rate is determined for each asset based on principal in these arrangements and the Group the Group’s incremental borrowing rate at accounts for receipts from customers as sales Depreciation charge for the year (317) (2,069) (232) (239) - (2,857) the beginning of the contract. The Company’s revenue. Third-party charges, including the Transfer to investment property 13 - - - - 13 incremental borrowing rate is based on the railroad tariff, is included in third-party charges rate given in the Bank of Russia Statistical related to principal activities in operating Impairment (2) - - - - (2) Bulletin and in the Central banks of the countries expenses. Disposals 175 589 2 157 - 923 where the subsidiaries are located. The range 31 December 2018 (2,866) (15,185) (1,407) (2,089) - (21,547) of discount rates for the Group’s additional Had the railway tariff and third-party services borrowing for 1 January 2019 is from 2% directly attributable to integrated freight Depreciation charge for the year (352) (2,395) (254) (229) - (3,230) to 9.7%, and for 31 December 2019 is forwarding and logistics services been excluded Impairment (463) - (53) (11) (117) (644) from 2% to 11%. from both revenue and expenses, then revenue Disposals 12 798 87 136 - 1,033 from integrated freight forwarding and logistics Revenue from integrated freight forwarding services and third-party charges related to 31 December 2019 (3,669) (16,782) (1,627) (2,193) (117) (24,388) and logistics services. In case the Group principal activities would have decreased by RUR Net book value provides integrated freight forwarding and 48,283m for the year ended 31 December 2019. logistic services the customers do not interact For the year ended 31 December 2018 this 31 December 2018 11,636 32,727 1,923 836 331 47,453 with other transportation organisations. A full effect would be RUR 45,671m.. 31 December 2019 10,853 49,371 1,616 647 143 62,630 service fee is charged by the Group to its

7. PROPERTY, PLANT AND EQUIPMENT AND ADVANCES FOR ACQUISITION The item “Land, buildings and constructions” containers and flatcars under lease (Note 17 — OF NONCURRENT ASSETS includes the amounts of RUR 1,275m and RUR Group is the lessor) that were leased out by the 1,275m, which represent the net book value of Group under operating lease agreements. land plots owned by the Group as at 31 December Land, buildings Сontainers Cranes Vehicles Construction Total 2019 and 31 December 2018, respectively. The item “Vehicles and other equipment group” and and flatcars and and other in progress includes motor transport used for terminal constructions loaders equipment As at 31 December 2019 and 31 December 2018 services and truck deliveries with gross carrying Cost the item “Land, buildings and constructions” amount of RUR 650m and RUR 696m as at includes the amounts of RUR 108m and 31 December 2019 and 31 December 2018, 1 January 2018 12,676 42,345 3,059 2,834 411 61,325 RUR 211m, respectively, which represent the respectively. Additions 39 6,146 146 176 154 6,661 gross carrying amounts of land, buildings and construction under lease (Note 17 Leases — During the year ended 31 December 2019 Acquisition in a business 2,022 - 126 30 - 2,178 combination Group is the lessor) that were leased out by the according to the investment programme for 2019 Group under operating lease agreements. provided for the renewal of the fleet of flatcars Transfers 90 52 3 15 (160) - and containers there were additions of flatcars Transfer to investment property (13) - - - - (13) As at 31 December 2019 and 31 December 2018 and containers in the amount of RUR 15,654m the item “Containers and flatcars” includes the and RUR 3,347m, respectively (during the year Сapitalised borrowing costs - - - - 11 11 amounts of RUR 375m and 240m, respectively, ended 31 December 2018 — RUR 5,364m and Disposals (312) (631) (4) (130) (85) (1,162) which represent the gross carrying amounts of RUR 782m, respectively).

PJSC TransContainer | Annual report 2019 188 189 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

As at 31 December 2018, the Group reviewed the Advances for acquisition of non-current 9. INVESTMENTS IN JOINT VENTURES useful lives of certain property, plant and equipment. assets As a result, the amount of accrued depreciation The table below summarises the movements in the carrying amount of the Group’s investment for the year ended 31 December 2019 decreased As at 31 December 2019 and 31 December in joint ventures: by RUR 135m compared to what would have been 2018, advances for the acquisition of non- Joint ventures Joint venture Other joint Total joint accrued under the previous useful lives, the range of current assets, net of VAT, consisted of JSC Kedentransservice LLC Freight ventures ventures useful life values for the objects of various groups advances for the acquisition of cranes and and Logistic System Village Kaluga had not changed. Assessing the impact of revision on loaders (RUR 0m and RUR 10m, respectively), Management B.V. Sever subsequent periods is impracticable. advances for the acquisition of containers (RUR 74m and RUR 243m, respectively), advances for Carrying amount as 3,132 163 108 3,403 The gross carrying amount of fully depreciated the purchase of rolling stock (RUR 306m and at 31 December 2017 property, plant and equipment that is still in use RUR 335m, respectively) and advances for the amounted to RUR 920m and RUR 1,036m as acquisition of other non-current assets (RUR 2m The impact of the new (55) - - (55) at 31 December 2019 and 31 December 2018, and RUR 2m, respectively). standard IFRS 9 respectively. Total restated at 3,077 163 108 3,348 1 January 2018 During the year ended 31 December 2019 the Group 8. INTANGIBLE ASSETS Share of profit/(losses) 304 (52) 16 268 recognised a provision for impairment of property, of joint ventures plant and equipment in the amount of RUR 644m The Company’s intangible assets are comprised (RUR 2m during the year ended 31 December 2018) of software with initial cost of RUR 344m and Dividends received (385) - (7) (392) (Note 25), mainly for real estate of JSC Logistika- accumulated depreciation of RUR 125m as at from Terminal (Group’s subsidiary, Note 1) in the amount 31 December 2019 (RUR 382m and RUR 113m joint ventures of RUR 274 million, as well as for real estate of the as at 31 December 2018 respectively). Share of translation to 131 - 15 146 Company located in the cargo yard of the Moscow— presentation currency Tovarnaya—Paveletskaya station in the amount of For the year ended 31 December 2019 Carrying amount 3,127 111 132 3,370 RUR 249m and for the Company’s construction-in- depreciation charge for intangible assets as at 31 December progress facility at Uglovaya station in the amount amounted to RUR 78m (for the year ended 2018 of RUR 117m, for which at the end of the reporting 31 December 2018 RUR 70m). period the Company recognised the impairment due Share of profit of joint 526 38 19 583 to the lack of economic benefits for the Company in Included in intangible assets are assets not ventures the form of future cash flows from these facilities. ready for intended use with historical cost of Dividends received (346) - - (346) RUR 21m as at 31 December 2019 (RUR 16m from The carrying amount of temporarily idle property, as at 31 December 2018). joint ventures plant and equipment as at 31 December 2019 and Share of translation to (332) - (17) (349) 31 December 2018 comprised the following: Intangible assets are mostly comprised of presentation currency railway services operations software, logistics Share of other (3) - - (3) services rendering software, software for 2019 2018 comprehensive loss of tax, management and financial accounting. joint venture These assets are depreciated on linear basis. Cost 1,002 785 Economic lives length of the assets is from 2 Reclassification to (2,972) - - (2,972) to 8 years. assets for sale under Accumulated deprecation (372) (283) IFRS 5 Carrying amount - 149 134 283 Impairment (371) (118) as at 31 December 2019

Net book value 259 384

PJSC TransContainer | Annual report 2019 190 191 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

In 2017, the Company acted as a guarantor for h with LLC V-Park (part of the FVK Group), Joint ventures Joint venture Other joint Total joint ventures the execution of LLC Freight Village Kaluga Sever according to which the Company received JSC Kedentransservice LLC Freight Village ventures (FVKS) obligations under the loan agreement a land plot and immovable property in the and Logistic System Kaluga Sever Management B.V. with Vnesheconombank. Since 28 June 2019 the amount of RUR 412m. creditor’s rights under the loan agreement have 2019 2018 2019 2018 2019 2018 2019 2018 passed to PJSC State Transport Leasing Company As at 31 December 2019 and 31 December 2018 Current liabilities - 709 354 606 66 59 420 1,374 (PJSC GTLK), a related party of the Group as at the amount of pledge agreements have not 31 December 2019 (Note 28). On 23 December changed. Non-current - 361 5,032 4,632 11 - 5,043 4,993 2019 an additional agreement was signed to liabilities the current loan agreement, as a result due to In November 2019 the Group entered into sale Net assets - 5,734 (671) (799) 270 264 (401) 5,199 a significant change in the terms of the loan agreement for 50% of the shares of Logistic Revenue 11,791 10,625 2,097 1,573 1,071 934 14,959 13,132 agreement, the Group derecognised the original System Management B. V. with JSC National financial liability and recognised a new financial Company Kazakhstan Temir Zholy (“KTZ”), Profit/(loss) 1,149 608 128 (172) 39 31 1,316 467 liability. the second shareholder of Logistic System Management B. V., which owns 100% of the share As at 31 December 2019 the debt of FVKS capital of JSC Kedentransservice. was secured by the guarantee under the loan agreement amounted to RUR 2.2bn (2.3bn as at KTZ can purchase shares if each party fulfills During the year ended 31 December 2019, Logistic shareholders in the amount of RUR 730m (50% to 31 December 2018). As at 31 December 2019 the certain conditions and responsibilities, which System Management B.V. paid dividends to PJSC TransContainer and 50% to JSC KTZ). financial guarantee for investment in joint venture must be met according to the agreement. As shareholders in the amount of RUR 649m (50% to recognised in the consolidated statement of of the date of approval of these consolidated PJSC TransContainer and 50% to JSC KTZ). The reconciling difference between the above financial position was RUR 151m (RUR 154m as at financial statements, these necessary conditions amounts and the carrying amount of the investments 31 December 2018). have not been met, but the Group is actively During the year ended 31 December 2018, Logistic in joint ventures is elimination of the ownership pursuing measures to fulfill these conditions, System Management B.V. paid dividends to interest held by the other investors and goodwill Furthermore, as part of the acquisition of the changes to the sales plan are not provided arising on acquisition of joint ventures. ownership of 30% of share capital of joint venture for in the agreement and are not planned, LLC FVKS in July 2017, the following pledge and therefore investments in joint ventures of agreements came into force in July-August 2017, JSC Kedentransservice and Logistic System Joint ventures JSC Joint venture Other joint Total joint providing a number of obligations of the parties to Management B.V. as at 31 December 2019 were Kedentransservice LLC Freight ventures ventures each other: classified as assets held for sale in accordance and Logistic System Village Kaluga with IFRS 5 Non-current Assets Held for Sale and Management B.V. Sever h with JSC Freight Village Kaluga (hereinafter, Discontinued Operations. FVK), which has 70% ownership through LLC FV 2019 2018 2019 2018 2019 2018 2019 2018 Logistics in FVK Sever authorised share capital, The Group plans to complete the sale of Logistic according to which the Company pledged to FVK System Management B. V. in 2020. Net assets - 5,734 (671) (799) 270 264 (401) 5,199 immovable property in the amount of RUR 301m; Interest held, % - 50% 30% 30% 49%,50% 49%,50% - -

Summarised financial information of joint ventures for the years ended 31 December 2019 and 31 December 2018, Goodwill - 260 351 351 - - 351 611 and as at 31 December 2019 and 31 December 2018: Investments in joint - 3,127 149 111 134 132 283 3,370 ventures Joint ventures Joint venture Other joint Total joint ventures JSC Kedentransservice LLC Freight Village ventures and Logistic System Kaluga Sever Management B.V.

2019 2018 2019 2018 2019 2018 2019 2018

Current assets - 2,460 590 1,001 329 315 919 3,776

Non-current assets - 4,344 4,125 3,438 18 8 4,143 7,790

PJSC TransContainer | Annual report 2019 192 193 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Additional financial information of joint ventures JSC Kedentransservice, Logistic System Management B.V. and LLC Outstanding Сredit loss Outstanding Freight Village Kaluga Sever for the year ended 31 December 2019 and 31 December 2018, and as at 31 December balance, allowance balance, net 2019 and 31 December 2018 is as follows: gross 31 December 2018 Joint ventures Joint venture Trade receivables 1,736 (31) 1,705 JSC Kedentransservice LLC Freight Village and Logistic System Kaluga Sever Other receivables 132 (93) 39 Management B.V. Total current trade and other receivables, 1,868 (124) 1,744 2019 2018 2019 2018 classified as financial assets Cash and cash equivalents - 1,286 358 791

Current financial liabilities (excluding trade and other - 20 8 334 The following table explains the changes in the credit loss allowance for trade and other receivables under payables and provisions) simplified ECL model between the beginning and the end of the period:

Non-current financial liabilities (excluding trade and - 20 5,032 4,296 other payables and provisions) 2019 2018

Depreciation and amortisation 349 248 192 147 Trade receivables

Interest income 6 11 34 26 Balance at 1 January (31) (25)

Interest expense 92 6 459 490 New originated (17) (14)

Income tax expense 303 297 37 139 Other movements 3 3 Total credit loss allowance charge in profit or loss for the period (14) (11)

Write-offs 8 5

10. INVENTORIES Balance at 31 December (37) (31)

2019 2018 Other receivables Raw materials 69 38 Balance at 1 January (93) (86) Spare parts and construction materials 512 130 New originated - (12) Other inventories 49 54 Other movements 3 - Total 630 222 Total credit loss allowance charge in profit or loss for the period 3 (12)

Write-offs 1 5

Balance at 31 December (89) (93) 11. TRADE AND OTHER RECEIVABLES

Outstanding Сredit loss Outstanding balance, allowance balance, net The Group applies the simplified approach credit losses are based on payment schedules for gross provided in IFRS 9 for assessment of expected sales for 12 months before 31 December 2019 or 31 December 2019 credit losses using the estimated allowance 1 January 2019, respectively, and similar historical for expected credit losses over the entire term credit losses incurred during this period. The credit Trade receivables 1,788 (37) 1,751 for trade and other receivables. To assess loss allowance for trade and other receivables Other receivables 137 (89) 48 expected credit losses allowance, trade and other is determined in accordance with the provision Total current trade and other receivables, classified 1,925 (126) 1,799 receivables were grouped based on the general matrix presented in the table below. The matrix as financial assets characteristics of credit risk and the number of of provision is based on a credit risk assessment days of late payment. The levels of expected system (Note 31).

PJSC TransContainer | Annual report 2019 194 195 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

31 December 31 December Short-term investments of the Group are presented accrued interest amounted to RUR 35m and has been 2019 2018 by deposits with a Russian banks with a maturity over included as the portion of short-term investments in Gross Lifetime ECL Gross Lifetime ECL three months. the consolidated statement of financial position. The carrying carrying deposits matured in January–March 2020. amount amount Six Russian Rouble-denominated bank deposits in the h Good 1,709 10 1,556 5 total amount of RUR 2,865m, bearing interest at annual The amount of the expected credit loss allowance rates in a range from 6.60 to 6.65%, were placed based on the results of credit quality analysis of bank h Satisfactory 92 13 177 4 with PJSC Bank VTB, a related party of the Group as deposit balances based on credit risk levels as at h Default 124 103 135 115 at 31 December 2019 (Note 28). The total amount of 31 December 2019 is insignificant.

Total trade and other receivables 1,925 - 1,868 - (gross carrying amount) 14. CASH AND CASH EQUIVALENTS

2019 2018 31 December 31 December 2019 2018 Foreign currency denominated current accounts with banks 1,137 1,198

ECL allowance - (126) - (124) Russian Rouble denominated bank deposits 1,529 5,380

Total trade and other receivables 1,799 - 1,744 - Foreign currency denominated bank deposits 15 1,948 (carrying amount) Cash and Russian Rouble denominated current accounts with banks 899 1,001

Total cash and cash equivalents 3,580 9,527

12. PREPAYMENTS AND OTHER CURRENT ASSETS Six Russian Rouble denominated short-term bank and three USD-denominated short-term bank deposits deposits in the amount of RUR 1,513m bearing in the amount of USD 28 million (RUR 1,945m at 2019 2018 interest at annual rates in a range from 1.59 to 6.6% the Central Bank of Russia exchange rate as at and one USD-denominated short-term bank deposit 31 December 2018) bearing interest at annual rates VAT receivable 6,252 3,034 in the amount of USD 0,2m (RUR 15m at the Central in a range from 2.4 to 3% were placed with JSC Alfa- Advances to suppliers (net of provision) 1,226 1,341 Bank of Russia exchange rate as at 31 December Bank, AO UniCredit Bank and PJSC Bank VTB, a related Other current assets 163 105 2019) bearing interest at annual rate in a range from party of the Group as at 31 December 2018 (Note 28). 0.65% were placed with JSC Alfa-Bank, AO UniCredit Total amount of accrued interest on Russian Rouble Total prepayments and other current assets 7,641 4,480 Bank and PJSC Bank VTB, a related party of the Group denominated and USD-denominated short-term bank as at 31 December 2019 (Note 28). Total amount of deposits amounted to RUR 21m. The deposits matured accrued interest on Russian Rouble denominated and in January–February 2019. As at 31 December 2019 and 31 December 2018 provision for impairment of advances to suppliers was recognised USD-denominated short-term bank deposits amounted in the amount of RUR 1m and RUR 2m, respectively. to RUR 16m. The deposits matured in January 2020. The credit quality of cash and cash equivalents balances may be summarised based on Standard and Poor’s long- The increase in VAT recoverable in 2019 compared to 2018 is due to an increase in the amount of tax deductions Seventeen Russian Rouble denominated short-term term ratings or equivalents of Moody’s or Fitch ratings due to large purchases of platforms and containers in December 2019 in accordance with the investment bank deposits in the amount of RUR 5,362m bearing as follows as at 31 December 2019 and 31 December programme and due to non-refunded VAT from the budget for the 3rd and 4th quarters of 2019. interest at annual rates in a range from 3 to 7.75% 2018:

12. SHORT-TERM INVESTMENTS 2019 2018 Bank balances Term Bank balances Term payable on deposits payable on deposits demand demand 2019 2018 h A- to A+ rated 26 - 43 - Russian Rouble denominated bank deposits 2,900 - h BBB to A- rated 1,713 1,364 79 - h Lower than BBB rated Total short-term investments 2,900 - 297 180 2,076 7,328 h Unrated - - 1 - Total 2,036 1,544 2,199 7,328

PJSC TransContainer | Annual report 2019 196 197 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The amounts of the expected credit loss allowance credit risk levels as at 31 December 2019 and statements under Russian accounting standards, Dividends of RUR 293.04 per share (RUR 4,072m based on the results of credit quality analysis 31 December 2018 are insignificant. as at 31 December 2019 and 31 December 2018 in total) were approved at the annual shareholders’ of cash and cash equivalents balances based on the Company had RUR 28,680m and RUR 25,948m meeting on 15 May 2018 relating to the Company’s of undistributed earnings, respectively, including results for the year ended 31 December 2017. In undistributed and unreserved earnings of the June 2018 the dividends have been fully paid. 15. EQUITY Company in the amount of RUR 10,100m and RUR 9,592m, respectively. Reserve fund Share Capital Dividends of RUR 154.57 per share (RUR 2,148m According to its charter, the Company is required The Company’s authorised, issued and paid share capital as at 31 December 2019 and in total) were approved at the annual shareholders’ to establish a legal reserve fund through the 31 December 2018 comprises: meeting on 25 September 2019 relating to the allocation of 5 percent of net profit as computed Company’s results for the six-month period ended under the Russian Accounting Rules. The total 30 June 2019. In October 2019 the dividends have amount of the reserve fund is limited to 5 percent Number Value been fully paid. of the nominal registered amount of the Company’s of ordinary shares issued share capital. The reserve fund may only be Dividends of RUR 480.37 per share (RUR 6,674m used to offset losses of the Company as well as to Ordinary shares (par value: RUR 1,000) 13,894,778 13,895 in total) were approved at the annual shareholders’ redeem issued bonds or purchase treasury shares meeting on 21 May 2019 relating to the Company’s and cannot be distributed to shareholders. As at results for the year ended 31 December 2018. In 31 December 2019 reserve fund was RUR 703m June 2019 the dividends have been fully paid. (RUR 703m as at 31 December 2018).. As at 31 December 2018 JSC United The difference between the fair value of net Transportation and Logistics Company (JSC UTLC) assets contributed and the nominal value of was the immediate parent of the Company, the shares issued by the Company, as well as holding 50% + 2 of its ordinary shares. differences arising from transactions with 16. LONG-TERM DEBT AND CURRENT PORTION shareholders, of RUR 2,221m were recorded as OF LONG-TERM DEBT On 13 December 2019 JSC UTLK sold its full other reserves as at 31 December 2012. share of 50% + 2 ordinary shares to LLC Delo- Long-term debt Center, a subsidiary of LLC UK Delo. As a result During the year ended 31 December 2019 the LLC Delo-Center became the parent company of share of other comprehensive loss of joint Effective 2019 2018 PJSC TransContainer. As at 31 December 2019 venture JSC Kedentransservice was recognised in interest rate LLC Delo-Center holds 50% + 2 of the Company’s the amount of RUR 3m (RUR 0m during the year Bonds, series PBO-01 7.34% 9,974 - ordinary shares. ended 31 December 2018). Bonds, series BO-01 7.55% 5,992 5,988

During the year ended 31 December 2019 the Due to the transfer of part of property, plant Bonds, series BO-02 9.45% 2,495 4,992 weighted average number of outstanding ordinary and equipment to the investment property shares, excluding treasury shares amounted to during the years 2013–2018 the investment Total 18,461 10,980 13,894,778 shares (13,894,778 during the year property’s revaluation was recognised in other ended 31 December 2018). comprehensive income for the amount of Long-term borrowings of the Group are denominated in Russian Roubles. RUR 275m (RUR 0m during the year ended Other reserves 31 December 2019). Five-year RUR bonds, The annual coupon rate of the bonds for five years As discussed in Note 1, the Company was formed Retained earnings, dividends series PBO-01 is 7.34% with interest paid semi-annually. as a result of a spin-off by RZD which involved the contribution by RZD of containers, flatcars, In accordance with the Russian legislation, On 23 October 2019, the Company issued non- The series PBO-01 bonds will be redeemed in buildings and constructions, VAT receivable dividends may only be declared from the convertible five-year bonds for a total amount of four equal semi-annual installments within the related to these assets, and cash, in exchange Company’s accumulated undistributed and RUR 10,000m at a par value of RUR 1,000 each. fourth and fifth years. As a result, these bonds for ordinary shares of the Company. As at unreserved earnings as shown in the Company’s Net proceeds from the issuance after deduction of are classified as long-term borrowings as at the 31 December 2019 Other Reserves amounted to statutory financial statements, which are related offering costs amounted to RUR 9,974m. reporting date. RUR 1,949m (RUR 1,946m as at 31 December prepared in accordance with Russian Accounting 2018). Rules. In accordance with the financial

PJSC TransContainer | Annual report 2019 198 199 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

As at 31 December 2019 the carrying value of Five-year RUR bonds, 17. RIGHT-OF-USE ASSETS agreements as at 31 December 2019, including the bonds amounted to RUR 10,112m (RUR 0m series BO-02 AND LEASE OBLIGATIONS extension options (Note 6), are from 1 year to as at 31 December 2018), including the amount 69 years, including the lease of railway flatcars for of accrued interest of RUR 138m (RUR 0m as On 22 September 2016, the Company issued non- Leases — Group is the lessee 2 years, production buildings and office premises at 31 December 2018). The amount of accrued convertible five-year bonds for a total amount of from 1 to 7 years, tank-containers for 6 years, interest has been included as current portion of RUR 5,000m at a par value of RUR 1,000 each. The Group leases flatcars, certain production handling equipment fоr 2 years, land from 1 to long-term debt in the consolidated statement of Net proceeds from the issuance after deduction of buildings and office premises, tank-containers 69 years. financial position. related offering costs amounted to RUR 4,987m. and handling equipment. Additionally, the Group The annual coupon rate of the bonds for five years leases the land on which its container terminals are The following table presents a summary of net book Five-year RUR bonds, is 9.45% with interest paid semi-annually. located. The remaining terms of the relevant lease value of rights-of-use assets: series BO-01 The series BO-02 bonds will be redeemed in four On 25 January 2018, the Company issued non- equal semi-annual instalments within the fourth and 31 December 1 January convertible five-year bonds for a total amount of fifth years. As a result, these bonds are classified 2019 2019 RUR 6,000m at a par value of RUR 1,000 each. as long-term borrowings as at the reporting date, Land, buildings and constructions 367 517 Net proceeds from the issuance after deduction of except the first and second principal repayments to related offering costs amounted to RUR 5,985m. be made in March and September 2020 in the total Сontainers and flatcars 504 246 The annual coupon rate of the bonds for five years amount of RUR 2,500m. Cranes and loaders - 12 is 7.55% with interest paid semi-annually. Vehicles and other equipment 2 5 As at 31 December 2019 the carrying value of the The series BO-01 bonds will be redeemed in bonds amounted to RUR 5,128m (RUR 5,123m as Total right-of-use assets 873 780 four equal semi-annual instalments within the at 31 December 2018), including the current portion fourth and fifth years. As a result, these bonds of long-term debt in the amount of RUR 2,500m are classified as long-term borrowings as at the (RUR 0m as at 31 December 2018) and the amount The additions of the Group’s right-of-use assets for the year ended 31 December 2019 amounted to RUR 637m. reporting date. of accrued interest of RUR 133m (RUR 131m as at 31 December 2018). The amount of current portion Depreciation of the rights-of-use assets for the year period ended 31 December 2019 included in depreciation As at 31 December 2019 the carrying value of the of long-term debt and the amount of accrued and amortisation expense in the consolidated statement of profit or loss and other comprehensive income was bonds amounted to RUR 6,188m (RUR 6,183m interest have been included as current portion as follows: as at 31 December 2018), including the amount of long-term debt in the consolidated statement of accrued interest of RUR 196m (RUR 195m as of financial position. 2019 at 31 December 2018). The amount of accrued Land, buildings and constructions 94 interest has been included as current portion of The fair value of Company’s bonds is disclosed in Сontainers and flatcars 70 long-term debt in the consolidated statement of Note 31. financial position. Vehicles and other equipment 1 Total depreciation charge 165

Current portion of long-term debt Lease obligations Effective 2019 2018 interest Liabilities under long-term lease were as follows: rate Bonds, series PBO-01 7.34% 138 - 31 December 1 January 2019 2019 Bonds, series BO-01 7.55% 196 195 Lease obligations, current maturities 274 147 Bonds, series BO-02 9.45% 2,633 131 Lease obligations, net of current maturities 650 633 Total 2,967 326 Total lease obligations 924 780

PJSC TransContainer | Annual report 2019 200 201 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The following table presents expenses related to lease, recognised in theconsolidated statement of profit 18. EMPLOYEE BENEFIT Benefits accrued through the Fund and loss and other comprehensive income for year ended 31 December 2019: LIABILITY Blagosostoyanie are partially funded, whilst benefits administered by the Fund Pochet are The employees of the Group are members of a not funded. In addition, the Group provides 2019 state-managed pension plan operated by the other retirement and post-employment benefits Depreciation of right-of-use assets (Note 25) 165 government of the Russian Federation. The Group to its employees, covering compensation for is required to contribute a specified percentage transportation costs on long-distance trains, Interest expense on lease obligations (Note 26) 51 of payroll costs as part of the contributions to the a one-time bonus on retirement ranging from Expense relating to short-term leases (except of the expense relating to leases with a lease 122 Pension Fund of the Russian Federation to fund one to six monthly salaries, depending on the term of one month or less), which are exempt under IFRS 16 (Note 25) the benefits. duration of the service period, a benefit for Expense relating to leases of low-value assets that are exempt under IFRS 16 13 dedication to the Company and certain other (Note 25) The Group also provides supplementary defined benefits. These benefits are not funded. Variable lease payments not included in the measurement of lease obligations 14 benefit and defined contribution retirement under IFRS 16 (Note 25) benefit plans covering about a quarter of its Defined contribution plans employees, requiring contributions to be made to a separately administered non-state pension fund The total amount recognised as an expense in The following table presents the maturity analysis of future undiscounted lease payments payable under Blagosostoyanie (”Fund Blagosostoyanie”). The respect of payments to defined contribution long-term lease agreements, net of VAT: not-for-profit fund Pochet (”Fund Pochet”) provides plans for the years ended 31 December 2019 and pensions to the Group’s employees that retired 31 December 2018 included in payroll and related before the defined benefit plan provided though services within operating expenses and consisted 31 December 1 January the Fund Blagosostoyanie was introduced. of the following: 2019 2019 Within one year 336 201

