Private Joint Stock Company Kyivstar International Financial Reporting

Private Joint Stock Company Kyivstar

International Financial Reporting Standards Separate Financial Statements and Independent Auditor's Report

31 December 2019

CONTENTS

INDEPENDENT AUDITOR’S REPORT

Balance Sheet (Statement of Financial Position)...... 3 Statement of Financial Results (Statement of Comprehensive Income) ...... 6 Statement of Cash Flows (indirect method) ...... 8 Statement of Shareholders’ Equity ...... 10 1. Corporate information ...... 13 2. Operating environment, risks, political and economic conditions in Ukraine ...... 13 3. Basis of preparation ...... 14 4. New or revised standards and interpretations ...... 14 5. Significant accounting policies ...... 17 6. Critical accounting judgements and key sources of estimation uncertainty ...... 29 7. Related party disclosure ...... 31 8. Property, plant and equipment ...... 33 9. Right-of-use assets and lease liabilities ...... 36 10. Intangible assets ...... 37 11. Investments in subsidiaries...... 39 12. Other non-current assets ...... 39 13. Trade and other receivables ...... 39 14. Cash and cash equivalents...... 41 15. Assets arising from Contracts with Customers ...... 41 16. Statutory capital ...... 42 17. Trade and other payables ...... 42 18. Taxes payable, other than income tax ...... 43 19. Provisions ...... 43 20. Other liabilities ...... 44 21. Liabilities arising from Contracts with Customers ...... 44 22. Revenue ...... 45 23. Other operating income ...... 46 24. Operating expenses ...... 46 25. Finance income ...... 47 26. Other income and expenses ...... 47 27. Income tax ...... 47 28. Commitments and contingencies ...... 49 29. Fair value of financial instruments ...... 49 30. Financial instruments and risk management ...... 49 31. Management of Capital ...... 52 32. Accounting policies before 1 January 2019 ...... 52 33. Events after the reporting period ...... 52 34. Supplementary notes ...... 53

Independent Auditor’s Report

I. Report on the financial statements

Independent Auditor`s Report on the audit of the separate financial statements of Private Joint Stock Company “Kyivstar”, submitted to National Securities and Stock Market Commission for registration of issue or issue and prospectus of issue of certain types of securities, or report on the results of placement of shares as of 31 December 2019.

To the National Securities and Stock Market Commission, Shareholders and Management Board of Private Joint Stock Company “Kyivstar”

Legal entity background

Full name: Private Joint Stock Company “Kyivstar”; EDRPOU code: 21673832; Location: Ukraine, 03113, Kyiv, Dehtiarivska 53; State registration date: 03 September 1997; Date of last change to Charter: 05 September 2019; Main types of economic activity: 61.20 Activities in the field of wireless telecommunications; Licences for operations: - #000669 - GSM-1800 cellular (mobile) telecommunication services; - #000670 - GSM-900 cellular (mobile) telecommunication services; - #001197 - Fixed international communication services; - #001196- Fixed inter city communication services; - #000673 - Fixed city communication services; - #000668 - Cellular (mobile) telecommunication services.

President: Oleksandr Komarov Chief Accountant: Olena Ksenich Number of employees: 2 992.

The Company’s separate financial statements comprise: • The balance sheet (statement of financial position) as at 31 December 2019; • the statement of financial results (statement of comprehensive income) for the year ended 31 December 2019; • the statement of cash flows (indirect method) for the year ended 31 December 2019; • the statement of shareholder`s equity for the year ended 31 December 2019; and the notes to the financial statements, which include significant accounting policies and other explanatory information.

LLC AF "PricewaterhouseCoopers (Audit)", 75 Zhylyanska str., Kyiv, 01032, Ukraine Phone: +380 44 354 0404, Fax:+380 44 354 0790, www.pwc.com/ua

Our opinion In our opinion, the separate financial statements present fairly, in all material respects, the financial position of PrJSC Kyivstar (the “Company”) as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply, in all material respects, with financial reporting requirements of the Law on Accounting and Financial Reporting in Ukraine.

Our auditor’s report is consistent with our additional report to the Audit Committee dated 27 March 2020.

What we have audited

The Company’s separate financial statements comprise: • The balance sheet (statement of financial position) as at 31 December 2019; • the statement of financial results (statement of comprehensive income) for the year ended 31 December 2019; • the statement of cash flows (indirect method) for the year ended 31 December 2019; • the statement of shareholder`s equity for the year ended 31 December 2019; and • the notes to the financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the separate financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements of the Law on Audit of Financial Statements and Auditing that are relevant to our audit of the separate financial statements in Ukraine. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

To the best of our knowledge and belief, we declare that we have not provided non-audit services that are prohibited under Article 6 part 4 of the Law on Audit of Financial Statements and Auditing.

Our audit approach

Overview

• Revenue recognition - occurrence of revenue transactions Key audit matters

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the separate financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the separate financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which the Company operates.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Revenue recognition - occurrence of revenue transactions Note 22 Our audit approach included testing of controls and performing substantive procedures, covering amongst others: The total revenues of the Company amount to

UAH 22,246 million and are made up of a high - Understanding and testing the IT environment in volume of relatively small transactions in which billing and other relevant support systems combination with multiple pricing plans. There reside, including the change management and are different complex billing and other restricted access procedures in place. operating support systems in the revenue - Testing the design and operational effectiveness of the process that result in an increased risk around revenue and receivables cycle related controls. the occurrence of the revenue recorded. The - Testing the end-to-end reconciliation from mediation magnitude as well as the increased risk requires to billing systems and to the general ledger. substantial audit attention and effort with - Testing of material manual journal entries made in the respect to the controls and substantive test general ledger and IFRS module with respect to procedures to be performed over occurrence of revenue. revenue. Therefore we consider this a key audit - Performing tests on the accuracy of pre-paid customer matter. bill generation by multiplying the parameters of services rendered and the appropriate tariffs. - Performed cash to revenue reconciliation for significant revenue streams. - Obtained external confirmation letters from corporate customers and roaming and interconnect partners. Our procedures did not result in material findings with respect to occurrence of revenue transactions recorded in the year.

Other information including the Management report and the Report of management

Management is responsible for the other information. The other information comprises the Management report, prepared in accordance with the article 11 of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” and the Report of the management, prepared in accordance with the Article 401 of the Law of Ukraine “On Securities and the Stock Market” and in accordance with Section VII of Annex 38 to the Regulation “On Disclosure of Information by Issuers of Securities No. 2826” (but does not include the separate financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report and the Annual information of the issuer of securities (except for the Report of management), which is expected to be made available to us after the date of this auditor’s report.

Our opinion on the separate financial statements does not cover the other information, including the Management report and the Report of management.

In connection with our audit of the separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

Based on the work undertaken in the course of our audit, in our opinion, the information given in the Management report and the Report of management for the financial year for which the separate financial statements are prepared is consistent with the separate financial statements.

In addition, in light of the knowledge and understanding of the entity and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Management report and the Report of management that we obtained prior to the date of this auditor’s report. We have nothing to report in this respect.

When we read the Annual information of the issuer of securities not yet received, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Shareholders and Management Board of the Group.

Responsibilities of management and those charged with governance for the separate financial statements Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with IFRS and financial reporting requirements of the Law on Accounting and Financial Reporting in Ukraine, and for such internal control as management determines is necessary to enable the preparation of the separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the separate financial statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report 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 adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

II. Report on other legal and regulatory requirements

Additional information, disclosed according to the “Requirements for Auditor`s Report, submitted to the National Securities and Stock Market Commission (hereinafter referred to as the “Commission”) as part of the documents for registration of issue or issue and prospectus of issue of certain types of securities, or report on the results of placement of shares (other than securities of collective investment institutions), approved by Commission decision N 2187 of 21 October 2013:

As at 31 December 2019 the authorised share capital of the Company amounted to UAH 887,119,450 (eight hundred eighty seven million one hundred nineteen thousand four hundred fifty of Ukrainian Hryvnia), which corresponds to the incorporation documents (Charter) of the Company; according to the accounting data of share capital was fully formed.

According to the incorporation documents, the Company's authorized capital is UAH 887 119 450 (eight hundred eighty seven million one hundred nineteen thousand four hundred fifty of Ukrainian Hryvnia), divided into 17 742 389 ordinary registered shares with a nominal value of UAH 50 per share.

Information on the registered issue of shares is given in the table below. Certificate # Date of Date of Nominal Total Share Quantity, registration issue value, emission capital, items UAH amount, UAH UAH

1 202/10/1/97 - 23.09.1997 50 18750 18750 375

2 265/10/1/97 - 14.11.1997 50 35270000 35270000 705400

3 257/10/1/98 12.05.1998 - 50 55692750 55692750. 1113855

4 985/10/1/98 29.10.1998 - 50 67371450 67371450 1347429

5 511/10/1/99 24.06.1999 - 50 98895450 98895450. 1977909

6 187/10/1/2001 28.04.2001 - 50 212430450 212430450 4248609

7 345/10/1/2001 26.07.2001 - 50 347805450 347805450 6956109

8 210/10/1/2003 25.06.2003 - 50 534369450 534369450 10687389

9 313/1/11 07.06.2011 - 50 884369450 884369450 17687389

10 06/1/12 26.01.2012 19.04.2012 50 887119450 887119450 17742389

The shares type is simple registered shares.

As of 31 December 2019, the Company's authorised share capital distribution among shareholders is as follows:

Securities owner Shares quantity, items Total nominal value, Share in authorized UAH capital, %

Veon Ltd. 700 35 000 0,003945

VEON HOLDINGS B.V. 13 094 562 654 728 100 73,803827

Private Joint Stock 4 647 127 232 356 350 26,192228 Company “Kyivstar”

As of 31 December 2019 the Company's authorized share capital is fully formed and paid up and amounts to UAH 887 119 450 (eight hundred eighty seven million one hundred nineteen thousand four hundred fifty of Ukrainian Hryvnia) divided by 17 742 389 ordinary registered shares with a nominal value of UAH 50 per share, which is confirmed by the certificate of registration of shares issue No. 06/1/12 of 26 January 2012, issued by the National Securities and Stock Market Commission.

Auditor`s appointment

We were first appointed as auditors of the Company for the year ended 2014. Our appointment has been renewed annually by the Supervisory board resolution representing a total period of uninterrupted engagement appointment of five years. Our appointment for the year ended 31 December 2019 was approved by the Supervisory board on 25 November 2019.

III. Other information

Audit of financial statements was conducted according to the Agreement #381390 for the Provision of Mandatory Audit Services dated 20 December 2019. Audit procedures were conducted from 26 November 2019 till 27 March 2020.

The key audit partner on the audit resulting in this independent auditor’s report is Yulia Victorivna Paranich

LLC AF “PricewaterhouseCoopers (Audit)” Audit Firm, Yulia Victorivna Paranich Limited Liability Company Registration number in the Zhylyanska, 75, Kyiv, 01032, Ukraine Register of Auditors and Registration number in the Register of Auditors and Auditing entities 101809 Auditing Entities 0152

Kyiv, Ukraine 27 March 2020

Private Joint Stock Company Kyivstar Statement of Financial Position (in thousands of Hryvnia)

Codes Date (year, month, date) 2019 12 31 Company Private Joint Stock Company "Kyivstar" EDRPOU 21673832 Territory Kyiv, Shevchenkivskyi district KOATUU 8038900000 Organisational and legal form of economic activity Joint Stock Company KOPFG 230 Type of economic activity Activities in the field of wireless telecommunications KVED 61.20 Average number of employees 2,992 Address, telephone 03113, Kyiv, Degtyarivska street, 53, tel.: 247-39-49 Measurement unit: thousands of Hryvnia, no decimal point (except for Section IV of the Statement of Financial Results (Statement of Comprehensive Income) (Form 2) where amounts are stated in Ukrainian hryvnias with kopecks) Prepared (tick the necessary box): according to National Regulations (Standards) of Accounting in Ukraine according to International Financial Reporting Standards Х

Balance Sheet (Statement of Financial Position) as at 31 December 2019 Form 1 DKUD code 1801001

At the At the end of Line beginning of ASSETS Notes the reporting code the reporting period period 1 2 3 4 5 I. Non-current assets Intangible assets 1000 10 8,302,717 8,158,678 historical cost 1001 12,704,637 13,301,479 amortisation 1002 (4,401,920) (5,142,801) Construction-in-progress 1005 552,810 569,400 Property, plant and equipment 1010 8 8,112,573 12,044,185 historical cost 1011 21,733,672 27,183,937 depreciation 1012 (13,621,099) (15,139,752) Investment property 1015 - - Long-term biological assets 1020 - - Long-term financial investments: accounted for according to the equity method 1030 - - other financial investments 1035 11 155,269 171,269 Long-term accounts receivable 1040 - - Deferred tax assets 1045 27 219,353 402,140 Other non-current assets 1090 12, 15 1,060,163 1,136,870 Total Section I 1095 18,402,885 22,482,542

3 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Financial Position (in thousands of Hryvnia)

At the At the end of Line beginning of ASSETS Notes the reporting code the reporting period period 1 2 3 4 5 II. Current assets Inventories 1100 61,702 65,974 production stock 1101 53,262 50,660 goods for resale 1104 8,440 15,314 Current biological assets 1110 - -

Accounts receivable for goods, works and services 1125 13 888,946 720,096 Accounts receivable on settlements: on advances issued 1130 13 83,000 69,583 with the budget 1135 13 40,221 54,499 including corporate profit tax prepaid 1136 - - Accounts receivable for settlements on accrued income 1140 13 20,993 4,198 Other current accounts receivable 1155 - - Current financial investments 1160 - - Cash and cash equivalents 1165 14 5,201,943 898,072 Deferred expenses 1170 15 109,647 98,043 Other current assets 1190 - - Total Section II 1195 6,406,452 1,910,465 III. Non-current assets held for sale and disposal groups 1200 111 597 BALANCE 1300 24,809,448 24,393,604

At the At the end of Line beginning of LIABILITIES Notes the reporting code the reporting period period 1 2 3 4 5 I. Equity Registered (share) capital 1400 16 887,119 887,119 Revaluation reserve 1405 - - Additional capital 1410 258,294 258,294 Share premium 1411 102,338 102,338 Reserve capital 1415 132,933 132,933 Retained earnings (accumulated deficit) 1420 15,778,068 12,752,409 Unpaid capital 1425 - - Withdrawn capital 1430 (370,398) (370,398) Total Section I 1495 16,686,016 13,660,357 II. Long-term liabilities and provisions Deferred tax liabilities 1500 - - Retirement benefit liabilities 1505 14,973 23,312 Long-term bank borrowings 1510 - - Other long-term liabilities 1515 20, 21 211,858 2,273,689 Long-term provisions 1520 19 115,290 213,552 including employee benefits 1521 34,057 4,597 Special-purpose financing 1525 - - Total Section II 1595 342,121 2,510,553

4 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Financial Position (in thousands of Hryvnia)

At the At the end of Line beginning of LIABILITIES Notes the reporting code the reporting period period 1 2 3 4 5 IІІ. Current liabilities and provisions Short-term bank borrowings 1600 - - Current accounts payable on settlements: for long-term liabilities 1610 - - for goods, works, services 1615 17 1,471,732 1,146,748 with the budget 1620 18, 27 672,353 941,535 including liability on corporate profit tax 1621 27 375,672 616,786 for insurance 1625 - - on payroll 1630 5,387 7,127 on advances received 1635 21 632,099 692,723 with shareholders 1640 16 3,730,603 3,484,063 Current provisions 1660 19 231,857 103,867 Deferred income 1665 21 550,362 650,784 Other current liabilities 1690 20 486,918 1,195,847 Total Section IІІ 1695 7,781,311 8,222,694 IV. Liabilities associated with non-current assets held for sale and disposal groups 1700 - - BALANCE 1900 24,809,448 24,393,604

Signed and authorised for release on behalf of management of Private Joint Stock Company Kyivstar on ___ March 2020:

President Oleksandr Komarov

Chief Accountant Olena Ksenich

5 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Comprehensive Income (in thousands of Hryvnia)

Codes Company Private Joint Stock Company "Kyivstar" Date (year, month, date) 2019 12 31 (name) EDRPOU 21673832

Statement of Financial Results (Statement of Comprehensive Income) for the year ended 31 December 2019 Form 2 DKUD code 1801003

І. Financial results For the For the similar Item Line Notes reporting period of the code period prior year 1 2 3 4 5 Net revenue from sales of goods, works and services 2000 22 22,245,793 19,069,391 Cost of sales of goods, works and services 2050 24 (7,725,453) (7,701,596) Gross: Profit 2090 14,520,340 11,367,795 Loss 2095 - - Other operating income 2120 23 144,233 104,334 Administrative expenses 2130 24 (1,411,002) (1,607,736) Selling expenses 2150 24 (1,956,396) (1,665,605) Other operating expenses 2180 24 (713,484) (188,853) Financial results from operating activities: Profit 2190 10,583,691 8,009,935 Loss 2195 - - Income from participation in equity 2200 - - Other financial income 2220 25 360,053 545,761 Other income 2240 26 97,130 43,955 Financial expenses 2250 (341,819) (7,185) Losses from participation in equity 2255 - - Other expenses 2270 26 (70,929) (298,081) Financial results before taxation: Profit 2290 10,628,126 8,294,385 Loss 2295 - - Income tax expense 2300 27 (1,666,906) (1,491,930) Profit (loss) from discontinued operations after tax 2305 - - Net financial result: Profit 2350 8,961,220 6,802,455 Loss 2355 - -

6 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Comprehensive Income (in thousands of Hryvnia)

II. Comprehensive income

For the For the similar Line Item Notes reporting period of the code period prior year 1 2 3 4 5 Upward (downward) revaluation of non-current assets 2400 - - Upward (downward) revaluation of financial instruments 2405 - - Accumulated exchange differences 2410 - - Share of other comprehensive income of associates and joint 2415 - - ventures Other comprehensive income 2445 - - Other comprehensive income before tax 2450 - - Income tax arising on other comprehensive income 2455 - - Other comprehensive income after tax 2460 - - Comprehensive income (total of lines 2350, 2355 and 2460) 2465 8,961,220 6,802,455

IIІ. Elements of operating expenses

For the For the similar Line Item Notes reporting period of the code period prior year 1 2 3 4 5 Material expenses 2500 24 111,271 286,367 Payroll 2505 24 1,413,988 1,164,030 Social payments 2510 24 242,951 190,822 Depreciation/amortisation 2515 24 3,150,330 2,282,851 Other operating expenses 2520 24 6,887,795 7,239,720 Total 2550 11,806,335 11,163,790

IV. Calculation of shares profitability

For the For the similar Line Item Notes reporting period of the code period prior year 1 2 3 4 5 Average annual number of ordinary shares 2600 - - Average annual number of ordinary shares, adjusted 2605 - - Net profit (loss) per share 2610 - - Net profit (loss) per share, adjusted 2615 - - Dividends per share 2650 - - Note: Section IV. Calculation of shares profitability is not completed, as shares of the Company are not sold or purchased on stock exchanges. Detailed information is presented in note 16.

Signed and authorised for release on behalf of management of Private Joint Stock Company Kyivstar on ___March 2020:

President Oleksandr Komarov

Chief Accountant Olena Ksenich

7 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Cash Flows (in thousands of Hryvnia)

Codes Company Private Joint Stock Company "Kyivstar" Date (year, month, date) 2019 31 12 (name) EDRPOU 21673832

Statement of Cash Flows (indirect method) for the year ended 31 December 2019

Form 3 DKUD code 1801004

For the For the similar Line Item Notes reporting period of the code period prior year 1 2 3 4 5 І. Cash flows from operating activities Profit (loss) from ordinary activities before taxation 3000 10,628,126 8,294,385 Adjustments for: depreciation of non-current assets 3505 24 3,150,330 2,282,851 increase (decrease) in provisions 3510 19 (29,728) 63,996 non-realised foreign exchange differences 3515 571,094 76,432 loss (income) from other non-operating and non-cash transactions 3520 (402,437) (350,700) Profit (loss) from participation in equity 3521 - - Changes in assets measured at fair value and gain (loss) on initial recognition 3522 - - Gain (loss) from disposal of non-current assets held for sale and disposal groups 3523 (486) - Gain (loss) from disposal of financial investments 3524 - - Impairment (reversal of impairment) of non-current assets 3526 49,944 31,163 Financial expenses 3540 335,078 7,185 Decrease (increase) in current assets 3550 13,417 (478,820) Decrease (increase) in inventories 3551 (4,272) (11,924) Decrease (increase) in accounts receivable for goods, works and services 3553 196,951 228,095 Decrease (increase) in other current accounts receivable 3554 (14,278) (38,323) Decrease (increase) in contract assets 3556 (8,388) 19,151 Decrease (increase) in other current assets 3557 - 14,639 Increase (decrease) in current liabilities 3560 60,624 31,780 Increase (decrease) in current accounts payable for goods, works and services 3561 (405,280) (209,455) Increase (decrease) in current accounts payable for settlements with the budget 3562 86,395 (229,923) Increase (decrease) in current accounts payable for settlements on insurance 3563 - - Increase (decrease) in current accounts payable for settlements on payroll 3564 (14,565) 58,431 Increase (decrease) in contract liabilities 3566 100,421 105,147 Increase (decrease) in other current liabilities 3567 (141,416) 15,818 Cash flows from operating activities 3570 14,171,530 9,909,928 Income tax paid 3580 (1,666,906) (1,049,428) Interest paid 3585 (335,078) - Cash flows from operating activities, net 3195 12,169,546 8,860,500

8 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Cash Flows (in thousands of Hryvnia)

For the For the similar Line Item Notes reporting period of the code period prior year 1 2 3 4 5 II. Cash flows from investing activities Receipts from sale of: financial investments 3200 - - non-current assets 3205 45,331 153,564 Receipts from: interest received 3215 25 314,651 545,761 dividends received 3220 25 45,402 - Receipts from derivatives 3225 - - Receipts from interest-free loans 3230 - 468,500 Other receipts 3250 - 1,655,055 Purchases of: financial investments 3255 11 (16,000) - non-current assets 3260 (3,774,161) (7,234,568) Payments on derivatives 3270 - - Expenditure for loan issue 3275 - (48,600) Other payments 3290 - - Cash flows from investing activities, net 3295 (3,384,777) (4,460,288) III. Cash flows from financing activities Receipts from: Equity 3300 - - Loans received 3305 - - Other receipts 3340 - - Expenditure for: Repurchase of own shares 3345 - - Loans repayment 3350 - - Payment of dividends 3355 (12,233,420) (4,546,656) Interest paid - - Other payments 3390 (291,195) - Cash flows from financing activities, net 3395 (12,524,615) (4,546,656) Cash flows for the reporting period, net 3400 (3,739,846) (146,444) Cash at the beginning of the year 3405 14 5,201,943 5,348,387 Effect of exchange rates on cash balances 3410 (564,025) - Cash at the end of the year 3415 14 898,072 5,201,943

Signed and authorised for release on behalf of management of Private Joint Stock Company Kyivstar on ___March 2020:

President Oleksandr Komarov

Chief Accountant Olena Ksenich

9 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Shareholders' Equity (in thousands of Hryvnia)

Codes Date (year, month, date) 2019 31 12 Company Private Joint Stock Company "Kyivstar"______EDRPOU 21673832 (name)

Statement of Shareholders’ Equity for the year ended 31 December 2019 Form 4 DKUD code 1801005

10 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Shareholders' Equity (in thousands of Hryvnia)

Retained earnings Line Registered Revaluation Additional Reserve Unpaid Withdrawn Item (accumulated Total code (share) capital reserve capital capital capital capital deficit) 1 2 3 4 5 6 7 8 9 10 Allocation to the reserve capital 4210 ------Contributions by owners: ------Capital contributions 4240 Repayment of unpaid capital 4245 ------Withdrawal of capital: ------Repurchase of shares 4260 Sale of treasury shares 4265 ------Cancellation of treasury shares 4270 ------Withdrawal of the share in equity 4275 ------Other changes in equity 4290 ------Changes in equity, total 4295 - - - - (3,025,659) - - (3,025,659) Balance at the end of the year 4300 887,119 - 258,294 132,933 12,752,409 - (370,398) 13,660,357

Signed and authorised for release on behalf of management of Private Joint Stock Company Kyivstar on ___March 2020:

President Oleksandr Komarov

Chief Accountant Olena Ksenich

11 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Statement of Shareholders' Equity (in thousands of Hryvnia)

Statement of Shareholders’ Equity for the year ended 31 December 2018

Retained Line Registered Revaluation Additional Reserve earnings Unpaid Withdrawn Item Total code (share) capital reserve capital capital (accumulated capital capital deficit) 1 2 3 4 5 6 7 8 9 10 Balance at the beginning of the year 4000 887,119 - 258,294 132,933 16,217,083 - (370,398) 17,125,031 Adjustments: 4005 Change in accounting policies - - - - 582,151 - - 582,151 Correction of errors 4010 ------Other changes 4090 ------Balance at the beginning of the year, adjusted 4095 887,119 - 258,294 132,933 16,799,234 - (370,398) 17,707,182 Net profit (loss) for the reporting period 4100 - - - - 6,802,455 - - 6,802,455 Other comprehensive income for the reporting period 4110 ------Profit distribution: 4200 Payments to the owners (dividends) - - - - (7,817,871) - - (7,817,871) Allocation to the registered capital 4205 ------Allocation to the reserve capital 4210 ------Contributions by owners: Capital contributions 4240 ------Repayment of unpaid capital 4245 ------Withdrawal of capital: Repurchase of shares 4260 ------Sale of treasury shares 4265 ------Cancellation of treasury shares 4270 ------Withdrawal of the share in equity 4275 ------Other changes in equity 4290 - - - - (5,750) - - (5,750) Changes in equity, total 4295 - - - - (1,021,166) - - (1,021,166) Balance at the end of the year 4300 887,119 - 258,294 132,933 15,778,068 - (370,398) 16,686,016

12 The accompanying notes form an integral part of the financial statements Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

1. Corporate information

Private Joint Stock Company Kyivstar (hereinafter referred to as “Kyivstar” or the “Company”) was established and registered on 3 September 1997 under the laws of Ukraine. The Company is involved in the design, construction and operating of a dedicated cellular telecommunication network and provides a wide range of mobile communication and home internet services in Ukraine.

The Company’s registered legal address is at 53, Degtyarivska St., Kyiv, 03113, Ukraine. The Company’s head office is located at the registered legal address and the principal place of the Company's business is its registered legal address.

The Company has Main office in Kyiv.

As at 31 December 2019 and 2018 the Company’s direct shareholders and their respective declared interests were as follows:

Interest Number of shares

VEON Holdings B.V. (Netherlands) 73.804% 13,094,562 VEON Ltd. (Bermuda) 0.004% 700 Treasury shares 26.192% 4,647,127

100.000% 17,742,389

As at 31 December 2019 and 31 December 2018, the Company had two wholly owned subsidiaries – Subsidiary Company “Staravto” and Limited Liability Company “StarMoney”.

The Company has also prepared consolidated financial statements in accordance with IFRS for the Company and its subsidiaries (the 'Group'). In the consolidated financial statements, subsidiary undertakings – which are those companies in which the Group, directly or indirectly, has an interest of more than half of the voting rights or otherwise has power to exercise control over the operations – have been fully consolidated.

Users of these separate financial statements should read them together with the Group's consolidated financial statements as at and for the year ended 31 December 2019 in order to obtain full information on the financial position, results of operations and changes in financial position of the Group as a whole.

The Company’s ultimate parent is VEON Ltd., a company headquartered in Amsterdam, the Netherlands.

2. Operating environment, risks, political and economic conditions in Ukraine

During 2019 the Ukrainian economy was showing signs of stabilisation after years of political and economic tensions. The year over year inflation rate in Ukraine has decreased to 4.1% during 2019 (as compared to 9.8% in 2018) while GDP continued to grow at estimated 3.5% (after 3.3% growth in 2018).

After several years of devaluation, Ukrainian currency has strengthened by 17% (as at 31 December 2019, the official NBU exchange rate of Hryvnia against EUR was UAH 26.42 per EUR 1, compared to UAH 31.71 per EUR 1 as at 31 December 2018). Among the key mitigating factors for the hryvnia were the successful unlocking of the IMF programme at the end of 2018, strong revenues of agricultural exporters, tight UAH liquidity, growth in remittances from labour migrants and steady inflow of foreign currency through government debt instruments. At the same time, from March 2020 the negative trend of devaluation of Ukrainian currency started.

Starting from April 2019, the National Bank of Ukraine (“NBU”) launched the cycle of easing of the monetary policy and a gradual decrease of its discount rate for the first time in the last two years from 18% in April 2019 to 10.0% in March 2020, which is justified by a sustainable trend of inflation deceleration.

In December 2018, the IMF Board of Directors approved the stand-by assistance (SBA) 14-month programme for Ukraine, totalling USD 3.9 billion. In December 2018, Ukraine has already received USD 2 billion from the IMF and the EU, as well as USD 750 million credit guarantees from the World Bank. IMF programme’s approval significantly increases the chance of Ukraine to meet foreign currency obligations in 2019, and thus has supported the financial and macroeconomic stability of the country. However, the IMF will decide on further tranches depending on Ukraine`s success in fulfilling the terms of the Memorandum on Economic and Financial Policies, which Ukraine plans to follow during the SBA programme`s implementation.

In 2020, Ukraine faces major public debt repayments, which will require mobilising substantial domestic and external financing in an increasingly challenging financing environment for emerging markets. Furthermore, negative trends in industrial production in Ukraine in the second half of 2019 may continue in 2020.

The events which led to annexation of Crimea by the Russian Federation in February 2014 and the conflict in the east of Ukraine which started in spring 2014 has not been resolved to date. The relationships between Ukraine and the Russian Federation have remained strained.

13 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

2. Operating environment, risks, political and economic conditions in Ukraine (continued)

Ukraine faced presidential elections in March-April 2019, and then early parliamentary elections in July 2019. The government, which was formed after the July 2019 parliamentary elections, was resigned on 4 March 2020. Amid recent political changes, the degree of uncertainty including in respect of the future direction of the reforms in 2020 remains very high.

In addition, on the 16th January, 2020, the Parliament of Ukraine adopted the law #1209-1 “On changes to other laws of Ukraine in respect of improving tax administration, eliminating technical and logical inconsistencies in tax legislation” and #1210 “On changes to the Tax Code of Ukraine in respect of improving tax administration, eliminating technical and logical inconsistencies in tax legislation”. These laws introduce numerous changes to the local tax and financial reporting regulations; however, the official text of the mentioned legislation acts is not yet available as of the date of these financial statements. Moreover, it is not yet known when these laws will be signed by the President and when they come into force.

In July 2019, the President of Ukraine adopted a Decree to provide internet access to all Ukrainian citizens and to eliminate the “digital divide” between cities and rural areas. Following the Decree, the National Regulator, the National Commission for the Regulation of Communications and Informatisation (“NCCIR”), developed a refarming plan to introduce LTE mobile communication standard in the highly fragmented 900 MHz spectrum. As the result, on 26 October 2019, the “Joint Action Plan” Memorandum was signed between NCCIR and three major Ukrainian Mobile Operators stating refarming details, time frames and commitments. This includes a by-step voluntarily return of GSM spectrum by the Company and other Mobile Operators for convergence of this resource to technological neutrality in 900 MHz and further re-distribution for LTE implementation. Management expect to complete the refarming process by July 2020. As at 31 December 2019, carrying value of licenses subject to reframing amount to UAH 143,715 thousands.

Despite certain improvements in 2019, the final resolution and the ongoing effects of the political and economic situation are difficult to predict but they may have further severe effects on the Ukrainian economy and the Company’s business.