Within one to three years 294 323 2019 2018 Within three to five years 305 215 Pension Fund of the Russian Federation 804 786

After five years 358 397 Defined contribution plan Blagosostoyanie 27 26

Total 1,293 1,136 Total expense for defined contribution plans 831 812

Total cash outflows for leases for the year ended 31 December 2019 amounted to RUR 151m, of which RUR 51m are included in interest paid. Defined benefit plans conditions participants can receive benefits after reaching retirement age as of 31 December Leases — Group is the lessor RUR 175m and RUR 97m, respectively, and were There were 53 employees as at 31 December 2018, before the general retirement age has included in other revenue (Note 23). 2019 (as at 31 December 2018: 84) eligible been increased. The corresponding change in For the year ended 31 December 2019 income from for defined benefit pension plan with benefits the present value of the defined benefit obligation operating lease of property, plant and equipment The following table presents the maturity depending on salary and years of service. is taken into account as part of the past services owned by the Group (Note 7) and income from analysis of future undiscounted lease payments In addition, there were 56 and 64 retired cost. sublease of right-of-use assets amounted to receivable: employees eligible for the post-retirement benefit programme of the Group through Fund Pochet The most recent actuarial valuation of the 31 December 1 January as at 31 December 2019 and 31 December defined benefit obligation was carried out 2019 2019 2018, respectively. Other retirement and as at 31 December 2019 by an independent Within one year 231 270 post-employment defined benefit plans cover actuary. The present value of the defined benefit substantially all employees of the Group. obligations, and related current service costs Within one to two years 160 92 and past service cost, were measured using the Within two to three years 157 92 During 2019 the Group changed the terms of projected unit credit method. the defined benefit pension plan. Under certain Within three to four years 155 91

Within four to five years 155 91

After five years 163 175

Total 1,021 811

PJSC TransContainer | Annual report 2019 202 203 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The amounts recognised in the consolidated statement of profit or loss and other comprehensive income Post-employment Other long-term Total in payroll and related charges for the year ended 31 December 2019 and 31 December 2018 in respect benefits benefits of these defined benefit plans are as follows: Actuarial losses/(gain): (52) (18) (70)

from changes in demographic assumptions (1) - (1) Post-employment Other long-term Total from changes in financial assumptions (62) (8) (70) benefits benefits other 11 (10) 1 2019 2018 2019 2018 2019 2018 Losses arising on transfer of employees** 6 - 6 Service cost 38 (94) 141 146 179 52 Settlement of liability (111) (157) (268) Net interest on obligation 40 52 12 10 52 62 Present value of defined benefit 681 275 956 Remeasurements of the net defined benefit - - 19 (18) 19 (18) obligation as at 31 December 2018 Net expense recognised in the 78 (42) 172 138 250 96 consolidated profit or loss Service cost: 38 141 179

Current service cost 27 141 168 Net loss recognised in the other comprehensive net defined benefit constitute RUR 38m for the year income for post-employment benefits related ended 31 December 2018. Past service cost 11 - 11 mainly to remeasurements of the net defined Interest on the defined benefit liability 45 12 57 benefit constitute RUR 128m for the year ended The amounts recognised in the consolidated Actuarial losses/(gain): 132 19 151 31 December 2019. Net gain recognised in the statement of financial position as at 31 December other comprehensive income for post-employment 2019 and 31 December 2018 in respect of these from changes in demographic assumptions 7 - 7 benefits related mainly to remeasurements of the defined benefit plans are as follows: from changes in financial assumptions 130 7 137

other (5) 12 7

Post-employment Other long-term Total Losses arising on transfer of employees** 2 - 2 benefits benefits Settlement of liability (166) (136) (302) 2019 2018 2019 2018 2019 2018 Present value of defined benefit 732 311 1,043 Present value of defined benefit 732 681 311 275 1,043 956 obligation as at 31 December 2019 obligation

Fair value of plan assets (55) (67) - - (55) (67) * *The changes in the present value of defined benefit obligation resulting from the increase in the minimum age for the right to retirement and post-employment benefits. Net employee benefit liability 677 614 311 275 988 889 ** The losses arising from transfer of employees represent the transfer of obligations on post-retirement benefits, which originated from the movement of employees from, as well as back to, the parent company. Net losses are the difference between the losses arising from transfer of employees and the assets arising from transfer of employees.

Movements in the present value of defined benefit obligation are as follows: Movements in the fair value of defined benefit pension plan assets:

Post-employment Other long-term Total 2019 2018 benefits benefits Fair value of plan assets as at 1 January (67) (66)

Present value of defined benefit obligation 875 294 1,169 Income on plan assets: (1) (7) as at 1 January 2018 interest on the plan assets (5) (5) Service cost: (94) 146 52 the return on plan assets, excluding amounts included in net interest 4 (2) Current service cost 32 146 178 on the net defined benefit liability

Past service cost* (126) - (126) Contributions from the employer (funded plans) (79) (43)

Interest on the defined benefit liability 57 10 67 Settlement of liability (funded plans) 92 49 Fair value of plan assets as at 31 December (55) (67)

PJSC TransContainer | Annual report 2019 204 205 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

The major categories of plan assets administered by the Fund Blagosostoyanie as a percentage of the fair value Change in Change in liabilities of total plan assets as at the balance sheet date were as follows: assumption 2019 2018 Projected average growth of consumer prices -1% (74) (52) Share in total plan assets +1% 86 62

2019 2018 Average life expectancy after retirement -1 year (5) (3) +1 year 4 3 Corporate bonds and stock of Russian legal entities 63% 66%

Shares in closed investment funds 25% 27%

Bank deposits 1% 1% Weighted average duration of the defined benefit obligation is 7.9 years (2018: 6.0 years).

Other 11% 6% The maturity profile of the defined benefit obligation as at 31 December 2019: 100% 100%

Less than 1 to 2 years 2 to 5 years 1 year Most benefits to employees and retired employees To reduce the risks in accordance with laws Fund depend on wage growth and rising consumer prices. Blagosostoyanie places the assets in a diversified Post-employment benefits 75 49 143 Besides inflation risk, post-employment benefits portfolio with a statutory structure. Since Other long-term benefits 124 96 114 are also subject to demographic risk due to the retirement of a participant Fund Blagosostoyanie is 199 145 257 dependence of payment duration to changes in life exposed to all the risks of the plan with respect to expectancy of retired employees. this participant. 19. CONTRACTS LIABILITIES Plan assets under the supplementary defined The principal assumptions used for the purposes benefit pension plan are subject to investment risks. of the actuarial valuations were as follows: Contracts liabilities as at 31 December 2019 and RUR 4,510m of revenue was recognised in the 31 December 2018 consist of advances from current reporting period related to the contract customers in the amount of RUR 4,590m and liabilities as at 31 December 2018, all of which 2019 2018 RUR 4,510m, respectively. related to advances. Discount rate 6.4% 8.7%

Average rate of employee turnover Based on the industry Based on the industry average rates average rates 20. TRADE AND OTHER PAYABLES

Projected average annual growth of consumer prices 4.0% 4.1% 2019 2018 Life expectancy table Russia, 2018, Russia, 2017, Trade payables 762 691 with probability corrected to with probability corrected 80% of the initial level to 87% of the initial level Amounts payable for the acquisition of property, plant and equipment 2,205 275 As at 31 December 2019 the Group assumed that wage and salary growth will be in line with the growth of Amounts payable for the intangible assets 14 9 consumer prices. Other liabilities 152 97 Total financial liabilities within trade and other payable 3,133 1,072 Results of sensitivity analysis of defined benefit obligation at 31 December 2019 and 31 December 2018: 21. TAXES OTHER THAN INCOME TAX PAYABLE

Change in Change in liabilities 2019 2018 assumption 2019 2018 Social insurance contribution 324 320 Property tax 43 116 Discount rate -1% 79 52 +1% (67) (45) VAT 2 6 Personal income tax 34 38 Rate of employee turnover -1% 31 22 +1% (31) (21) Other taxes 7 11 Total taxes other than income tax payable 410 491

PJSC TransContainer | Annual report 2019 206 207 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

22. SETTLEMENTS 23. REVENUE AND SEGMENT 24. OTHER OPERATING INCOME WITH EMPLOYEES INFORMATION 2019 2018 Settlements with employees as at 31 December The Company’s CEO is its chief operating Gain from disposal of property, plant and equipment 705 1,144 2019 and 31 December 2018 comprised decision-maker. The Group’s business activities Gain from the sale of inventory and from the reuse of spare parts 158 215 accrued salaries and bonuses of RUR 1,117m are interdependent in providing customers with and RUR 1,153m, respectively, and accruals for container shipping and other logistics services. As Other operating income 298 127 unused vacation of RUR 193m and RUR 188m, such, the Group’s internal reporting, as reviewed Total other operating income 1,161 1,486 respectively. by the CEO to assess performance and allocate resources, is prepared as a single reportable segment. The Group’s internal management Gain from the disposal of property, plant and equipment in 2019 is due to the recording of materials from the disassembly reports are prepared on the same basis as these of containers and wagons. consolidated financial statements. Gain from disposal of property, plant and equipment in 2018 is primarily due to the sale of assets of the Vitebsk terminal resulting in a gain of RUR 1,100m in December 2018.

Analysis of revenue by category 2019 2018 25. OPERATING EXPENSES Integrated freight forwarding and logistics services 79,895 71,158 2019 2018 Agency fees 3,217 2,988 Third-party charges related to principal activities 48,283 45,671 Other 3,067 2,813 Payroll and related charges 6,492 6,422 Total revenue 86,179 76,959 Freight handling and transportation services 6,202 5,407 Materials, repair and maintenance 3,692 3,427 Analysis of revenue by location of customers 2019 2018 Depreciation and amortisation 3,473 2,927 Revenue from external customers Change in provision for impairment of property, plant and equipment 644 2 Russia 67,669 65,056 Taxes other than income tax 383 725 China 6,567 2,051 Consulting and information services 304 205 Korea 5,923 6,020 Fuel costs 208 184 Germany 2,292 1,889 Security 178 179 Kazakhstan 1,026 372 Charity 154 146

Austria 531 28 Rent 149 410

Latvia 442 467 License and software 141 169 Communication costs 67 70 Italy 353 57 Other expenses 1,199 942 Great Britain 269 213 Total operating expenses 71,569 66,886 Lithuania 247 68

Belarus 186 22 26. INTEREST EXPENSE Other 674 716

Total revenue 86,179 76,959 2019 2018 Interest expense on RUR bonds 1,058 885 Interest expense on lease obligations 51 - Performance obligations under revenue contracts are short-term in nature. All contract liabilities at 31 December 2018 were recognised as revenue in 2019. Interest expense on bank loans 9 - Total interest expense 1,118 885

PJSC TransContainer | Annual report 2019 208 209 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

27. INCOME TAX 1 January Charged Charged to 31 December 2019 to profit other 2019 2019 2018 or loss comprehensive income Current income tax expense (2,996) (2,511) Trade and other payables (53) (45) - (98) Deferred income tax expense (650) 42 Right-of-use assets - 92 - 92 Income tax expense (3,646) (2,469) Lease obligations - (100) - (100)

Accruals and other current - 114 - 114 The statutory tax rate applied to the profit of the Group was 20% for the years ended 31 December 2019 liabilities and 31 December 2018. Other (2) 8 - 6

Profit before income tax for financial reporting purposes is reconciled to income tax expense as follows: Total net deferred tax liability 1,782 658 (9) 2,431 Deferred tax assets (11) (8) - (19)

2019 2018

Profit before income tax 15,396 11,978 1 January Acquisition Charged Charged 31 December Theoretical tax charge at statutory rate of 20% (3,079) (2,396) 2018 of JSC to profit to other 2018 Logistika- or loss comprehensive Tax effect of items which are not deductible or assessable for taxation Terminal income purposes and other effects: Investment property 59 - (1) 20 78 Benefits in-kind and other non-deductible payments to employees (36) (33) Property, plant and 1,890 156 13 - 2,059 Non-deductible charitable donations (31) (29) equipment

Non-taxable income of result of joint ventures 117 86 Employee benefits liability (98) - 6 8 (84)

The effects of unrecognised deferred tax assets (114) - Trade and other receivables (174) - (42) - (216)

The effect from non-current assets classified held for sale (211) Trade and other payables (28) - (25) - (53)

Other effects, net (292) (97) Other (14) - 12 - (2)

Income tax expense (3,646) (2,469) Total net deferred tax 1,635 156 (37) 28 1,782 liability

Total accumulated temporary differences that arise between the Russian statutory tax base of assets Deferred tax assets (6) - (5) - (11) and liabilities and their carrying amounts in the consolidated statements of financial position give rise to the following deferred tax effects:

The Group did not recognise a deferred tax The Management has performed an analysis 1 January Charged Charged to 31 December liability for temporary differences of RUR 888m of the dividend policies at the Group’s joint 2019 to profit other 2019 or loss comprehensive (31 December 2018: RUR 1,978m) in respect of ventures with regard to the Group’s potential income investments in subsidiaries and joint ventures deferred tax liabilities where the Group as the Group is able to control the timing of the does not control reversal of the temporary Non-current assets classified as held for sale - 211 - 211 reversal of these temporary differences and does difference or expects the reversal to occur in Investment property 78 1 - 79 not intend to reverse them in the foreseeable the foreseeable future. For all joint ventures, Property, plant and equipment 2,059 160 - 2,219 future. management expects that the carrying value

Employee benefits liability (84) 11 (9) (82)

Trade and other receivables (216) 206 - (10)

PJSC TransContainer | Annual report 2019 210 211 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

of the investments would be recovered primarily 28. BALANCES AND TRANSACTIONS Related party Nature of relationship through a sale and partially through dividends. WITH RELATED PARTIES 31 December 31 December No deferred taxes related to potential reversal 2019 2018 of taxable temporary difference are recognised In accordance with IAS 24 “Related party disclosures”, in respect of all joint ventures because any sale parties are considered to be related if they are under Far East Land Bridge Ltd. State-controlled company Subsidiary of RZD would occur in a tax free jurisdiction. common control or if one party has the ability to JSC Carriage Repair Company - 1 State-controlled company Subsidiary of RZD control the other party or can exercise significant JSC Carriage Repair Company - 2 State-controlled company Subsidiary of RZD In the context of the Group’s current structure, influence or joint control over the other party in making tax losses and current tax assets of different financial and operational decisions. In considering JSC Carriage Repair Company - 3 - Subsidiary of RZD group companies may not be offset against each possible related-party relationship, attention JSC RZD Logistics State-controlled company Subsidiary of RZD current tax liabilities and taxable profits of other is directed to the substance of the relationship, not group companies and, accordingly, taxes may merely the legal form. Non-state Pension Fund Post-employment benefit plan for Post-employment benefit plan for Blagosostoyanie Company employees Company employees accrue even where there is a consolidated tax loss. Therefore, deferred tax assets and liabilities Related parties may enter into transactions which are offset only when they relate to the same unrelated parties might not, and transactions between taxable entity and there is a legally enforceable related parties may not be effected on the same terms, right to offset current tax assets against current conditions and amounts as transactions between The Group’s ultimate controlling party as at Bank VTB, which is a state-controlled entity. PJSC tax liabilities. unrelated parties. 31 December 2018 and until 12 December 2019 Bank VTB provides settlement and cash servicing is the Russian Federation and, therefore, all of Company’s bank accounts and carries out The nature of the related-party relationships for those companies related to the Russian Federation depository operations for free funds placement. related parties with which the Group has entered are also treated as related parties of the Group Transactions with government related entities are into significant transactions, or had significant for the purposes of these consolidated financial conducted on general commercial terms. balances outstanding as at 31 December 2019 and statements. 31 December 2018, are disclosed below: Relationships with RZD, its subsidiaries, Since 13 December 2019 LLC Delo-Center has joint ventures and associates become the immediate parent company, and Related party Nature of relationship LLC UK Delo has become the Group’s ultimate The Group carries out various transactions with controlling party. The significant shareholder of RZD, which is the sole owner and provider of 31 December 31 December Delo Group is the group Atomenergoprom, which railroad infrastructure and locomotive services in 2019 2018 is a company controlled by the Russian Federation, Russia. Furthermore, RZD owns the vast majority LLC UK Delo Ultimate parent company - and, therefore, all companies related to the of rail-car repair facilities in Russia, which LLC Delo-Center Immediate parent company - Russian Federation are also treated as related the Group uses to maintain its rolling stock in parties of the Group for the purposes of these operating condition. JSC Atomenergoprom Significant shareholder - consolidated financial statements. LLC Enysei Capital Significant shareholder Significant shareholder Under current Russian regulations, only RZD In the ordinary course of business, the Group can perform certain functions associated with PJSC Bank VTB Significant shareholder Significant shareholder enters into various transactions and has arranging the container transportation process. OJSC Russian Railways (RZD) State-controlled company Ultimate parent company outstanding balances with government related As the assets required for performing such JSC UTLC (Note 15) State-controlled company Immediate parent company entities and governmental bodies, which are shown functions were transferred to the Company, RZD as “Other related parties” in the tables below. The engaged the Company to act as its agent in JSC Kedentransservice Joint venture of the Company Joint venture of the Company Group also enters in transactions with government the performance of these functions. Company’s Oy ContainerTrans Scandinavia Ltd. Joint venture of the Company Joint venture of the Company entities for acquisition of goods and providing revenue generated from such transactions with services like electricity, taxes and post services. RZD is reported as agency fees in the consolidated Chinese-Russian Rail-Container Joint venture of the Company Joint venture of the Company International Freight Forwarding (Beijing) The majority of related-party transactions are profit or loss. Co, Ltd. with OJSC Russian Railways, its subsidiaries, joint ventures and associates (shown as “Other Transactions and outstanding balances with LLC Freight Village Kaluga Sever (FVK Joint venture of the Company Joint venture of the Company Sever Group) (Note 9) RZD group entites” in the table below), and PJSC related parties as at and for the year ended 31 December 2019 are shown below:

PJSC TransContainer | Annual report 2019 212 213 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

RZD Other Group’s Other Total Transactions with Russian Railways for the period parties as at and for the year ended 31 December (until RZD joint related from 13 December 2019 to 18 December 2019 are 2019 amounted to: accounts receivables — RUR 12 December Group ventures parties not related party transactions. 10m, accounts payable — RUR 141m, revenue — 2019 ultimate entities parent RUR 93m, expenses — RUR 11m. company) Transactions with Delo Group’s companies for the period from 13 to 31 December 2019 (from Transactions and outstanding balances with related ASSETS the date of sale of a controlling interest in the parties as at and for the year ended 31 December Cash and cash equivalents - 257 - 2,694 2,951 Company) and outstanding balances with related 2018 are shown below:

Short-term investments - - - 2,900 2,900

Trade receivables 402 2 (3) - 401 Ultimate Other Group’s Other Total parent RZD Group joint related Advances to suppliers 927 46 51 4 1,028 company (RZD) entities ventures parties

Other assets 5 3 22 18 48 ASSETS Cash and cash equivalents - - - 7,003 7,003 Total assets 1,334 308 70 5,616 7,328 Trade receivables 367 3 13 - 383 LIABILITIES Advances to suppliers 903 46 19 2 970 Contracts liabilities 28 13 105 20 166 Other assets 6 3 18 17 44 Other liabilities 32 93 18 16 159 Total assets 1,276 52 50 7,022 8,400 Total liabilities 60 106 123 36 325 LIABILITIES

Revenue Contracts liabilities - 219 149 8 376 Other liabilities 28 33 8 18 87 Agency fees 3,159 - - - 3,159 Total liabilities 28 252 157 26 463 Integrated freight forwarding and - 3,465 737 151 4,353 logistics services Revenue

Other revenue 335 93 14 1 443 Agency fees 2,923 - - - 2,923 Integrated freight forwarding and logistics 1 3,416 731 392 4,540 Interest income on deposits - 4 - 197 201 services Dividends from joint ventures - - 329 - 329 Other revenue 332 108 20 6 466

Other income 11 83 - 8 102 Interest income on deposits - - - 268 268

Total income 3,505 3,645 1,080 357 8,587 Dividends from joint ventures - - 372 - 372 Other income 20 10 - 23 53 Operating Expenses Total income 3,276 3,534 1,123 689 8,622 Freight and transportation services 4,953 - 275 - 5,228 Operating Expenses Third-party charges related 38,623 (11) 3,356 3 41,971 Freight and transportation services 4,146 - 236 58 4,440 to principal activities Third-party charges related to principal 36,350 1 3,602 120 40,073 Repair services 378 1,624 34 2 2,038 activities Other expenses 145 76 53 234 508 Repair services 401 1,681 35 3 2,120

Total expenses 44,099 1,689 3,718 239 49,745 Other expenses 179 39 11 133 362 Total expenses 41,076 1,721 3,884 314 46,995 Purchases of property, plant - 2 - 285 287 and equipment Purchases of property, plant and equipment - 2 - 69 71 Purchases of inventory - 168 - 34 202 Purchases of inventory 2 324 - 17 343

Contributions to non-state pension - - - 111 111 Contributions to non-state pension funds - - - 73 73 funds Total other transactions 2 326 - 159 487 Total other transactions - 170 - 430 600

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In October 2018 as a result of the sale of its Accountant and directors of the central office who 29. LIABILITIES ARISING FROM FINANCING ACTIVITIES shareholding to PJSC Bank VTB FAR-EASTERN are under direct control of the CEO in accordance SHIPPING COMPANY PLC has lost significant with the Company’s existing organisational As at Cash flow Reclassification Non-monetary As at influence on the Company. Operations with the structure and comprised 21 and 22 persons as 1 January of current portion changes 31 December Group of companies of FAR-EASTERN SHIPPING at 31 December 2019 and 31 December 2018, 2019 of long-term debt 2019 COMPANY prior to the date of sale of the respectively. Long-term debt 10,980 9,974 (2,500) 7 18,461 Company’s shares are reflected above as “Other Current portion of long-term debt 326 (925) 2,500 1,066 2,967 related parties transactions”. Total gross compensation to key management personnel, including social contributions and before Lease obligations - (100) - 1,024 924 As at 31 December 2019 the debt of FVKS withholding of personal income tax, amounted to Dividends paid - (8,822) - 8,822 - was secured by the guarantee under the loan RUR 508m (including total social contributions of agreement amounted to RUR 2.2bn (2.3bn as at RUR 68m) for the year ended 31 December 2019. Total 11,306 127 - 10,919 22,352 31 December 2018). As at 31 December 2019 the In addition, the amount of the additional annual financial guarantee for investment in joint venture gross compensation, including social contributions The cash flow of the current portion of long-term debts for the year ended 31 December 2019 consists of interest recognised in the consolidated statement of and before withholding of personal income tax, paid in the amount of RUR 925m. financial position was RUR 151m (RUR 154m as at for the entire Company’s management, including 31 December 2018) (Note 9). management personnel, will not exceed RUR 338m As at 1 January Cash flow Non-monetary As at 31 December (including total social contributions of RUR 45m) 2018 changes 2018 Dividends for the year ended 31 December 2019. Long-term debt 4,987 5,985 8 10,980 On 25 September 2019 the Group declared Total gross compensation, including social Current portion of long-term 1,425 (1,995) 896 326 dividends payable to JSC UTLC, LLC Enysei Capital contributions and before withholding of personal debt and PJSC Bank VTB in the amount of RUR 1,074m, income tax, to key management personnel Dividends paid - (4,072) 4,072 - RUR 531m and RUR 533m, respectively, which amounted to RUR 802m (including total social Total 6,412 (82) 4,976 11,306 were paid in October 2019. contributions of RUR 106m) for the years ended 31 December 2018. On 21 May 2019 the Group declared dividends The cash flow of the current portion of long-term debts for the year ended 31 December 2018 consists payable to JSC UTLC, LLC Enysei Capital and PJSC This compensation is included under payroll and of repayment of principal part in the amount of RUR 1,250m and interest paid in the amount of RUR 745m. Bank VTB in the amount of RUR 3,337m, RUR related charges in the consolidated profit and 1,651m and RUR 1,658m, respectively, which were loss and comprises primarily short-term benefits. 30. COMMITMENTS, OPERATING RISKS AND CONTINGENCIES paid in June 2019. Major part of compensation for key management personnel is generally sort-term excluding The Group’s capital commitments as at 31 December 2019 and 31 December 2018 consisted On 15 May 2018 the Group declared dividends contributions under pension plans with defined of the following, including VAT: payable to JSC UTLC, FAR-EASTERN SHIPPING benefits. Defined benefits to key management of 2019 2018 COMPANY PLC. and LLC Enysei Capital in the the Group are calculated based on the same terms amount of RUR 2,036m, RUR 1,021m and RUR as for other employees. Acquisition of containers and flatcars 25,945 4,533 998m, respectively, which were paid in June 2018. Construction of container terminal complexes and modernisation 6 135 As at 31 December 2019 liabilities in respect of existing assets Compensation of key management of key management personnel recognised in Acquisition of lifting machines and other equipment - 67 personnel settlements with employees amounted to RUR 512m, and on employee benefit liability amounted Total capital commitments 25,951 4,735 Key management personnel consist of members to RUR 2m (RUR 411m and RUR 1m respectively as of the Company’s Board of Directors, as well at 31 December 2018). as the General Director and his deputies, Chief In accordance with the investment program provided h in March 2019 with LLC Torgoviy Dom RM for the renewal of the fleet of platforms and Rail on the purchase of 3,500 flatcars for the containers for the year ended 31 December 2019 the total amount of RUR 10,861m (plus VAT in the Group entered into the following main agreements: amount of RUR 2,172m). Delivery is expected no

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later than 31 December 2021, according to the for Economic Cooperation and Development Group periodically evaluates its obligations under Logistics Terminal and cargo owners. Until claims delivery schedule; (OECD), although it has specific features. The TP environmental regulations. As obligations are from third parties is not obtained, the amount of legislation provides for the possibility of additional determined, they are immediately recognised in additional losses is not determined. h in April 2019 with JSC Altaiskogo vagonostroenia tax assessment for controlled transactions the consolidated financial statements. Potential on the purchase of 5,200 flatcars for the total (transactions between related parties and certain liabilities, which might arise as a result of changes Insurance. The Group holds no insurance policies amount of RUR 15,632m (plus VAT in the amount transactions between unrelated parties) if such in existing regulations, civil litigation or legislation, in relation to its assets, operations and other RUR 3,126m). Delivery is expected no later than transactions are not on an arm’s-length basis. The cannot be estimated but could be material. In insurable risks, with the exception of insurance 31 December 2021, according to the delivery management has implemented internal controls to the current enforcement climate under existing policies that partially cover its vehicles, buildings schedule; comply with current Russian tax TP legislation. legislation, management believes that there are no and constructions, machinery, Directors and Officers significant liabilities for environmental damage. No liability insurance policy. Until the Group obtains h in June 2019 with Taicang CIMC special logistic Russian tax legislation does not contain clear provisions have been recognized in the consolidated adequate insurance coverage, there is a risk that equipment Co.,Ltd on the purchase of 17,700 guidance on some issues, the solution of which is financial statements at the reporting dates. the loss or destruction of certain assets could have containers for the total amount of RUR 2,474m at complicated, including the lack of established law a material adverse effect on the Group’s operations the Central Bank of Russia official exchange rate enforcement practice. In such cases, the Group Legal proceedings. During the year, the Group was and financial position.. as at the 31 December 2019, net of VAT. Delivery applies professional judgment, which, if necessary, involved in a number of court proceedings (both as is expected no later than September 2020, will be substantiated and confirmed. a plaintiff and a defendant) arising in the ordinary Operating leases commitments. Future minimum according to the delivery schedules; course of business. In the opinion of management, lease payments under contracted operating leases, The Controlled Foreign Company (CFC) legislation there are no current legal proceedings or other excluding the possibility of prolongation, including h LLC RailAlians on the purchase of 500 flatcars for introduced Russian taxation on profits of foreign claims outstanding, which management believes VAT, are as follows: the total amount of RUR 1,850m (plus VAT in the companies and non-corporate structures (including could have a material effect on the result of amount RUR 370m). Delivery is expected no later trusts) controlled by Russian tax residents operations or financial position of the Group, beyond 2018 than February 2020, according to the delivery (controlling parties). CFC’s profits are subject to those already recognised in these consolidated schedules. a 20% tax rate. As a result of the analysis of the financial statements. Within one year 109 relevant foreign companies’ business and the Within two to five years 127 Operating environment of the Group. The Russian structure of earnings, expenses, dividend policy, Contingencies. On 3 December 2019, a fire broke Federation displays certain characteristics of evaluation of tax residency status, management of out in the territory of JSC Logistics Terminal, the After five years 18 an emerging market. Its economy is particularly the Group has not identified any liabilities for taxes subsidiary of the Group (Note 1), as a result of which Total future minimum lease 254 sensitive to oil and gas prices. The legal, tax and to the Russian budget in respect of CFC’s profits. material damage was caused to the third parties payments regulatory frameworks continue to develop and are (customers) related to compensation of damage to subject to changes and varying interpretations). Because of the ambiguity of formulation of current them. The Russian economy continues to be negatively Russian tax legislation, the Group can use the impacted by ongoing political tension and provisions of the tax law in the interpretation that The amount of the estimated liability for the future 31. RISK MANAGEMENT ACTIVITIES international sanctions against certain Russian differs from the applicable by regulatory authorities. compensation of actual damage caused to third AND FAIR VALUE OF ASSETS companies and individuals. Firm oil prices, low While management estimates that it is probable parties as a result of the fire was determined based AND LIABILITIES unemployment and rising wages supported a that the tax positions and interpretations that it has on the quantity and value of the cargo completely modest growth of the economy in 2019. The taken can be sustained, there is a possible risk that destroyed by the fire and amounted to RUR 419m as Capital risk management operating environment has an impact on the Group’s an incremental outflow of resources will be required at 31 December 2019 operations and financial position. Management is should such tax positions and interpretations be The Group manages its capital to ensure that it taking necessary measures to ensure sustainability challenged by the tax authorities. The impact of The amount of the estimated liability for the future will be able to continue as a going concern while of the Group’s operations. However, the future any such challenge cannot be reliably estimated, compensation of actual damage caused to third maximising the return to shareholders through the effects of the current economic situation are difficult however, it may be significant to the financial parties in relation to partially damaged cargo up optimisation of the debt and equity balance. to predict and management’s current expectations position and/or the overall operations of the Group. to the maximum amount of RUR 304m cannot and estimates could differ from actual results. be reliably estimated at the reporting date, and The Group’s objectives when managing capital is Environmental matters. The enforcement of therefore, the Group assumed a contingent liability to maintain an optimal capital structure to reduce Transfer pricing. Russian transfer pricing (TP) environmental regulation in the Russian Federation is as at 31 December 2019. The exact amount of the cost of capital and to provide the shareholders legislation is generally aligned with the international evolving and the enforcement posture of government damage will be determined based on the results of with an acceptable level of return respecting TP principles developed by the Organisation authorities is continually being reconsidered. The the loss settlement procedure with the clients of JSC the interests of other stakeholders. In order to

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maintain or adjust the capital structure, the The management of the Group reviews the capital flows and expected revenue receipts. In the long- The Group has both interest bearing and non- Group may adjust the amount of dividends paid structure on a regular basis. As part of this review, term perspective the liquidity risk is determined interest bearing financial liabilities. The interest to shareholders, return capital to shareholders, management considers the cost of capital and the by forecasting future cash flows at the moment of bearing liabilities consist of bond obligations and issue new shares or sell assets to reduce debt. The risks associated with each class of capital. signing new credit, loan or lease agreements and by lease obligations. The non-interest bearing liabilities amount of capital that the Group managed as at budgeting procedures. include trade and other payables and other financial 31 December 2019 (total equity attributable to Major categories of financial liabilities. the Company’s owners per consolidated statement instruments In March and September 2020 the Company will of financial position) was RUR 48,434m (as at The Group’s financial assets include trade and make the first and second principal repayments The following table details the Group’s remaining 31 December 2018: RUR 46,061m). other receivables, cash and cash equivalents, under five-year RUR bonds, series BO-02 in the contractual maturity for financial liabilities. The tables short-term investments and other non-current total amount of RUR 2,500m that have been have been drawn up based on undiscounted cash The capital structure of the Group consists of assets. All financial assets are carried at amortised included as current portion of long-term debt in the flows of financial liabilities, including future interest, issued capital, reserves and retained earnings as cost. consolidated statement of financial position as at based on the earliest date on which the Group can be disclosed in Note 15. 31 December 2019 and affected current liquidity required to pay or expect to make the payment. ratio of the Group. 2019 2018

Financial assets Effective On demand Less 1-3 3 months- 1-5 More Total Cash and cash equivalents (Note 14) 3,580 9,527 interest rate than months 1 year years than 1 month 5 year Short-term investments (Note 13) 2,900 - 2019 Trade and other receivables 1,812 1,760 Non-interest bearing - - 2,894 189 44 6 - 3,133 Other non-current assets 23 7 liabilities (including trade Total financial assets 8,315 11,294 and other payables) Bonds 7.34–9.45% - 224 1,484 2,376 21,827 - 25,911

Financial guarantee for 2–11% - 17 34 151 538 397 1,137 The Group’s principal financial liabilities are trade and other payables, debt, which includes bonds, lease obligations investment in joint venture and financial guarantee for investment in joint venture. All financial liabilities, excluding financial guarantee for Bonds - 2,204 - - - - - 2,204 investment in joint venture (Note 3), are carried at amortised cost. Total 2,204 3,135 1,707 2,571 22,371 397 32,385

2019 2018 Effective On demand Less 1-3 3 months- 1-5 years Total Financial liabilities interest rate than months 1 year Trade and other payables (Note 20) 3,133 1,072 1 month

Long-term debt (Note 16) 18,461 10,980 2018

Current portion of long-term debt (Note 16) 2,967 326 Non-interest bearing - - 711 315 46 - 1,072 liabilities (including trade Lease obligations (Note 17) 924 - and other payables)

Financial guarantee for investment in joint venture (Note 9) 151 154 Bonds 7.55–9.45% - 224 234 459 12,820 13,737

Total financial liabilities 25,636 12,532 Financial guarantee for - 2,323 - - - - 2,323 investment in joint venture

Total 2,323 935 549 505 12,820 17,132

Liquidity risk by the treasury function. The Group has established Maturity analysis of lease liabilities presented in Note 17. budgeting and cash flow planning procedures to Liquidity risk is the risk that the Group will not be able ensure it has adequate cash available to meet its to settle all liabilities as they fall due. The Group’s payment obligations as they fall due. Management liquidity position is carefully monitored and managed controls current liquidity based on expected cash

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Currency risk foreign currency have exceeded its foreign currency Interest rate risk changes. The effective interest rate of the bonds, financial liabilities. series BO-02 is 9.45%. Currency risk is the risk that the financial results of Interest rate risk is the risk that movement the Group will be adversely impacted by changes As at 31 December 2019 there was the strengthening in interest rates for borrowed funds will have The annual coupon rate of the five-year RUR in exchange rates to which the Group is exposed. of the Russian Rouble against the USD by 11% and an adverse effect on the Group’s financial bonds, series BO-01 issued on 25 January 2018 The Group has export revenue, and purchases against EUR by 13% (as at 31 December 2018 was performance. Management monitors changes in was set at 7.5% for five years without any further third party transportation services, which are the weakening of the Russian Rouble against the USD interest rates and takes steps to mitigate these changes. The effective interest rate of the bonds, denominated in foreign currencies. Certain by 21% and weakening of the Russian Rouble against risks as far as practicable by ensuring the Group series BO-01 is 7.55%. receivable and payable balances, related primarily the EUR by 15%). The Group does not have or use any has financial liabilities with both floating and fixed to settlements with customers, are denominated formal arrangements to manage foreign currency risk interest rates, and maintaining an appropriate mix The annual coupon rate of the five-year RUR in currencies other than the Russian Rouble, the exposure (derivatives). between debt and equity. bonds, series PBO-01 issued on 23 October 2019 functional currency of the Company. was set at 7.3% for five years without any further The carrying amounts of the Group’s foreign As at 31 December 2019 the Group’s borrowed changes. The effective interest rate of the bonds, As at 31 December 2019 and 31 December 2018 currency denominated monetary assets and funds consist of long-term debt, current portion series PBO-01 is 7.34%. the Group’s financial assets denominated in liabilities as at the reporting date are as follows: of long-term debt (Note 16) and lease obligations (Note 17) (of long-term debt, current portion of Credit risk long-term debt as at 31 December 2018). USD EUR Other Credit risk refers to the risk that counterparty will As at 31 December 2019 and 1 January 2019 default on its contractual obligations resulting in 2019 2018 2019 2018 2019 2018 all lease obligations are bearing a fixed interest financial loss to the Group. The Group does not Assets rate, therefore the Group was not exposed to the hedge its credit risk. additional interest rate risk. Cash and cash equivalents 912 808 193 365 32 25 Credit risk grading system. For measuring credit Trade and other receivables 264 37 118 103 342 9 As at 31 December 2019 and 31 December 2018 risk and grading financial instruments by the long-term debt and current portion of long-term amount of credit risk, the Group applies two Total assets 1,176 845 311 468 374 34 debt consist of bonds only. All bonds were granted approaches — an Internal Risk-Based (IRB) rating Liabilities at fixed interest rates, therefore they are not system or risk grades estimated by external rating subject the Group to the additional interest risk. agencies (Standard & Poor’s, Fitch, Moody’s). Trade and other payables 738 182 74 80 145 10 Internal and external credit ratings are mapped on Total liabilities 738 182 74 80 145 10 The annual coupon rate of the five-year RUR an internally defined master scale with a specified bonds, series BO-02 issued on 22 September 2016 range of probabilities of default s disclosed in the was set at 9.4% for five years without any further table below: The table below provides analysis of sensitivity of Group’s profit and loss and capital to strengthening of the Russian Rouble against the USD and EUR by 30%, all other variables being held constant. The analysis was applied to monetary items at the balance sheet dates denominated in respective currencies: Master scale credit risk Corresponding internal ratings Corresponding Corresponding grade ratings of external PD interval USD – impact EUR – impact rating agencies (where possible) 2019 2018 2019 2018 Good Counterparties with the lowest risk of AAA – B- 0–10% Total (131) (199) (71) (116) default and strong ability to fulfil their contractual obligations, for which the Group has relevant data and performs The weakening of the Russian Rouble in relation to the same currencies by the same percentage will produce an periodic financial analysis equal and opposite effect on the consolidated financial statements of the Group to that shown above. Satisfactory Counterparties with the moderate risk CCC+ – СС 10–20% of default and payments overdue from 30 to 90 days

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Master scale credit risk Corresponding internal ratings Corresponding Corresponding The largest trade and other receivables outstanding as at the balance sheet date are as follows: grade ratings of external PD interval rating agencies Outstanding (where possible) balance, net Special monitoring Counterparties with the high risk of C–SD 20–80% 2019 2018 default and payments overdue from 30 LLC Liga Development - 771 to 90 days OJSC RZD 407 373 Default Counterparties with the payments D 80–100% (interest or principal amount) overdue DB Cargo Logistics GmbH (DB Schenker Rail Automotive GmbH) 311 146 for more than 90 days SIBUR 222 -

China Railway (CR) 165 -

The Group’s exposure to credit risk arises amounts of expected credit loss allowance China Mobile Hong Kong 85 - primarily with respect to receivables in based on the results of credit quality analysis connection with container shipping activities of cash and cash equivalents and short-term OJSC Volgskiy Trubniy Zavod 33 - and financial guarantee for investment in joint investments balances based on credit risk levels JSC Kuznetskie Ferrosplavy 32 35 venture. as at 31 December 2019 and 31 December Fintrans GL LLC 30 1 2018 are insignificant. Although collection of The Group considers the credit quality of receivables could be influenced by economic WR Logistik GmbH 29 - customers at the contract execution stage. The factors, management believes that there is no UNICO LOGISTICS 26 15 Group considers their financial position and significant risk of loss to the Group beyond the JSC RZD Logistics 21 1 credit history. The Group monitors the existing expected credit loss allowance already recorded. receivables on a continuous basis and takes JSC RT-Logistics 18 - actions regularly to ensure collection and to The Group’s maximum exposure to credit risk Total 1,379 1,342 minimise losses. by class of assets and liabilities is reflected in the carrying amounts of financial assets Credit exposure is managed by establishing credit and financial guarantee in the consolidated limits for the most significant customers that are statement of financial position, described below. The impact of the amount of the allowance for collecting receivables (as at 31 December 2018: reviewed and approved by management. Deferred ECL based on the results of credit quality analysis RUR 2,697m). payment terms are offered only to the most The Group’s concentration of credit risk is of cash and cash equivalents and short-term significant customers of the Group with proven dependent on a few large key customers. As investments balances based on credit risk levels The Group’s management monitors balances of credit history. Sales to other customers are made at 31 December 2019, 77% of the total net as at 31 December 2019 and 31 December 2018 receivables with default level of credit risk and on a prepayment basis. amount of trade and other receivables related to is insignificant. provides credit quality analysis as disclosed in twelve largest counterparties of the Group (as at Note 11. Credit risk on liquid funds is limited The carrying amount of accounts receivable, net 31 December 2018: 77% related to five largest Financial assets with a good level of credit risk because these funds are placed only with financial of expected credit loss allowance of receivables counterparties) of which as at 31 December are primarily receivables from related parties organisations with minimal level if defolt risk. (Note 11), carrying amount of cash and cash 2019 one of the largest counterparty is a (Note 28) and receivables from other companies in As at 31 December 2019 75% of total cash and equivalents (Note 14), short-term investments related party and accounts for 23% of the the transportation and logistics sector. Accounts cash equivalents were held with one bank which (Note 13) and financial part of other non- total amount of trade receivables and other receivable from related parties are characterised is related to the Group (as at 31 December 2018: current assets represents the maximum amount receivables (as at 31 December 2018 one of the by a high degree of creditworthiness and the 72%) (Note 14). of financial assets exposed to credit risk.The largest counterparty: 21%). likelihood of recovery. Accounts receivable from other companies have similar rates of credit As part of the financial guarantee issued by the capacity and analysed on a regular basis by the Company for FVK Sever under a loan agreement Group for reliability and collectability. with PJSC GTLK, as of 31 December 2019, the credit risk is represented by a maximum amount As at 31 December 2019 the Group received of RUR 2.2 billion (as of 31 December 2018: RUR financial guarantees in the total amount of RUR 2.3 billion), which the Company will have to pay 2,557m in order to ensure the proper performance if the joint venture fails to settle its obligations of contractual obligations and minimise risks of under a loan agreement (Note 9).

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Fair value of assets and liabilities for new instruments with similar credit risk and 33. SUBSEQUENT EVENTS for 1,057 flatcars with LLC Ruscon, with a remaining maturity. Discount rates used depend on floating rental rate. According to preliminary Management uses its judgment to the assessment credit risk of the counterparty. Acquisition of flatcars. In January–March 2020 estimates, the maximum total amount of lease and classification of financial instruments by the Group obtained under the previously signed payments under the agreement will amount to category using the fair value measurement Liabilities carried at amortised cost. The fair agreements: RUR 1bn, net of VAT. hierarchy (Note 3). As at the reporting date, the value of bonds is based on quoted market prices. h 380 flatcars from JSC Altaivagon for the total Group had financial assets and liabilities classified Fair values of other liabilities were determined Share pledge agreement. In March 2020 the amount of RUR 1,128m, net of VAT; as Levels 1, 2 and 3. using valuation techniques. The estimated fair Company entered into a pledge agreement with value of fixed interest rate instruments with stated h 359 flatcars from LLC Torgoviy dom RM Rail for PJSC GTLK of Company’s 30% interest in the For financial assets and liabilities not measured maturity was estimated based on expected cash the total amount of RUR 1,078m, net of VAT; share capital of LLC FVC Sever, a joint venture of at fair value but for which fair value is disclosed, flows discounted at current interest rates for new h 100 flatcars from LLC RailAlians for the total the Group (Note 1). management believes that the fair value of the instruments with similar credit risk and maturity. amount of RUR 370m, net of VAT. Delivery is following assets and liabilities approximates their completed in full. Other events. Late in 2019 news first emerged carrying value: cash and cash equivalents, short- from China about the COVID-19 (Coronavirus). term investments, trade and other receivables, Acquisition of containers. In January-March 2019 The situation at year end, was that a limited other financial assets, trade and other payables 32. ACCOUNTING POLICIES BEFORE the Group obtained under the previously signed number of cases of an unknown virus had been and financial guarantee for the investment in joint 1 JANUARY 2019 agreements 1,744 containers from Taicang CIMC reported to the World Health Organisation. In the venture. These financial assets and liabilities, special logistic equipment Co.,Ltd for the total first few months of 2020 the virus had spread except for cash and cash equivalents and short- Accounting policies applicable to the comparative amount of RUR 221m at the Central Bank of Russia globally and its negative impact has gained term investments relate to Level 3 in the fair period ended 31 December 2018 that were official exchange rate as at the date of purchase, momentum. Management considers this outbreak value hierarchy. amended by IFRS 16 Leases, are as follows. net of VAT. to be a non-adjusting post balance sheet event. While this is still an evolving situation at the Cash refers to the Level 1 in the fair value Operating leases. Where the Group is a lessee in a Loan received. In February 2020 under a revolving time of issuing these consolidated financial hierarchy, cash equivalents and short-term lease which does not transfer substantially all the credit line agreement with JSC Raiffeisenbank the statements, to date there has been no discernible investments refer to the Level 2 in the fair value risks and rewards incidental to ownership from the Group received a loan in the amount of RUR 400m, impact on the Group’s sales or supply chain, hierarchy. lessor to the Group, the total lease payments are with an annual interest rate of 6.9% per annum and however the future effects cannot be predicted. charged to profit or loss for the year on a straight- a maturity date of no later than 26 February 2021. Management will continue to monitor the Company’s bonds are placed on the Moscow line basis over the lease term. The lease term is potential impact and will take all steps possible Exchange and quoted on the market, thus they the noncancellable period for which the lessee has Contractual obligations. In March 2020 the to mitigate any effects. refer to the Level 1 in the fair value hierarchy. contracted to lease the asset together with any Group entered into a long-term lease agreement further terms for which the lessee has the option The following table details the fair value of the to continue to lease the asset, with or without Company’s bonds: further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option. 2019 2018 Financial liabilities When assets are leased out under an operating Bonds 21,204 10,915 lease, the lease payments receivable are recognised as rental income on a straight-line Total 21,204 10,915 basis over the lease term.

Financial lease. A lease is classified as a finance Financial assets carried at amortised cost. lease if it transfers substantially all the risks and The fair value of floating rate instruments is rewards incidental to ownership of an underlying normally their carrying amount. The estimated asset. fair value of fixed interest rate instruments is based on estimated future cash flows expected to The Group had no finance lease as at 31 December be received discounted at current interest rates 2018.

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No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance APPENDICES principle with the corporate governance principle

3. Shareholders were provided Compliance 1. Report on Compliance with the Corporate access to information on who proposed agenda items and Governance Code Included in Annual who nominated candidates for the board of directors and the Report 2019 of PJSC TransСontainer revision group of the company. 1.1.3. During preparation for Compliance the general meeting and 1. Throughout the reporting Compliance No. Corporate Governance Criteria for assessment Corporate Explanations <2> of the general meeting itself, shareholders period, shareholders were Principles of compliance with the Compliance deviations from the criteria given an opportunity to ask corporate governance Status <1> for assessment of compliance had an opportunity to freely and timely receive members of the executive principle with the corporate bodies and members of governance principle information about the meeting and related the board of directors of 1.1. The company must ensure equal and fair treatment of all shareholders when they exercise their right to materials, ask executive the company questions participate in the management of the company bodies and members of immediately before and during the company’s board of the annual general meeting. 1.1.1. The Company creates the Compliance directors questions, and 2. The position of the board Compliance most favorable conditions communicate with each of directors (including for shareholders to 1. The company’s internal Compliance other. participate in the general document approved by the dissenting opinions included meeting, conditions for general shareholders meeting in the minutes) on each item developing a reasonable and regulating the procedures on the agenda of the general position on the agenda for holding the general meetings held during the of the general meeting, meeting is publicly available. reporting period was included coordination of their in the materials for the 2. The company provides an Compliance activities, as well as an general shareholders meeting. simple way to communicate opportunity to express with the company, such as a 3. The company provided Compliance their opinion on the issues hotline, e-mail or an Internet shareholders who had a under consideration. forum, allowing shareholders respective right with access to express their opinion and to the list of persons entitled submit questions regarding to participate in the general the agenda in the process meeting, starting from the of preparing for the general date it was received by the meeting. These actions company, for all general were taken by the company meetings held in the reporting immediately before each period. general meeting held during the reporting period. 1.1.4. The exercise of Compliance shareholders’ right to call 1.1.2. The procedure for general Compliance for a general meeting, 1. In the reporting period, Compliance meeting notification and to nominate candidates shareholders had an provision of materials 1. The general shareholders Compliance to the governing bodies opportunity to propose items for the general meeting meeting notification is posted and to propose items for the agenda of the annual gives shareholders an (published) on the web-site for the agenda of the general meeting within at opportunity to properly at least 30 days before the general meeting were least 60 days after the end of prepare for the general date of the general meeting. not associated with the corresponding calendar meeting. unreasonable difficulties. year 2. The general meeting Compliance notification indicates the 2. In the reporting period, Compliance place of the meeting and the company did not refuse the documents required for to accept items proposed for admission to the premises. the agenda or candidates to the bodies of the company due to typos and other minor shortfalls in the shareholder’s proposal.

PJSC TransContainer | Annual report 2019 228 229 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

1.1.5. Each shareholder had Compliance 2. If the company’s dividend Non-compliance The dividend policy of the an opportunity to freely policy uses the company’s Company provides for the exercise the right to vote 1. The internal document Compliance reporting indicators to calculation of dividend in the simplest and most (internal policy) of the determine the amount of payout as a percentage of convenient way for him. company contains provisions dividends, then the relevant the net profit of the Company according to which each dividend policy provisions take calculated in accordance person present at the general into account the consolidated with RAS (excluding income meeting may request a copy financial statements data. from revaluation of financial of the voting paper filled out investments). The dividend by them and certified by the policy was developed by the tellers, before the completion Company before the publication of the meeting. of the Corporate Governance Code recommended for use 1.1.6. The company’s procedure Compliance by the Bank of Russia, and for conducting a general reflected the practice generally meeting provides an equal 1. During general meetings Compliance accepted in the Russian opportunity for all persons held in the form of a Railways holding company present at the meeting to meeting (joint attendance regarding the calculation of express their opinion and of shareholders) during the dividend payout. ask questions of interest reporting period, sufficient The target level of the to them. time was provided for reports on the agenda items as well share of the Company’s net as time for discussion of these profit payable in the form items. of dividends is 25 % of the net profit of the Company 2. Candidates for the Compliance according to RAS, however, in governing and control the reporting period, 75 % of bodies of the company were the net profit received by the available to answer questions Company in 2018 was paid out of shareholders during the as dividends, which is more meeting at which their than 70 % of the net profit candidacy was put to a vote. according to IFRS. The issue of approval of a new 3. When making decisions Compliance revision of the Dividend Policy related to preparation is scheduled to be considered and holding of general in 2020. shareholders meetings, the board of directors considered 1.2.2. The company does Compliance the use of telecommunications not make a decision to provide shareholders with to pay dividends, if 1. The company’s dividend Compliance remote access required for such decision, without policy contains clear their participation in general formally violating the indications of financial / meetings in the reporting restrictions established by economic circumstances in period. the law, is economically which the company should not unreasonable and may pay dividends. 1.2. Shareholders are given an equal and fair opportunity to participate in the company’s profits through cause misperception of dividends. the company’s activities

1.2.1. The company has Partial 1.2.3. The company does not Compliance developed and compliance allow the deterioration implemented a of dividend rights of the 1. In the reporting period, the Compliance 1. The company has developed Compliance transparent and existing shareholders. company did not take actions understandable and disclosed a dividend policy leading to deterioration of mechanism for approved by the board of dividend rights of the existing determining the amount directors. shareholders. and payment of dividends.

PJSC TransContainer | Annual report 2019 230 231 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

1.2.4. The company seeks Non-compliance 1.3.2. The company does not Compliance to exclude the use by take actions that lead shareholders of other 1. In order to exclude Non-compliance Due to the lack of evidence or may lead to a forced 1. There are no quasi-treasury Compliance ways of making profit other ways of making of effected transactions in redistribution of corporate shares or they did not vote (receiving income) using profit (receiving income) the results of the audit of control. during the reporting period. the company’s assets, by shareholders using the the Company, the internal besides dividends and company’s assets, besides documents of the Company 1.4. The shareholders are provided with reliable and efficient ways of recording their rights to shares, as residual value. dividends and residual value, do not establish control well as a possibility of free and unhindered disposal of their shares. the company’s internal mechanisms that ensure timely documents establish control identification and approval 1.4.1. The shareholders are Compliance mechanisms that ensure timely of transactions with persons provided with reliable and 1. The quality and reliability Compliance identification and approval affiliated with (related to) efficient ways of recording of the activities carried out by of transactions with persons substantial shareholders their rights to shares, as the registrar of the company affiliated with (related to) (persons entitled to dispose well as a possibility of free to maintain the register of substantial shareholders of the votes attached to and unhindered disposal of securities owners correspond (persons entitled to dispose voting shares), in cases where their shares. to the needs of the company of the votes attached to the law does not formally and its shareholders. voting shares), in cases where recognise such transactions as the law does not formally interested-party transactions. 2.1. The board of directors carries out strategic management of the company, determines the basic recognise such transactions as When conducting transactions principles and approaches to organizing the company’s risk management and internal control system, interested-party transactions. with persons affiliated with controls the activities of the executive bodies of the company, and performs other key functions. (related to) substantial shareholders (persons entitled 2.1.1. The board of directors is Compliance to dispose of the votes responsible for making attached to voting shares), decisions related to 1. The board of directors Compliance the Company is guided by the the appointment and has the powers that are set requirements of the legislation dismissal of executive forth in the charter on the of the Russian Federation. bodies, including in cases appointment, dismissal and Currently, the Company is of improper performance determination of the terms not considering the need to of their duties. The board of contracts in relation to establish this mechanism. of directors also ensures members of the executive In the future, in case of that the executive bodies bodies. objective necessity, the of the company act in 2. The board of directors Compliance Company is ready to consider accordance with the reviewed the report (s) of the establishment of such approved development the individual executive mechanism. strategy and the core body and members of the business of the company’s. 1.3. The corporate governance system and practice ensure equal conditions for all shareholders — holders collegial executive body on of shares of one category (type), including minority (minor) shareholders and foreign shareholders, and the implementation of the equal treatment of them by the company. company’s strategy.

1.3.1. The company created Compliance 2.1.2. The board of directors Compliance conditions for fair establishes the key 1. During the reporting period, Compliance treatment of each 1. During the reporting Compliance guiding principles for the meetings of the board of shareholder by the period, procedures for long-term activities of directors addressed issues governing bodies and managing potential conflicts the company, evaluates related to the implementation controlling persons of of interest among substantial and approves the key and updating of the strategy, the company, including shareholders are efficient, performance indicators approval of the finance and conditions ensuring and conflicts between and main business goals economic plan (budget) of prohibition of abuse by shareholders, if any, have been of the company, evaluates the company, as well as principal shareholders of duly addressed by the board of and approves the strategy consideration of the criteria minority shareholders. directors. and business plans for the core business activities of and indicators (including the company. intermediate ones) for implementation of the strategy and business plans of the company.