In addition, negative trends in global markets due to the Coronavirus epidemic (COVID-19) may further affect Ukraine's economy and Company`s operations in particular. Late 2019 news about Coronavirus emerged from China. The situation at year end, was that a limited number of cases of an unknown virus had been reported to the World Health Organization. In the first few months of 2020 the virus had spread globally and its negative impact has gained momentum. Management considers this outbreak to be a non-adjusting post balance sheet event. Management assesses that the situation might potentially result in revenue losses due to delays in supply of Chinese vendors’ equipment, including filters for 900mHz, delays in delivery of smartphones to retail shops, and decrease in outbound roaming traffic for the whole Europe, USA and Russia. While this is still an evolving situation, the future effect cannot be precisely predicted. Management will continue to monitor the potential impact and will take all steps possible to mitigate any effects.

3. Basis of preparation The separate financial statements of the Company have been prepared on a historical cost basis. The principal accounting policies applied in the preparation of these financial statements are set out below. Apart from the accounting policy changes resulting from the adoption of IFRS 16, Leases, effective from 1 January 2019, these policies have been consistently applied to all the periods presented, unless otherwise stated. (refer to Notes 4 and 5). The principal accounting policies applied to leases until 31 December 2018 are presented in Note 32. These financial statements are presented in UAH and all values are rounded to the nearest thousands, except when otherwise indicated. Statement of compliance The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). 4. New or revised standards and interpretations (i) New and amended standards adopted by the Company IFRS 16, Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The Company decided to apply the standard from its mandatory adoption date of 1 January 2019 using the modified retrospective method, without restatement of comparatives and using certain simplifications allowed by the standard. Right- of-use assets for property leases are measured on transition as if the new rules had always applied. All other right-of-use assets are measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued expenses). In applying IFRS 16 for the first time, the Company has used the following practical expedients permitted by the standard: • applying a single discount rate to a portfolio of leases with reasonably similar characteristics, • relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at 1 January 2019,

14 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

4. New or revised standards and interpretations (continued) • accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short- term leases, • excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and • using hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The Company has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Company relied on its assessment made applying IAS 17, Leases, and IFRIC 4, Determining whether an Arrangement contains a Lease. The weighted average incremental borrowing rate applied be the Company to the leased liabilities on 1 January 2019 was 15.06%. As at 31 December 2018 the Company has non-cancellable lease commitments of UAH 1,297,749 thousand. Of these commitments, UAH 10,443 thousand relate to short-term leases and UAH 112,248 thousand to low values leases which will both be recognized on a straight-line basis as expense in profit or loss. A reconciliation of the operating lease commitments to the recognised liability is as follows: 31 December 2018 / In thousands of Hryvnia 1 January 2019 IAS 17 undiscounted operating lease commitments disclosed as at 31 December 2018 1,297,749 - Lease term revisions on adoption of IFRS 16 (reasonably certain extension / termination options) 1,799,253 - Recognition exemption for leases of low-value assets (112,248) - Recognition exemption for short-term leases (10,443) - Lease identification differences (if previous treatment not grandfathered) 18,248 Total undiscounted lease payments which are reasonably certain 2,992,559 - Discounting effect using weighted-average incremental borrowing rate of 15% (888,509) - IAS 17 finance lease liabilities recognised on balance sheet as at 31 December 2018 (Discounted) 42,231 Total lease liabilities 2,146,281 Of which are: - Short-term lease liabilities 520,491 - Long-term lease liabilities 1,625,790

As at 1 January 2019, the Company recognised right-of-use assets of UAH 2,146,170 thousand, lease liabilities of UAH 2,146,281 thousand (after adjustments for prepayments and accrued lease payments recognised as at 31 December 2018). Net current assets are UAH 520,491 thousands lower due to the presentation of a portion of the liability as a current liability.

The new significant accounting policies applied in the current period are described in Note 5. Accounting policies applied prior to 1 January 2019 and applicable to the comparative information are disclosed in Note 32.

The following amended standards became effective from 1 January 2019, but did not have any material impact on the Company: • IFRIC 23 "Uncertainty over Income Tax Treatments" (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January 2019). • Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019). • Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019). • Annual Improvements to IFRSs 2015-2017 cycle ‒ amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019). • Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” (issued on 7 February 2018 and effective for annual periods beginning on or after 1 January 2019). (ii) New standards and interpretations not yet adopted Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2020 or later, and which the Company has not early adopted. Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business.

15 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

4. New or revised standards and interpretations (continued) A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are held by a subsidiary. The Company is currently assessing the impact of the amendments on its financial statements. IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Company expects to apply the standard to performance guarantees that it issues and is currently assessing the impact of the new standard on its financial statements. Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020). The revised Conceptual Framework includes a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance ‒ in particular the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting. Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020). The amendments revise definition of a business. A business must have inputs and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present, including for early stage companies that have not generated outputs. An organised workforce should be present as a condition for classification as a business if are no outputs. The definition of the term ‘outputs’ is narrowed to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. It is also no longer necessary to assess whether market participants are capable of replacing missing elements or integrating the acquired activities and assets. An entity can apply a ‘concentration test’. The assets acquired would not represent a business if substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets). The amendments are prospective and the Company will apply them and assess their impact from 1 January 2020. Definition of materiality – Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020). The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company is currently assessing the impact of the amendments on its financial statements. Interest rate benchmark reform - Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019 and effective for annual periods beginning on or after 1 January 2020). The amendments were triggered by replacement of benchmark interest rates such as LIBOR and other inter-bank offered rates (‘IBORs’). The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by the IBOR reform. Cash flow hedge accounting under both IFRS 9 and IAS 39 requires the future hedged cash flows to be ‘highly probable’. Where these cash flows depend on an IBOR, the relief provided by the amendments requires an entity to assume that the interest rate on which the hedged cash flows are based does not change as a result of the reform. Both IAS 39 and IFRS 9 require a forward- looking prospective assessment in order to apply hedge accounting. While cash flows under IBOR and IBOR replacement rates are currently expected to be broadly equivalent, which minimises any ineffectiveness, this might no longer be the case as the date of the reform gets closer. Under the amendments, an entity may assume that the interest rate benchmark on which the cash flows of the hedged item, hedging instrument or hedged risk are based, is not altered by IBOR reform. IBOR reform might also cause a hedge to fall outside the 80–125% range required by retrospective test under IAS 39. IAS 39 has therefore been amended to provide an exception to the retrospective effectiveness test such that a hedge is not discontinued during the period of IBOR-related uncertainty solely because the retrospective effectiveness falls outside this range. However, the other requirements for hedge accounting, including the prospective assessment, would still need to be met. In some hedges, the hedged item or hedged risk is a non-contractually specified IBOR risk component. In order for hedge accounting to be applied, both IFRS 9 and IAS 39 require the designated risk component to be separately identifiable and reliably measurable. Under the amendments, the risk component only needs to be separately identifiable at initial hedge designation and not on an ongoing basis. In the context of a macro hedge, where an entity frequently resets a hedging relationship, the relief applies from when a hedged item was initially designated within that hedging relationship. Any hedge ineffectiveness will continue to be recorded in profit or loss under both IAS 39 and IFRS 9. The amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present. The amendments require entities to provide additional information to investors about their hedging relationships that are directly affected by these uncertainties, including the nominal amount of hedging instruments to which the reliefs are applied, any significant assumptions or judgements made in applying the reliefs, and qualitative disclosures about how the

16 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

4. New or revised standards and interpretations (continued) entity is impacted by IBOR reform and is managing the transition process. The Company is currently assessing the impact of the amendments on its financial statements. Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Company’s financial statements. 5. Significant accounting policies Functional and presentation currencies The functional and presentation currency of the Company is Ukrainian Hryvnia, the currency of the primary economic environment in which the Company operates. Foreign currency translation Monetary assets and liabilities are translated into the functional currency of the Company at the official exchange rate of the National Bank of Ukraine (“NBU”) at the end of the respective reporting period. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into the Company’s functional currency at the end of the reporting period at the official exchange rates of the NBU are recognised in profit or loss for the year as foreign currency translation gains less losses. Translation at period-end rates does not apply to non-monetary items that are measured at historical cost. At 31 December 2019 and 2018, the principal rates of exchange used for translating foreign currency balances were as follows:

31 December 2019, UAH 31 December 2018, UAH 1 US dollar (USD) 23.686 27.688 1 Euro (EUR) 26.422 31.714

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary items at exchange rates different from those used to translate monetary items upon initial recognition during the current or prior reporting periods are recognised in profit or loss as originated, except for foreign exchange differences recognised in comprehensive income. Foreign exchange gains and losses resulting from the translation of monetary items (other than cash and cash equivalents) in a foreign currency at the end of the reporting period are shown in unrealised foreign exchange differences. Upon settlement of the monetary items (cash payments or receipts), all previously accumulated unrealised foreign exchange differences arising during the period from initial recognition to the settlement of the monetary item are recorded as realised foreign exchange differences. Foreign exchange gains and losses resulting from the translation of cash and cash equivalents in a foreign currency are always shown in realised foreign exchange differences. Foreign exchange gains and losses resulting from the translation of monetary items related to investing and financing activities are shown in non-operating foreign exchange differences. These include amounts payable on loan agreements, deposits with the contractual maturity in excess of three months, accounts payable (receivable) on property, plant and equipment and intangible assets, loans issued to employees etc. Foreign exchange gains and losses resulting from the translation of monetary items other than those related to investing and financing activities are included in operating foreign exchange differences. Amendment of the financial statements after issue Any changes to these financial statements after issue require approval of the Company’s management who authorised these financial statements for issue. Revenue recognition and measurement Revenue is income arising in the course of the Company’s ordinary activities. Revenue is recognised in the amount of transaction price. Transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. Revenue is recognised net of discounts, returns and value added taxes. Revenues primarily comprise provision (sales) of: ► services: revenue from air time charges, interconnection fees, periodic fees, connection and one-time subscription fees, FTTB internet, fixed lines revenues, roaming and value added services; ► customer equipment: telephone handsets, modems, etc. Services The Company provides services under fixed-price and variable price contracts. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously.

17 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Revenue recognition and measurement (continued) Where the contracts include multiple performance obligations, the transaction price is allocated to each separate performance obligation based on the stand-alone selling prices. In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Company exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. Revenue is deferred as a contract liability until the related services have been provided to the subscribers, sold pre-paid card or start packages has expired. The Company derecognises the contract liability and recognises revenue when it transfers services and therefore satisfies its performance obligation. If the contract includes an usage-based fee, revenue is recognised in the amount to which the Company has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced. If the contract includes variable consideration, revenue is recognised only to the extent that it is highly probable that there will be no significant reversal of such consideration. Air time charges The Company earns air time revenue by providing its pre-paid and post-paid subscribers with access to the cellular network and routing their calls through its network and networks of its roaming partners. Interconnection Revenue from interconnection represents the revenue earned for the termination of calls from other telecommunication services providers’ networks on the Company’s network. Air time and interconnection revenue is recognised in the period when the respective service is rendered. Periodic fees Periodic fees include fees for subscription to new tariff plans and fees for supplementary subscriptions used by subscribers in particular period, such as periodic fees for subscription to voicemail, itemised invoice etc. Periodic fees also include fees for transfer of money between subscribers’ balances, extra money services etc. Periodic fees are recognised in the period when the respective service is rendered. Connection and one-time subscription fees Connection fees are paid by pre-paid subscribers for the first time activation of network service. Revenues from connection are deferred and recognised over the period when the fees are earned within an overall service agreement with subscriber, which is the expected period of customer relationship and approximates 54 months for pre-paid subscribers (2018: 56 months). The expected period of customer relationship is based on the past history of churn rate and expected development of the Company. One-time subscription fees mainly consist of one-time fees for various supplementary subscriptions and also include fees for change of subscription type and transfer of subscriptions from one location to another. One-time subscription fees are deferred and recognised over the subscription validity period or, in case of unlimited validity period, the expected period of customer relationship, which approximates 82 months for contract subscribers, 54 months for pre-paid subscribers and 104 months for fixed line subscribers (2018: 105 months, 56 months and 86 months, respectively). FTTB internet Revenue from FTTB services represents fixed monthly charges for the internet access provided to the Company’s subscribers. Such revenue is recognised in the period when the respective service is rendered to subscribers. Fixed lines Revenue from fixed lines services represents monthly charges to the Company’s subscribers for access to the fixed telephone lines network and for routing the subscribers’ calls through this network. Such revenue is recognised in the period when the respective service is rendered to subscribers. Roaming and access to network Roaming revenues and revenues from access to network include (i) charges for services provided to the Company’s subscribers in the networks of its roaming partners, (ii) charges for services provided by the Company in its network to subscribers of the Company’s roaming partners and (iii) charges for access to the Company’s network by the foreign operators without termination of calls. Such revenues are recognised in the period when the respective services are rendered. Value added services Revenues from value added services include charges for outgoing SMS and MMS, circuit of switched data, packet switched data (WAP, GPRS, EDGE etc.) and content. Revenues from charges for data transmission services are recognised in the period when the respective services are rendered.

18 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Revenue recognition and measurement (continued) Customer equipment sales Sales are recognised when control of the good has transferred, being when the goods are delivered to the customer, the customer has full discretion over the goods, and there is no unfulfilled obligation that could affect the customer’s acceptance of the goods. Delivery occurs when the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the goods in accordance with the contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied. If the Company provides any additional services to the customer after control over goods has passed, revenue from such services is considered to be a separate performance obligation and is recognised over the time of the service rendering. Discounts to roaming partners Discounts are often provided in the form of cash payments calculated based on the terms of the agreement with roaming partner and billing data on the roaming traffic for the period. Discounts are recognized in the period when the discount is earned as a reduction of revenue of corresponding period. Loyalty programs Customer loyalty credits are accounted for as a separate component of the sales transaction, in which they are granted. A portion of the fair value of the consideration received is allocated to the award credits and deferred, based on estimated number of award credits that will actually be redeemed by the customer. This is then recognised as revenue over the period that the award credits are redeemed. Presentation Where the Company’s role in a transaction is a principal, revenue is recognised on a gross basis. In this case revenue comprises the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost. Where the Company’s role in a transaction is that of an agent, revenue is recognised on a net basis and represents the margin earned. The evaluation of whether the Company is acting as principal or an agent is based on the analysis of the substance of transaction, the responsibility for providing the goods or services and setting prices, as well as the underlying financial risks and rewards. Interest income Interest income is recorded for all debt instruments on an accrual basis using the effective interest method. This method defers, as part of interest income, all fee received between the parties to the contract that are an integral part of the effective interest rate, all other premiums or discounts. Fees integral to the effective interest rate include origination fees received or paid by the Company relating to the creation or acquisition of a financial asset, for example fees for evaluating creditworthiness, evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing transaction documents. For financial assets that are originated or purchased credit-impaired, the effective interest rate is the rate that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial recognition (normally represented by the purchase price). As a result, the effective interest is credit-adjusted. Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for (i) financial assets that have become credit impaired (Stage 3), for which interest revenue is calculated by applying the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets that are purchased or originated credit impaired, for which the original credit-adjusted effective interest rate is applied to the AC. Interest income on current bank accounts and on demand deposits, or term deposits with the maturity less than three months classified as cash and cash equivalents is recognised in the operating cash flows. Interest income on term deposits other than those classified as cash and cash equivalents is recognised in the investing cash flows. Expense recognition and measurement The Company recognises expenses upon outflow of future economic benefits from decrease in an asset or increase in a liability that can be measured reliably. The Company classifies its expenses by functional group: cost of materials and services, administrative expenses, selling expenses, other operating expenses, financial expenses and other expenses. The Company applies the classification of expenses by element according to their economic substance (such as depreciation/amortisation, payroll, roaming, dealership fees, repairs, advertising etc.). The cost of materials and services comprises the cost of materials and services to be realised during the reporting period, and unallocated fixed general productions costs. The cost includes: direct material, direct labor and other direct expenses, and general production costs. The cost includes the following (the list is not exhaustive): costs of interconnection, traffic transit, international roaming services, inter-operator line leases, content, subscriber product purchases, leases and electricity supplies of telecommunication network facilities, technical maintenance of the network, technical function staff, and other direct expenses. Administrative expenses are general business expenses associated with management and maintenance of the Company's operations. Administrative expenses include the following (the list is not exhaustive): management services, professional services, banking charges, provisions and other expenses related to maintenance of the Company's operations.