PJSC TransContainer | Annual report 2019 232 233 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

2.1.3. The board of directors Compliance 2.1.7. The board of directors Compliance determines the principles oversees corporate and approaches to the 1. The board of directors Compliance governance practices 1. During the reporting Compliance organisation of the risk determined the principles in the company and period, the board of directors management and internal and approaches to organising plays a key role in major considered the issue of control system of the the risk management and corporate events. corporate governance company. internal control system of the practices in the company. company. 2.2. The board of directors reports to the shareholders of the company. 2. The board of directors Compliance assessed the risk management 2.2.1. Information on the Compliance and internal control system activities of the board 1. The company’s annual Compliance of the company during the of directors is disclosed report related to the reporting reporting period. and made available to shareholders. period includes information 2.1.4. The board of directors Compliance on attendance of individual determines the company’s directors at meetings of policy on remuneration 1. The company has Compliance the board of directors and and (or) reimbursement of developed and implemented committees. expenses (compensations) a policy (policies) approved 2. The annual report contains Compliance of members of the board by the board of directors information on the basic of directors, executive on remuneration and results of the assessment of bodies and other key reimbursement of expenses the activities of the board of managers of the company. (compensations) of members of the board of directors, directors carried out in the executive bodies of the reporting period. company and other key 2.2.2. The chairman of the board Compliance managers of the company of directors is available 1. The company has a Compliance 2. During the reporting period, Compliance for communication transparent procedure that meetings of the board of with the company’s provides shareholders with directors addressed issues shareholders. an opportunity to address relating to the specified questions and their position policy (s). thereupon to the chairman of 2.1.5. The board of directors Compliance the board of directors. plays a key role in the 2.3. The board of directors is an efficient and professional governing body of the company capable prevention, detection 1. The board of directors Compliance of making objective independent judgments and decisions that meet the interests of the company and resolution of internal plays a key role in preventing, and its shareholders. conflicts between the detecting and resolving internal conflicts. bodies of the company, 2.3.1. Only persons having an Compliance shareholders of the 2. The company has developed Compliance impeccable business company and employees 1. The procedure adopted by Compliance a system for identifying and personal reputation of the company. the company for evaluating transactions relating to a and possessing the the efficiency of the board conflict of interest, and a knowledge, skills and of directors includes, among system of measures aimed at experience necessary to other things, assessing the resolving such conflicts. make decisions relating to the competence of professional qualifications of 2.1.6. The board of directors Compliance the board of directors the members of the board of plays a key role in and required for efficient directors. ensuring the transparency 1. The board of directors Compliance implementation of its 2. In the reporting period, Compliance of the company, approved the information functions are elected the board of directors (or the timeliness and policy regulation. members of the board of its nomination committee) completeness of the directors. 2. The company defined Compliance evaluated the board of disclosure by the company the persons responsible directors candidates in terms of information, easy for implementation of the of their experience, knowledge, access of shareholders information policy. business reputation, lack of to the documents of the conflict of interest, etc. company.

PJSC TransContainer | Annual report 2019 234 235 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

2.3.2. Members of the company’s Compliance 2.4. The board of directors includes a sufficient number of independent directors. board of directors are elected through a 1. For all general shareholders Compliance 2.4.1. An independent director Compliance transparent procedure meetings in the reporting is a person who has 1. During the reporting period, Compliance that allows shareholders period, the agenda of which sufficient expertise, all independent members of to receive information included items on the election experience and the board of directors met about candidates sufficient of the board of directors, independence in forming all the independence criteria to form an idea of their the company provided to the his own position, is able specified in recommendations personal and professional shareholders biographical to make objective and 102–107 of the Code, or were qualities. data of all board of directors bona fide judgments candidates, the results of not affected by the recognised independent by the the assessment of such executive bodies of the board of directors. candidates by the board of company, certain groups directors (or its nomination of shareholders or other committee), and information interested parties. on the candidate’s compliance It should be borne in with the independence mind that under normal criteria in accordance with conditions a candidate (an recommendations 102–107 of elected member of the the Code and written consent board of directors) who is of candidates for election to related to the company, its the board of directors. substantial shareholder, substantial counterparty 2.3.3. The composition of the Compliance or competitor of the board of directors is company or related to 1. As part of the evaluation Compliance balanced, including in the state cannot be of the activities of the board terms of qualifications considered independent. of its members, their of directors carried out in experience, knowledge the reporting period, the 2.4.2. An assessment of Compliance and business skills, and board of directors analysed compliance of the board has the confidence of its own needs in the field of of directors candidates 1. In the reporting period, Compliance shareholders. professional qualifications, with independence criteria the board of directors (or the experience and business skills. and a regular analysis of nomination committee of the compliance of independent board of directors) formed an 2.3.4. The quantitative Compliance board members with opinion on the independence composition of the independence criteria of each board of directors board of directors of the 1. As part of the evaluation of Compliance are carried out. When candidate and provided the company makes it possible the board of directors carried conducting such respective opinion to the to organise the activities out in the reporting period, the assessment, the substance shareholders. of the board of directors board of directors considered must prevail over form. in the most efficient way, the issue of whether the 2. During the reporting period, Compliance including the possibility quantitative composition of the board of directors (or of forming committees the board of directors meets the nomination committee of the board of directors, the needs of the company and of the board of directors) and provides substantial the interests of shareholders. at least once examined the minority shareholders independence of the current of the company with an members of the board of opportunity to elect the directors whom the company candidate for whom they indicates as independent vote. directors in the annual report.

PJSC TransContainer | Annual report 2019 236 237 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

3. The company has developed Compliance 2.5. The chairman of the board of directors contributes to the most efficient implementation procedures that determine the of the functions assigned to the board of directors. necessary actions of a member of the board of directors when 2.5.1. An independent director is he ceases to be independent, elected as the chairman Compliance including obligations to inform of the board of directors, 1. The chairman of the board Compliance On 26 February 2019, the the board of directors thereon or a senior independent of directors is an independent board of directors recognised in a timely manner. director appointed from among the elected director, or a senior five directors independent and 2.4.3. Independent directors Compliance independent directors independent director <3> is appointed a senior independent form at least one third of coordinates the activities appointed from among the director. the elected members of 1. Independent directors form Compliance of independent directors independent directors. The number of independent the board of directors. at least one third of the board and interacts with the directors made it possible to of directors. chairman of the board of elect a senior independent directors. director from among them. 2.4.4. Independent directors Partial The chairman of the board of play a key role in the compliance directors is a representative of prevention of internal a subatantial shareholder of 1. Independent directors (who Partial Due to the lack of facts of conflicts in the company the Company. and carrying out major do not have a conflict of compliance major corporate actions corporate actions by the interest) preliminarily evaluate related to a possible conflict 2. The role, period, and Compliance company. major corporate actions of interest, independent obligations of the chairman related to a possible conflict directors did not carry out of the board of directors of interest, and the results of the specified procedure in (and, if applicable, the senior such evaluation are provided the reporting period. If they independent director) are to the board of directors. arise, independent directors duly defined in the company’s will be given an opportunity to internal documents. preliminarily evaluate major corporate actions related to 2.5.2. The chairman of the board Compliance a possible conflict of interest of directors provides a and provide the results of such positive atmosphere of 1. In the reporting period the Compliance evaluations to the board of meetings, free discussion efficiency of the chairman of directors. of items included in the the board of directors was In practice, independent agenda of the meeting, evaluated as part of evaluation directors declare their position and control over the of the efficiency of the board regarding the approval of implementation of of directors. major corporate actions before decisions made by the and during the meeting of the board of directors. board of directors. In addition, issues of major corporate 2.5.3. The chairman of the Compliance actions are considered at board of directors takes 1. The obligation of the Compliance meetings of committees of the necessary measures chairman of the board of the board of directors with to timely provide the directors to take measures participation of independent members of the board to ensure timely provision of directors. of directors with the meeting materials to members Currently, the company does information necessary of the board of directors is not consider the necessity for making decisions on fixed in the company’s internal to establish this mechanism. agenda items. documents. In the future, in case of objective necessity, the Company is ready to consider the establishment of such mechanism.

PJSC TransContainer | Annual report 2019 238 239 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

2.6. The members of the board of directors act in good faith and reasonably for the benefit of the company 2.6.4. All members of the Compliance and its shareholders on the basis of sufficient awareness, with a due degree of care and caution. board of directors have an equal opportunity to 1. In accordance with the Compliance 2.6.1. Members of the board of Compliance access the documents company’s internal documents, directors make decisions and information of the members of the board of 1. The internal documents of Compliance taking into account all company. The newly directors have the right the company establish that available information, in elected members of the to access documents and a member of the board of the absence of a conflict board of directors are make inquiries regarding directors is obliged to notify of interest, taking into provided with sufficient the company and its related the board of directors if he has account the principle of information about the organisations, and the a conflict of interest in relation equal treatment of the company and activities of company’s executive bodies to any item on the agenda company’s shareholders, the board of directors as are obliged to provide the of a meeting of the board of within the framework of soon as possible. required information and ordinary business risk. directors or committee of the documents. board of directors, prior to the discussion of the relevant 2. The company has a Compliance agenda item. formalised programme of getting-acquainted sessions 2. The company’s internal Compliance for newly elected members of documents stipulate that the board of directors. a member of the board of directors should not vote on 2.7. Meetings of the board of directors, preparation for them and participation of members of the board of any issue in which he has a directors in therein ensure efficient operation of the board of directors. conflict of interest. 2.7.1. Meetings of the board Compliance 3. The company has established Compliance of directors are held as a procedure that allows the necessary, taking into 1. The board of directors held Compliance board of directors to receive account the range of at least six meetings in the professional advice on matters activity and the tasks reporting year. within its competence at the facing the company in a expense of the company. certain period of time.

2.6.2. The rights and obligations Compliance 2.7.2. The internal documents of Compliance of members of the board the company stipulate the of directors are clearly 1. The company adopted and Compliance procedure for preparing 1. The company has an Compliance defined and fixed in issued an internal document and holding meetings of internal document in place the company’s internal that clearly defines the rights the board of directors that determines the procedure documents. and obligations of members of which provides members for preparing and holding the board of directors. of the board of directors meetings of the board of with an opportunity to directors, which, inter alia, 2.6.3. The board members have Compliance properly prepare for these establishes that the meeting enough time to carry out notification should be made, as 1. The individual attendance Compliance meetings. their duties. a rule, at least five days before at meetings of the board and the meeting. committees, as well as the time taken to prepare for 2.7.3. The form of the meeting Compliance participation in the meetings, of the board of directors were taken into account is determined with 1. The charter or internal Compliance when evaluating the board of consideration for the document of the company directors in the reporting period. importance of the agenda provides that the most items. The most important important issues (according 2. In accordance with the Compliance issues are resolved by to the list given in internal documents of the personal attendance. recommendation 168 of the company, members of Code) should be considered the board of directors are at in-person meetings of the obliged to notify the board board. of directors of their intention to join the governing bodies of other organisations (except controlled and related organisations of the company), as well as of such appointment.

PJSC TransContainer | Annual report 2019 240 241 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

2.7.4. Decisions on the most Compliance 4. During the reporting Compliance important issues of the period meetings of the audit company’s activities are 1. The charter of the company Compliance committee were held at least taken at a meeting of stipulates that decisions on quarterly. the most important issues set the board of directors by out in recommendation 170 2.8.2. For preliminary Partial a qualified majority or a of the Code should be taken consideration of issues compliance majority of votes of all at a meeting of the board of relating to establishment 1. The board of directors Non-compliance In 2019, the Company’s elected members of the directors by a qualified majority of an efficient and board of directors. formed a remuneration Personnel and Remuneration of at least three quarters of transparent remuneration committee which consists only Committee consisted of four the vote or by a majority of the practice, there was formed of independent directors. independent directors, as well votes of all elected members of a remuneration committee as members of the board of the board of directors. consisting of independent directors — representatives directors and headed by 2.8. The board of directors forms committees for preliminary consideration of the most important issues of of a minority and majority an independent director the company’s activities. shareholders. who is not the chairman of The board of directors seeks 2.8.1. For preliminary Partial the board of directors. to maximise the involvement consideration of issues compliance of independent directors in the related to the control of 1. The board of directors has Non-compliance In 2019, the Company’s Audit activities of committees of the finance and economic formed an audit committee Committee consisted of three the board of directors. When activities of the company, consisting only of independent independent directors, as well forming committees, the board there was formed an audit directors. as members of the board of of directors, along with the committee consisting of directors — representatives independence factor, takes independent directors. of minority and majority into account the professional shareholders. The Audit and practical experience of the Committee was chaired by a director and his intention to senior independent director. work at a particular committee, The board of directors seeks which contributes to his efficient to maximise the involvement participation in the activities of of independent directors in the the Personnel and Remuneration activities of committees of Committee. the board of directors. When In 2020, the Company intends forming committees, the board of directors, along with the to achieve compliance with this independence factor, takes criterion. into account the professional 2. The remuneration Non-compliance In 2019, the chairman of the and practical experience of the committee is chaired by an Personnel and Remuneration director and his intention to independent director who is Committee of the Company was work at a specific committee, not the chairman of the board not an independent director. which contributes to his efficient of directors. The chairman of the Committee participation in the activities of is a non-executive director and is the Audit Committee. not the chairman of the board of When forming the audit directors. committee in 2020, the Company assumes that independent The absence of independence directors will form its majority. status of the chairman of the Committee did not affect the 2. The internal documents Compliance development by the Committee of the company define the of objective recommendations tasks of the audit committee, for the board of directors including the tasks contained in and implementation by the recommendation 172 of the Code. Committee of its tasks and 3. At least one member of Compliance functions. the audit committee, who is In 2020, the Company intends an independent director, has to achieve compliance with this experience and knowledge criterion. in the field of preparation, analysis, evaluation and audit of accounting (financial) statements.

PJSC TransContainer | Annual report 2019 242 243 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

3. The internal documents Compliance 2.8.5. The committees are Partial of the company define the formed so as to allow compliance tasks of the remuneration for a comprehensive committee, including but not discussion of preliminarily 1. Board committees are Partial The audit committee is headed limited to the tasks specified considered issues, taking headed by independent compliance by a senior independent in recommendation 180 of the into account different directors. director. The Strategy Code. opinions. Committee and the Personnel and Remuneration Committee 2.8.3. For preliminary Partial are headed by non-executive consideration of issues compliance directors. related to personnel The reason for deviation planning (succession 1. The board of directors has Non-compliance The Company has formed a of the Company from this planning), professional established a nomination Personnel and Remuneration recommendation is that composition and committee (or its tasks Committee carrying out when electing chairpersons efficiency of the board of specified in recommendation tasks similar to those of the of committees the board of directors, a nomination 186 of the Code are nomination committee (see directors focuses, among other (appointments, personnel) implemented by another the commentary to paragraph things, on whether members committee was formed, committee <4>), most 2.8.2.). of the board of directors have most of whose members of whose members are the necessary knowledge, skills are independent directors. independent directors. and experience in the field 2. The internal documents of Compliance of activity of the respective the company define the tasks committee and intention to of the nomination committee exercise the functions of (or the respective committee the chairman of the relevant with combined functionality), committee, which helps to including the tasks contained increase the efficiency of their in recommendation 186 of the work in committees. Code. 2. The internal documents Compliance 2.8.4. Taking into account the Compliance (policies) of the company range of activity and contain provisions according the level of risk, the 1. In the reporting period, Compliance to which persons who are board of directors of the the board of directors of the not members of the audit company made sure that company considered the issue committee, nomination the composition of its of whether the composition of committee and remuneration committees fully meets its committees corresponds committee can attend the goals of the company. to the tasks of the board committee meetings only Additional committees of directors and the goals by invitation of the chairman were either formed of the company. Additional of the relevant committee. committees were either or were not deemed 2.8.6. The chairmen of the Compliance necessary (strategy formed or were not deemed necessary. committees regularly committee, corporate inform the board of 1. During the reporting period, Compliance governance committee, directors and its chairman committee chairpersons ethics committee, risk about the activities of the regularly reported on the management committee, respective committees. activities of the committees budget committee, health, to the board of directors. safety and environment committee, etc.).

PJSC TransContainer | Annual report 2019 244 245 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

2.9. The board of directors ensures an assessment of the quality of work of the board of directors, its 3.1.2. The corporate Compliance committees and members of the board of directors. secretary has sufficient independence from the 1. The board of directors Compliance 2.9.1. The assessment of the Compliance executive bodies of the approves the appointment, quality of work of the dismissal of, and additional 1. Self-assessment or external Compliance company and all necessary board of directors is powers and resources remuneration for the corporate aimed at determining assessment of the activities of secretary. the board of directors carried to carry out the tasks the degree of efficiency assigned to him. of the work of the board out in the reporting period of directors, committees included an assessment of 4.1. The level of remuneration paid by the company is sufficient to attract, motivate and retain persons with and members of the the activities of committees, the level of competence and qualifications required by the company. Remuneration is paid to members board of directors, their individual members of the of the board of directors, executive bodies and other key managers of the company in accordance with compliance with the board of directors and the the remuneration policy adopted by the company. needs of development of board of directors as a whole. the company, enhancing 4.1.1. The level of remuneration Compliance 2. The results of the self- Compliance for members of the board the work of the board of assessment or external 1. The company adopted an Compliance directors and identifying of directors, executive assessment of the board of bodies and other key internal document(s) — policy areas in which their directors conducted during (policies) on remuneration activities can be improved. managers creates the reporting period were sufficient motivation of members of the board of considered during an in-person for their efficient work, directors, executive bodies and meeting of the board of allowing the company other key managers, which directors. to attract and retain clearly defines approaches to remuneration of these persons. 2.9.2. Assessment of the Compliance competent and qualified activities of the board of specialists. At the same directors, committees and 1. The company involved Compliance time, the company avoids members of the board of an external organisation a greater than necessary directors is carried out on (consultant) to conduct an level of remuneration, as a regular basis at least independent assessment of well as an unreasonably once a year. An external the quality of work of the large gap between the organisation (consultant) board of directors during the levels of remuneration is involved to conduct an last three reporting periods at of these persons and independent assessment least once. employees of the of the quality of work of company. the board of directors at 4.1.2. The company’s Compliance least once every three remuneration policy years. was developed by the 1. During the reporting period, Compliance the remuneration committee 3.1. The corporate secretary of the company carries out efficient ongoing interaction with shareholders, remuneration committee and approved by the reviewed the remuneration coordinates the company’s activities aimed at protection of the rights and interests of shareholders, policy (policies) and the and supports the efficient work of the board of directors. company’s board of directors. The board practice of implementation 3.1.1. The Corporate Secretary Compliance of directors, with thereof and, where has the knowledge, the support of the necessary, made relevant experience and 1. The company adopted Compliance remuneration committee, recommendations for the qualifications sufficient to and disclosed an internal exercises control over board of directors. fulfill the duties assigned document — the regulation on implementation and to him, as well as an the corporate secretary. realisation of the impeccable reputation 2. The company’s website Compliance remuneration policy in and has the confidence of and the annual report provide the company, and, if shareholders. biographical data of the necessary, reviews and corporate secretary with makes adjustments to the the same level of detail as policy. it is provided to members of the board of directors and executive management of the company.

PJSC TransContainer | Annual report 2019 246 247 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

4.1.3. The company’s Compliance 4.2.2. Long-term ownership of Compliance remuneration policy the company’s shares to contains transparent 1. The company’s remuneration Compliance the greatest extent helps 1. If the internal document(s) Compliance mechanisms for policy (policies) contains to bring the financial — the company’s policy determining the amount of (contain) transparent interests of board (policies) on remuneration remuneration for members mechanisms for determining members closer to the provide for provision of of the board of directors, the amount of remuneration long-term interests of company shares to members executive bodies and for members of the board of shareholders. However, the of the board of directors, clear other key managers of the directors, executive bodies company does not make rules of ownership of shares company and regulates and other key managers of the right to sell shares by members of the board of all types of payments, the company and regulates dependent on achieving directors aimed at stimulating benefits and privileges (regulate) all types of certain performance long-term ownership of such provided to them. payments, benefits and indicators, and members shares should be provided and privileges provided to them. of the board of directors disclosed. 4.1.4. The company Compliance do not participate in determines the policy option programmes. 1. The remuneration Compliance for reimbursement of 4.2.3. The company does Compliance expenses (compensations) policy (policies) or other internal documents of the not provide any specifying the expenses additional payments or 1. The company does not Compliance to be reimbursed and company establish rules for provide any additional reimbursement of expenses compensations in case the level of service that of early termination of payments or compensations members of the board of of members of the board of in case of early termination directors, executive bodies powers of members of the directors, executive bodies board of directors due to of powers of members and other key managers and other key managers of the of the board of directors company. transfer of control over of the company can apply the company or other due to transfer of control for. Such policy may form circumstances. over the company or other a part of the company’s circumstances. remuneration policy. 4.3. The remuneration of members of executive bodies and other key managers of the company is dependent 4.2. The remuneration system for members of the board of directors ensures the convergence on the result of the company’s activities and their personal contribution to achieving this result. of the financial interests of directors with the long-term financial interests of shareholders. 4.3.1. The remuneration of Partial 4.2.1. The company pays a fixed Compliance members of the executive compliance annual remuneration of bodies and other key members of the board of 1. The fixed annual Compliance managers of the company 1. During the reporting period, Compliance directors. The company remuneration was the is determined so as to the annual performance does not pay remuneration only monetary form of provide a reasonable and indicators approved by the for participating in remuneration of members justified ratio of the fixed board of directors were used individual meetings of the of the board of directors for part of the remuneration to determine the amount board or committees of work on the board of directors to the variable part of the of variable remuneration of the board of directors. The during the reporting period. remuneration depending members of executive bodies company does not provide on the results of the and other key managers of the short-term motivation company’s activities and company. or additional material the employee’s personal 2. During the latest Compliance incentives to members of (individual) contribution to assessment of the system the board of directors. the final result. of remuneration of members of executive bodies and other key managers of the company, the board of directors (remuneration committee) made sure that the company applies an efficient ratio of the fixed part of remuneration to the variable part of remuneration.

PJSC TransContainer | Annual report 2019 248 249 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

3. The company has Non-compliance The Regulation on bonus 2. The long-term motivation Not applicable established a procedure to payments to the heads of programme for members of ensure the refund of bonus the executive office of PJSC the executive bodies and other payments to the company TransСontainer based on the key managers of the company wrongfully received by annual results does not provide stipulates that they acquire members of the executive for a procedure of refund of the right to sell shares and bodies and other key managers bonus payments wrongfully other financial instruments of the company. received by the executive used in such programme bodies and other key managers, no earlier than three years since such cases are absent from the date they were from the Company’s practice. provided. Moreover, the right The Company established to sell them is dependent on a clear mechanism for the achievement of certain determining remuneration of performance indicators of the members of executive bodies company. and other managers excluding the possibility of making 4.3.3. The amount of Compliance wrongful payments. compensation (golden farewell) paid by the 1. The amount of Compliance Refunds of bonus payments compensation (golden wrongfully received by company in case of early termination of powers of farewell) paid by the company members of the executive in case of early termination bodies (members of the members of the executive bodies or key managers of powers of members of Management Board and CEO) the executive bodies or key and other key managers of at the initiative of the company and in the managers at the initiative the Company (if the fact is of the company and in the confirmed) are carried out in absence of any fraud on their part does not exceed absence of any fraud on their accordance with the applicable part in the reporting period did legislation of the Russian twice the fixed part of their annual remuneration. not exceed twice the amount Federation. of the fixed part of their annual remuneration. 4.3.2. The company implemented Non-compliance a long-term incentive 5.1. The company implemneted an efficiently functioning system of risk management and internal control 1. The company implemented Non-compliance Currently, the Company does programme for members aimed at ensuring reasonable confidence in achieving the goals set by the company. of the executive bodies a long-term incentive not take measures to develop and other key managers programme for members of a long-term motivation 5.1.1. The board of directors of Compliance of the company using the the executive bodies and other programme for members the company defined the 1. The functions of various Compliance company’s shares (options key managers of the company of the executive bodies principles and approaches management bodies and or other derivative using the company’s shares and other key managers of to the organisation of company divisions in the risk financial instruments the (financial instruments based on the company using shares the risk management and management and internal underlying asset of which the company’s shares). of the company (financial internal control system of control system are clearly are the company’s shares). instruments based on the the company. company’s shares). defined in internal documents The Company considers the / relevant company policies possibility of developing such approved by the board of motivation programme in directors. future. 5.1.2. The executive bodies Compliance of the company ensure the development and 1. The executive bodies of the Compliance maintenance of an company ensured distribution efficient system of of functions and powers in risk management and relation to risk management internal control within the and internal control between company. heads of departments and divisions reporting to them.

PJSC TransContainer | Annual report 2019 250 251 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

5.1.3. The risk management and Compliance 5.2.2. The internal audit unit Compliance internal control system evaluates the efficiency of the company ensures 1. The company approved an Compliance of the internal control 1. During the reporting period, Compliance an objective, fair and anti-corruption policy. <1> system, efficiency of the during internal audit an clear idea of the current risk management system, assessment of the efficiency state and prospects of as well as the corporate of the internal control and the company, the integrity governance system. The risk management system was 2. The company organised a Compliance made. and transparency of the simple way of informing the company applies generally company’s reporting, board of directors or audit accepted performance 2. The company uses generally Compliance the reasonableness and committee of the board of standards in internal audit. accepted approaches to acceptability of the risks directors about violations of internal control and risk accepted by the company. the law, internal procedures, management. and the company’s code of ethics. 6.1. The company and its activities are transparent for shareholders, investors and other interested parties.

5.1.4. The board of directors Compliance 6.1.1. The company has Compliance of the company takes developed and 1. During the reporting Compliance implemented an 1. The company’s board Compliance necessary measures to of directors approved the ensure that the system period, the board of directors information policy or the audit committee that ensures efficient company’s information policy of risk management and developed with consideration internal control in place of the board of directors communication assessed the efficiency of between the company, for the recommendations of in the company complies the Code. with the principles the risk management and shareholders, investors and approaches to its internal control system of and other interested 2. The board of directors Compliance organisation defined by the company. Information parties. (or one of its committees) the board of directors and on the basic results of considered issues related to is functioning efficiently. such assessment is included compliance by the company in the company’s annual with its information policy at report. least once during the reporting 5.2. The company organises an internal audit to ensure a systematic independent assessment period. of reliability and efficiency of the risk management and internal control system and corporate 6.1.2. The company discloses Partial governance practices. information on the compliance 5.2.1. A separate structural Compliance corporate governance system and practice, 1. The company discloses Compliance unit was created in information about the the company or an 1. The company formed a Compliance including detailed separate structural unit of information on compliance corporate governance system independent external and the general principles of organisation was engaged internal audit functionally with the principles and accountable to the board recommendations of the corporate governance applied to conduct an internal in the company, among other audit. The functional of directors or the audit Code. committee, or an independent means, on the company’s and administrative website. accountability of the external organisation was internal audit unit are involved following the same 2. The company discloses Compliance distinguished. Functionally, principle of accountability to information on the the internal audit unit conduct an internal audit. composition of the executive reports to the board of bodies and the board of directors. directors, independence of board members and their membership in committees of the board of directors (in accordance with the definition attributed to it in the Code).

PJSC TransContainer | Annual report 2019 252 253 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

3. If there is a person Non-compliance In the reporting period, the 3. If foreign shareholders Compliance controlling the company, Company did not issue a own a substantial amount the company issues a memorandum of the controlling of the company’s shares, memorandum of the shareholder because the during the reporting year controlling person regarding controlling shareholder did not information was disclosed not such person’s plans for inform the Company of its plans only in Russian, but also in corporate governance in the for corporate governance in one of the most widespread company. the Company. If the Company foreign languages. receives any notifications from the controlling person of the 6.2.2. The company avoids Compliance plans of such person regarding a formal approach to corporate governance in the disclosing information 1. During the reporting period, Compliance Company, the Company shall and discloses material the company disclosed annual publish such information on information about its and semi-annual financial the website and in the Annual activities even if the statements prepared in Report. disclosure of such accordance with IFRS. The A description of the key priorities information is not company’s annual report and development prospects of required by law. related to the reporting the Company, as well as planned period includes the annual measures for the development financial statements prepared of corporate governance in accordance with IFRS, are provided in the Annual together with an auditor’s Report approved annually by opinion. shareholders, including owners of the largest blocks of shares of 2. The company discloses the Compliance the Company. complete information about In connection with the changes the capital structure of the of the controlling shareholder company in accordance with that took place in December recommendation 290 of the 2019, it is possible to consider Code in the annual report and and issue the memorandums of on the company’s website. the controlling person on their plans for corporate governance 6.2.3. The annual report, being Compliance in the Company. one of the most important means of communication 1. The company’s annual Compliance with shareholders and report contains information on 6.2. The company timely discloses complete, relevant and reliable information about the company other interested parties, key aspects of the company’s to ensure that reasoned decisions are made by shareholders and investors. contains information that operations and its financial 6.2.1. The Company discloses Compliance allows evaluating the results. information in accordance company’s performance 1. The information policy Compliance 2. The annual report of the Compliance with the principles of of the company defines for the year. regularity, consistency company contains information approaches and criteria for on the environmental and operational efficiency, determining information that as well as availability, and social aspects of the can have a significant impact company’s activities. reliability, completeness on the assessment of the and comparability of the company and the value of its 6.3. The company provides information and documents on the request of shareholders in accordance data disclosed. securities, and procedures that with the principles of equal and unhindered access. ensure timely disclosure of such information. 6.3.1. The company provides Compliance information and 2. If the company’s securities Compliance documents at the 1. The company’s information Compliance are traded in foreign regulated request of shareholders policy defines a procedure markets, the disclosure of in accordance with the of unhindered access of material information in the principles of equal and shareholders to information, Russian Federation and unhindered access. including information about in such markets is carried legal entities controlled by the out simultaneously and company, on the request of equivalently during the shareholders. reporting year.

PJSC TransContainer | Annual report 2019 254 255 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

6.3.2. When the company Compliance 7.1.2. The board of directors Partial provides information to plays a key role in compliance shareholders, a reasonable 1. During the reporting period, Compliance making decisions or balance is maintained the company did not refuse to recommendations 1. The company has a Partial The Company does not have between interests of grant shareholders’ requests regarding major corporate procedure in place under compliance a special procedure in place specific shareholders and for information, or such actions. The board which independent directors under which independent interests of the company refusals were justified. of directors bases its declare their position on major directors declare their position that is interested in opinion on the position of corporate actions before such on major corporate actions 2. In cases determined by Compliance keeping the confidentiality independent directors of actions are approved. before such actions are the information policy of the of important commercial the company. approved. company, shareholders are information that can have Issues of major corporate advised of the confidential a significant impact on its actions are considered at nature of information and competitiveness. meetings of the Board of assume responsibility to keep Directors and committees of its confidentiality. the board of directors that include independent directors. 7.1. Actions that significantly affect or may affect the structure of the share capital and the financial Materials for meetings of condition of the company and, accordingly, the position of shareholders (major corporate actions) are the Board of Directors and carried out on fair terms, ensuring that the rights and interests of shareholders and other interested committees are provided parties are respected. within a time period that 7.1.1. Major corporate actions Compliance allows developing a position on include reorganisation of agenda items. the company, acquisition 1. The charter of the company Compliance Thus, independent directors of 30 or more percent defines a list of transactions are given an opportunity to of the company’s voting or other actions that are preliminarily evaluate major shares (takeover), the considered major corporate corporate actions related to company effecting actions, and criteria for their a possible conflict of interest, significant transactions, determination. Decision and provide the results of such increasing or decreasing making regarding major evaluations to the Board of the authorised capital of corporate actions is within Directors. the company, listing and the competence of the board The company plans to develop delisting the company’s of directors. In cases where a procedure for the Board shares, as well as other the implementation of these of Directors under which actions that could lead corporate actions is directly independent directors will to a significant change in attributed by law to the be required to declare their rights of shareholders or competence of the general position on major corporate violation of their interests. shareholders meeting, the actions before such actions are The charter of the board of directors provides approved. company defines the list shareholders with relevant (criteria) of transactions recommendations. or other actions that 2. The company’s charter Compliance are considered major defines at least the following corporate actions, and actions as major corporate such actions are within actions: reorganisation of the the competence of the company, acquisition of 30 or board of directors of the more percent of the company’s company. voting shares (takeover), the company effecting significant transactions, increasing or decreasing the company’s authorised capital, listing and delisting of the company’s shares.

PJSC TransContainer | Annual report 2019 256 257 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria Principles of compliance with the Compliance deviations from the criteria corporate governance Status <1> for assessment of compliance corporate governance Status <1> for assessment of compliance principle with the corporate principle with the corporate governance principle governance principle

7.1.3. When major corporate Compliance In accordance with the actions affecting the 1. The charter of the company Compliance Charter of the Company, when rights and legitimate establishes lower minimum approving these transactions interests of shareholders criteria for classifying the the Board of Directors makes are carried out, equal company’s transactions as an individual decision on the conditions are ensured major corporate actions price (monetary value) of the for all shareholders of than those established by property, determining it based the company, and if the legislation, with consideration on the market value among mechanisms provided for the specifics of its other things. The appraiser for by legislation for activities. is engaged by the Company protecting the rights not only in cases stipulated by of shareholders are 2. During the reporting period, Compliance law, but also in other cases in insufficient, additional all major corporate actions accordance with the Charter measures to protect the were approved prior to their of the Company and (or) by rights and legitimate implementation. decision of the governing interests of shareholders bodies of the Company. of the company are taken. In this case the company 2. The company’s internal Partial The internal documents of is guided not only by documents establish a compliance the Company do not establish formal requirements of procedure for engaging an a procedure for engaging the law, but also by the independent appraiser to an independent appraiser to principles of corporate assess the value of acquisition assess the value of acquisition governance set forth in and repurchase of the and repurchase of shares of the Code. company’s shares. the Company. There were no such cases in the reporting 7.2. The Company ensures implementation of a procedure for carrying out major corporate actions that period or earlier. At the same allows shareholders to receive full information about such actions in a timely manner, provides them time, if there are reasons with an opportunity to influence such actions and guarantees compliance with and an adequate level of for repurchase of shares, protection of their rights when carrying out such actions. the Company will engage an 7.2.1. Information on the Compliance appraiser to enable the Board major corporate actions of Directors of the Company to 1. During the reporting period, Compliance is disclosed with an determine the repurchase price the company disclosed timely explanation of the of the shares in accordance and detailed information on reasons, conditions and with Federal Act No. 208-FZ major corporate actions of consequences of such “On Joint Stock Companies” the company, including the actions. dated 26 December 1995 reasons and time limits for (cl. 3 art. 76). such actions. In accordance with the 7.2.2. The rules and procedures Partial Charter of the Company, when related to the compliance approving these transactions, implementation of major the Board of Directors makes 1. The internal documents Partial The internal documents of corporate actions by the an individual decision on of the company provide for compliance the Company do not provide company are fixed in the share repurchase price, the procedure for engaging for a procedure for engaging the company’s internal determining it based on market an independent appraiser an independent appraiser to documents. value, among other things. to determine the value of determine the value of property The appraiser is engaged by property disposed of or disposed of or acquired under the Company not only in cases acquired under a major a major transaction or an stipulated by law, but also transaction or an interested- interested-party transaction. in other cases in accordance party transaction. At the same time, if there with the Charter of the are grounds for disposal or Company and (or) by decision acquisition of property, the of the governing bodies of the Company will engage an Company. appraiser to determine its value in accordance with the legislation of the Russian Federation.

PJSC TransContainer | Annual report 2019 258 259 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

No. Corporate Governance Criteria for assessment Corporate Explanations <2> of Principles of compliance with the Compliance deviations from the criteria 2. Major and Interested Party corporate governance Status <1> for assessment of compliance principle with the corporate Transactions governance principle

3. The company’s internal Non-compliance The internal documents of the The reliability of the data contained in APPROVED documents provide for an Company do not provide an extended list of grounds extended list of grounds on the Report was confirmed by the Audit by decision of the Board of Directors on which members of the which members of the board Commission of PJSC TransСontainer PJSC TransСontainer company’s board of directors of directors of the Company as of ______, 2020 (Record No.__) and other persons as provided and other persons as provided for by law are recognised as for by the legislation of interested in the company’s the Russian Federation are transactions. recognised as interested in Chairman of the Audit Commission Chairman of the Board of Directors transactions of the Company. Ponyavkin M. Shishkarev S. When determining persons interested in transactions, the Company is guided by the Report on interested party transactions concluded by requirements of the legislation of the Russian Federation. PJSC TransСontainer in 2019 The issue of expanding the list of grounds on which members Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis of the Board of Directors of material conditions making decision party the Company and other persons as provided for by law are 1. Supplemental Agreement No. 4 dd 18 February 2019 to the Contract No. TKtz/18/02/001dd 9 February 2018 recognised as interested can be considered during the next JSC RUSSIAN Change in the cost NA Within the period Notification of JSC RUSSIAN JSC Russian Railways, the update of internal documents in RAILWAYS of terminal services of validity of the the members RAILWAYS controlling entity of PJSC being provided by contract of the Board of Starkov A. K. TransСontainer, which 2020–2021. the Contractor at Directors and the has the right to indirectly the terminals of JSC Management Board (through JSC UTLC ERA) Russian Railways from of the Company of exercise more than 50 % <1> The status is “Compliance” only if the company meets all the criteria of compliance with the corporate governance principle. Otherwise, the status is 1 January 2019 a planned interested of PJSC TransContainer “partial compliance” or “non-compliance”. party transaction votes, is a party to the stipulated by transaction; Starkov A. K., <2> Are given for each criterion of compliance with the principle of corporate governance if the company meets only part of the criteria or does not meet Paragraph 1 of the member (Chairman) any criteria for assessment of compliance with the principle. If the company indicated the status “Compliance”, no explanation is required. Clause 1, Article of the Board of Directors <3> Indicate which of the two alternative approaches allowed by the principle is being implemented in the company, and explain this approach was chosen. 81 of the Federal of PJSC TransContainer, Law “On Joint Stock holds a position in the <4> If the tasks of the nomination committee are implemented by another committee, indicate its name. Companies” corporate body that is a <5> Indicate the list of additional committees formed. party to the transaction (member of the Management Board of JSC Russian Railways)

2. Contract No. 12/19-23 dd 15 February 2019 JSC RUSSIAN The provision of The cost of ITS 31 December 2019 Notification of JSC RUSSIAN JSC Russian Railways, the RAILWAYS integrated transport services shall the members RAILWAYS controlling entity of PJSC services (ITS) in not exceed RUB of the Board of Starkov A. K. TransСontainer, which accordance with the 2,000,000,000,00 Directors and the has the right to indirectly list of services of JSC Management Board (through JSC UTLC ERA) Russian Railways, of the Company of exercise more than 50 % available on the official a planned interested of PJSC TransContainer website https://eng.rzd. party transaction votes, is a party to the ru/en/9446 stipulated by transaction; Starkov A. K., Paragraph 1 of the member (Chairman) Clause 1, Article of the Board of Directors 81 of the Federal of PJSC TransContainer, Law “On Joint Stock holds a position in the Companies” corporate body that is a party to the transaction (member of the Management Board of JSC Russian Railways)

PJSC TransContainer | Annual report 2019 260 261 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis material conditions making decision party material conditions making decision party

3. Supplemental Agreement No. 22 dd 20 February 2019 to the Contract No. 26/417 dd 31 July 2006 6. Contract No. 3437168 dd 8 May 2019 JSC RUSSIAN Changing the terms NA Within the period Notification of JSC RUSSIAN JSC Russian Railways, the JSC RUSSIAN Against the contractual The Agent’s 30 March 2020 Notification of JSC RUSSIAN JSC Russian Railways, the RAILWAYS for the provision of of validity of the the members RAILWAYS controlling entity of PJSC RAILWAYS incentive, the Agent, incentive equals the members RAILWAYS controlling entity of PJSC services, extending contract of the Board of Starkov A. K. TransСontainer, which on their own account, to 0.01 % of the of the Board of Starkov A. K. TransСontainer, which the contract validity Directors and the has the right to indirectly on the instructions of amount of the Directors and the has the right to indirectly period until 30 March Management Board (through JSC UTLC ERA) the principal and at its service charge Management Board (through JSC UTLC ERA) 2020, new revision of of the Company of exercise more than 50 % expense, undertakes paid by customers of the Company of exercise more than 50 % Annex No. 1 “The List a planned interested of PJSC TransContainer to perform legal and for the use of a planned interested of PJSC TransContainer of Railway Stations party transaction votes, is a party to the other actions related engaged cars party transaction votes, is a party to the with TransContainer stipulated by transaction; Starkov A. K., to the engagement of and containers, stipulated by transaction; Starkov A. K., container terminals” Paragraph 1 of the member (Chairman) cars and containers excluding VAT Paragraph 1 of the member (Chairman) Clause 1, Article of the Board of Directors for the carriage of Clause 1, Article of the Board of Directors 81 of the Federal of PJSC TransContainer, customers’ goods and 81 of the Federal of PJSC TransContainer, Law “On Joint Stock holds a position in the household items of Law “On Joint Stock holds a position in the Companies” corporate body that is a service persons Companies” corporate body that is a party to the transaction party to the transaction (member of the (member of the Management Board of Management Board of JSC Russian Railways) JSC Russian Railways) 4. Contract No. 14/19-26/ОF dd 6 March 2019 7. Contract No. 3437180 dd 8 May 2019 JSC RUSSIAN Public offer contract The price of the 30 March 2020, Notification of JSC RUSSIAN JSC Russian Railways, the JSC RUSSIAN Against the contractual The Agent’s 30 March 2020 Notification of JSC RUSSIAN SC Russian Railways, the RAILWAYS for providing contract is not or until the date the members RAILWAYS controlling entity of PJSC RAILWAYS incentive, the Agent, incentive equals the members RAILWAYS controlling entity of PJSC military and special specified and of conclusion of of the Board of Starkov A. K. TransСontainer, which on their own account, to 0.01 % of the of the Board of Starkov A. K. TransСontainer, which transportations with is made up of contracts with the Directors and the has the right to indirectly on the instructions of amount of the Directors and the has the right to indirectly railway rolling stock the cost of the winning bidder, Management Board (through JSC UTLC ERA) the principal and at its service charge Management Board (through JSC UTLC ERA) (both specialised services actually determining the of the Company of exercise more than 50 % expense, undertakes paid by customers of the Company of exercise more than 50 % and passenger) and provided conditions for a planned interested of PJSC TransContainer to perform legal and for the use of a planned interested of PJSC TransContainer containers engaging railway party transaction votes, is a party to the other actions related engaged cars party transaction votes, is a party to the rolling stock from stipulated by transaction; Starkov A. K., to the engagement of and containers, as stipulated by transaction; Starkov A. K., owners Paragraph 1 of the member (Chairman) cars and containers excluding VAT Paragraph 1.1 of the member (Chairman) Clause 1, Article of the Board of Directors for the carriage of Clause 1, Article of the Board of Directors 81 of the Federal of PJSC TransContainer, customers’ goods and 81 of the Federal of PJSC TransContainer, Law “On Joint Stock holds a position in the household items of Law “On Joint Stock holds a position in the Companies” corporate body that is a service persons Companies” corporate body that is a party to the transaction party to the transaction (member of the (member of the Management Board of Management Board of JSC Russian Railways) JSC Russian Railways) 5. Contract No. TKd/19/03/0010 dd 7 March 2019 8. Contract No. 3437191 dd 8 May 2019

LLC Supply of wrought The total price until 31 December Notification of JSC RUSSIAN JSC Russian Railways is JSC RUSSIAN Against the contractual The Agent’s 30 March 2020 Notification of JSC RUSSIAN JSC Russian Railways, the SpecTransContainer wheels 957*190, p. of the contract is 2019 inclusively; the members RAILWAYS the controlling entity of RAILWAYS incentive, the Agent, incentive equals the members RAILWAYS controlling entity of PJSC 00186269-162 2 as 173,273,276.36 or until the parties of the Board of JSC UTLC ERA LLC SpecTransContainer, on their own account, to 0.01 % of the of the Board of Starkov A. K. TransСontainer, which per GOST 10791-2011 rubles, including fully fulfill their Directors and the which has the right to on the instructions of amount of the Directors and the has the right to indirectly in the amount of 3,608 VAT 20 % obligations (in terms Management Board indirectly (through JSC the principal and at its service charge Management Board (through JSC UTLC ERA) units of settlements) of the Company of UTLC ERA) excercise expense, undertakes paid by customers of the Company of exercise more than 50 % a planned interested over 50 % of the PJSC to perform legal and for the use of a planned interested of PJSC TransContainer party transaction TransContainer votes, the other actions related engaged cars party transaction votes, is a party to the stipulated by owner to 100 % stake in to the engagement of and containers, as stipulated by transaction; Starkov A. K., Paragraph 1 of LLC SpecTransContainer, cars and containers excluding VAT Paragraph 1.1 of the member (Chairman) Clause 1, Article and is a party to the for the carriage of Clause 1, Article of the Board of Directors 81 of the Federal transaction customers’ goods and 81 of the Federal of PJSC TransContainer, Law “On Joint Stock household items of Law “On Joint Stock holds a position in the Companies” service persons Companies” corporate body that is a party to the transaction (member of the Management Board of JSC Russian Railways)

PJSC TransContainer | Annual report 2019 262 263 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis material conditions making decision party material conditions making decision party

9. Contract No. 3432183 dd 29 April 2019 11. Supplemental Agreement No. 1 dd 5 July 2019 to the Contract No. 442-045269/18/TKd/18/07/0007 dd 6 July 2018 IPJSC Ingosstrakh Extension of the The size of 20 August 2019 Notification of Members of the Board Members of the Board of JSC RUSSIAN Against the contractual The Agent’s 30 March 2020 Notification of JSC RUSSIAN JSC Russian Railways, the validity of the Policy the insurance the Company of Directors, the Directors, the collective RAILWAYS incentive, the Agent, incentive equals the members RAILWAYS controlling entity of PJSC (contract) of liability premium under shareholders of a collective executive executive body and the on their own account, to 0.01 % of the of the Board of Starkov A. K. TransСontainer, which insurance of members the supplementary planned interested body and the sole sole executive body of on the instructions of amount of the Directors and the has the right to indirectly of the Board of agreement shall be party transaction executive body of PJSC PJSC TransContainer are the principal and at its service charge Management Board (through JSC UTLC ERA) Directors and the USD 9,000 (VAT is as stipulated by TransContainer beneficiaries in terms of expense, undertakes paid by customers of the Company of exercise more than 50 % Management of the not applicable) Paragraph 1.1 of the insurance contract to perform legal and for the use of a planned interested of PJSC TransContainer Company without Clause 1, Article other actions related engaged cars party transaction votes, is a party to the changing the terms of 81 of the Federal to the engagement of and containers, as stipulated by transaction; Starkov A. K., insurance Law “On Joint Stock cars and containers excluding VAT Paragraph 1.1 of the member (Chairman) Companies” for the carriage of Clause 1, Article of the Board of Directors 12. Supplemental Agreement No. 5 dd 26 July 2019 to the Contract No. TKtz/18/02/001 dd 9 February 2018 customers’ goods and 81 of the Federal of PJSC TransContainer, household items of Law “On Joint Stock holds a position in the JSC RUSSIAN Extension of the NA Within the period Notification of JSC RUSSIAN JSC Russian Railways, the service persons Companies” corporate body that is a RAILWAYS contract validity period of validity of the the members RAILWAYS controlling entity of PJSC party to the transaction until 31 December contract of the Board of Starkov A. K. TransСontainer, which (member of the 2022, as well as the Directors and the has the right to indirectly Management Board of supplementing of Management Board (through JSC UTLC ERA) JSC Russian Railways) the conditions for of the Company of exercise more than 50 % 10. Contract No. TKd/19/06/0018 dd 24 June 2019 making changes to a planned interested of PJSC TransContainer the cost of services party transaction votes, is a party to the LLC Supply of wrought The total price 31 December 2019 Notification of JSC RUSSIAN JSC Russian Railways is under the contract and as stipulated by transaction; Starkov A. K., SpecTransContainer wheels 957*190, p. of the contract the members RAILWAYS the controlling entity of the exclusion of the Paragraph 1.1 of the member (Chairman) 00186269-162 2 as is based on the of the Board of JSC UTLC ERA LLC SpecTransContainer, settlement limits under Clause 1, Article of the Board of Directors per GOST 10791- specifications Directors and the Starkov A. K. which has the right to the contract 81 of the Federal of PJSC TransContainer, 2011 (hereinafter the thereto signed by Management Board indirectly (through JSC Law “On Joint Stock holds a position in the ‘Goods’) for railway the parties. The of the Company of UTLC ERA) excercise Companies” corporate body that is a rolling stock. Name, parties set a limit a planned interested over 50 % of the PJSC party to the transaction quantity, price, place for settlements party transaction TransContainer votes. (member of the and delivery time of under the contract as stipulated by JSC ULTC ERA is the Management Board of each consignment in the amount of Paragraph 1.1 of controlling shareholder JSC Russian Railways) of the Goods, as well RUB 500,000,000, Clause 1, Article of PJSC TransContainer, as the consignee of 00, excluding VAT 81 of the Federal which has the right to 13. Supplemental Agreement No. 1 dd 12.08.2019 to Contract No. 12/19-23 dd 15 February 2019 the Goods and the Law “On Joint Stock exercise over 50 percent JSC Russian Railways Extension of the NA Within the period Notification of JSC Russian Railways JSC Russian Railways, the details thereof shall be Companies” of the votes. contract validity of validity of the the members Starkov A. K. controlling entity of PJSC specified by the parties PJSC TransContainer is period until contract of the Board of TransСontainer, which in the specification(s) the controlling entity 31 December 2022 Directors and the has the right to indirectly to the contract. LLC SpecTransContainer inclusive; exclusion Management Board (through JSC UTLC ERA) The quantity of the having the right to of the condition of of the Company of exercise more than 50 % delivered Goods agreed exercise a 100 % unilateral extrajudicial a planned interested of PJSC TransContainer upon by the parties in of the stake in LLC termination of the party transaction votes, is a party to the the delivery schedule SpecTransContainer contract initiated by as stipulated by transaction; Starkov A. K., shall be 6,068 units and being a party to the one of the parties Paragraph 1.1 of the member (Chairman) and may be changed transaction. Clause 1, Article of the Board of Directors by agreement of the Member (Chairman) of 81 of the Federal of PJSC TransContainer, parties the Board of Directors Law “On Joint Stock holds a position in the of PJSC TransContainer Companies” corporate body that is a A. K. Starkov holds a party to the transaction position in the governing (member of the organ of the controlling Management Board of entity (member of the JSC Russian Railways) Management Board of JSC Russian Railways, 14. Contract No. 442-065566/19 dd 5 September 2019 Chairman of the Board IPJSC Ingosstrakh Liability insurance The size of the 20 August 2020 Notification of Members of the Board Members of the Board of of Directors of JSC UTLC for members of the insurance premium the Company of Directors, the Directors, the collective ERA) Company’s Board shall be USD shareholders of a collective executive executive body and the of Directors and 140,000.00 (not planned interested body and the sole sole executive body of management subject to VAT) party transaction executive body of PJSC PJSC TransContainer are as stipulated by TransContainer beneficiaries in terms of Paragraph 1.1 of the insurance contract Clause 1, Article 81 of the Federal Law “On Joint Stock Companies”

PJSC TransContainer | Annual report 2019 264 265 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis Name of counterparty Subject and other Price Validity Governing organ, Interested Interest basis material conditions making decision party material conditions making decision party

15. Supplemental Agreement No. 6 dd 18 October 2019 to Contract No. TKd/18/02/001 dd 9 February 2018 18. Supplement No. 1 dd 23 December 2019 to surety contract No. 110100/1410-DP/TransContainer dd 27 June 2017

JSC Russian Railways Change in the level of NA Within the period Notification of JSC Russian Railways JSC Russian Railways, the PJSC STLC Change in the size of In the event of Within the period Notification of LLC Freight Village The General Director allotment for storage of validity of the the members Starkov A. K. controlling entity of PJSC secured obligations in joint liability, the of validity of the the members Kaluga North (V. G. Saraev) is a of empty containers of contract of the Board of TransСontainer, which terms of the amount transaction price contract of the Board of member of the Board of PJSC TransContainer Directors and the has the right to indirectly of the principal debt, will be 50% of Directors and the Directors of LLC Freight at terminals owned by Management Board (through JSC UTLC ERA) payment periods, the loan amount Management Board Village Kaluga North; JSC Russian Railways, of the Company of exercise more than 50 % change in the size of of LLC Freight of the Company of A member of the inclusion of services a planned interested of PJSC TransContainer the interest rate; Village Kaluga a planned interested Board of Directors for the processing of party transaction votes, is a party to the the guarantors North on the date party transaction (M. A. Gavrilenko) is a heavy cargo, as well as as stipulated by transaction; Starkov A. K., include Freight Village of the submission as stipulated by member of the Board of coordination of rates Paragraph 1.1 of the member (Chairman) Logistics Limited of claim and the Paragraph 1.1 of Directors of LLC Freight for storage of loaded Clause 1, Article of the Board of Directors Liability Company; amount of interest Clause 1, Article Village Kaluga North of containers under the 81 of the Federal of PJSC TransContainer, Article 8 of the accrued for using 81 of the Federal the beneficiary under the accumulation of a Law “On Joint Stock holds a position in the Surety Contract is the loan amount Law “On Joint Stock transaction (clause 21 of container train on Companies” corporate body that is a supplemented by an at a rate of 11% Companies” Decisions of the Plenum the Kuybyshevskaya party to the transaction anti-corruption clause per annum on the of the Supreme Court of Railway (member of the in accordance with the loan debt amount the Russian Federation Management Board of ICC Anti-Corruption payable by the No. 27 dd 26 June 2018) JSC Russian Railways) Rules recommended debtor at the by the International last day of each 16. Supplemental Agreement No. 23 dd 26 November 2019 to Contract No. 26/417 dd 31 July 2006 Chamber of Commerce interest period (ICC) JSC Russian Railways Change in the terms NA Within the period Notification of JSC Russian Railways JSC Russian Railways, the for the provision of of validity of the the members Starkov A. K. controlling entity of PJSC services, extending the contract of the Board of TransСontainer, which contract validity period Directors and the has the right to indirectly until 31 December Management Board (through JSC UTLC ERA) 2022 inclusively; of the Company of exercise more than 50 % or until the parties a planned interested of PJSC TransContainer completely fulfill party transaction votes, is a party to the CEO V. N. Markov their obligations stipulated by transaction; Starkov A. K., under the contract Paragraph 1 of the member (Chairman) (in terms of mutual Clause 1, Article of the Board of Directors settlements); exclusion 81 of the Federal of PJSC TransContainer, of the condition of Law “On Joint Stock holds a position in the unilateral extrajudicial Companies” corporate body that is a termination of the party to the transaction contract initiated by (member of the one of the parties Management Board of JSC Russian Railways)