19 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Expense recognition and measurement (continued) Selling expenses are expenses related to sales (distribution) of the Company's goods and services. Selling expenses include the following (the list is not exhaustive): dealers fees (except for costs to obtain or fulfil a contract that are subject for capitalisation), advertising, marketing, sales market researches, payroll and other employee benefits of selling units etc. Other operating expenses are the Company's expenses not included in the cost of sales, administrative expenses, selling expenses, financial expenses and corporate profit tax expenses but associated with the Company's operating activity. Other operating expenses include the following (the list is not exhaustive): provisions for expected credit losses, other provisions, fines and penalties, operating foreign exchange differences, and membership fees to professional associations. Financial expenses result from finance raising transactions including finance leases, and from accounting for financial assets or financial liabilities at discounted (amortised) cost. Other expenses are the Company's expenses not related to its operating activities. These include expenses resulting from unusual events not inherent in the Company's operations: non-operating foreign exchange differences, charitable contributions, cost of disposal of property, plant and equipment, intangible assets, impairment of non-current assets, decommissioning of unusable fixed assets, and other non-operating expenses. Assets arising from contracts with customers Capitalised connection costs Initial direct costs incurred in connecting customers to the network are deferred over the same period as connection fee charged to customers. Such costs consist primarily of the costs of the start packages, scratch cards etc. Capitalised dealer commissions Dealer commission for acquisition of customers are capitalised as non-current assets and amortised over the average customer life estimated based on recent churn rate. Respective amortisation is presented within selling expenses in the same line item that the expenses were previously booked when incurred. An impairment loss is recognised to the extent that the carrying amount of asset exceeds: (a) the amount of consideration to which the Company expects to be entitled in exchange for the goods and services to which the asset relates; less (b) the remaining costs that relate directly to providing those goods and services. Advertising costs, marketing and sales commissions Advertising costs, marketing and sales commissions are expensed as incurred, unless they form a part of the costs that are deferred in relation to connection fees as described above. Expenditure on advertising and promotional activities is recognised as an expense when the Company has either the right to access the goods or has received the service. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes professional fees and, for qualifying assets, borrowing costs are capitalised. Depreciation is calculated to reduce the cost of assets, other than land, to their estimated residual value, if any, over their estimated useful lives. Depreciation commences when the assets are ready for their intended use. Repair and maintenance are capitalised in case significant improvement of assets is in place, which brings new functionality and could result in increased useful life of an asset. Current repair and maintenance is expensed as incurred. If new parts are capitalised, replaced parts are derecognised and any remaining net book value is recorded as loss on disposal. When the expected cost of decommissioning of an asset after its use is material to the financial statements, the present value of the expected cost of decommissioning of an asset after its use is included into the cost of the respective asset, if the recognition criteria for a provision are met. Subsequent increases in decommissioning liability as a result of change in assumptions (i.e. discount rate, period until dismantling, cost of dismantling etc.) are recognised in the additions to property, plant and equipment. Subsequent decreases in decommissioning liability as a result of change in assumptions are recognised in disposal of property, plant and equipment. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Group of property, plant and equipment Useful life (years) Buildings, constructions and transmission equipment 5-30 Machinery and equipment 5-20 Vehicles 3-5

Depreciation method, estimated useful life and residual value are evaluated at least annually and adjusted prospectively, if appropriate. Residual value is estimated to be zero for most of the assets, as the Company expects to use these assets for their entire economic life. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the year when the item is derecognised. Leasehold improvements are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

20 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Property, plant and equipment (continued) Land Freehold land to which the Company has due legal title is included in the Company’s statement of financial position at its historical cost less any accumulated impairment losses. Freehold land is not depreciated. Construction in progress The construction-in-progress items are capitalised as a separate element of non-current assets and are stated at cost less any accumulated impairment losses. On completion, the constructed asset at its cost less accumulated impairment loss is transferred to the appropriate category of property, plant and equipment. Construction in progress is not depreciated. Uninstalled equipment Uninstalled equipment is equipment purchased by the Company but not put into operation and is stated at cost less any accumulated impairment losses. Uninstalled equipment is not depreciated. Right-of-use assets The Company leases various buildings, constructions and transmission equipment, offices, and vehicles. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate, constructions and transmission equipment for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Assets arising from a lease are initially measured on a present value basis. Right-of-use assets are measured at cost comprising the following: ► the amount of the initial measurement of lease liability, ► any lease payments made at or before the commencement date less any lease incentives received, ► any initial direct costs, and ► costs to restore the asset to the conditions required by lease agreements, if stipulated by the contract. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets’ useful lives. Depreciation on the items of the right-of-use assets is calculated using the straight-line method over their estimated useful lives as follows:

Group of right-of-use assets Useful life (years) Buildings, constructions and transmission equipment 3-7 Vehicles 3-5

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur included to financial expenses. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. Intangible assets Intangible assets acquired separately are initially measured at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditures are charged to profit and loss as incurred. Amortisation is provided using the straight-line basis over the estimated useful lives of the related assets as follows:

Asset category Useful life (years) Licenses 5-15 Network and billing software 5-10 Intangible assets, all of which are determined as having finite useful lives, are amortised over their useful lives. The amortisation period and amortisation method for intangible assets is reviewed at least annually, and adjusted prospectively, if appropriate. Individual useful lives can be applied to intangible assets according to contractual or license terms.

21 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Intangible assets (continued) Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised as other expenses or other income in the statement of comprehensive income. Investments in subsidiaries Investments in subsidiaries are measured at cost less provision for impairment (where appropriate). Cost of the asset comprises its purchase price and/or other direct costs. The purchase price and/or other direct costs represents the amount paid and the fair value of other consideration paid to acquire the asset. Inventories Inventories are valued at the lower of cost and net realisable value for items that will be sold as separate products. Inventories that will be sold as part of a transaction with several components, which the Company expects to earn net income from, are valued at cost even if the selling price of the inventories is below cost. Cost of inventories used in multiple arrangements is determined using the weighted average method. Impairment of non-financial assets The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Impairment losses of continuing operations are recognised in profit and loss. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Based on the specifics of the Company’s operations, the management concluded that the Company has one cash generating unit, which is the Company’s network as a whole. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit and loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Financial instruments – key measurement terms Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is the price in an active market. An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the number of instruments held by the entity. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing information is not available. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

22 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Financial instruments – key measurement terms (continued) Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses (“ECL”). Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to the maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of the related items in the consolidated statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments. Financial instruments – initial recognition Financial instruments at fair value through profit and loss (FVTPL) are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. After the initial recognition, an ECL allowance is recognised for financial assets measured at AC and investments in debt instruments measured at fair value through other comprehensive income (FVTOCI), resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the Company commits to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual provisions of the instrument. Financial assets – classification and subsequent measurement – measurement categories The Company classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measurement of debt financial assets depends on: (i) the Company’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. The Company’s financial assets include cash and cash equivalents, trade and other receivables, other financial assets all of which are classified as AC in accordance with IFRS 9. Financial assets – classification and subsequent measurement – business model The business model reflects how the Company manages the assets in order to generate cash flows – whether the Company’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. The Company’s business model for financial assets is to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”). Financial assets – classification and subsequent measurement – cash flow characteristics Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Company assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). In making this assessment, the Company considers whether the contractual cash flows are consistent with the basic landing arrangements, i.e. interest includes only considerations for credit risk, time value of money, other basic lending risks and profit margin. The SPPI assessment is performed on initial recognition of an asset and is not subsequently reassessed. Financial assets – reclassification Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. Financial assets impairment – credit loss allowance for ECL The Company assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts, for contract assets. The Company measures ECL and recognises net impairment losses on financial and contract assets at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

23 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Financial assets impairment – credit loss allowance for ECL (continued) Debt instruments measured at AC and contract assets are presented in the statement of financial position net of the allowance for ECL. For loan commitments and financial guarantees, a separate provision for ECL is recognised as a liability in the statement of financial position. For debt instruments at FVOCI, changes in amortised cost, net of allowance for ECL, are recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses on debt instruments at FVOCI. The Company applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”). If the Company identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). If the Company determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. For financial assets that are purchased or originated credit-impaired (“POCI Assets”), the ECL is always measured as a Lifetime ECL. Financial assets – write-off Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery. Financial assets - derecognition The Company derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expire or (b) the Company has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement whilst (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all the risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale. Financial assets – modification If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners. If the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets), and recognises a modification gain or loss in profit or loss. Financial liabilities – measurement categories Financial liabilities are classified as subsequently measured at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments. The Company’s financial liabilities include trade and other payables, other financial liabilities all of which are classified as AC in accordance with IFRS 9. Financial liabilities – derecognition Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business, (ii) in the event of default and (iii) in the event of insolvency or bankruptcy. Trade and other receivables Trade and other receivables are recognised initially at fair value and are subsequently carried at AC using the effective interest method. Trade and other payables Trade payables are accrued when the counterparty performs its obligations under the contract and are recognised initially at fair value and subsequently carried at AC using the effective interest method.

24 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Customer advances The initial and subsequent payments of credit balance loaded by prepaid customers are recognized as a financial liability (customer advances) in the event that the prepaid credit balance is refundable to the customer, or if the credit balance can be used by the customer as currency to purchase goods or services from other suppliers (other than Company’s mobile services). If the prepaid credit balances are non-refundable and can only be used to purchase Company’s mobile services, such balances are recognised as deferred revenue in the balance sheet. Lease liabilities Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: ► fixed payments (including in-substance fixed payments), less any lease incentives receivable, ► variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date, ► amounts expected to be payable by the Company under residual value guarantees, ► the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and ► payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.

Extension and termination options are included in a number of buildings, constructions and transmission equipment lease agreements across the Company. These terms are used to maximise operational flexibility in terms of managing the assets used in the Company’s operations. The majority of extension and termination options held are exercisable only by the Company and not by the respective lessor. Extension options (or period after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Company, the Company’s incremental borrowing rate is used, being the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, collateral and conditions.

To determine the incremental borrowing rate, the Company:

► uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk, and ► makes adjustments specific to the lease, e.g. term, country, currency and collateral.

The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance costs. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. Short- term leases are leases with a lease term of 12 months or less. Operating lease Where the Company is a lessor in a lease which does not transfers substantially all the risks and rewards incidental to ownership to the lessee (i.e. operating lease), lease payments from operating leases are recognised as other income on a straight-line basis.

25 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Employee benefits The Company makes defined contributions to the State Pension Fund at the relevant statutory rates in force during the year, based on gross salary payments; such an expense is charged in the period when the related salaries are earned. In addition to the above, employees of the Company are entitled to jubilee and post-employment benefits. Post-employment benefits are paid out as a one-off benefit upon retirement. The amount of those benefits depends on the tenure with the Company and the average salary. The benefits payable under these arrangements are unfunded. The expected cost of providing employee benefits is determined annually using the projected unit credit actuarial valuation method to calculate the net present value of benefit obligations at the reporting date. The balance of employee benefit obligations equals discounted payments to be made in the future and accounts for staff turnover and relates to the period to the reporting date. Demographic information and assumptions on staff turnover are based on historical data. Re-measurements, comprising of actuarial gains and losses are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit and loss in subsequent periods. Past service costs are recognised in profit and loss on the earlier of: ► the date of the plan amendment or curtailment, and ► the date that the Company recognises restructuring-related costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability. Service costs comprise current service cost, past service cost, gains and losses on curtailments and non-routine settlements and are recognised in profit and loss. Any actuarial gains or losses relating to jubilee benefits are recognised in profit and loss in the period in which they arise. The past service cost is recognised immediately. Taxes Current income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: ► where the deferred tax liability arises from the initial recognition of goodwill, or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit and loss; and ► taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses carried forward, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and unused tax losses carried forward can be utilised, except: ► when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit and loss; ► in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

26 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Taxes (continued) The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to be applied in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit and loss is recognised outside profit and loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Value added tax ► Revenues, expenses and assets are recognised net of value added tax (VAT) except: where VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case VAT is recognised as part of the cost of acquisition of the asset or as part of expense item as applicable; and ► receivables and payables are stated with the amount of VAT included. The net amount of VAT recoverable from, or payable to, the taxation authority is disclosed in the notes to the financial statements. Within the scope of its economic activities, the Company simultaneously performs operations subject to VAT, and those that are not subject to VAT. The Company may purchase goods and services, which are simultaneously used in taxable and non-taxable transactions. In such case, the Company makes a proportionate allocation of tax amounts to a tax credit in respect of purchases of goods / services / non-current assets intended for simultaneous use in transactions subject to VAT and VAT exempt. Current/non-current classification An asset/liability is classified as current, when it is expected to be realised (settled) or is intended for sale or consumption within twelve months after the reporting date. Other assets/liabilities are classified as non-current. Financial instruments are classified based on expected life. Deferred tax assets are classified as non-current. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months (92 days) or less. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. For the purpose of cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts, if any. Provisions and reserves Provisions and reserves are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

27 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

5. Significant accounting policies (continued) Contingent assets and liabilities A contingent asset is not recognised in the financial statements, but disclosed when an inflow of economic benefits is probable. Contingent liabilities are not recognised in the financial statements unless it is probable that an outflow of economic resources will be required to settle the obligation and it can be reasonably estimated. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Withdrawn capital (treasury shares) Treasury shares are recognised at purchase price and are deducted from equity. No gain or loss is recognised in the profit and loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Any difference between the carrying amount and the consideration, if shares are reissued, is recognised in share premium. Voting rights related to treasury shares are nullified for the Company and no dividends are allocated to them. Events after the reporting period Events after the reporting period that provide additional information on the Company’s position at the reporting date (adjusting events) are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material. Transactions with the ultimate parent and entities under common control Transactions between unrelated parties are presumed to be exchanges of equal fair values. When the Company is engaged in transactions with the ultimate parent and entities under common control, where there is no presumption of equal fair values, and IFRS require the transaction to be recognised at fair value, the Company accounts for the difference between fair value and the amount of such transaction directly in equity as distribution to or capital from shareholders, in accordance with its economic substance.

Changes in presentation Where necessary, corresponding figures have been adjusted to conform to changes in the presentation in the current year.