17. Supplemental Agreement No. 1 dd 31 December 2019 to supply contract No. TKd/19/06/0018 dd 24 June 2019

LLC Change in the The settlement Within the period Notification of JSC Russian Railways PJSC TransContainer is SpecTransContainer settlement limit under limit under of validity of the the members JSC UTLC ERA the controlling entity of the contract, from the contract is contract of the Board of LLC SpecTransContainer, 500,000,000.00 rubles 706,229,112.00 Directors and the which has the right excluding VAT to rubles excluding Management Board to exercise a 100 % 706,229,112.00 rubles VAT of the Company of of the stake in LLC excluding VAT; change a planned interested SpecTransContainer, in the quantity of party transaction which is also a party to goods supplied, agreed as stipulated by the transaction. by the parties in the Paragraph 1.1 of JSC ULTC ERA is the delivery schedule, from Clause 1, Article controlling shareholder 6,068 units to 10,020 81 of the Federal of PJSC TransContainer, units Law “On Joint Stock which has the right to Companies” exercise over 50% of the votes. JSC Russian Railways is the controlling entity of LLC SpecTransContainer, which has the right to indirectly (through JSC UTLC ERA and PJSC TransContainer) exercise over 50% of LLC SpecTransContainer votes

PJSC TransContainer | Annual report 2019 266 267 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures 3. Corporate Risk Map risk

01.2.2. Shareholder conflict 1. Disagreements or disputes 1. Blocking decision making 1. Timely identification and Number and name of the Risk reasons Risk consequences Measures between the Company’s body and its procedures prevention of corporate conflicts risk Criticality level shareholders, as well as between the 2. Shareholder indemnity claims (ongoing) Acceptable risk Company shareholders who affect the 3. Loss of the Company’s 2. Monitoring compliance with Area of risk (process) — S.01 Corporate governance interests of the Company reputation before the opinion of corporate procedures in the Management method 2. Lack of mechanisms for the investment community Company (ongoing) Area of risk (subprocess) — 01.1. Corporate governance model Adoption identifying, preventing and resolving 4. Fall of stock quotes corporate conflicts 01.1.1. Corporate law 1. Non-compliance of the corporate 1. Falling of the Company’s security 1. Monitoring of corporate High level process of PJSC violation governance level with the quotes (decrease in liquidity and legislation, requirements of TransContainer requirements of bidders necessary to increase of funding costs) bidders, the Regulation on U.6. Corporate governance Criticality level maintain the Company’s securities on 2. Exclusion of the Company’s the Information Policy of the Acceptable risk the corresponding quotation list securities from quotation lists, Company and best practices 2. Non-compliance of the decision- suspension of operations with in the field of information Management method making procedure of the Company’s securities disclosure, bringing corporate 01.2.3. Shareholder claims 1. Disagreement or dispute between 1. Blocking decision making 1. Timely identification and Control and prevention governing bodies with the legislation 3. Recognition of decisions of the governance practices of the the Company’s body and its procedures prevention of corporate conflicts of the Russian Federation, the governing bodies (BD, GMS) as Company in accordance with Criticality level shareholders, as well as between the 2. Court decisions on compensation (ongoing) High level process of PJSC Charter and internal documents of illegitimate, and transactions as these requirements (ongoing) Acceptable risk Company shareholders who affect the by the Company and/or members 2. Monitoring compliance with TransContainer the Company invalid 2. Monitoring compliance interests of the Company of the Board of Directors of the corporate procedures in the U.6. Corporate governance 3. Violations of the deadlines for 4. Regulator fines with corporate legislation Management method 2. Lack of mechanisms for Company for shareholders’ losses Company (ongoing) the provision of materials to the 5. Loss of the Company’s and requirements of bidders Control and prevention identifying, preventing and resolving 3. Loss of the Company’s 3. D&O annual insurance Company shareholders in preparation reputation before the opinion of necessary to maintain the corporate conflicts reputation before the opinion of (Q3 2018 for the General Meeting of the investment community Company’s securities on the High level process of PJSC the investment community Shareholders 6. Claims by shareholders against corresponding quotation list TransContainer 4. Fall of stock quotes 4. Violations of the deadlines the Company and members of the (ongoing) U.6. Corporate governance for the provision of documents Board of Directors 3. Monitoring compliance with and information to the Company the procedure and timing for 01.2.4. Management 1. Change of a controlling 1. Delay in making management 1. Monitoring and development shareholders, which is mandatory in information disclosure stipulated resignation (the CEO/ shareholder decisions of the current remuneration accordance with the legislation of the by the Federal Law ‘On Securities more than one of the key 2. Non-competitive terms of 2. Falling of the Company’s security system at PJSC TransContainer Russian Federation Market’, the Regulation on managers) remuneration for the CEO and top quotes of the CEO and management 5. Violation of the order and terms Information Disclosure by Issuers managers 3. Decreased Company of the Company (in accordance of execution of the decision of the of Equity Securities, approved Criticality level competitiveness with the work plan of the Human governing organs of the Company by Order of the Bank of Russia Critical risk 4. Decrease in the efficiency Resources and Remuneration 6. Violation by the Company of No. 454-P dd 30.12.2014 of the Company and business Committee) (as required) obligations to shareholders regarding (ongoing) Management method manageability 2. Approval by the Board of the procedure and terms of dividend 4. Personnel skill enhancement/ Control and prevention 5. Deterioration of performance Directors of the Company upon payment training in the field of information indicators the recommendation of the CEO 7. Untimely/incomplete disclosure disclosure in accordance with High level process of PJSC 6. Deterioration in financial of the Company, adoption of of information on the activities of legal requirements (ongoing) TransContainer performance decisions on a lump-sum bonus the Company in accordance with the U.9. KPI system management for persons holding positions requirements of Russian legislation in the executive office of the and the United Kingdom Company whose candidates 8. Insufficient formalisation of the are approved by the Board of disclosure process Directors (as required)

Area of risk (subprocess) — 01.2. Shareholder relations

01.2.1. Loss of the 1. Market conditions 1. Decrease in shareholders’ 1. Compliance with Moscow Area of risk (subprocess) — 01.3. Management of S&A and branches Company’s share value 2. Decline in the corporate financial results Exchange listing requirements governance quality 2. Reputational loss (ongoing) 01.3.1. Increasing the 1. Changes in market environment 1. Inefficient spending of 1. Monitoring the implementation Criticality level 3. Low free float 2. Maintaining information payback period of 2. Forecasting errors in the business investments of business plans of the Company Low risk 4. Deterioration of the Company’s disclosure standards (ongoing) investments/depreciation of plan at subsidiaries and affiliates 2. Decrease of ROE and ROIC and analysis of reasons for financial situation 3. Carrying out measures to investments in subsidiaries 3. Inadequate due diligence indicators deviations (quarterly) Management method increase the liquidity of shares at and associates/failure to 4. Ineffective management of 3. Additional load on the Company’s 2. Monitoring compliance Control and prevention the Moscow Exchange (ongoing) achieve project objectives subsidiaries and affiliates liquidity due to the implementation with corporate procedures in 5. Conflict of interest with other of project guarantees subsidiaries and associates High level process of PJSC Criticality level participants in subsidiaries and 4. Deterioration of the Company’s (ongoing) TransContainer Critical risk affiliates financial condition 3. Involvement of specialised U2. Interaction with the managers of the Company in stock market and investors Management method the activities of subsidiaries and Control and prevention associates (as required)

High level process of PJSC TransContainer U.7. Management of the companies of PJSC TransContainer

PJSC TransContainer | Annual report 2019 268 269 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 01.4. Organisational structure and separation of powers 4. Compliance with regulations for the preparation of estimates 01.4.1. Inconsistency of the 1. Violation of the principles 1. Decrease in productivity and 1. Annual audits of processes in (ongoing) organisational and functional of separation of powers and work efficiency of structural accordance with the approved 5. Carrying out competitive model with the Company responsibility divisions and increase in expenses audit schedule (ongoing) procedures for the right to objectives 2. Inconsistency of the organisational (duplication of functions) 2. Updating the order on conclude contracts in the manner structure of the Company with 2. Deterioration of the working separation of powers in PJSC and terms established by the Criticality level changes in the external and internal climate in the Company; internal TransContainer between the internal regulatory documents of Low risk environment (landscape of business conflicts CEO, the Deputy CEO, directors, PJSC TransContainer (ongoing) processes) chief engineer, chief accountant 6. Budgeting of expenses for Management method and first deputy financial investment projects (ongoing) Control and prevention director (amending the order) (as 7. Inspection of contractors at required) the stage of concluding contracts High level process of PJSC (ongoing) TransContainer 8. Carrying out construction control R.5. Organisational and architectural supervision development management as investment projects are implemented (as required) Area of risk (process) — S.02 Strategy 9. Provision of a bank guarantee ensuring the obligations of the Area of risk (subprocess) — 02.1. Strategic planning contractor to eliminate deficiencies 02.1.1. Failure to achieve the 1. Insufficient or poor marketing 1. Reduction in yield 1. Implementation of the in the work during the warranty Company’s strategic goals research 2. Decreased business efficiency Regulations of the Strategic period (as required) 2. Unpredictable environmental (marketing and rate policies, asset Management process, which Area of risk (process) — S.04 Mergers, acquisitions and divestment of assets Criticality level changes management, quality of service, determines the procedure for Acceptable risk 3. Inadequate assessment of etc.) development, updating and Area of risk (subprocess) — 04.1. Divestment of assets counterparties’ impact 3. Failure to achieve strategic goals monitoring of the implementation Management method 4. Incomplete or incorrect analysis of 4. Inadequate assessment of of the PJSC TransContainer 04.1.1. Hostile takeover of 1. Inefficiency of the corporate control 1. Loss of control over subsidiaries 1. Successful upholding of the Control and prevention existing or potential service markets counterparties’ impact Strategy (ongoing) subsidiaries, incl. raiding system over subsidiaries both from 2. Equity structure alteration Company interests in working 5. Inadequate assessment of the 5. Incomplete or incorrect analysis 2. Initiation and implementation the side of PJSC TransContainer (the 3. Loss of the Company’s with government authorities and High level process of PJSC impact of state and regulatory of existing or potential service of strategic development projects Criticality level shareholder), and the subsidiaries’ reputation in courts (ongoing) TransContainer authorities markets in accordance with decisions Low risk management 4. Reduced business performance 2. Training on countering hostile U.1. Strategic management 6. Incorrect or incomplete assessment 6. Making wrong strategic of the Company shareholders 2. Uncontrolled divestment of assets takeover (as required) of the internal state or needs of the decisions (ongoing) Management method by subsidiaries’ management Company 7. Failure to achieve targets Control and prevention 7. An underdeveloped HR strategy or the lack of it High level process of PJSC TransContainer Area of risk (process) — S.03 Investment project management U.7. Management of the companies of PJSC Area of risk (subprocess) — 03.1. Project management TransContainer

03.1.1. Failure to achieve 1. Errors in estimated costs 1. Additional unbudgeted financial 1. Diversification of suppliers Area of risk (process) — SC.05 Macroeconomic environment the expected results of assessment expenses (conducting competitive investment projects in 2. Incorrect planning of the sequence 2. Failure to complete an procedures with a sum of Area of risk (subprocess) — 05.1. Political factors terms of the quality of work of design tasks and calendar period investment programme payments for purchase of performed for implementation thereof 3. Fines, penalties, sanctions, goods/work/services exceeding 05.1.1. Deterioration or 1. Political situation in the Russian 1. Loss of Company assets 1. Monitoring the political 3. Stricter requirements to an judicial claims from counterparties RUB 500,000, including negative change in political Federation or in foreign jurisdictions 2. Problems in the implementation situation of the Russian Criticality level investment project (ecology, under concluded contracts related VAT, in accordance with the conditions affecting the Company activities, of investment projects Federation and countries of PJSC Acceptable risk industrial safety, etc.) by regulatory to the supply of products and Regulation on the Procedure for including legislative changes 3. Breach of obligations TransContainer presence, as well authorities the provision of services for the Procurement of goods, works and Criticality level 4. Fines as changes in legislation, including Management method 4. Non-compliance of the scope of construction project services for the needs of PJSC Acceptable risk 5. Antitrust authorities’ claims Customs and Tax (ongoing) Control and prevention work to the design estimates 4. Inadequate priorities TransContainer, approved by 6. Failure to achieve strategic goals 2. Participation in specialised 5. Violation of obligations by the Board of Directors dd 8 July Management method 7. Increase of the cost of associations, including High level process of PJSC contractors 2016. If the amount of payments Control and prevention/ investment projects international (ongoing) TransContainer 6. Untimely financing for a purchase does not exceed adoption 3. Notification of the management R.2. Research and technology 7. Facility conservation for economic RUB 500,000 including VAT, of PJSC TransContainer on the advancement management reasons the initiator conducts market High level process of PJSC deterioration of the political research) (as required) TransContainer situation and contributing 2. Forecasting the dynamics of U.1. Strategic management factors (upon receipt of relevant prices for resources (carried out information) by the initiator) (as required) 3. Acquisition of additional information on the selection of an organisation for the investment project (as required)

PJSC TransContainer | Annual report 2019 270 271 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 05.2. Industry factors 05.2.4. Infrastructure 1. Availability of a single service 1. Reduction of volumes 1. Application of new logistics restrictions provider (on any of the hauls: railway, 2. Violation of goods delivery terms transportation schemes (ongoing) 05.2.1. Deterioration of 1. Decrease of consumer demand 1. Decrease in traffic volume 1. Monitoring of the market terminal/port/depot, sea, truck) 3. Rolling stock fleet turnover 2. Careful planning of market conditions 2. Inflation 2. Drop of prices environment and analysis of the Criticality level 2. Inadequate performance by a co- reduction coordination of transportation 3. Slowdown in GDP 3. Decrease in financial results market situation (ongoing) Acceptable risk executor of its functions 4. Reduced customer satisfaction hauls with co-executors and Criticality level 4. Economic crisis 2. Daily monitoring of the 3. Non-compliance of railway 5. Loss of reputation service providers (ongoing) Critical risk 5. Switching to alternative modes of execution of orders in terms Management method infrastructure to the market demand 6. Fines, fees from purchasers, 3. Making suggestions on finding transport, alternative transportation of providing rolling stock and Control and prevention 4. Excessive truck downtime non-recharged to a carrier new co-executors for the haul Management method routes, alternative types of rolling container fleet (ongoing) 5. Insufficient consideration of 7. Increase of transportation costs in the event of force majeure Adoption stock High level process of PJSC transportation factors and conditions at fixed payments from customers or unacceptable restrictions (as TransContainer 6. Delays in drawing of transport 8. Damage to cargo occurring at required) High level process of PJSC O.4. Container and flatcar documents terminals or during movement 4. Response plan development (as TransContainer fleet management 9. Excessive truck downtime required) O.2. Marketing O.5. Order execution 5. Management of equipment O.7. Truck management (flatcars and containers) based 05.2.2. Change in prices for 1. High dependence on market 1. Increase of purchase costs 1. Monitoring of energy O.8. Terminal resource on resource plans (applications) other materials and fixed monopoly suppliers 2. Reduced profitability resources’ prices in the management of the Logistics Centre/sales unit assets (except for rolling 2. Increase in energy resources’ prices 3. Lost profit constituent entities of the (as required) stock repairs) 3. Upward price trend for components Russian Federation (ongoing) 6. Processing of requests 2. Forecasting industry price considering rolling stock Criticality level dynamics (ongoing) provision, check of special Low risk 3. Active targeted marketing transportation conditions, (ongoing) operation of loading and Management method unloading stations and their Control and prevention technical capability, availability of convention prohibitions, High level process of PJSC seasonality of transportations, TransContainer throughput capacity of border B.7. Acquisition, maintenance terminals, ports (ongoing) and repair of equipment 7. Timely provision of data B.15 Management of and information necessary construction and operation for approval of applications, of buildings and structures monitoring the stages thereof 05.2.3. Dependence of 1. Change in the cost of co-executor 1. Decreased Company 1. Continuous monitoring and (ongoing) co-executors on price and services competitiveness forecasting of the container 9. Timely provision of orders conditions 2. Change in market conditions 2. Reduction of traffic volume transportation market (ongoing) and instructions for the 3. Change of cargo transportation 3. Decrease of transportation 2. Expanding presence in key transportation arrangement Criticality level geography profitability markets through the development (ongoing) Acceptable risk 4. Russian Railways rate indexation of agent network (ongoing) 05.2.5. Decrease in the 1. Availability of a state rate 1. Increased expenses of the 1. Interaction with government 5. Lack of infrastructure and related 3. When concluding contracts Company’s competitiveness regulation Company for the transportation organisations responsible for rate Management method activities (transport: ports, terminals, with affiliates, provision of due to railway rate of loaded/empty flatcars and/or regulation (ongoing) Control and prevention etc.) possibility of rates indexation indexation containers 2. Timely notification of the with a notification at least 2. Decreased container traffic Company’s involved employees High level process of PJSC 2 months in advance (ongoing) Criticality level on the upcoming change in rates TransContainer 4. Procurement of services based Acceptable risk (Order No. 74 dd 13 August O.6. Development and on tender and competition 2008 introduced an electronic maintenance of transport 5. Conclusion of long-term Management method document management system) solutions and calculation of contracts with co-executors with Adoption (as required) their cost a fixed rate (ongoing) 6. Forming rates with a certain High level process of PJSC risk component TransContainer O.6. Development and maintenance of transport solutions and calculation of their cost

PJSC TransContainer | Annual report 2019 272 273 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

05.2.6. Unpredictable 1. High dependence on market 1. Excess of expenses for rolling 1. Forecasting industry price 06.1.2. Ineffective 1. Mistakes in planning brand 1. Low return on investment in the 1. Image positioning (planning changes in prices for monopoly suppliers stock repairs exceeds a budgeted dynamics (ongoing) communication strategy communication strategy implementation of the Company’s of image campaigns, the basis materials for rolling stock 2. Exponential growth in prices one 2. Monitoring of the spare part 2. Deterioration of competitive communication strategy of which consists in selection of repairs of spare parts for equipment repair 2. Inability to operate the flatcar price market (ongoing) Criticality level business environment 2. Improper brand perception by the platforms for distribution of (unpredictable increase of the fleet 3. Maintaining minimum stock Low risk 3. Changes in groups and categories the target audience image information (conferences, Criticality level equipment repair cost) 3. Increase in cost of an operating level of materials for car repair of potential consumers, audience business forums, round tables), Critical risk 3. Upward price trend for rolling stock (heavy car casting, wheelsets) Management method 4. Obsolescence of communication as well as optimisation of components (ongoing) Control and prevention strategy allocation by coverage, cost and Management method other characteristics) taking into Control and prevention High level process of PJSC account presence of the Company TransContainer in the markets (as required) High level process of PJSC B.1. Maintenance of TransContainer corporate communications B.7. Acquisition, maintenance and public relations and repair of equipment

Area of risk (subprocess) — 05.3. Competition

05.3.1. Increased 1. Competition on behalf of related 1. Inconsistency of products/ 1. Monitoring changes in the competition in the market of modes of transport services sold and market demand, state of the market for flatcars Operational risks railway container shipping 2. Capacity limitation/obsolescence reduction in sales (ongoing) 3. Obsolescence of production 2. Customer loss 2. Monitoring the pricing policy Criticality level facilities, insufficient modernisation, 3. Reduction in yield of competing companies using Critical risk restrictions on cargo handling at external sources of information; Number and name of the Risk reasons Risk consequences Measures terminals if necessary, deciding on a risk Management method change in the rate level of PJSC Control and prevention TransContainer (ongoing) Area of risk (process) — О.07 Procurements 3. Monitoring the structure of High level process of PJSC customer needs Area of risk (subprocess) — 07.1. Procurement, warehouse logistics TransContainer 4. Study of the adequacy of O.2. Marketing the list of provided services to 07.1.1. Procurement 1. Unreasonability of the 1. Inefficient spending of 1. Analysis of feasibility for customer needs inefficiency procurement investments and resources contract concluding at the level of 2. Insufficient quality and quantity 2. Supply of goods/works/services of responsible persons (ongoing) Area of risk (process) — S.06 Corporate communications Criticality level control for purchased goods/works/ improper quality and quantity 2. Monitoring the market of goods/ Acceptable risk services 3. Increase in expenses for assurance works/services and suppliers, Area of risk (subprocess) — 06.1. Media relations 3. Ineffective organisation of tenders of the Company activities including use of market researches Management method 4. Low competition 4. Loss of market share (ongoing) 06.1.1. Reputational risk 1. Unfair competition 1. Loss of the Company’s 1. Efficient interaction with media Control and prevention 5. Absence of medium- and long-term 3. Maintaining the register of mala 2. Failure to comply with contractual reputation representatives regarding the procurement planning fide suppliers (ongoing) Criticality level obligations to the Company’s 2. Loss of the Company’s share provision of information on the High level process of PJSC 6. Absence of category planning 4. When purchasing goods/ Acceptable risk stakeholders value Company activities (ongoing) 3. An ineffective media/government 3. Decreased competitiveness 2. Monitoring of the media TransContainer 7. Delays in implementation of orders works/services, if necessary, Management method authorities relations policy space: full-text selection of news, B.18. Administrative support 8. Absence of analysis for real require conformity certificates, Control and prevention 4. Lack of or ineffective policies on analytical articles and tables market conditions product certificates, certificates sustainable development and social for the entire industry and the and licenses required for work High level process of PJSC responsibility segment of Company operation performance from suppliers TransContainer 5. Lack of or ineffective media (ongoing) within the limits of the contracts. B.1. Maintenance of relations policy 3. Audit of the media space: (ongoing) corporate communications 6. Lack of or inefficiency of the social assessment of the mentioning 5. Monitoring fulfilment of and public relations media monitoring process of the Company and its brand in procurement procedures (ongoing) 7. Lack of external media monitoring media (Q4 2018) 4. Timely response to the Area of risk (subprocess) — 07.2. Equipment purchase dissemination of negative 07.2.1. Untimely 1. Low administrative discipline 1. Impossibility to provide the 1. Monitoring implementation information about the Company’s activities within the media space commissioning of the 2. Failure to submit a full package of required operating fleet of flatcars of the investment programme in (ongoing) container and flatcar fleet supply documents and containers accordance with the approved 5. Methodological work on 3. Supplier’s delays 2. Absence of the possibility to titles (ongoing) corporate communications at Criticality level dispose of purchased equipment 2. Monitoring the rolling stock request of branches and units of Acceptable risk 3. Fines, fees and misc. for storage, price market and associated the executive office (ongoing) holding on tracks and public (private) industries (ongoing) 6. Media planning (as required) Management method places 3. Monitoring the capabilities for Control and prevention 4. Fines for incorrect accounting and potential suppliers (if necessary) tax information 4. Control of TsKPRK, TsKPRPS, High level process of PJSC 5. Untimely commissioning of the TsKP for reception of a new flatcar TransContainer flatcar and container fleet and container fleet (if necessary) B.7. Acquisition, 5. Check of submitted supply maintenance and repair of documents (if necessary) equipment

PJSC TransContainer | Annual report 2019 274 275 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

07.2.2. Untimely acquisition 1. Insufficient control of equipment 1. Non-fulfillment of the investment 1. Monitoring implementation Area of risk (process) — О.09 Sales of a flatcar and container procurement process (untimely programme of the investment programme in fleet organisation of procurement accordance with the approved Area of risk (subprocess) — 09.1. Planning of sales volumes, order management activities) titles (ongoing) 09.1.1. Decrease in the 1. Incompliance of commercial 1. Decrease in financial result 1. Update of the software in terms Criticality level 2. Increase of equipment cost over 2. Monitoring the rolling stock customer service quality conditions with market conditions 2. Decrease in the volume of of sales forecasting (ongoing) Acceptable risk the forecasted value price market and associated level 2. Significant deviations in the rendered services 2. Update of the software 3. Incompliance of a manufacturer’s industries (ongoing) process of service rendering 3. Customer outflow regarding the work of sales Management method capacities with the demand level Criticality level 3. Ineffective provision of equipment managers with potential customers Control and prevention Critical risk and rolling stock to customers, (ongoing) significant deviations during order 3. Use of company sales planning High level process of PJSC Management method execution (ongoing) TransContainer Control and prevention 4. Polling of customers (ongoing) B.18. Administrative support 5. Analysis of service quality Area of risk (process) — О.08 Transportation management High level process of PJSC according to the Mystery Shopper TransContainer procedure (ongoing) Area of risk (subprocess) — 08.1. Railway transportation О.3. Customer service 6. Control for correctness of transportation cost charging 08.1.1. Increase in empty 1. Flatcar fleet obsolescence 1. Lost profit from the impossibility 1. Acceptance of competitive rates (ongoing) runs 2. Ineffective rates for individual to use the equipment fleet for provision of the Company 7. Development and directions 2. Fines, fees from purchasers, equipment on the basis of the implementation of the action plan Criticality level 3. Container flow disbalance non-recharged to the carrier detailed analysis of cargo traffic to improve the service quality Acceptable risk 4. Non-optimal planning of directions 3. Decrease in the volume of for use of third-party rolling stocks (with involvement of interested and types of transportation due to transported cargoes (ongoing) managers) (Q2 2018) Management method poor quality of input data 4. Income reduction 2. Ensuring high-quality resource Control and prevention 5. Increase of transportation costs planning of equipment based Area of risk (subprocess) — 09.2. E-commerce channel management at fixed payments from customers on the agreed plan of sales and High level process of PJSC 6. Overstatement of expenses operations (ongoing) 09.2.1. Change in the share 1. Decrease in the total volume of 1. Decrease in the revenue obtained 1. Implementation of measures to TransContainer 3. Processing of requests of service sales through cargo transportation by the Company by orders received through improve e-commerce services (as О.9. Planning of sales considering rolling stock provision, e-commerce channels 2. Insufficiency of marketing e-commerce channels required) and operations of PJSC check of special transportation measures of the Company to 2. Non-achieving of the strategic 2. Measures aimed at promoting TransСontainer conditions, operation of loading Criticality level promote e-commerce channels in objective on switching a significant the Company’s electronic sales and unloading stations and their Acceptable risk order to involve new customers and part of the Company’s customers channels (as required) technical capability, availability transfer of the existing ones to servicing through e-commerce 3. Immediate response of the of convention prohibitions, Management method 3. Imperfection of IT infrastructure channels Company’s divisions to complaints seasonality of transportations, Control and prevention and IT services of e-commerce 3. Decrease in the Company’s and offers from customers throughput capacity of border channels reputation in the market segment of regarding the operation of terminals, ports (ongoing) High level process of PJSC 4. Insufficient security of orders users of e-commerce channels e-commerce channels to eliminate 4. Analysis of the reasons for non- TransContainer received through e-commerce 4. Loss of potential and existing deviations and improve the service provision (refusal to provide) of О.1. Service sales channels by transportation resources customers using electronic sales (as required) equipment for planned and agreed 5. Nonfulfilling or poor fulfilling channels 4. Priority resolution and orders of the customers (on daily of the requirements for IT system monitoring for implementation basis) automation of IT requests for support and development of electronic sales channels (as required)

PJSC TransContainer | Annual report 2019 276 277 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 09.3. Contact centre management Area of risk (process) — O.11 Repair and maintenance

09.3.1. Incompliance of the 1. Renewal of contact centre’s staff 1. Decrease in service quality of 1. Operational control for incoming Area of risk (subprocess) — 11.1. Repair and maintenance subscriber service level with by more than 50% subscribers of the Contact Centre load (ongoing) specified quality indices 2. Absence of tools to monitor the 2. Business process slowing down 2. Operational and monthly 11.1.1. Inefficient repair of 1. Inefficient quality of rolling stock 1. Decrease in fleet reliability 1. Control of TsKPS and repair quality of subscriber service 3. Decrease in the customer loyalty monitoring of the service quality rolling stock and containers and containers 2. Operating flatcar fleet reduction departments in the branches for Criticality level 3. Incompliance of the active linear level level for subscribers (ongoing) 2. Overestimated repair prices 3. Non-fulfilment of the safe proper quality of rolling stock and Acceptable risk number of the department with the 4. Customers’ complaints concerning 3. Control for the active personnel Criticality level 3. Insufficient diversification of the operation requirements container repair (ongoing) required target number insufficient service number of the Contact Centre Acceptable risk repair base 4. Duplication of expenses for 2. Control by TsKPS and the Management method 4. Unpredictable load increase (ongoing) 4. Insufficient fleet condition analysis routine evaluating repair due to flatcar and container repair cost Control and prevention triggered by incidents or 4. Forming and control for Management method 5. There are no tools for centralised poor depot repair (increase in repair department in order to prevent implemented marketing activities fulfilment of the requirements for Control and prevention accounting of fleet failures, analysis expenses) repair overpricing (ongoing) High level process of PJSC 5. Implementation of new automation of service processes of possible consequences and risks, 5. Traffic accidents 3. Development of measures on the TransContainer functionality, setting new tasks for for subscribers (particularly, as High level process of PJSC and the appointment and control of part of TsKPRPS and TsKPRK on B.14. Contact Centre the division without providing any part of CRM implementation) (as TransContainer the timing of their elimination diversification of the repair base Functioning personnel required) B.7. Acquisition, 6. Poor depot, routine estimating and (as required) 6. Inefficient employee motivation 5. Monthly monitoring of technical maintenance and repair of overhaul repair 4. Analysis of fleet condition on system incidents (accidents) affecting the equipment 7. Inefficient repair planning the part of TsKPRPS and TsKPRK 7. Technical incidents (accidents) work of the Contact Centre. Timely (ongoing) affecting the work of the Contact reporting concerning occurring 5. Analysis of fleet failures, Centre incidents (ongoing) possible consequences and risks, control for terms of their Area of risk (process) — O.10 Marketing elimination by TsKPRPS and TsKPS (ongoing) Area of risk (subprocess) — 10.1. Pricing 6. Selection of flatcar depots for repair of flatcars owned by PJSC 10.1.1. Setting of non- 1. Changing in the market of 1. Absence of demand for services 1. Setting base rates for provision TransСontainer with optimal competitive rates container transportation services and reduction of the customer base of a flatcar and/or container of selection of the rendered services 2. Competition on the part of other 2. Decreased competitiveness PJSC TransСontainer ensuring and the best quality of repair (as Criticality level market participants 3. Decrease in revenue and expense coverage and competitive required) Acceptable risk 3. Competition on the part of profitability of services ability of the Company services 7. Control for photofixation alternative truck types (ongoing) introduction for flatcar and Management method 2. Conducting meetings of the container failures eliminated Control and prevention Expert Council of the logistics during repair, accounting of spare centre at least 2 times a week and parts and materials (ongoing) High level process of PJSC setting exceptional rate conditions 8. Control for fulfilment of internal TransContainer for provision of a flatcar and/or regulatory documents of PJSC O.6. Development and container of PJSC TransСontainer TransСontainer regarding flatcar maintenance of transport (daily) repair (ongoing) solutions and calculation of 3. Monitoring the pricing policy 9. Work with flatcar repair their cost of competing companies using companies to charge the cost of external sources of information; poorly performed depot repair (as if necessary, deciding on a required) change in the rate level of PJSC TransContainer (ongoing) 11.1.2. Inefficient other 1. Violation of scheduled preventive 1. Non-fulfilment of the safe 1. Timely conclusion of a repair 4. Development of the pricing repair (except for rolling maintenance terms due to untimely operation requirements contract in accordance with the policy of PJSC TransСontainer stock and containers) supply of spare parts, their absence 2. Duplication of expenses for repair approved budgets for overhaul and 2. Hidden defects detection of fixed assets, cranes, trucks, routine repairs (ongoing) Criticality level loading equipment 2. Operation of the automated Acceptable risk 3. Equipment downtime system “Operation Management and Fixed Assets Renewal” (AS Management method OMFAR) (ongoing) Control and prevention 3. Expertise of industrial safety in accordance with Federal Law High level process of PJSC No. 116-FZ dated 21 July 1997 TransContainer On Industrial Safety of Hazardous B.15. Management of Production Facilities (as required) construction and operation of buildings and structures B.07. Acquisition, maintenance and repair of equipment

PJSC TransContainer | Annual report 2019 278 279 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

4. Verification of cost estimating Area of risk (process) — O.12 Personnel documents for repair works in accordance with damage Area of risk (subprocess) — 12.1. Personnel management statements based on collected 12.1.1. Insufficient provision 1. Dissatisfaction with labour payment 1. Additional costs for training of 1. Annual labour satisfaction book of industrial unit prices for of qualified personnel and non-competitive remuneration new employees analysis (ongoing) construction and special works conditions 2. Reduction in personnel work 2. Formation of personnel reserve (OERZh parts 1–47; OERZhm Criticality level 2. Absence of prospects for efficiency (ongoing) parts 1–40; OERZhp parts 1–16, Acceptable risk professional and career development 3. Possible information leakage/loss 3. Formation of a training plan and Procedures for Construction 3. Unsatisfactory working conditions 4. Deterioration of the Company advanced training of employees Product Cost Determination in Management method and psychological climate in the team image in the labour market (ongoing) the Russian Federation MDS Control and prevention 4. Inefficient employee motivation 5. Non-fulfillment of the Company 81-35.2004; MDS 81-33.2004; system objectives collected books of the estimate High level process of PJSC 5. Insufficient number of specialists standards of costs for construction TransContainer with the required qualifications in the of temporary buildings and B.8. Personnel management labour market structures GSN81-05-01-2001, 6. Incorrect personnel number planning collected book of the estimate 7. Outflow of qualified personnel standards on additional costs for 8. Absence or insufficiency of the repair and construction works in developed HR management strategy the winter, GSNr81-05-02-2001, Town Planning Code of the Area of risk (process) — O.13 Information technologies Russian Federation No. 190-FZ dated 29 December 2004, Area of risk (subprocess) — 13.1. Management information systems OPDS-2821.2011 “Procedure of Cost Determination for 13.1.1. Incompliance of IT 1. Obsolete IT equipment 1. Increased IT costs, duplication 1. Scheduled replacement Construction of Railway Transport systems and IT equipment 2. Obsolete software of functional, failure in operating and improvement of obsolete Infrastructure Facilities and Other with the needs of the 3. Deviations in implementation of IT activities equipment (as required) Facilities of JSC Russian Railways” Company strategy 2. Modification and updating of (as required) 4. Insufficient level of integration for the software in accordance with 5. Regular control of quality Criticality level IT systems decisions of the Expert Group and terms of repair works in Acceptable risk based on the informational accordance with the construction support programme and codes and regulations SNiP Management method information system maintenance 2.03.11-85, SNiP2.03.13- Control and prevention and development regulations (as 88, SNiP2.04.01-85*, required) SNiP2.05.02-85*, SNiP31-03-2001, High level process of PJSC 3. Monitoring for IT strategy SNiP12 -01-2004, SP13-102-2003; TransContainer implementation in the context Standards GOST4.212-80, B.11. Information resource of the allocated budget and GOST4.251-79, GOST12.0.003-74, management implemented informational support GOST4.230-83, Federal Codes projects, updating of IT strategy and Regulations in the area (Q4 2018) of industrial safety “Safety 4. Testing of information system Regulations for Hazardous operation at branches, preparation Industrial Facilities, at Which of reports on operation of systems Lifting Facilities Are Used” and their sending for analysis to approved by Order of the Federal the Automated System Operation Service for Environmental, Service (TsKPEAS) and the Technological and Nuclear Automated System Development Supervision No. 533 dated Department (TsKPRAS) (ongoing) 12 November 2013, operating 5. Monitoring of efficiency and instructions for loading and completeness of use of the unloading machines (TsMM-20) information systems developed and (ongoing) put into operation by the functional customers (once per half a year)

PJSC TransContainer | Annual report 2019 280 281 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

13.1.2. Failure in IT 1. Obsolete IT equipment 1. Violation of the Company 1. IT equipment redundancy, data 14.1.2. Illegal actions of the 1. Criminal intent for fraud, 1. Damages from assets loss, 1. Constant control for work of systems and infrastructure 2. Obsolete software operating activities backup (ongoing) third parties in relation to commercial bribery, theft of the costs for restoring of facilities security companies in order to functioning 3. Deviations in implementation of IT 2. Loss of critical information 2. Timely update of antivirus the property of the company Company’s property, its intentional serviceability, lost advantage from increase their readiness to detect strategy software (ongoing) and its personnel or negligent damage, terrorist and/or activities stopping (interrupting) and prevent the facts of stripping Criticality level 4. Insufficient level of integration for 3. Monitoring and implementation other extremist acts 2. Human losses, negative socio- down of railway tracks, containers Acceptable risk IT systems of measures to prevent Criticality level 2. Insufficiently full verification of political resonance and fitting platforms, lifting 5. Virus attack unauthorized access to IT systems Acceptable risk contractor dependability for objective devices, signs of preparation for Management method 6. Unauthorized access (ongoing) or subjective reasons terrorist acts (ongoing) Control and preventionе 7. Software failure 4. Reconciliation of user Management method 3. Insufficient control of access to 2. Maintenance of video 8. Inefficiency in IT Continuity accounting records of information Control and prevention the facilities: access railway tracks, surveillance systems and security High level process of PJSC Support Plan systems not covered by Active container terminals (sites), industrial alarm for all facilities of PJSC TransContainer 9. Interruptions in communication Directory with the lists of High level process of PJSC and administrative buildings TransСontainer in constant B.11. Information Resource service provision dismissed employees (quarterly) TransContainer (premises), containers, fitting working condition (ongoing) Management 10. Absence of contracts for 5. Acceptance of the software B.4. Security assurance platforms, etc. 3. Detection of persons, who hardware and software maintenance into operation in accordance possibly harbours criminal 11. Setting of incorrect business with the regulatory documents, intentions at the stage of requirements timely updating of the software preparation for their commission, in accordance with the approved among employees of the third- technical specifications according party organisation (ongoing) to the procedures recommended by 4. Taking necessary legal actions GOST 34.601 (ongoing) against persons detained during 6. Fulfilment of IT continuity commissioning of unlawful acts, requirements (ongoing) handing materials over to law 7. Redundancy of communication enforcement agencies with the aim channels (ongoing) of taking measures to compensate 8. Formation of training plan for for losses incurred (as required) specialists for a year 5. Conducting periodic preventive 9. Recalculation of labour costs measures to train the Company’s for servicing of IT business employees in the event of processes, formation of personnel revealing signs of preparation a requirements terrorist act, if they get involved in it or face its consequences, Area of risk (process) — O.14 Economic security to increase the vigilance of all employees of the Company, Area of risk (subprocess) — 14.1. Fraud management regardless of their position (at 14.1.1. Leakage of 1. Insufficient level of information 1. Direct and indirect financial losses, 1. Performance of regular checks least 1 time per quarter) information constituting security (poor protection of particularly, on possible claims of for observance of the trade secret 6. Checking of counterparties a trade secret or other authorisation tools, software failures, third-party owners of confidential regime and internal facility regime for their reliability (within the confidential information configurations) information (according to a separate plan framework of procedures, upon 2. Violations of the established 2. Loss of the Company approved for a year) conclusion of contracts, upon Criticality level mode of work with information and competitiveness 2. Performance of regular approval of allocation of a limit Acceptable risk documents (negligence) by employees 3. Loss of the image of a checks of information resource on receivables, verification of the of the Company reliable partner in the container security of PJSC TransСontainer quality of fulfilment of contractual Management method 3. Intentional actions of the transportation market form external attacks, use of obligations) (ongoing) Control and prevention Company employees or other persons 4. Penalties for violation of personal confidential information and the 4.1.3. Unlawful acts by 1. Inadequate security measures 1. Losses of the Company, including 1. Assessing the key employees of gained access to the confidential data protection legislation Internet network by the Company’s employees of the Company 2. Inadequate ethical maturity of losses from loss of assets the Company for a possible conflict High level process of PJSC information lawfully, aimed at employees (at least once per a employees 2. Lost profit of interest, identifying persons TransContainer transmitting of the confidential month) Criticality level 3. Conscious embezzlement, stealing 3. Fatalities lobbying for the conclusion of B.4. Security assurance information to competitors with a 3. Control for inclusion of the Acceptable risk of assets and other property of the 4. Loss of the Company’s reputation contracts based on a mercenary or selfish or other vested interest confidentiality provisions in Company, including by fraud other personal interest (ongoing) contracts, if necessary, or Management method 4. Deliberate approval of 2. Conducting a quality check of conclusion of the separate Control and prevention unfavourable terms of contracts of candidates to be employed in the Confidentiality Agreements, mercenary or other personal interest Company on key positions. verification of contract obligation High level process of PJSC by the Company’s employees Identification among them of fulfilment in relation to the TransContainer 5. The domestic political situation in persons with low moral qualities, confidentiality (as required) B.4. Security assurance the country, the ongoing activity of as well as the possibility of them extremist forces having conditions of conflict of interests (ongoing) 3. Identification of employees harbouring criminal intentions of embezzlement, fraud, extortion of commercial bribery and bribery, taking preventive measures against them (ongoing)

PJSC TransContainer | Annual report 2019 282 283 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

4. Conducting proceedings over the 4. Compliance of repair works to facts of theft and loss, identifying the rules and normative documents the persons involved in them, (Federal Codes and Regulations establishing their intent, as well in the area of industrial safety as the amount of losses of the “Safety Regulations for Hazardous Company (as required) Industrial Facilities, at Which 5. Identification acts and signs Lifting Facilities Are Used” of fraud with accountable assets: approved by the order of the overestimation of amounts in Federal Service for Environmental, exculpatory documents, purchase Technological and Nuclear of goods at inflated prices or “kick- Supervision dated 12 November back”, etc. (ongoing) 2013 No. 533, operating 6. Prevention of possible criminal instructions for loading and conspiracy between employees of unloading machines (TsMM-20) the Company and its customers or (ongoing). suppliers (ongoing) 5. Timely training of responsible 7. Conducting informational persons in accordance with the and psychological events: clear requirements of the Labour Code informing of all partners on the of the Russian Federation, Order Company’s policy regarding non- of the Federal Environmental, tolerance of fraud and corruption, Industrial, and Nuclear Supervision other abuses, maintaining the Service dated 29 January 2007, work of the hotlines for receiving No. 37 “On the Procedure for signals and messages, including Training and Certification of anonymous ones, publicising the Employees of Organisations facts of punishment of the guilty Supervised by the Federal parties, etc. (ongoing) Environmental, Industrial, and 8. Monitoring compliance with the Nuclear Supervision Service”, other rules of collegial decision-making regulatory legal acts, rules and and independent approval of regulations, an approved retraining documents (ongoing) and advanced training plan (as 9. Identification of workers with required) terrorist intentions (ongoing) 15.1.2. Occupational injuries 1. Failure by employees to comply 1. Causing injury to workers 1. Training in safe working methods Area of risk (process) — O.15 Industrial safety with legislation and internal 2. Administrative and criminal in accordance with the Regulation Criticality level documents regarding labour liability “On the organisation of training Area of risk (subprocess) — 15.1. Incident management Critical risk protection, industrial and fire safety 3. Legal costs on labour protection and checking 2. Non-compliance of the 4. Company reputation damage knowledge of labour protection 15.1.1. Technical incidents 1. Obsolescence and damage to 1. Stopping the production process 1. Timely carrying out of repair Management method equipment with safety requirements requirements for employees of PJSC (accidents, emergency equipment 2. Recovery costs work in accordance with the Control and prevention 3. Untimely training for safe TransContainer”, approved by Order situations during processing 2. Factory equipment defects 3. Fines, penalties, forfeits Federal norms and rules in the working methods of PJSC TransContainer No. 63 of dangerous goods) 3. Poor repair 4. Accident losses field of industrial safety “Safety High level process of PJSC 4. Non-compliance with internal dated 21 March 2007 (as required) 4. Inadequate staff/contractor 5. Threat to life and health of staff Rules for Hazardous Industrial TransContainer labour regulations 2. Provision of personal protective Criticality level qualifications 6. Loss of reputation Facilities at which Lifting Facilities B.17. HSE equipment in accordance with the Acceptable risk 5. Ineffective planning of schedules 7. Loss, damage to equipment, are Used”, approved by order of order of the Ministry of Health and and volumes of repair work cargo, cars, containers) during the Federal Service for Ecological, Social Development of the Russian Management method transportation Technological and Nuclear Federation dated 22 October 2008 Control and prevention Supervision dated 12 November 582n “On the approval of the 2013 No. 533, operating standards for the free issuance of High level process of PJSC instructions for loading and certified special clothing, special TransContainer unloading machines (TsMM-20) footwear and other personal B.17. HSE (as required) protective equipment for railway B.07. Acquisition, 2. Acquisition of modern workers of the Russian Federation maintenance and repair of technological equipment in engaged in work carried out in equipment accordance with the approved special temperature conditions or investment programme (as related to pollution” (as required) required) 3. Implementation of a three-stage 3. Expertise of industrial safety control over the state of labour in accordance with Federal Law protection in accordance with the No. 116-FZ dated 21 July 1997 Regulation on the Organisation of “On Industrial Safety of Hazardous Control over the State of Labour Production Facilities” (as required) Protection at PJSC TransContainer, approved by Order No. 200 of PJSC TransContainer of 8 June 2007 (ongoing)

PJSC TransContainer | Annual report 2019 284 285 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

4. A special assessment of 5. Further training of employees working conditions is carried out in accordance with the Regulation in accordance with Federal Law “On the organization of training No. 426 dated 28 December 2013 on labour protection and testing “On a special assessment of working knowledge of labour protection conditions”, and is carried out once requirements” for employees of PJSC every 5 years, as well as when TransContainer, approved by Order creating new jobs, and is carried of PJSC TransContainer No. 63 out by an organisation licensed by dated 21 March 2007, the approved the Ministry of Health and Social retraining and advanced training Development (as required) plan (ongoing) 5. Issuance of work permits for 6. Timely payment for permissible carrying out relevant work in emissions (discharges) of accordance with the Regulation pollutants in accordance with “On the organisation of training the Federal Laws No. 7-FZ on labour protection and testing dated 10 January 2002 “On knowledge of labour protection Environmental Protection”, requirements for employees of PJSC No. 96-FZ dated 4 May 1999 “On TransContainer”, approved by Order Protection of Atmospheric Air”, of PJSC TransContainer No. 63 No. 89-FZ dated 24 June 1998 “On dated 21 March 2007 (as required) production wastes” (as required) 6. Carrying out technical training 7. Timely development and with employees in accordance with approval by regulatory authorities the Regulation “On the technical of the documentation governing training of employees of PJSC the activities of the Company TransContainer, approved by Order in the field of environmental of PJSC TransContainer» No. 234 of protection (MPE. Limits of 18 September 2007 (as required) pollutants formation and limits of 7. Creation and updating of the their placement, MPD, SPZ, etc.) necessary regulatory framework in accordance with Federal Laws for labour protection and industrial No. 7-FZ dated 10 January 2002 safety as changes arise in the “On Environmental Protection”, regulatory legal acts of the Russian No. 96-FZ dated 4 May 1999 “On Federation in the field of labour Protection of Atmospheric Air”, protection and industrial safety No. 89-FZ dated 24 June 1998 “On (ongoing) production wastes” (ongoing)

Area of risk (subprocess) — 15.2. Environmental protection Area of risk (process) — O.16 Paperwork and docflow 15.2.1. The negative 1. Untimely upgrade and replacement 1. Harm to workers and the public 1. Development of environmental impact of equipment of physically and morally obsolete 2. Penalties and compensation for measures (ongoing) Area of risk (subprocess) — 16.1. Paperwork and docflow and technologies on the technological equipment damage to the environment and 2. Insurance of hazardous industrial environment 2. Inadequate level of professional health of workers and the public facilities against harm to third 16.1.1. Ineffective paperwork 1. Non-compliance with the Rules 1. Decreased quality of work, 1. Monitoring of compliance training of responsible persons 3. Legal costs parties in accordance with Federal management for the preparation and execution unsatisfactory work results, breach by units: The Rules of Criticality level 3. Violation of operating conditions, 4. Imposing environmental Law dated 27 July 2010 No. 225- of regulatory and other documents of obligations, slowdown of business “Documentation Management of Low risk wear and tear of equipment, remediation obligations FZ “On compulsory insurance Criticality level at PJSC TransContainer, approved processes, disruptions in business PJSC TransСontainer”, the Rules accidents of civil liability of owners of Low risk by Order of PJSC TransContainer processes, adverse effect on the of Procedure “Organisation of the Management method hazardous industrial facilities for No. 238 dated 18 September, 2007, image of PJSC TransСontainer reception room, meetings, business Control and prevention harm resulting from an accident at a hazardous facility” (certificate Management method which apply to all structural divisions trips, storage and use of company High level process of PJSC of registration of hazardous Control and prevention of the company printing in PJSC TransСontainer” TransContainer industrial facilities A01-08721 from 2. Non-compliance with the Rules (excluding the subprocess for B.17. HSE 24 February 2014) (NKP) (ongoing) High level process of PJSC of Procedure “Documentation documentation management) B.07. Acquisition, 3. Acquisition of modern equipment TransContainer Management of PJSC (ongoing) maintenance and repair of and technical equipment in B.12. Affairs Management TransСontainer”, approved by order 2. Daily monitoring of the equipment accordance with the approved of PJSC TransСontainer, which progress and quality of execution investment programme (as required) applies to all structural divisions of of all documents that are 4. Compliance with technological the company under execution/approval in the processes in accordance with technological processes approved by 3. Non-compliance with the management apparatus of PJSC the NKP (ongoing) Rules of the Organization of the TransСontainer. Bringing relevant reception, organization of meetings, information to the attention of organization of business trips, employees (ongoing) storage and use of company stamps 3. Updating and, if necessary, in PJSC TransСontainer (with the improving the paperwork exception of the subprocess for management (as required) docflow) approved by order of PJSC 4. Issue of the digest “ABC OF TransСontainer, which applies to all LITERACY.TK” (ongoing) structural divisions of the Company

PJSC TransContainer | Annual report 2019 286 287 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Regulatory risks risk

Area of risk (process) — O.17 External threats (force majeure) Number and name of the Risk reasons Risk consequences Measures Area of risk (subprocess) — 17.1. Force Majeure risk 17.1.1. Failures, suspension 1. Natural disasters, climate change 1. Loss of assets, recovery costs 1. Insurance of fixed assets Area of risk (process) — H.20 Legal support of activities due to force majeure events 2. Tense criminal situation in certain 2. Causing harm to the health and (according to the law (policies regions life of the Company’s personnel are available at branches) Area of risk (subprocess) — 20.1. Legal support of activities Criticality level 3. Ineffective protection of 3. Causing harm to third parties and voluntary insurance under Acceptable risk production facilities contract No.15 MV 2220 / TKd / 20.1.1. Adoption of normative 1. Lack of effective interaction with 1. Significant deterioration 1. Continuous interaction and 4. Accidents, explosions, fires at 15/08/0026 dated 14 August 2015 acts adversely affecting the public authorities in production and financial organisation of effective work with Management method third-party facilities that impede the (as required) activities of the Company, as 2. Insufficient analysis of changes in performance of the Company public authorities to protect the Control and prevention/ Company’s activities 2. Conducting periodic trainings well as untimely adoption of legislation affecting the activities of 2. Termination of certain activities interests of the Company in the adoption 5. Violation of production and in civil defence and emergency planned normative acts and the Company and the consequences 3. Business reputation deterioration development of draft regulatory technological discipline situations, safety briefings (as introduction of necessary of their introduction acts in order to identify factors and High level process of PJSC 6. Lack of formal procedures for required) amendments to existing 3. Inadequate representation of the norms in draft regulatory acts and in TransContainer responding to critical situations, 3. Development of emergency normative acts interests of the Company in state newly adopted regulatory acts that B.17. HSE unstructured crisis management response plans (as required) authorities could have a negative impact on the 4. Conclusion of contracts in the Criticality level 4. Adoption of regulatory acts activities of the Company (ongoing) field of fire safety and emergency Low risk adversely affecting the activities of 2. Participation in working groups, response (ongoing) the Company expert councils and other deliberative Management method 5. Untimely adoption of planned bodies under state bodies and public Area of risk (process) — O.18 Management of the fleet Control and prevention normative acts and introduction of organisations in order to monitor necessary amendments to existing changes in legislation and state Area of risk (subprocess) — 18.1. Container and car fleet management High level process of PJSC normative acts regulation of the transport industry, 18.1.1. Decreased efficiency 1. Lack of control over the use of the 1. Reduction in traffic volume 1. Control over the location of cars TransContainer as well as lobbying for changes in in the use of the fleet of fleet of cars and containers 2. Violation of the terms of delivery and containers (ongoing) B.3. Legal support legislation (to the extent possible) cars and containers 2. Inefficient use of car and container of goods 2. Monitoring the execution of 3. Methodological work to clarify capacity 3. Rolling stock fleet turnover orders for adjustment (ongoing) the provisions of the legislation at Criticality level reduction 3. Timely provision of the the request of the divisions of the Low risk 4. Losses of the Company in necessary information for filing Company (as required) connection with untimely provision claims related to the loss of cars 4. Further training through the Management method of information for filing claims and containers (as required) organisation of training for Control and prevention related to the loss of cars and 4. Process optimisation in terms of employees of the legal divisions of containers reducing the turnover of cars and the administrative apparatus and High level process of PJSC containers branches on issues of amending TransContainer and enforcing the legislation of the O.4. Container and car fleet Russian Federation (as required) management Area of risk (subprocess) — 20.2. Contract work

Area of risk (process) — O.19 Property management 20.2.1. Non-observance of 1. Insufficient elaboration of contracts 1. Declaring a contract null or 1. Monitoring the completeness of the interests of the Company in terms of company interests invalidating a contract or its the passage and approval of contract Area of risk (subprocess) — 19.1. Non-core asset management when concluding contracts 2. Insufficient legal elaboration of separate conditions documents (ongoing) 19.1.1. Failure or untimely 1. Untimely arrangements for the 1. Failure to fulfil the Non-core Asset 1. Identification and submission to with counterparties transaction conditions 2. Monitoring compliance with implementation of measures sale of non-core assets Sales Programme on time the Board of Directors of assets the provisions on contract work for the sale of non-core 2. The high cost of non-core assets, 2. Non-productive expenses that are not used in economic Criticality level (ongoing) assets approved in the Non-core Asset Sales associated with the maintenance of activity (ongoing) Acceptable risk 3. Monitoring compliance with Programme non-core assets 2. Timely organisation of activities procurement procedures (ongoing) Criticality level 3. Lack of demand for non-core for the sale of non-core assets Management method 4. Further training through arranging Low risk assets in the market in accordance with the approved Control and prevention of training for employees of the Non-core Asset Sales legal divisions of the management Management method Programme (arrangements for High level process of PJSC and branches on issues of amending Control and prevention holding auctions, targeted sales) TransContainer and enforcing the legislation of the (as required) B.3. Legal support Russian Federation (as required) High level process of PJSC B.10 Organisation of the 5. Methodological assistance on the TransContainer procurement of goods, works, implementation of contractual work B.13 Property management services and for the needs of to departments of the administrative PJSC TransСontainer apparatus and branches (ongoing)