28 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

6. Critical accounting judgements and key sources of estimation uncertainty Key sources of estimation uncertainty - critical accounting estimates Certain amounts included in or affecting the financial statements and related disclosures must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. A critical accounting estimate is one, which is both important to the portrayal of the Company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management evaluates such estimates on an ongoing basis, based upon historical results and experience, consultation with experts, trends and other methods, which management considers reasonable in the particular circumstances, as well as the forecasts as to how these might change in the future. However, uncertainty about these estimates could result in outcomes that require a material adjustment to the carrying amount of an asset or liability affected in future periods. Revenue recognition The main part of the Company’s revenues is earned from mobile services, such as airtime, one-time connection fees or periodic subscriptions. The Company has many pre-paid and post-paid subscribers and offers a number of different services with different tariff plans. The Company also provides discounts of various types, often in connection with different campaigns. Revenues from one-time subscriptions or connections to the Company's network are deferred and released to the profit and loss in the periods when the fees are earned within an overall service agreement with a customer, based on the average customer relationship period. The management regularly reviews its estimates in respect of customer relationship period, based on the historical experience and its plans for future development of the Company. As at 1 January 2019 the management estimated the customer relationship period to be equal to 82 months for contract subscribers and 54 months for pre-paid subscribers (2018: 105 months and 56 months, respectively). As a result of change in the above mentioned accounting estimates starting from 1 January 2019, the Company’s profit before tax for the year 2019 increased by UAH 14,340 thousands. Capitalised dealer commissions Incremental costs incurred to acquire customer contract such as commissions to third party dealers for the acquisition of customers are capitalised within other non-current assets. Costs that have been capitalised are then amortised consistently with the pattern of when services to which the asset relates are transferred to the customer. Judgement is required to identify which costs are eligible for capitalisation, the period over which the costs are charged to the income statement and the assessment of capitalised costs for impairment. The costs capitalised are amortised over the average customer life calculated based on the most recent full-year churn rate available, with the maximum of five years based on management judgement as applicable for mobile services industry. In assessing recoverability of the asset the company tracks churn, credit risk and margin contribution of customers applying a portfolio approach to contracts with similar characteristics. No impairment was identified by management as of the reporting date. Depreciation and amortisation Depreciation and amortisation methods are based on management estimates of the expected useful lives of property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful lives and in the amortisation or depreciation charges. Some technological developments are difficult to predict and the Company’s views on the trends and pace of development may change over time. Some of the assets and technologies, in which the Company invested several years ago, are still in use and provide the basis for the new technologies. The useful lives of property, plant and equipment and intangible assets are reviewed at least annually taking into consideration the factors mentioned above and all other important factors. In case of significant changes in estimated useful lives, depreciation and amortisation charges are adjusted prospectively. Depreciation of right-of-use assets Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Details of judgements applied for lease term determination are disclosed in paragraph “Extension and termination options”.

29 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019

6. Critical accounting judgements and key sources of estimation uncertainty (continued) Extension and termination options Extension and termination options are included in a number of buildings, constructions and transmission equipment leases across the Company. These are used to maximise operational flexibility in terms of managing the assets used in the Company’s operations. The majority of extension and termination options held are exercisable only by the Company and not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). For leases of, the following factors are normally the most relevant: ► If there are significant penalties to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate); ► Otherwise, the Company considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset. The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. Impairment of non-financial assets The Company has made significant investments in property, plant and equipment, construction in progress and intangible assets. These assets are tested for impairment when circumstances indicate there may be a potential impairment. Factors considered important which could trigger an impairment evaluation include the following: significant fall in market values, significant underperformance relative to historical or projected future operating results, significant changes in the use of assets or the strategy for the Company’s overall business, including assets that are decided to be phased out or replaced and assets that are damaged or taken out of use, significant negative industry or economic trends and significant cost overruns in the development of assets. Estimating recoverable amounts of assets must in part be based on management’s evaluations, including determining appropriate cash generating units, estimates of future performance, revenue generating capacity of the assets, assumptions of the future market conditions and the success in marketing of new products and services. Changes in circumstances and in management’s evaluations and assumptions may give rise to impairment losses in the relevant periods. Additional information about loss on impairment of property, plant and equipment, construction in progress, intangible assets and assets of disposal group classified as held for sale is disclosed in Note 26.

30 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

7. Related party disclosure As at 31 December 2019 and 2018, income and expenses with related parties were as follows:

2019 2018 Entities Entities under Other under Other Immediate common Subsidia- related Immedia- common Subsidia- related parent control ries parties te parent control ries parties

Sales of goods and - 645,139 - - - 1,137,969 - 288,715 services Cost of materials, traffic charges and other - (246,591) (23,633) - - (534,014) - (23,769) direct costs Other operating (38,178) (134,169) - - (142,087) (106,249) - - expenses Unwinding of discount on interest-free loans - - - - - 10,785 - - provided Other income - 1,844 13,619 - 25,446 - -

Total (38,178) 266,223 (10,014) - (142,087) 533,937 - 264,946

As at 7 September 2018, the Company's parent disposed of part of its interest in Wind Telecomunicazioni S.p.A., previously classified as other related parties. During 2019, the Company sold UAH 1,267 thousand of property, plant and equipment to an entity under common control (2018: UAH 2,091 thousand). During 2019, 2.9% of total revenue represents sales to VEON Wholesale Services B.V., the entity under common control (2018: 6.0% of total revenue). As at 31 December 2019 and 2018, balances with related parties were as follows: 2019 2018 Entities Entities under under Immediate common Subsidia- Immediate common Subsidi- parent control ries parent control aries

Other financial investments - - 171,269 - - 155,269 Interest-free loans ------Trade and other receivables - 37,323 39,691 - 215,784 - Trade and other payables (19,526) (22,948) (2,784) (55,021) (40,647) - Payables to shareholders (3,484,063) - - (3,730,603) - - Other current liabilities - (95,841) - - (96,006) -

- Total (3,503,589) (81,466) 208,176 (3,785,624) 79,131 155,269 Transactions with related parties were on contractual terms. Terms and conditions of transactions with related parties Outstanding balances with related parties at the year-end are unsecured and settlement occurs in cash. Outstanding balances with related parties are interest free. There have been no financial guarantees issued in favor of the Company or received to/from any related party. For the years ended 31 December 2019 and 2018, the Company has not recorded any significant impairment of receivables due from the related parties. Revenues and trade receivables In 2019 the Company provided to domestic and foreign telecom operators, being the Company’s related parties, interconnection, roaming and access to network services in the total amount of UAH 645,139 thousand (2018: UAH 1,426,684 thousand). The related trade receivables as at 31 December 2019 and 2018 due from related parties are non-interest bearing, unsecured and are settled in the normal course of business.

31 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

7. Related party disclosure (continued)

Cost of materials, traffic charges and other direct costs and trade payables Cost of materials, traffic charges and other direct costs included access to network, roaming and interconnection services, provided by entities under common control and other related parties. Trade payables to entities under common control and other related parties comprise amounts due for access to network, roaming and interconnection services. Trade payables to related parties are non-interest bearing and are settled in the normal course of business. Other operating expenses Other operating expenses included consultancy fees and external personnel services provided by the ultimate parent and entities under common control. Other financial investments Other financial investments comprise of investments into share capital of subsidiaries SC “Staravto” and LLC “Starmoney”. Detailed information regarding investments into subsidiaries is presented in the note 11. Settlements with shareholders Settlements with shareholders comprise of dividends declared but not yet paid to shareholders as at 31 December 2019 and 2018. Other current liabilities Other current liabilities to entities under common control are mostly represented by deferred payment for the share in Golden Telecom LLC that was acquired by the Company. Compensation to management personnel As at 31 December 2019 key management personnel consisted of 13 top executives of the Company (2018: 12 top executives). For the years ended 31 December total compensation to key management personnel included in salaries and personnel costs comprised: 2019 2018 Short-term employee benefits 88,313 80,001 Long term incentive plan for management 2,546 32,784 Total compensation to key management personnel 90,859 112,785

32 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

8. Property, plant and equipment The movement of property, plant and equipment during 2019 is as follows:

Including: Revaluation Balance at the Disposals in the Other changes for Balance at the end of Transferred (upward +, Received on beginning of the year year Depreci- the year the year on operating Addi- downward -) Impair- finance lease Groups of property, Line ation lease tions in ment plant and equipment code charge for Accum Accu the year Cost or Accum. Cost or loss Cost or Cost or Cost or Accum. Accum. the year Cost or . Cost or Accum Accum m valua- deprec' valua- valua- valu- valuation deprec’n deprec'n valua-tion deprec' valuation deprec'n deprec'n depre tion n tion tion ation n c'n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44,684 ------44,684 - - - - - Investment property 105 ------Capital costs of land 110 ------improvement Buildings, constructions and 120 1,963,848 833,770 1,229,945 - - 241,126 13,122 554,712 - 2,089,902* - 5,042,569 1,375,360 - - - - transmission equipment ** Machinery and 130 19,533,579 12,716,199 2,989,628 - - 636,881 617,735 1,509,159 26,606 - - 21,886,326 13,634,229 - - - - equipment Vehicles 140 191,561 71,130 19,065 - - 268 157 59,190 - - - 210,358 130,163 80,278 24,099 - - Tools, fittings and 150 ------furniture Livestock 160 ------Perennial plants 170 ------Other fixed assets 180 ------Library assets 190 ------Non-current low- 200 ------value items Temporary buildings 210 ------Natural resources 220 ------Packaging 230 ------Hire items 240 ------Other non-current 250 ------tangible assets Total 260 21,733,672 13,621,099 4,238,638 - - 878,275 631,014 2,123,061 26,606 2,089,902 - 27,183,937 15,139,752 80,278 24,099 - -

* “Other changes for the year” include effect from the adoption of IFRS 16, Leases, effective from 1 January 2019. Refer to Notes 4, 9. ** “Buildings, constructions and transmission equipment” include right-of-use asset, recognized in the result of IFRS 16, Leases implementation. Refer to Notes 4, 9.

33 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

8. Property, plant and equipment (continued) The movement of property, plant and equipment during 2018 is as follows: Including: Revaluation Balance at the Disposals in the Other changes for Balance at the end of Transferred on (upward +, Received on beginning of the year year Depreci- the year the year operating Groups of downward -) Impair- finance lease Line Additions ation lease property, plant and ment code in the year charge for Cost equipment Cost or Accum. Cost or loss Cost or Cost or Accum Accum Cost or Accum. Accum. the year Accum. Cost or Accum or valua- deprec' valua- valua- valua- deprec' deprec' valuation deprec’n deprec'n deprec'n valuation deprec'n valu- tion n tion tion tion n n ation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44,684 ------44,684 - - - - - Investment property 105 ------Capital costs of land 110 ------improvement Buildings, constructions and 120 1,925,503 744,129 40,245 - - 1,900 1,900 91,541 - - - 1,963,848 833,770 - - - - transmission equipment Machinery and 130 17,634,628 11,820,009 2,393,579 - - 494,628 472,992 1,339,370 29,812 - - 19,533,579 12,716,199 - - - - equipment Vehicles 140 134,084 26,361 61,293 - - 3,816 1,758 45,176 1,351 - - 191,561 71,130 61,014 4,943 - - Tools, fittings and 150 ------furniture Livestock 160 ------Perennial plants 170 ------Other fixed assets 180 ------Library assets 190 ------Non-current low- 200 ------value items Temporary 210 ------buildings Natural resources 220 ------Packaging 230 ------Hire items 240 ------Other non-current 250 ------tangible assets Total 260 19,738,899 12,590,499 2,495,117 - - 500,344 476,650 1,476,087 31,163 - - 21,733,672 13,621,099 61,014 4,943 - -

34 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

8. Property, plant and equipment (continued) Additions in the year are represented by transfers from CIP. Net book value in 2019 was:

Buildings, constructions Machinery and Net book value Land plots and transmission Vehicles Total equipment equipment At the beginning of period 44,684 1,130,078 6,817,380 120,431 8,112,573 At the end of period 44,684 3,667,209 8,252,097 80,195 12,044,185

Net book value in 2018 was:

Buildings, constructions Machinery and Net book value Land plots and transmission Vehicles Total equipment equipment At the beginning of period 44,684 1,181,374 5,814,619 107,723 7,148,400 At the end of period 44,684 1,130,078 6,817,380 120,431 8,112,573

The group “Machinery and equipment” includes the following categories: local, regional & trunk networks, mobile telephone network and switches, radio installations. The group “Buildings, constructions and transmission equipment” are comprised of buildings and corporate administrative assets. Temporarily dismantled equipment continues to be depreciated over the estimated remaining useful life.

35 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

9. Right-of-use assets and lease liabilities The Company leases various buildings, constructions and transmission equipment and vehicles. Rental contracts are typically made for fixed periods of 6 months to 7 years, but may have extension options as described in Notes 5, 6. Until 31 December 2018 leases of property, plant and equipment were classified as either finance leases or operating leases. Refer to Notes 8, 20 and 28. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available for use by the Company. Buildings, Vehicles Total constructions and Note transmission equipment

Carrying amount at 1 January 2019 2,089,902 56,268 2,146,170

Additions 1,134,236 19,033 1,153,269 Disposals (227,959) - (227,959) Depreciation charge (458,125) (19,123) (477,248)

Carrying amount at 31 December 2019 2,538,054 56,178 2,594,232

Right-of use assets as at 31 December 2019 are included in “Property, plant and equipment”, refer to Note 8. The Company recognised lease liabilities as follows: 31 December 1 January 2019 2019

Short-term lease liabilities (Note 20) 705,913 520,491 Long-term lease liabilities (Note 20) 2,090,113 1,625,790

Total lease liabilities 2,796,026 2,146,281

Interest expense included in financial expenses of 2019 was UAH 334,453 thousand. Expense relating to variable lease payments not included in lease liabilities included in general and administrative expenses of 2019 was UAH 184,250 thousand. Total cash outflows for leases during 2019 amounted UAH 626,273 thousand.

36 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

10. Intangible assets The movement of intangible assets during 2019 is as follows:

Balance at the beginning Revaluation (upward +, Other changes for the Balance at the end of the Disposals in the year Amortisation Impairment Line of the year Addi-tions downward -) year year Groups of intangible assets charges for losses for the code in the year Cost or Accum. Cost or Accum. Cost or Accum. the year year Cost or Accum. Cost or Accum. valuation amortisation valuation amortisation valuation amortisation valuation amortisation valuation amortisation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Rights to use natural resources 010 ------Rights to use property 020 ------Rights for commercial signs 030 ------Rights for the industrial property objects 040 ------Copyright and allied rights 050 ------060 ------Other intangible assets 070 12,704,637 4,401,920 895,207 - - 298,364 296,235 1,027,269 9,848 - - 13,301,479 5,142,801 Total 080 12,704,637 4,401,920 895,207 - - 298,364 296,235 1,027,269 9,848 - - 13,301,479 5,142,801 Goodwill 090 ------The movement of intangible assets during 2018 is as follows:

Balance at the beginning Revaluation (upward +, Other changes for the Balance at the end of the Disposals in the year Amortisation Impairment Line of the year Addi-tions downward -) year year Groups of intangible assets charges for losses for the code in the year Cost or Accum. Cost or Accum. Cost or Accum. the year year Cost or Accum. Cost or Accum. valuation amortisation valuation amortisation valuation amortisation valuation amortisation valuation amortisation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Rights to use natural resources 010 ------Rights to use property 020 ------Rights for commercial signs 030 ------Rights for the industrial property objects 040 ------Copyright and allied rights 050 ------060 ------Other intangible assets 070 8,767,064 4,677,033 5,114,752 - - 1,177,179 1,081,877 806,764 - - - 12,704,637 4,401,920 Total 080 8,767,064 4,677,033 5,114,752 - - 1,177,179 1,081,877 806,764 - - - 12,704,637 4,401,920 Goodwill 090 ------

37 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

10. Intangible assets (continued) NBV of intangible assets as 31 December 2019 and 31 December 2018 was UAH 8,158,678 thousand and UAH 8,302,717 thousand respectively. The Company’s intangible assets are represented mainly by licences and network and billing software. The Company’s major licenses as at 31 December are as follows: Net book Net book value as at value as at 31 Acquisition Expiration 31 December December License # Coverage License date date 2019 2018 GSM-1800 cellular (mobile) #000669 National telecommunication services (ііі) Oct 2011 Oct 2026 4,268 4,893

GSM-900 cellular (mobile) #000670 National telecommunication services (ііі) Oct 2011 Oct 2026 4,268 4,893

Interna- Fixed international communication #000671 tional services (ііі) Aug 2004 Aug 2019 - 398

Fixed inter city communication #000672 Inter city services (ііі) Aug 2004 Aug 2019 - 407

Fixed inter city communication #001196 Inter city services (і) Jun 2019 Aug 2024 2,570 -

Interna- Fixed international communication #001197 tional services (і) Jun 2019 Aug 2024 2,518 -

#000673 City Fixed city communication services Aug 2015 Aug 2020 55 139

Cellular (mobile) telecommunication #000668 National services (іі) Apr 2015 Mar 2030 6,935 6,935 ДЛ №000912 Digital Mobile Radio IMT-2000 (#8665) National (UMTS) (ii) Apr 2015 Mar 2030 2,684,332 2,843,010 Digital Mobile Radio IMT (Frequency range: 2520-2525/2640-2645 MHz) #9446 National (iv) Mar 2018 Feb 2033 346,984 373,172 Digital Mobile Radio IMT (Frequency range: 2525-2530/2645-2650 MHz) #9445 National (iv) Mar 2018 Feb 2033 314,036 337,736 Digital Mobile Radio IMT (Frequency range: 2530-2535/2650-2655 MHz) #9444 National (iv) Mar 2018 Feb 2033 314,036 337,736 Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1725-1750/1820- #9517 National 1845 MHz) (v) Jul 2018 Jun 2033 1,199,861 1,288,194 Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1770-1775/1865- #9503 National 1870 MHz) (v) Jul 2018 Jun 2033 554,200 595,000 Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1775-1780/1870- #9518 National 1875 MHz) (v) Jul 2018 Jun 2033 815,000 875,000 Total 6,249,063 6,667,513

(i) In June 2019 the Company purchased new licenses for providing fixed inter city/international communication services. Previous license were expirationated at August 2019. (ii) Based on the results of the auction in 2015 the Company received Licences to use the radio frequency band 1965- 1980 / 2155-2170 MHz for services provision in the standard 3G («digital cellular radio Communication IMT-2000 (UMTS)»). On 1 April 2015, the Company paid for the respective Licenses. (iii) In December 2016 National Commission for the State regulation of Communications and Informatization has reissued licenses previously granted to Kyivstar due to the change of the Company's registered address pursuant to the amendments introduced to the Company's statutory and registration documents. (iv) In January 2018 the National Commission for the Regulation of Communications and Informatisation (NCCIR) held an auction for the 15-year right to use of 4G licenses in the 2600 MHz band. Based on the results of the auction the Company received Licenses to use the radio frequency band for services provision in the standard 4G. (v) In March 2018 the National Commission for the Regulation of Communications and Informatisation (NCCIR) held an auction for the 15-year right to use of 4G licenses in the 1800 MHz band. Based on the results of the auction the Company received Licenses to use the radio frequency band for services provision in the standard 4G.

38 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

11. Investments in subsidiaries The table below summarises the movements in the carrying amount of the Company’s investments in subsidiaries.

2019 2018 Carrying amount at 1 January 155,269 156,167 Additional contributions during the year 16,000 - Impairment of investment in subsidiaries - (898)

Carrying amount at 31 December 171,269 155,269 Interest held by the Company in its principal subsidiaries is disclosed below: 2019 2018 Country of Country of Name Interest held operation Interest held operation Subsidiary SC "Staravto" 100.00% Ukraine 100.00% Ukraine Subsidiary LLC “Starmoney” 100.00% Ukraine 100.00% Ukraine 12. Other non-current assets Other non-current assets as at 31 December are as follows:

2019 2018

Non-current contract assets arising from contract with customers (Note 15) 1,072,562 955,988 Prepayments for property, plant and equipment 63,709 98,567 Prepayments for intangible assets 599 5,608 Total 1,136,870 1,060,163 13. Trade and other receivables Trade and other receivables consist of the following as at 31 December: 2019 2018

Trade receivables – subscribers 330,576 265,425 Trade receivables – roaming 280,123 396,308 Trade receivables – interconnection and access to network 228,688 344,337 Trade receivables – dealers for pre-paid cards and packages 25,035 22,206 Accounts receivable for settlements on accrued income 4,198 20,993 Accounts receivable from sale of non-current assets 2,552 4,163 Other receivables 21,909 20,175 Expected credit loss allowance (168,787) (163,668)

Total financial assets within trade and other receivables 724,294 909,939

Advances issued 74,647 91,535 Other settlements with budget 54,499 40,221 Expected credit loss allowance (5,064) (8,535)

Total 848,376 1,033,160 Financial trade and other receivables, net of allowance for impairment as at 31 December are denominated in the following currencies: 2019 2018

UAH 316,549 263,349 EUR 264,898 307,202 USD 140,367 331,579 GBP 2,480 7,809

Total 724,294 909,939 As at 31 December 2019 and 2018 trade and other receivables are non-interest bearing and are settled in the normal course of business. The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade and other receivables.

39 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

13. Trade and Other Receivables (continued) To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 18 month before each balance sheet date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The credit loss allowance for trade and other receivables is determined according to provision matrix presented in the table below. The provision matrix is based on the number of days that an asset is past due. 31 December 2019 31 December 2018 Gross Gross Loss carrying Lifetime Loss carrying Lifetime In % of gross value rate amount ECL rate amount ECL

Trade and other receivables - current 1.94% 614,455 11,950 0.89% 606,044 5,376 - less than 30 days overdue 9,90% 93,011 9,212 3.21% 225,446 7,246 - 30 to 60 days overdue 41,11% 23,471 9,649 8.09% 70,674 5,717 - 61 to 90 days overdue 38,42% 38,203 14,676 20.01% 25,818 5,165 - 91 to 120 days overdue 90,08% 6,463 5,822 45.51% 9,956 4,495 - over 120 days overdue 100.00% 117,478 117,478 100.00% 135,669 135,669

Total trade and other receivables (gross carrying amount) 893,081 168,787 1,073,607 163,668

Credit loss allowance (168,787) (163,668)

Total trade and other receivables

(carrying amount) 724,294 909,939

The following table explains the changes in the credit loss allowance for trade and other receivables under simplified ECL model between the beginning and the end of the annual period: 2019 2018

Allowance for credit losses on trade receivables at 1 January 163,668 184,700

New originated or purchased 51,766 61,649 Financial assets derecognised during the period (251) (2,186)

Total credit loss allowance charge in profit or loss for the period 51,515 59,463

Write-offs (37,337) (78,626) FX movements (9,059) (410) Other movements - (1,459)

Allowance for credit losses on trade receivables at 31 December 168,787 163,668

In 2019 bad debt expense in the amount of UAH 51,515 thousand (2018: UAH 59,463 thousand) is included in other operating expenses (Note 24). Accounts receivable with related parties are disclosed in Note 7.

40 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

14. Cash and cash equivalents Cash and cash equivalents consist of the following as at 31 December: 2019 2018

Short-term deposits 454,302 4,823,430 Cash in transit 270,946 191,503 Cash at banks 172,824 187,010

Total 898,072 5,201,943 As at 31 December cash at banks is denominated in the following currencies: 2019 2018

UAH 159,127 113,129 USD 11,862 40,073 EUR 1,362 33,808 GBP 473 -

Total 172,824 187,010 Cash in transit is denominated in UAH. In 2019 cash at bank accounts earned interest at fixed rates varying from 0.1% to 19.2% per annum (2018: 0.1% to 18.0% per annum). As at 31 December short-term deposits split by contractual maturity, currency and interest rate earned is as follows:

2019 2018 UAH UAH Interest rate Currency Maturity date thousands Interest rate p.a. thousands p.a.

UAH 31-60 days - - 250,000 18.5%-19.2% UAH 61-92 days - - 1,055,000 18.0%-19.2% USD 0-30 days - - 523,917 2.5%-3.5% USD 31-60 days 454,302 1.9% 1,324,606 2.5%-3.6% USD 61-92 days - - 508,440 3.5%-3.75% EUR 0-30 days - - 82,711 1.9% EUR 31-60 days - - 1,030,392 1.0%-2.1% EUR 61-92 days - - 48,364 2.0%-2.35%

Total 454,302 4,823,430 15. Assets arising from Contracts with Customers The Company has recognised the following assets arising from contracts with customers: 31 December 31 December 2019 2018

Dealer commission (iv) 973,000 861,091 Connection costs (i) 99,171 110,200 Fixed line connections (iii) 19,621 16,107 Start packages and scratch-cards (ii) 15,268 16,359 Other assets 63,545 61,878

Total 1,170,605 1,065,635

Current part 98,043 109,647 Non-current part (Note 12) 1,072,562 955,988 (i) Capitalised connection costs mainly consist of costs of start packages activated by subscribers and cost of Wi-Fi routers; (ii) Capitalised start packages and scratch-cards represent costs of start packages and scratch-cards sold to dealers, but not yet activated by subscribers; (iii) Capitalised fixed line connections consist of costs of last mile; (iv) Capitalised dealer commission consist of costs of dealer’s commissions new subscribers, dealers’ fees for migration of contract and prepayment subscribers, dealers’ fees for sales promotion, commission for SME segment direct sales.

41 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

15. Assets arising from Contracts with Customers (continued) The movement in assets arising from contracts with customers is as follows: Start packages Dealer and Fixed line Other commissio Connection scratch- connect- deferred n costs cards ions costs Total As at 1 January 2018 - 108,722 14,450 11,309 56,185 190,666

Remeasured at 1 January 2018 709,940 - - - - 709,940 Deferred during the year 436,380 58,420 55,520 7,860 160,226 718,406 Released to profit and loss (285,229) (56,942) (53,611) (3,062) (154,533) (553,377)

As at 31 December 2018 861,091 110,200 16,359 16,107 61,878 1,065,635

Deferred during the year 472,036 49,763 42,279 8,333 136,639 709,050 Released to profit and loss (360,127) (60,792) (43,370) (4,819) (134,972) (604,080)

As at 31 December 2019 973,000 99,171 15,268 19,621 63,545 1,170,605

16. Statutory capital Registered (share) capital As at 31 December 2019 the authorised and fully paid share capital comprised 17,742,389 ordinary shares (2018: 17,742,389 ordinary shares) at a par value of UAH 50 each. The nominal registered amount of the Company’s issued share capital corresponds to the amount reported in these financial statements. Dividends declared In 2019, the Company declared dividends in the amount of UAH 11,986,879 thousand or UAH 915.36 per share (2018: UAH 7,817,871 thousand or UAH 597.00 per share). As at 31 December 2019, the total amount of unpaid dividends is UAH 3,484,063 thousand (2018: UAH 3,730,603 thousand). Treasury shares On 2 December 2019, the Company’s shareholders approved a resolution to cancel 4,647,127 of the Company’s Treasury shares.The impact on Statement of Shareholders’ Equity in 2020 will be as follows:

2020 Registered (share) capital (232,356) Retained earnings (accumulated deficit) (138,042) Withdrawn capital 370,398 Other “Change in accounting policies” of UAH 582,151 thousand in Statement of Shareholders’ Equity for the year ended 31 December 2019 represent impact of adoption of IFRS 9 "Financial liabilities" and IFRS 15 "Revenue from contracts with customer" as at 1 January 2018. As at 31 December 2019 and 2018 additional capital includes share premium of UAH 102,338 thousand.

17. Trade and other payables As at 31 December trade and other payables consist of the following:

2019 2018

Equipment and construction works 300,471 306,636 Roaming 198,207 297,788 Technical support services 193,709 243,280 Software 110,487 108,715 Advertising and promotion 84,039 89,030 Dealers 72,191 76,821 Professional and consultancy fees 51,718 109,152 Content services 29,542 28,788 Rent 25,863 62,483 Interconnection 24,936 42,262 Inventory 12,193 29,757 Other payables 43,392 77,020 Total financial payables within trade and other payables at AC 1,146,748 1,471,732

42 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

17. Trade and other payables (continued) Payables for professional and consultancy fees and for interconnection are mostly due to related parties (refer to Note 7), mainly denominated in foreign currencies. As at 31 December trade and other payables are denominated in the following currencies: 2019 2018

UAH 742,669 761,136 USD 222,255 544,453 EUR 172,754 156,571 GBP 7,249 2,023 RUB 1,821 7,549 Total 1,146,748 1,471,732 As at 31 December 2019 and 2018 trade and other payables are non-interest bearing and are settled in the normal course of business. 18. Taxes payable, other than income tax Taxes payable, other than income tax consist of the following as at 31 December: 2019 2018

VAT payable 170,657 148,629 Frequency fee 82,558 82,525 Pension fund duty for mobile services 70,071 64,555 Miscellaneous other taxes 1,463 972

Total 324,749 296,681 19. Provisions The movement in provisions is as follows: Long-terms Decommi- Legal cases incentive to ssioning and penalties management Other Total

As at 1 January 2018 54,501 32,625 73,149 122,876 283,151

Arising during the year 15,029 57,787 32,784 28,562 134,162 Utilised (20,290) - (2,085) (1,488) (23,863) Unused amounts reversed - - (69,791) (8,505) (78,296) Change in estimates 28,035 - - - 28,035 Discount rate adjustment 3,958 - - - 3,958

As at 31 December 2018 81,233 90,412 34,057 141,445 347,147 Arising during the year 8,852 55,852 2,546 - 67,250 Utilised (1,142) - - (1,142) Unused amounts reversed - (77,115) (32,005) (23,132) (132,252) Reclassified to liability on corporate profit tax - - - (83,595) (83,595) Change in estimates 113,270 - - - 113,270 Discount rate adjustment 6,741 - - - 6,741

As at 31 December 2019 208,954 69,149 4,598 34,718 317,419

As at 31 December 2018 81,233 90,412 34,057 141,445 347,147

Current - 90,412 - 141,445 231,857 Non-current 81,233 - 34,057 - 115,290

As at 31 December 2019 208,954 69,149 4,598 34,718 317,419

Current - 69,149 - 34,718 103,867 Non-current 208,954 - 4,598 - 213,552 Decommissioning liabilities As at 31 December 2019 the Company recognised UAH 208,954 thousand (2018: UAH 81,233 thousand) of provision for decommissioning in respect of future dismantling costs related to its network equipment installed on leased sites. Provision for decommissioning has increased in 2019 due to the changes in input assumptions as follows:

43 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

19. Provisions (continued) Assumptions used as at Assumptions used as at 31 December 2019 31 December 2018 Cost of dismantling per site, UAH 79,265 79,265 Discount rate 10,3% 13,8% Inflation rate 5,0% 5,2%

As at 31 December 2019, the 1% decrease in the discount rate would increase the provision by UAH 65,644 thousand. As at 31 December 2018, the 1% decrease in the discount rate would increase the provision by UAH 24,630 thousand.