PJSC TransContainer | Annual report 2019 288 289 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 20.3. Legal support for protecting the interests of PJSC TransContainer in judicial bodies 21.2.2. Non-compliance with 1. Non-compliance of customs rules 1. Profit reduction due to repayment 1. Analysis of Administrative customs legislation under and requirements of the FCS by the of arising penalties Responsibility Cases (as required) 20.3.1. Loss of cases in court 1. Insufficient study of the terms of 1. Losses from compensation 1. Formation of a substantiated legal the Code of Administrative employees of PJSC TransContainer. 2. Development of recommendations on claims of contractors the transaction by initiators of the of damages, payment of fines, position in the case, development Offenses of the Russian 2. Non-compliance with the deadlines and training and/or briefing of and/or employees against conclusion of contracts penalties, compensations, legal of professional tactics of judicial Federation for the implementation of customs employees whose activities entailed the Company, cases on 2. Lack of necessary primary expenses, deterioration of reputation protection (ongoing) rules and formalities the institution of an administrative appealing decisions/decisions documents or their improper 2. Keeping records of court cases Criticality level violation in relation to PJSC of authorised bodies/officials execution by Company employees using the electronic docflow system, Acceptable risk TransContainer (as required) on bringing the Company to 3. Violation by the Company monitoring of judicial practice administrative responsibility, or Company’s co-executors of (ongoing) Management method which have a significant contractual obligations 3. Summarising the practice of Control and prevention impact on the financial result 4. Unreasonable rejection of litigation with the participation of counterparty claims PJSC TransСontainer and sending High level process of PJSC Criticality level 5. Violation of legislative relevant reviews to the branches of TransContainer Acceptable risk requirements by the Company PJSC TransСontainer (as required) O.5 Order execution 4. Advanced training of employees Management method of legal departments through Area of risk (subprocess) — 21.3. Tax legislation Control and prevention participation in seminars, lectures on changes and enforcement of the 21.3.1. Non-compliance with 1. Incorrect application of tax 1. Additional tax liabilities, fines, 1. Participation of tax specialists in High level process of PJSC legislation of the Russian Federation tax legislation legislation penalties the process of concluding contracts TransContainer (as required) 2. Ambiguous interpretation 2. Legal costs (ongoing) B.3. Legal support Criticality level of tax legislation requirements 3. Arrest of property/accounts 2. Control over the reflection of Acceptable risk documents in tax accounting Area of risk (process) — H.21 Activity Regulation (ongoing) Management method 3. Employee training (continuous Area of risk (subprocess) — 21.1 Industry Law Control and prevention professional development) (as required) 21.1.1. Violation of technical 1. Inconsistency of application of the 1. Failure of engineering systems 1. Monitoring of the condition High level process of PJSC 4. Engagement of consultants (as requirements for the current regulatory documentation 2. Recovery costs of facilities in accordance with TransContainer required) maintenance and operation 2. Untimely inspections and repairs of 3. Deterioration of established the “Procedure for inspecting B.16. Tax management 5. Monitoring changes in tax of buildings and structures buildings and structures operational indicators of buildings buildings and structures operating legislation (ongoing) and structures federal railway organisations” 6. Monitoring arbitration practice in Criticality level 4. Violation of the performance of No. TsUKS-788 of 29 September tax disputes (ongoing) Acceptable risk elements of buildings and structures 2000, building codes (ongoing) 7. Conducting internal control over 2. Repair of buildings and structures the completeness of accrual and Management method according to the approved plan in reliability of tax obligations (ongoing) Control and prevention accordance with the building codes VSN55-87 (p), VSN55-88 (p) (as 21.3.2. Tax degradation 1. Changes in tax legislation leading 1. Increasing the tax burden on 1. Monitoring tax legislation High level process of PJSC required) to a significant increase in the level the Company (ongoing) TransContainer 3. Timely communication of Criticality level of tax burden on the Company 2. Deterioration in financial 2. Timely response to changes in tax B.15. Management of changes in regulatory documents to Acceptable risk 2. Ineffective tax burden planning performance legislation (as required) construction and operation of employees as changes are made to 3. Incorrect calculation of tax burden buildings and structures regulatory documents (as required) Management method 4. Refusal to refund/deduct/deduct Acceptance/Control and tax/fee Area of risk (subprocess) — 21.2. Customs legislation Prevention 5. EBITDA increase/profit 21.2.1. Sanctions and 1. Insufficient awareness of the client 1. Violation of goods delivery terms 1. If there is an appeal from the 6. Expansion of activities restrictions by customs of PJSC TransContainer about the 2. The incurrence of additional costs Sales Block, the TsKPVT provides High level process of PJSC authorities on the existing restrictions and prohibitions at the customs border a conclusion on the possibility or TransContainer international carriage of regarding the movement of goods 3. Reduction of traffic volume impossibility of importing/exporting B.16. Tax management goods across the customs border of the 4. Rolling stock fleet turnover goods to/from the territory of the Customs Union reduction customs union, as well as on the Criticality level 2. An incomplete list of information 5. Reduced customer satisfaction amount of information that shall be Low risk contained in shipping documents and 6. Reduction in yield contained in the shipping documents required to customs clear the goods when placing goods under customs Management method procedures (as required) Acceptance/Control and Prevention

High level process of PJSC TransContainer O.5 Order execution

PJSC TransContainer | Annual report 2019 290 291 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 21.4. Legislation on Fraud and Corruption Prevention R.6. Development of international business 21.4.1. Corruption risks: 1. The inability to familiarise and 1. Responsibility of the Company, 1. Interaction with law enforcement cooperation conflict of interest, insider work with information and documents its officers and employees, including agencies, prosecution authorities, B.1. Providing corporate trading, bribe, commercial regulating the basic principles and under UK law other state bodies and organisations, communications and public bribery approaches of the Company to fight 2. Losses of the Company, including participation in the activities of the relations corruption losses from loss of assets Anti-Corruption Charter of Russian B.2. Accounting and reporting Criticality level 2. Inadequate ethical maturity of the 3. Loss of the Company’s reputation Business (ongoing) B.3. Legal support Critical risk Company’s employees and/or third 2. Implementation of a set of B.4. Security parties campaigning, organisational, B.5. Statistics, analysis and Management method 3. Conscious corruption acts against explanatory and other measures forecasting of the activities Control and prevention employees of state (municipal) to combat corruption (holding a of PJSC TransContainer structures, extortion of commercial seminar, technical training, individual B.6. Financial management High level process of PJSC bribery, etc consultations and other events) B.7. Acquisition, maintenance TransContainer (ongoing) and repair of equipment B.8. Personnel Management D.1 Strategic management 3. Conducting checks on received B.9. Technological support of D.2. Interaction with the stock notifications on facts of approaches the main production market and cooperation with to the employees of PJSC B.10. Organisation of investors TransContainer with a view to induce procurement of goods, works, U.3 Budget management them to commit corruption offenses services for the needs of PJSC U.4. Economic accounting and and sending, if necessary, materials TransContainer planning of current activities of investigations to prosecution B.11. Information resource U.5. Audit of activities authorities and other federal state management U.6. Corporate governance bodies (as required) B.12. Affairs Management U.7. Management of 4. Ensuring the operation of a B.13. Property management the companies of PJSC helpline (hotline) for citizens to B.14. Functioning of the TransСontainer group address facts of corruption (ongoing) contact centre U.8. Management of risks 5. Analysis of appeals of citizens B.15. Management of U.9. Management of a system and other persons in order to construction and operation of of key performance indicators reveal information on corruption by buildings and structures U.10. Management of traffic employees of PJSC TransContainer, B.16. Tax management safety management system as well as the facts of improper B.17. HSE U.11. Investment processing of such appeals (as B.18. Administrative support management required) O.1. Sales of services 6. Familiarisation of newly hired Area of risk (subprocess) — 21.5. Other legislative requirements O.2. Marketing employees with the legislation and 21.5.1. Violation of labour law 1. Violation of obligations towards 1. Additional costs associated with 1. Strict observance of labour law O.3. Customer service local acts of the Company on anti- former employees (for example, on an claims of employees when dismissing employees for any O.4. Management of corruption issues (ongoing) Criticality level unjustified dismissal on the initiative 2. Loss of reputation reason (ongoing) container and car fleets 7. Regular monitoring of compliance Low risk of the employer) 2. Consultations with representatives O.5. Order execution with internal procedures to combat 2. Violation of labour laws in relation of the legal block on issues of O.6. Development and corruption, corporate fraud and theft Management method to employees (e.g. for unjustified compliance with labour laws (as maintenance of transport (ongoing) Control and prevention disciplinary proceedings) required) solutions and calculation of 8. Monitoring the performance 3. Non-compliance with the 3. Advanced training of employees their cost of official duties by employees High level process of PJSC requirements of the law regarding of personnel structures of the O.7. Vehicle management whose activities are associated TransContainer the provision of guarantees and management apparatus and O.8. Terminal resource with corruption risks, including B.8. Personnel Management benefits to certain categories of branches, the study of periodical management communicating to employees workers (pregnant women and literature on the application of labour O.9. Sales and operations information on revealed facts and/ women with children under the age legislation (ongoing) planning in PJSC or intentions of corporate fraud of 3 years; disabled people, minors; 4. Conducting quarterly TransContainer and theft, measures taken on them people working part-time; employees videoconferences with employees of R.1. Project management in (ongoing) working in harmful and/or hazardous personnel structures of branches on business development 9. Providing information to the working conditions; student workers, the issue of compliance with labour R.2. Management of scientific involved managers and the General etc.) laws (ongoing) and technical development Director on the signs of occurrence 4. Unreasonable conclusion of fixed- 5. Conducting audits of work R.3. Control of Quality (possible materialisation) of term employment contracts with personnel in 4 branches in management system; corruption risks, risks of corporate 5. Errors and inaccuracies in accordance with the approved plan R.4. Development and fraud and theft (as required) the design and maintenance of (ongoing) Employment record books updating of transport services 6. Non-compliance with workers’ R.5 Management of rights to annual basic and additional organisational development holidays, study leaves, compensation, additional vocation days 7. Violations when arranging working on weekends and non-working holidays, overtimes 8. Violation of guarantees and compensations upon termination of employment contracts 9. Violation of the law during processing of personal data

PJSC TransContainer | Annual report 2019 292 293 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

21.5.2. Legal risks of 1. Inadequate qualifications in 1. Fines, restrictions on activities in 1. Advanced training of employees 22.3.2. Counterparty bank 1. Inaccurate information about the 1. Cash shortage 1. Setting limits on operations with the company associated international law international markets of the legal block regarding the credit risk Counterparty Bank 2. Deterioration in financial counterparty banks (ongoing) with activities in foreign 2. Changes in the legislation of 2. Loss of reputation provisions of the legislation of other 2. Incorrect credit rating of the performance 2. Monitoring of credit ratings of jurisdictions when concluding foreign states states (as necessary) Criticality level Counterparty Bank 3. Loss of deposits counterparty banks (ongoing) transactions by the Company 2. Engagement of specialised Acceptable risk 3. Poor limit planning consultants (as required) 4. Ineffective monitoring of Management method the financial condition of the Criticality level Acceptance/Control and Counterparty Bank Acceptable risk Prevention

Management method High level process of PJSC Control and prevention TransContainer B.6. Financial management High level process of PJSC TransContainer Area of risk (subprocess) — 22.4. Interest rate risk B.3. Legal support 22.4.1. Interest rate risk 1. Worsening of macroeconomic 1. Decrease in income on bank 1. Market analysis (as necessary) Area of risk (process) — F.22 Capital market and liquidity situation deposits/other instruments with a 2. Diversification of the base of Criticality level 2. Decrease of the credit rating of floating interest rate creditors and investors (ongoing) Area of risk (subprocess) — 22.1. Liquidity risk Acceptable risk the Company (deterioration of the 2. Increase in expenses on loans/ 3. Hedging (as required) financial condition of the Company) other instruments with a floating 4. Further education/training of 22.1.1. Liquidity risk 1. Unpredictable cost increases 1. Increase in borrowing costs (if 1. Introduction of a payment Management method 3. Increase of interest rate on loans interest rate employees in the field of securities 2. Lack of financial reserves additional financing is raised) schedule in accordance with the Acceptance/Control and 4. Incorrect debt policy 3. Cash shortage market and financial management Criticality level 3. Ineffective cash planning process 2. Increase in other expenses of the Financial Management Process Prevention 4. Deterioration in financial (ongoing) Acceptable risk 4. Lack of access to funding Company (fines/penalties) in case Regulation of PJSC TransСontainer performance High level process of PJSC 5. Failure to meet budget indicators 5. Exchange rate fluctuation of violation of the terms of the (approved by order of PJSC TransContainer Management method 6. Increase in accounts receivable Contract with Counterparties TransСontainer No. 37 dated B.6. Financial management Control and prevention 7. Tax claims 27 February 2015) (ongoing) 8. Tax burden increase 2. Support of limits and credit lines Area of risk (process) — F.23 Management accounting and reporting High level process of PJSC in banks (ongoing) TransContainer 3. Adjustment of budget processes Area of risk (subprocess) — 23.1. Budgeting B.6. Financial management (as required) 23.1.1. Ineffective budget 1. Macroeconomic changes 1. Failure to achieve the strategy 1. Initiation of the Company’s budget planning process 2. Inaccuracy of the information targets adjustment in accordance with the Area of risk (subprocess) — 22.2. Currency risk provided by the FRC during the 2. Failure to achieve budget regulations for formation and control Criticality level formation/adjustment of the budget indicators of budget implementation (approved 22.2.1. Currency risk 1. Unpredictable change in exchange 1. Deterioration in financial 1. Monitoring of exchange rates Acceptable risk of the Company by the PJSC TransContainer Board rates performance (ongoing) 3. Inadequate automation of the of Directors on 18 December 2013, Criticality level 2. Change in prices for services of 2. Quarterly forecast of rates Management method budgeting process Minutes No. 6) (as required) Control and prevention 2. Consideration of the FRC budgets Acceptable risk co-contractors/equipment from for setting tariffs of PJSC at the meetings of the Budget suppliers TransСontainer (ongoing) High level process of PJSC Committee up to the budget Management method 3. Monthly download of forecast TransContainer adjustment (as required) Acceptance/Control and rates from the Bloomberg U3. Budget management 3. Implementation of the FRC Prevention information system (ongoing) budgeting process (ongoing) 4. Hedging operations (as required) 4. Monitoring of the economic High level process of PJSC 5. Management of an open foreign situation (ongoing) TransContainer exchange position (as required) 5. Comparison of the FRC budget B.6. Financial management with the financial model (as required)

Area of risk (subprocess) — 222.3. Credit risk 23.1.2. Uncontrolled 1. Ineffective controlling system 1. Budget variance 1. Expanding the factor analysis of deviations from the budget 2. Lack of funds to finance the deviations of planned costs from 22.3.1. Credit risk 1. Inaccurate information about 1. Cash shortage 1. Calculation, control and setting activities of the Company actual costs and quantities in the counterparty 2. Deterioration in financial limits for counterparties (ongoing) Criticality level context of each accounting item. Criticality level 2. Incorrect counterparty credit rating performance 2. Counterparty creditworthiness Acceptable risk 2. Introduction of holistic budgeting Acceptable risk 3. Ineffective credit limit planning 3. Overdue accounts receivable monitoring (ongoing) elements based on production 4. Providing deferred payments growth Management method planning Control and prevention 3. Monitoring of the process Management method 5. Ineffective monitoring of of regular reporting of FRC Acceptance/Control and counterparty receivables/financial High level process of PJSC directors to the CEO regarding the Prevention condition of the counterparty TransContainer implementation of budgets (ongoing) 6. Accounts receivable increase U.3. Budget management 4. Monitoring by the Budget High level process of PJSC 7. Overdue accounts receivable Committee of PJSC TransСontainer TransContainer growth of the information provided by the B.6. Financial management FRC during formation/adjustment of the budget (ongoing)

PJSC TransContainer | Annual report 2019 294 295 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Number and name of the Risk reasons Risk consequences Measures Number and name of the Risk reasons Risk consequences Measures risk risk

Area of risk (subprocess) — 23.2. Economic accounting and planning of current activities Area of risk (subprocess) — 24.2. IFRS Accounting and Reporting

23.2.1. Ineffective inventory 1. Untimely write-off/sale/non-use of 1. Overstatement of Company 1. Monthly monitoring of inventory 24.2.1. Unreliability and/ 1. Untimely and/or incomplete 1. Misrepresentation of IFRS 1. Participation in the process of management inventories in production assets balances at the end of the reporting or delay of the consolidated and/or inaccurate provision of consolidated financial statements concluding contracts (ongoing) 2. Ineffective inventory planning period, identifying the reasons for financial statements in information and documents by: of PJSC TransСontainer, 2. Entry of documents into the books Criticality level excess stocks compared to the accordance with IFRS Subsidiaries and affiliates, branches, misrepresentation of consolidated (ongoing) Low risk standard value (ongoing) structural units, consultants and financial statements of Russian 3. Employee training (continuous 2. Bringing the stock to the standard Criticality level contractors Railways Group professional development) Management method approved by order of the CEO of Low risk 2. Errors in the adjustment and/ 2. Inaccuracy of data disclosed 4. Timely provision of the necessary Control and prevention PJSC TransContainer No. 295 of or consolidation of financial in the IFRS consolidated staff (regulations of JSC Russian 21 December 2015 (ongoing) Management method statements financial statements of PJSC Railways approved. by Order High level process of PJSC Control and prevention 3. Untimely and/or incomplete and/ TransСontainer, as well as in the No. 398r of 3 March 2017, the TransContainer or inaccurate reporting of material consolidated financial statements Regulation on CSC IFRS department) U.4 Economic accounting and High level process of PJSC transactions for the purpose of of the Russian Railways Group (as required) planning of current activities TransContainer disclosure in the consolidated 3. Late preparation of the IFRS 5. Timely execution of contract B.2. Accounting and reporting financial statements consolidated financial statements documents, regulations and Area of risk (process) — F.24 Accounting, reporting 4. Untimely and/or incomplete of PJSC TransСontainer, and the telegrams of JSC Russian Railways and/or inaccurate presentation of consolidated financial statements (ongoing) Area of risk (subprocess) — 24.1. Accounting and reporting under RAS information on the acquisition/ of the Russian Railways Group 6. Monitoring of contractors 24.1.1. Unreliability and/or 1. Untimely and unreliable provision 1. Misrepresentation of financial 1. Participation in the process of sale of shares of companies, 4. Decreased confidence of users (including monitoring compliance untimely accounting under of information by units or contractors statements concluding contracts (ongoing) the establishment/formation of of the statements (including with internal regulations of branches RAS 2. Lack of documented procedure for 2. Penalties for late reporting 2. Entry of documents into the books new companies/joint ventures/ company management, and subsidiaries and affiliates the distribution of services of joint 3. Violation of the regulations of (ongoing) associated companies/special shareholders, investors, banks, in terms of improving quality, Criticality level contractors JSC Russian Railways, violation of 3. Employee training (continuous purpose companies, liquidation of counterparties, etc.) completeness and timeliness of Low risk 3. Signing reconciliation statements shareholders’ requirements professional development) companies 5. Decrease in stock prices, reporting) (ongoing) with disagreements, or absence 4. Timely execution of contract 5. Reducing the time for preparing violation of LSE requirements, 7. Engagement of consultants Management method thereof documents (ongoing) consolidated financial statements violation of MOEX requirements, (ongoing and as required) Control and prevention 4. Untimely and unreliable booking 5. Monitoring of contractors in accordance with IFRS and special delisting 8. Interaction with branches and (including monitoring of compliance financial statements in accordance 6. Violation of the regulations of subsidiaries and affiliates (ongoing) High level process of PJSC with local regulatory acts of the with IFRS for shareholders JSC Russian Railways, violation of 9. Interaction with shareholders of TransContainer NPP in terms of improving quality, (JSC Russian Railways Group), shareholders’ requirements JSC Russian Railways (ongoing) B.2. Accounting and reporting completeness and timeliness of amendment of Law 208-FZ 7. Violation of the law on 10. Interaction with audit companies reporting (order of the Director 6. Failures in the operation consolidated financial statements (auditor of PWC, E&Y, KPMG) during General of PJSC TransContainer of the IFRS AS system and No. 208-FZ; violation of the law on audit (as required) No. 154 of 17 November 2010) other information systems of securities market No. 39-FZ. 11. Interaction with consultants (ongoing) the company, untimely and/or providing services for 6. Engagement of consultants (as incomplete provision of support implementation of the new ORACLE required) by IT services, untimely and/or system and finalisation of the 7. Interaction with audit companies incomplete provision of services for IFRS AS and IT service of PJSC during audits. maintenance and completion of th TransСontainer (as required) 8. Monitoring of changes in IFRS AS system by the IT service legislation on the accounting, as well and/or consultants as explanatory letters of JSC Russian 7. Untimely and/or incomplete Railways (ongoing) and / or inaccurate provision of 9. Monitoring compliance of IT information and documents: by systems with the requirements of branches, structural divisions and the current legislation on accounting contractors in connection with the and accounting and reporting in transition to a new subsystem of accordance with RAS: timely creation the ORACLE system instead of IRS of applications to the IT department Transportation for maintaining up-to-date 8. Changing the frequency accounting and reporting systems of preparing special financial according to the requirements of statements for shareholders, incl. RAS (ongoing) accounting in the SAP system of JSC 10. Interaction with branches Russian Railways (increase in the and involved divisions of the volume of work) management apparatus (ongoing) 9. Change in the structure of the PJSC TransСontainer Group (increase of the number of subsidiaries and affiliates in the Group)

PJSC TransContainer | Annual report 2019 296 297 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

4. The Structure of Remuneration for the Members of Executive Bodies and Management

Index Constant Part of Remuneration Variable Part of Remuneration — Bonus Index Constant Part of Remuneration Variable Part of Remuneration — Bonus

Salary Other Types of Quarterly Annual Single Salary Other Types of Quarterly Annual Single Remuneration Remuneration Objective Competitive basic motivation It is aimed to It is aimed to achieve Encouragement for Amount of 122,697,112.03 4,609,902.97 89,272,713.31 77,740,768.00 21,539,267.00 package for attracting and retaining achieve short- management of implementation of payments and of highly qualified managers term financial and corporate and strategic objectives remuneration to production indices individual KPI identified by the members of the by management Board of Directors, Management Board individual projects of the Company and (or) critical works (including the CEO) not having systematic in 2019 (RUB) nature Total Description The constant part of the Bonuses are The annual bonus The size of non- remuneration for 315,859,763.31 remuneration is formed considering made based on is paid based on recurring bonus is 2019 (RUB) knowledge, experience and role of the results of the results of KPI determined by the the manager in the Company, as well the Company’s fulfillment. The size of Board of Directors The amount of 184,558,677.16 30,539,345.86 146,093,505.96 137,691,682.33 36,526,426.00 as the level of remuneration in the activities and the annual bonus for each and depends on payments and labour market individual labour manager is defined the significance, remuneration to the activity results as the product of the complexity and results management of the of each manager constant part of the of strategic objective Company (including in the reporting remuneration and the implementation members of the quarter amount of factors Management Board that evaluate the and the CEO of the manager’s activities Company) in 2019 on implementation (RUB) of general corporate, Total process and design remuneration for 535,409,637.31 KPI 2019 (RUB) Payment terms Monthly Quarterly Annually After the Board of Directors has made a decision to pay a non- recurring bonus

Maximum possible Determined in the labour contract CEO — 3.5 Annual bonus at – payments with a manager times of the the rate of 100% constant part from the constant of remuneration part of the annual per a quarter; remuneration. management — Maximum percentage 1.5 times of the of plan fulfilment for constant part of net profit used to remuneration per a calculate additional quarter annual bonus is 125%

PJSC TransContainer | Annual report 2019 298 299 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

5. Global Sustainability Standards Board (GSSB/GRI)

Content Content Page/Comment Content Content Page/Comment index index

102-1 Name of the organization 102-15 Key impacts, risks, and opportunities

102-2 Activities, brands, products, and services 102-16 Values, principles, standards, and norms of behaviour

102-3 Location of headquarters 102-17 Mechanisms for advice and concerns about ethics

102-4 Location of operations 102-18 Governance structure

102-5 Ownership and legal form 102-20 Executive-level responsibility for economic, environmental, and social topics

102-6 Markets served 102-22 Composition of the highest governance body and its committees

102-7 Scale of the organization 102-23 Chair of the highest governance body

102-8 Information on employees and other workers 102-26 Role of highest governance body in setting purpose, values, and strategy

102-9 Supply chain 102-27 Collective knowledge of highest governance body

102-10 Significant changes to the organization and its supply chain Without changes 102-28 Evaluating the highest governance body’s performance

102-11 Precautionary Principle or approach Applied locally for estimation 102-35 Remuneration policies of major projects

102-36 Process for determining remuneration 102-12 External initiatives ISO 9001, 14001 certification GRI standards 102-38 Annual total compensation ratio

102-13 Membership of associations The Company has been a member of the RUIE since 102-39 Percentage increase in annual total compensation ratio 2019 102-40 List of stakeholder groups 102-14 Statement from senior decisionmaker 102-41 Collective bargaining agreements 100%

PJSC TransContainer | Annual report 2019 300 301 Strategic Report Market Overview Core Activities Social Responsibility Corporate Governance Financial Report Appendices

Content Content Page/Comment Content Content Page/Comment index index

102-42 Identifying and selecting stakeholder The Company refers to 102-56 External assurance The report passes the internal stakeholders that have audit procedure. Confirmation a significant impact on of completeness of disclosure the value chain and the of GRI indicators by external environment in which its units parties is not carried out operate

103-1,2,3 General requirements for reporting the management approach 102-43 Approach to stakeholder engagement

201-3 Defined benefit plan obligations and other retirement plans Partially 102-45 Entities included in the consolidated financial statements

203-1 Infrastructure investments and services supported 102-47 List of material topics The report reveals significant aspects for the major stakeholder groups in 205-3 Confirmed incidents of corruption and actions taken the areas of operational efficiency, financial 302-1 Energy consumption within the organization sustainability, environmental and industrial safety, social responsibility and corporate 302-4 Reduction of energy consumption governance

306-2 Waste by type and disposal method 102-48 Restatements of information Without changes

403-2 Hazard identification, risk assessment, and incident investigation 102-49 Changes in reporting Without changes

404-1 Average hours of training per year per employee 102-50 Reporting period

404-2 Programs for upgrading employee skills and transition assistance programs 102-51 Date of most recent report

404-3 Percentage of employees receiving regular performance and career 102-52 Reporting cycle development reviews

102-53 Contact point for questions regarding the report 405-1 Diversity of governance bodies and employees

102-54 Claims of reporting in accordance with the GRI Standards In accordance with the GRI 413-1 Operations with local community engagement, impact assessments, and Standards development programs

102-55 GRI content index

PJSC TransContainer | Annual report 2019 302 303 Strategic Report Market Overview Core Activities Social Responsibility

6. Administrative Details

Full name of the Company in Russian: Andrey Bobonin, Публичное акционерное общество «Центр по перевозке Corporate Secretary грузов в контейнерах «ТрансКонтейнер» Phone: +7 (495) 788 17 17, ext. 1380

Abbreviated name of the Company in Russian: Sales and customer relations: ПАО «ТрансКонтейнер» e-mail: [email protected]

Full name of the Company in English: Customer hotline: Public Joint Stock Company Center for Cargo Container 8 800 100 22 20 (24hr) Traffic TransContainer For calls from Russia only Abbreviated name of the company in English: PJSC TransContainer Company’s registrar: JSC STATUS, the Registrar Society Location of the Company: Moscow Location: Ring Park Business Centre, 23/1 ul. Novokhokhlovksya, Postal address: Moscow, Russia, 109052 19 Oruzheyniy Pereulok, Moscow, 125047 Phone/fax: +7 (495) 974 83 50, 974 83 45 Date of state registration: 4 March 2006 (OGRN: 1067746341024) E-mail: [email protected]

Website: Licence: No. 10-000-1-00304 dated 12 March 2004 www.trcont.com e-mail: [email protected] Issued by: Federal Commission for the Securities Market Licence Multichannel line: TERM: unrestricted +7 (495) 788 17 17 Date on which STATUS began to maintain securities +7 (499) 262 77 00 registers: 20 June 1997

CEO’s office reception desk: The Company’s auditor: +7 (495) 788 17 17 JSC PricewaterhouseCoopers Audit

Media relations: Location: 10 ul. Butyrsky Val, Moscow, Russia, 125047 e-mail: [email protected] OGRN: 1027700148431 INN: 7705051102 Ekaterina Varyenova, Corporative Communications Department Head, Phone: +7 (495) 967 60 00 Phone: +7 (495) 788 17 17 ext. 1070 Fax: +7 (495) 967 60 01 Shareholder and investor relations: Website: https://www.pwc.ru/en e-mail: [email protected] Member of the non-commercial partnership Audit Chamber of Russia, a self-regulating organisation of auditors 10201003683

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