20. Other liabilities As at 31 December other current liabilities consist of the following: 2019 2018

Bonuses accrued 254,384 275,978 Accrual for unused vacations 94,994 63,471 Guarantee payments received 44,321 40,079 Other 394 898

Total non-financial liabilities 394,093 380,426

Deferred payment for investment in subsidiaries 95,841 96,006 Lease liability (Note 9) 705,913 10,486

Total financial liabilities at AC 801,754 106,492

Total 1,195,847 486,918 As at 31 December 2019 and 2018, other current liabilities are non-interest bearing and denominated in UAH. As at 31 December 2019 other non-current liabilities include UAH 2,090,113 thousand representing non-current part of financial lease liability denominated in UAH (2018: UAH 30,937 thousand). 21. Liabilities arising from Contracts with Customers As at 31 December contract liabilities consist of the following: 2019 2018

Contract liabilities – Deferred revenue 819,168 731,283 Contract liabilities – Advances received from customers 673,221 610,926 Contract liabilities – Other advances received 19,502 21,173

Total 1,511,891 1,363,382 As at 31 December 2019 advances received from customers amounting to UAH 644,440 thousand are financial liabilities at AC (2018: UAH 439,794 thousand) and represent prepaid credit balances that are refundable to the customers or can be used by customers as currency to purchase goods or services from other suppliers. As at 31 December contract liabilities – deferred revenue consists of the following: 2019 2018

Contract liabilities – dealers and customers (i) 555,451 465,592 Contract liabilities – connection and one-time subscription fees mobile (ii) 248,600 254,431 Contract liabilities – connection fees fixed (iv) 15,117 10,977 Contract liabilities – customer loyalty programs (iii) - 283

Total 819,168 731,283 Contract liabilities current 650,784 550,362 Contract liabilities non-current 168,384 180,921 (i) Contract liabilities – dealers – represents deferred revenue from pre-paid cards, which were sold by dealers, but have not yet been activated by customers. Contract liabilities – dealers are recognised in the statement of financial position until the pre-paid cards have been activated by customers or the pre-paid card has expired. Contract liabilities – customers – mainly consists of deferred revenue from unused time on pre-paid cards, which were activated by customers. Contract liabilities – customers is recognised as revenue in the statement of comprehensive income on the basis of actual mobile communication services usage by customers;

44 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

21. Liabilities arising from Contracts with Customers (continued) (ii) Contract liabilities – connection and one-time subscription fees mobile – mainly consist of fees for initial connection to the network and one-off payments for subscription to additional services. Deferred connection and subscription fees are recognised in the statement of comprehensive income over the periods that the fees are earned within an overall service agreement with a customer; (iii) Contract liabilities – customer loyalty programs represent various loyalty programs, established by the Company, whereby enrolled mobile and FTTB customers are eligible for bonuses, which may then be used for discounts on future mobile calls or additional FTTB internet services. (iv) Contract liabilities – connection fees fixed – consist of fees for initial connection to the fixed network. Contract liabilities – connection fees are recognised in the statement of comprehensive income over the periods that the fees are earned within an overall service agreement with a customer. (v) 21. Liabilities arising from Contracts with Customers (continued) The movements in contract liabilities are as follows: Connection and one-time Customer Dealers and subscription fees Connection loyalty subscribers mobile fees fixed programs Total As at 1 January 2018 367,422 242,049 7,890 1,152 618,513

Deferred during the year 151,491 101,678 4,852 20,766 278,787 Released to profit and loss (53,321) (89,296) (1,765) (21,635) (166,017)

As at 31 December 2018 465,592 254,431 10,977 283 731,283

Deferred during the year 107,635 103,235 6,190 - 217,060 Released to profit and loss (17,776) (109,066) (2,050) (283) (129,175)

As at 31 December 2019 555,451 248,600 15,117 - 819,168

22. Revenue

2019 2018

Periodic fees 14,019,436 9,980,447 Interconnect fees 2,518,216 3,254,641 Value added services 1,984,328 1,961,681 Air time charges 1,238,959 1,630,726 FTTB internet 863,372 741,453 Roaming (subscribers) 752,557 596,862 Fixed lines 441,778 411,444 Roaming and access to network 166,158 207,441 Connection and one-time subscription fees 109,066 89,296 Customer equipment sales 11,472 10,585 Other revenue 140,451 184,815

Total 22,245,793 19,069,391 Increase in Revenues from Periodic fees mainly represent increase in subscription tariffs, and shifts to new tariff plans with obligatory regular payments. Decrease of Revenues from Interconnect fees was mainly caused by lower tariffs for international and national interconnect between operators, lower international traffic and effect of foreign exchange differences in the result of strengthening of Ukrainian hryvnia during 2019. Decrease in Revenues from Air time charges mainly represent decrease of on-net voice traffic and international off-net voice traffic. This resulted from new tariff plans that include unlimited on-net voice packages and more international voice traffic that users pay as Periodic Fees. More details on the Company’s services are presented in Note 5.

45 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

23. Other operating income

2019 2018

Rent income 84,554 68,928 HUB service income 16,379 19,520 Data service income 17,122 8,150 Agent fee 13,575 - Other income 12,603 7,736

Total 144,233 104,334

24. Operating expenses 2019 2018

Cost of materials and services 111,271 286,367 Material expenses 111,271 286,367 Salaries and wages 957,495 743,296 Bonuses to employees 360,827 355,042 Other staff costs 95,666 65,692 Payroll 1,413,988 1,164,030 Social payments 242,951 190,822 Depreciation/amortisation 3,150,330 2,282,851 Interconnection 1,098,905 1,427,881 Repair and maintenance 1,041,458 954,934 Local taxes and non-reimbursable VAT 976,960 1,179,350 Marketing and sales commission 828,857 732,912 Electricity 635,315 547,391 Foreign transaction loss 605,905 33,166 Roaming 340,035 362,815 Advertising 283,018 236,189 Consultancy fees and external personnel 215,891 284,809 Outsourced services 204,614 224,744 License and research fees 191,171 199,795 Operating leases of building, land and equipment 122,914 624,072 Leased line costs 61,336 95,008 Bad debts 51,515 59,463 Business trip expenses 46,865 58,635 Materials and supplies 44,870 42,916 Access to network 29,051 16,796 Postage, freight, distribution and telecommunication 18,877 32,137 Insurance 5,023 5,582 Bank charges 1,614 2,366 Provision for litigations and other claims - 77,485 Other operating expenses 83,601 41,274 Other operating expenses 6,887,795 7,239,720 Total 11,806,335 11,163,790 Cost of sales of goods, works and services 7,725,453 7,701,596 Administrative expenses 1,411,002 1,607,736 Selling expenses 1,956,396 1,665,605 Other operating expenses 713,484 188,853 Total 11,806,335 11,163,790 The average number of employees of the Company in 2019 was 2,992 (2018: 2,674). Foreign transaction loss in 2019 mainly represent foreign transaction loss on deposits in currencies, other than Ukrainian hryvnia, caused by strengthening of Ukrainian hryvnia against these currencies.

46 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

25. Finance income 2019 2018

Interest income 314,651 534,976 Dividend income 45,402 - Unwinding of discount on interest-free loans provided - 10,785

Total 360,053 545,761

26. Other income and expenses 2019 2018

Foreign transaction gain 95,592 - Net gain on lease termination 546 - Gain on disposal of property, plant and equipment, construction in progress, intangible assets and assets of disposal group classified as held for sale 137 43,921 Other income 855 34 Other income 97,130 43,955 Loss on impairment of property, plant and equipment, construction in progress, intangible assets and assets of disposal group classified as held for sale (53,615) (100,383) Write-off of property, plant and equipment, construction in progress, intangible assets and assets of disposal group classified as held for sale (14,801) (102,997) Impairment loss from other financial assets - (48,772) Foreign transaction loss - (26,250) Contributions and donations (1,924) (3,971) Other expenses (589) (15,708) Other expenses (70,929) (298,081) Total 26,201 (254,126)

In 2019 the Company recognised impairment losses on property, plant and equipment, construction in progress, intangible assets and assets of disposal group classified as held for sale, in the amount of UAH 53,615 thousand (2018: UAH 100,383 thousand), based on internal indications of impairment for various individual components of network equipment, as the Company did not plan to use this equipment in future. Assets identified as no longer in use were written down to their recoverable amounts, which were based on value in use determined for individual assets, usually zero. 27. Income tax The Company's profits are subject to corporate profit tax in Ukraine only. The major components of income tax expense for the years ended 31 December are: 2019 2018 Current income tax: Current income tax charge 1,873,040 1,552,889 Adjustments of current income tax related to prior periods (23,347) - Deferred tax: Relating to origination and reversal of temporary differences (182,787) (60,959)

Total 1,666,906 1,491,930 Reconciliations between tax expense and the product of accounting profit multiplied by the tax rate for the years ended 31 December are as follows: 2019 2018

Accounting profit before tax 10,628,126 8,294,385

Income tax at actual rate (18%) 1,913,063 1,492,989

Non - taxable income (8,172) - Non - deductible expenses for tax purposes 25,490 38,312 Change of approach in temporary differences recognition (240,128) (39,371) Adjustments recognised in the period for current tax of prior periods (23,347) -

Total 1,666,906 1,491,930

47 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

27. Income tax (continued) Deferred tax assets and liabilities relate to the following items in 2019:

31 December Recognised in 31 December 2019 profit and loss 2018 Deferred tax assets / (liability) : Property, plant and equipment (i) 233,306 53,474 179,832 Intangible assets (i) 68,848 10,043 58,805 Trade and other receivables 31,979 31,979 - Other current liabilities (ii) - (19) 19 Assets arising from contracts with customers (ii) (46,004) 38,500 (84,504) Employee benefit liability (ii) 6,057 (3,464) 9,521 Provisions (ii) 107,954 52,274 55,680 Accumulated tax losses (iii) 56,063 - 56,063 Total 458,203 182,787 275,416

Provision for deferred tax asset (56,063) - (56,063) Net deferred tax asset / (liability) 402,140 182,787 219,353

Deferred tax assets and liabilities relate to the following items in 2018:

31 December Recognised in 1 January 31 December 2018 profit and loss 2018 2017 Deferred tax assets / (liability): Property, plant and equipment (i) 179,832 6,924 172,908 172,908 Intangible assets (i) 58,805 (8,269) 67,074 67,074 Other current liabilities (ii) 19 (40) 59 59 Assets arising from contracts with customers (84,504) 43,285 (127,789) - (ii) Employee benefit liability (ii) 9,521 (5,957) 15,478 15,478 Provisions (ii) 55,680 25,016 30,664 30,664 Accumulated tax losses (iii) 56,063 - 56,063 56,063 Total 275,416 60,959 214,457 342,246

Provision for deferred tax asset (56,063) - (56,063) (56,063) Net deferred tax asset / (liability) 219,353 60,959 158,394 286,183

The nature of the temporary differences is as follows: (i) For property, plant and equipment, intangible assets – differences arise mainly due to different useful lives and impairment estimation; differences in capitalisation principles; (ii) For assets arising from contracts with customers, contract liabilities, employee benefit liability, other current liabilities, provisions– differences arise due to different period of expenses recognition in financial and tax accounting, as well as due to the differences in measurement and recognition principles; (iii) In 2014, the Company recognised deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from ‘Golden Telecom LLC’ (“GT”). In 2015 the Company recognised provision for deferred tax assets of UAH 56,063 thousand on accumulated tax losses inherited from LLC "Golden Telecom" (“GT”). As at 31 December 2019, the Company has payable position on settlements with the budget amounted to UAH 616,786 thousand (2018: UAH 375,672 thousand), which was classified as a current liabilities. It is expected that all tax differences, except those arising on property plant and equipment, intangible assets and assets arising from contracts with customers will be utilized within the next accounting period.

48 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

28. Commitments and contingencies (i) Tax risks Ukrainian legislation and regulations regarding taxation and other operational matters, including currency exchange control and custom regulations, continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations by local, regional and national authorities, and other governmental bodies. Instances of inconsistent interpretations are not unusual. Management believes that the Company has complied with the laws governing its activities and that the Company paid and accrued all taxes. Where the risk of outflow of resources is probable, the Company has accrued provisions based on management’s best estimate. The Company identified certain possible tax contingencies, which are not required to be accrued in the financial statements. These potential tax liabilities may arise and the Company will have to pay additional taxes. The tax authorities can perform inspections for the financial period of three calendar years preceding the year of the inspection. Under certain circumstances reviews may cover longer periods. (ii) Legal matters In the ordinary course of business, the Company is subject to legal actions and complaints. Where the risk of outflow of resources is probable, the Company has accrued provisions based on management’s best estimate. Management believes that the ultimate liability, arising from unasserted claims and complaints, if any, will not have an adverse effect on the Company’s financial position or the results of its future operations in excess of provisions that have been made in these financial statements. (iii) Other capital and purchase of services commitments As at 31 December 2019 the Company had outstanding commitments in respect of purchase and construction of property, plant and equipment in the amount of UAH 748,054 thousand (2018: UAH 183,649 thousand). Increase from prior year represent commitments on new arrangements based on plans of network extension. As at 31 December 2019 the Company had outstanding commitments related to purchases of intangible assets in the amount of UAH 142,504 thousand (2018: UAH 28,631 thousand). As at 31 December 2019 the Company had outstanding commitments related to purchases of services in the amount of UAH 746,570 thousand (2018: UAH 351,544 thousand). (iv) Lease commitments Operating lease – the Company as a lessee The Company had certain leases of buildings, constructions and transmission equipment and vehicles. These leases had an average life from one to seven years with a renewal option included in the contracts. Future minimum rentals payable under non-cancellable operating lease agreements as at 31 December 2018: 2018

Within one year 445,179 After one year but not more than five years 314,910 More than five years 537,660

Total 1,297,749

29. Fair value of financial instruments The management assessed that as at 31 December 2019 and 2018 fair value of cash and short-term deposits, trade and other receivables, other current financial assets, other non-current financial liabilities, trade and other payables approximates their carrying amounts largely due to the short-term maturities of these instruments and its estimate is based on the cash flows discounted at the rates determined under Level 3 of the fair value hierarchy, with the exception of cash and cash equivalents for which Level 1 rates were used.

30. Financial instruments and risk management The Company’s principal financial instruments comprise cash and cash equivalents and other current financial assets. The Company has various other financial instruments, such as trade payables and trade receivables, prepaid credit balances that are refundable to the customers or can be used as currency to purchase items from other suppliers, which arise directly from its operations. It is the Company’s policy not to trade with financial instruments. The Company is exposed to market risk, credit risk and liquidity risk.

49 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

30. Financial instruments and risk management (continued) The Company’s overall risk management program focuses on the unpredictability and inefficiency of the Ukrainian financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company’s senior management oversees the management of these risks and financial risk-taking activities are governed by appropriate policies and procedures so that financial risks are identified, measured and managed in accordance with the Company policies. The policies for managing each of these risks are summarised below. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. The Company does not have significant exposure to interest rate risk as it normally borrows at fixed rates. Neither it has exposure to other price risk. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when the Company’s trade receivables and trade payables are denominated in foreign currencies) and financing activities (when interest-bearing borrowings are denominated in foreign currencies). The exchange rates for foreign currencies, in which the Company’s financial assets and liabilities were denominated, against Ukrainian hryvnia, as declared by the National Bank of Ukraine as at the dates and periods stated, are as follows: USD EUR

1 January 2018 28.067 33.495 Average for 2018 27.202 32.134 31 December 2018 27.688 31.714 Average for 2019 25.837 28.941 31 December 2019 23.686 26.422

The following tables demonstrate the sensitivity to a reasonably possible change in the corresponding exchange rates, with all other variables held constant, of the Company’s profit before tax (due to the changes in the fair value of monetary assets and liabilities). The sensitivity analyses have been prepared on the basis that the proportion of financial instruments in foreign currencies is constant at 31 December 2019 and 2018. Increase/ Increase/ Increase/ (decrease) (decrease) of (decrease) of 2019 in % profit before tax retained earnings

Change in USD exchange rate +10.00% 38,923 31,917 Change in the EUR exchange rate +10.00% 10,029 8,224

Change in the USD exchange rate -1.00% (3,892) (3,191) Change in the EUR exchange rate -1.00% (1 003) (822)

Increase/ Increase/ Increase/ (decrease) (decrease) of (decrease) of 2018 in % profit before tax retained earnings

Change in USD exchange rate +10.00% 219,644 180,108 Change in the EUR exchange rate +10.00% 137,599 112,831

Change in the USD exchange rate -1.00% (21,964) (18,010) Change in the EUR exchange rate -1.00% (13,760) (11,283)

50 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

30. Financial instruments and risk management (continued) Liquidity risk The Company analyses the ageing of its assets and the maturity of its liabilities and plans its liquidity depending on the expected repayment of various instruments. The Company’s short-term and long-term liquidity needs are funded largely through cash flow from operating activities. The table below shows liabilities at 31 December 2019 by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows, including gross finance lease obligations (before deducting future finance charges). Such undiscounted cash flows differ from the amount included in the statement of financial position because the statement of financial position amount is based on discounted cash flows. The maturity analysis of financial liabilities at 31 December 2019 is as follows: Demand From From Over Total and less 3 to 12 12 months 5 years than months to 5 years 3 months

Lease liabilities 192,310 543,451 2,580,067 573,369 3,889,197 Dividends payable 3,484,063 - - - 3,484,063 Trade and other payables 1,146,748 - - - 1,146,748 Advances received from customers 644,440 - - - 644,440 Other financial liabilities 95,841 - - - 95,841

Total 5,563,402 543,451 2,580,067 573,369 9,260,289

The maturity profile of the Company’s financial liabilities as at 31 December 2018 includes only trade and other payables, dividends payable and other financial liabilities with maturity less than 3 month in the amount of UAH 5,738,135 thousand based on contractual undiscounted payments. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Financial instruments, which potentially expose the Company to significant concentrations of credit risk, consist principally of cash in bank, short-term deposits, and trade and other receivables. The Company’s maximum credit risk exposure at 31 December comprises: 2019 2018

Cash and cash equivalents (except for cash in hand) 898,072 5,201,943 Trade and other receivables 724,294 909,939

Total 1,622,366 6,111,882

The Company’s cash and deposits are primarily held in major reputable banks located in Ukraine. As at 31 December 2019 66% of cash and cash equivalents were held in one bank (2018: 84% in three banks). As at 31 December 2019 100% of short-term deposits up to 3 months were held in 1 bank. Analysis by credit quality of cash and cash equivalents and short- term deposits up to 3 months based on Fitch’s ratings as at 31 December is as follows: 2019 2018 Cash and cash Short term Cash and cash Short term equivalents deposits over 3 equivalents deposits over 3 months months

- B rated 224 - - - - B- rated 593,332 - 3,583,519 - - Unrated – Other Ukrainian banks 304,516 - 1,618,424 -

Total 898,072 - 5,201,943 -

For cash and cash equivalents the Company assessed ECL based on the Fitch’s rating for rated banks and based on the sovereign rating of Ukraine defined by Fitch as “B” as of 31 December 2019 for non-rated banks (2018: rating of Ukraine defined by Fitch as “B-”).Based on this assessment the Company concluded that the identified impairment loss was immaterial.

51 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

30. Financial instruments and risk management (continued) Credit risk (continued) Accounts receivable are presented net of allowances. The Company does not require collateral for trade receivables. As at 31 December 2019 part of trade receivables are due from entities under common control totaling to 10.7% (2018: 23.7%) and due from other related parties totalling to zero (2018: zero). Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed for all customers requiring credit over a certain amount. Credit risk arising from financial transactions is reduced through diversification, through accepting counterparties with high credit ratings only and through defining limits on aggregated credit exposure towards each counterparty. The Company’s credit risk exposure is monitored and analysed on a case-by-case basis, and the Company’s management believes that credit risk is appropriately reflected in impairment allowances recognised against assets. 31. Management of Capital The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company has established certain financial targets and coverage ratios that it monitors on a quarterly and annual basis and may adjust its capital management policies and targets following changes of its operating environment, market sentiment or its development strategy. Management is still assessing their optimum capital structure. The Company considers its net debt and equity as its primary capital sources. Its net debt comprises long-term and short- term borrowings (if any) adjusted for the amount of cash and cash equivalents and short-term deposits over 3 months. The amount of capital that the Company managed as of 31 December 2019 was UAH 12,762,285 thousand (2018: UAH 11,484,073 thousand). 32. Accounting policies before 1 January 2019 Leases Leases are classified as finance leases whenever under the terms of the lease lessor transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The evaluation is based on the substance of the transaction. However, there are situations that individually would normally lead the Company to classify a lease as a finance lease, such as if the lease term covers more than 75 percent of the estimated economic life or the present value of the minimum lease payments exceeds 90 percent of the fair value of the leased asset. The Company may enter into an arrangement that does not take the legal form of a lease but conveys a right to use an asset in return for a payment or series of payments. Determining whether an arrangement contains a lease is based on the substance of the arrangement and requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset; and (b) the arrangement conveys a right to use the asset. The Company as lessee Property and equipment acquired by way of finance lease is capitalised and carried at the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses, if any. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are charged to profit and loss on a straight-line basis over the term of the relevant lease. Benefits received and incentives to enter into an operating lease are also amortised on a straight-line basis over the lease term. Advance lease payments made on entering into operating leases or acquiring leaseholds are amortised to profit and loss over the lease term. 33. Events after the reporting period The following non-adjusting events were identified: During February 2020 dividends in the amount of UAH 2,000,039 thousand were declared. During February there were repayments of dividends for the amount of UAH 888,000 thousand. The operating conditions and economic situation in Ukraine are described in Note 2 of these financial statements. On 16 March 2020, as a part of the reframing process, the Kyivstar received a 20-year license for using of 4G and 2G technologies on 888,8-895,0/933,8-940,0 MHz (6,2 х 2 MHz) freequences in 25 regions of Ukraine and a total bandwidth of 310 MHz. The payment to the National Commission for the Regulation of Communications and Informatisation (NCCIR) amounted to UAH 212,391 thousand. The license becomes active as at 01 July 2020.

52 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

34. Supplementary notes Codes Date (year, month, date) 2019 12 31 Company: Private Joint Stock Company “Kyivstar” EDRPOU 21673832 Territory: Kyiv, Shevchenkivsky district КОАТUU 8038900000 State power authority: - SPODU Organisational and legal form of economic activity: Joint Stock Company KOPFG 230 Type of economic activity: Activities in the field of wireless telecommunications КVЕD 61.20 Measurement unit: thousands of Hryvnia, no decimal point

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 DKUD code 1801001 І. Intangible assets Balance at the beginning Revaluation (upward +, Other changes for the Balance at the end of the Disposals in the year Amortisation Impairment Line of the year Additions in downward -) year year Groups of intangible assets charges for losses for the code the year Cost or Accum. Cost or Accum. Cost or Accum. the year year Cost or Accum. Cost or Accum. valuation amortisation valuation amortisation valuation amortisation valuation amortisation valuation amortisation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 ------Rights to use natural resources 010 Rights to use property 020 ------Rights for commercial signs 030 ------Rights for the industrial property ------objects 040 ------Copyright and allied rights 050 060 ------Other intangible assets 070 12,704,637 4,401,920 895,207 - - 298,364 296,235 1,027,269 9,848 - - 13,301,479 5,142,801 Total 080 12,704,637 4,401,920 895,207 - - 298,364 296,235 1,027,269 9,848 - - 13,301,479 5,142,801 Goodwill 090 ------

Item Line code Amount 1 2 3 From line 080, col. 14 cost of intangible assets with restricted ownership rights 081 - cost of pledged intangible assets 082 - cost of intangible assets created in-house 083 - From line 080, col. 5, cost of intangible assets received for targeted financing 084 - From line 080, col. 15, accumulated amortisation of intangible assets with restricted ownership rights 085 -

53 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

II. Property, plant and equipment Including: Revaluation Balance at the Disposals in the Other changes for Balance at the end of Transferred (upward +, Depreciati Received on finance Groups of beginning of the year year Impair- the year the year on operating Line Additions downward -) on charge lease property, plant and ment lease code in the year for the Cost equipment loss Accum. Cost or Accum Cost or Accum. Cost or Accum. year Cost or Accum. Cost or Accum Cost or Accum or deprec’ valuation deprec'n valuation deprec'n valuation deprec'n valuation deprec'n valuation deprec'n valuation deprec'n valu- n ation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44,684 ------44,684 - - - - - Investment property 105 ------Capital costs of land 110 improvement ------Buildings, constructions and 120 1,963,848 833,770 1,229,945 - - 241,126 13,122 554,712 - 2,089,902 * - 5,042,569 1,375,360 - - - - transmission equipment ** Machinery and 130 19,533,579 12,716,199 2,989,628 - - 636,881 617,735 1,509,159 26,606 - - 21,886,326 13,634,229 - - - - equipment Vehicles 140 191,561 71,130 19,065 - - 268 157 59,190 - - - 210,358 130,163 80,278 24,099 - - Tools, fittings and 150 furniture ------Livestock 160 ------Perennial plants 170 ------Other fixed assets 180 ------Library assets 190 ------Non-current low- 200 value items ------Temporary 210 buildings ------Natural resources 220 ------Packaging 230 ------Hire items 240 ------Other non-current 250 tangible assets ------Total 260 21,733,672 13,621,099 4,238,638 - - 878,275 631,014 2,123,061 26,606 2,089,902 - 27,183,937 15,139,752 80,278 24,099 - -

* “Other changes for the year” include effect from the adoption of IFRS 16, Leases, effective from 1 January 2019. Refer to Notes 4, 9. ** “Buildings, constructions and transmission equipment” includes right-of-use asset, recognized in the result of IFRS 16, Leases implementation. Refer to Notes 4, 9.

54 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

II. Property, plant and equipment (continued)

Item Supplementary Line code Amount notes From line 260, col. 14 cost of PPE where legal restrictions of ownership rights exist 261 - cost of pledged PPE 262 - residual value of PPE out of use on a temporary basis (conservation, reconstruction, etc.) 263 - 264 7,760,366 cost (or valuation) of fully depreciated PPE PPE of leased property 2641 - From line 260, col. 8 residual value of PPE decommissioned for future sale 265 597 residual value of fixed assets lost due to accidents 2651 - From line 260, col. 5 cost of PPE purchased for targeted finance 266 - Cost of PPE received on operating lease terms 267 From line 260, col. 15 accumulated depreciation of fixed assets where legal restrictions of ownership rights exist 268 - From line 105, col. 14 cost of investment property valued at fair value 269 -

55 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

ІІІ. Capital investments

Line At the end of Item For the year code the year 1 2 3 4 Capital construction 280 1,201,403 110,707 Purchase (manufacturing) of PPE 290 1,852,446 364,955 Purchase (manufacturing) of other non-current tangible assets 300 - - Purchase (manufacturing) of intangible assets 310 965,107 93,738 Purchase (growing) of long-term biological assets 320 - - Other 330 - - Total 340 4,018,956 569,400

From line 340, col. 3 capital investments in investment property (341) ______financial costs included in financial investments (342) ______

IV. Financial investments

Item Line At the end of the year For the year code Long-term Current 1 2 3 4 5 А. Financial investments under equity method into: associates 350 - - - subsidiaries 360 - - - joint activities 370 - - - В. Other financial investments into: shares in other entities’ statutory capital 380 16,000 171,269 - shares 390 - - - bonds 400 - - - other 410 - - - Total (A+ B) 420 16,000 171,269 -

From line 1035 col. 4 of the Balance Sheet Other long-term financial investments stated: (Statement of Financial Position) at cost (421) __171,269 _ at fair value (422) ______at fair value (423) ______From line 1160 col. 4 of the Balance Sheet Current financial investments stated: (Statement of Financial Position) at cost (424) ______at fair value (425) ______at amortised cost (426) ______

56 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

V. Income and expenses

Suppleme Line Item ntary Income Expenses code notes 1 2 3 4 А. Other operating income and expenses Operating lease of assets 440 84,554 - Operating exchange difference 450 - 605,905 Sale of other current assets 460 - - Fines, penalties and interest 470 3,294 4,071 Maintenance of social assets 480 - - Other operating income and expenses 490 56,385 103,508 Including: X charges to bad debt reserve 491 52,653 non-productive expenses and losses 492 X - B. Income and expenses from participation in equity of: associates 500 - - subsidiaries 510 - - joint activities 520 - - C. Other financial income and expenses Dividends 530 - X Interest 540 X - Finance lease of assets 550 - - Other financial income and expenses 560 360,053 341,819 D. Other income and expenses Sale of financial investments 570 - - Income from business combinations 580 - - Result of impairment test 590 - - Non-operating exchange difference 600 95,592 - Assets received for free 610 - Write-off of non-current assets 620 X 14,801 Other income and expenses 630 1,538 56,128

Line Item Amount code 1 2 3 Barter transactions with goods, works and services 631 - Share in sales revenue from sales of goods, works and services under barter agreements with related parties (%) 632 - From lines 540-560 col. 4: finance expenses included in cost of sales 633 -

57 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

VI. Cash

Item Line code At the end of the year 1 2 3 Cash on hand 640 - Current bank account 650 172,824 Other bank accounts (letters of credit, cheque books) 660 454,302 Cash in transit 670 270,946 Cash equivalents 680 - Total 690 898,072

From line 1090, col. 4 of the Balance Sheet (Statement of Financial Position) cash with restricted use 691

VII. Provisions

Increase during the Amount of Reversal of reporting period expected Balance at unused compensation by Balance at Type of provision Line the begin- Amount used amounts the other party the end of code ning of the Provision Additional during the year during the included in the the year year created charges reporting provision year assessment 1 2 3 4 5 6 7 8 9 Provision for vacation payments to employees 710 63,471 136,069 - 104,546 - - 94,994 Provision for additional future pension expenses 720 14,973 8,339 - - - - 23,312 Provision for future expenses related to guarantees 730 ------Provision for future restructuring expenses 740 ------Provision for future expenses related to onerous contracts 750 ------Other provisions 760 347,147 102,524 - - 132,252 - 317,419 770 ------Doubtful debt provision 775 172,203 52,653 - 51,005 - - 173,851 Total 780 597,794 299,585 - 155,551 132,252 - 609,576

58 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

VIII. Inventories

Revaluation in the year Line Closing book Item code value Increase in the net Downward realisable value* revaluation 1 2 3 4 5 Raw and other materials 800 48,234 - - Purchased components and units 810 - - - Fuel 820 1,416 - - Packaging 830 - - - Construction materials 840 - - - Spare parts 850 - - - Agricultural materials 860 - - - Current biological assets 870 - - - Low-value items 880 1,010 - - Work in progress 890 - - - Finished goods 900 - - - Goods for resale 910 15,314 - - Total 920 65,974 - -

From line 920, col. 3 Book value of inventories: Supplemen- tary notes shown at net realisable value (921) __-__ transferred for processing (922) __-__ pledged (923) __-__ transferred on commission (924) __-__ Assets on safekeeping (off-balance sheet account 02) (925) __-__ From line 1200, col. 4 of the Balance Sheet (Statement of Financial Position) Inventories (926) __-__ held for sale * determined according to p. 28 of NR(S)AU 9 “Inventories”

59 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

IX. Accounts receivable

Including outstanding by age: Line Total at Item code year-end Less than 12 From 12 to From 18 to months 18 months 36 months 1 2 3 4 5 6 Accounts receivable for goods, works and - - services 940 720,096 720,096 Other current accounts receivable 950 - - - -

Bad accounts receivable written-off during the reporting year (951) ______From lines 940 and 950 accounts receivable with related parties (952) ______

X. Losses and shortages resulting from damages

Line Item Amount code 1 2 3 Losses and shortages identified and written-off during the year 960 77 Recognised as debts of the guilty parties during the year 970 - Losses and shortages where guilty parties are not identified at year end (off-balance sheet account 072) 980 -

XI. Construction contracts

Line Item Amount code 1 2 3 Revenue from construction contracts for current year 1110 - Amounts outstanding at reporting year end: from customers, gross 1120 - to customers, gross 1130 - on advances received 1140 - Overdue amounts at year end 1150 - Cost of work done by subcontractors for construction contracts in progress 1160 -

60 Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2019 (in thousands of Hryvnia)

Notes to the Annual Financial Statements for the year ended 31 December 2019 Form 5 (continued)

XII. Corporate profit tax

Line Item Amount code 1 2 3 Current corporate profit tax 1210 1,849,693 Deferred tax assets: at the beginning of year 1220 219,353 at the end of year 1225 402,140 Deferred tax liabilities: at the beginning of year 1230 - at the end of year 1235 - Included in the Statement of Financial Results – total 1240 1,666,906 Including: current corporate profit tax 1241 1,849,693 decrease (increase) of deferred tax assets 1242 (182,787) increase (decrease) of deferred tax liabilities 1243 - Recorded in equity – total 1250 - Including: current corporate profit tax 1251 - decrease (increase) of deferred tax assets 1252 - increase (decrease) of deferred tax liabilities 1253 -

XIII. Use of depreciation charge

Line Item Amount code 1 2 3 Depreciation charge for the year 1300 3,150,330 Used during the year – total 1310 3,150,330 Including for: construction of units 1311 941,741 purchasing (manufacturing) and improvements of PPE 1312 1,452,073 including machines and equipment 1313 1,433,008 purchasing (manufacturing) of intangible assets 1314 756,516 paying off loans received for capital investments 1315 - 1316 - 1317 -

______Oleksandr Komarov Olena Ksenich President Chief Accountant