SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly

Presented by: VTB Bank, Custody

April 20, 2017 Issue No. 2017/14

st th Please be advised that May 1 and May 9 are public holidays (“Labor Day” and “Victory Day”) in . Please note that May 8th is an official day off.

Company News

MTS may replace one representative on MGTS’ board of directors On April 13, 2017 the board of directors of City Telephone Company (MGTS), a fixed line unit of mobile operator MTS, approved a list of candidates to its new membership, which will be elected by shareholders on June 23. Irina Karyova, MTS’ financial director for work with macroregions, was replaced on the list with Vladimir Travkov, director of MTS’ functional controlling department. The other candidates to the board, comprising nine people in total, are its current members. MGTS will close the shareholders’ register for an annual general meeting on May 29.

Chinese Fosun to acquire 20-25% in for USD 2 bln On April 13, 2017 it was reported that Chinese investment company Fosun intends to acquire 20-25% in Russian gold producer Polyus for USD 2 bln. Fosun will represent a consortium of Chinese companies in a deal with Polyus’s parent company Polyus Gold. The parties have come to an agreement on the main transaction terms, they are elaborating the project legislatively and will make a public announcement afterwards. After Polyus had won a tender for the Sukhoi Log, the biggest gold mine in Russia and the world, earlier this year, its gold reserves increased considerably. The company’s proven and inferred reserves amount to 3,600 tonnes, which is comparable to China’s overall gold reserves. The deal envisages that the Chinese party will get the right to sell the company’s output proportionally to its shareholding, which may reach 25%. This may substantially boost China’s gold reserves to meet demand of the country’s market.

Bank mulls offering RUB 2-3 bln additional shares On April 13, 2017 Konstantin Balandin, CEO of Bank Saint Petersburg, stated that the bank was considering offering RUB 2-3 bln additional shares to fulfill obligations under state assistance in the form of OFZ government bonds. The bank received 14.6 bln worth of OFZ bonds, but in 2016, it violated one of the clauses of its agreement with the Deposit Insurance Agency (DIA) and now must pay a fine of to up to 2% of the sum. According to Balandin the bank is indeed considering whether it should offer a small additional package of shares to raise tier 1 capital and to fulfill the agreement and avoid covenants. The decision has not been made yet but the bank is studying the issue quite seriously. The decision on the issue will be made by July.

Cyprus-based Lagranolia wants to buy 100% in M.Video at USD 7 per share On April 14, 2017 Cyprus-based Lagranolia Holdings Limited made an offer to acquire a 100% stake or 179.77 mln shares of Russian electronic goods retailer M.Video at USD 7 per share. The sum of the

1

transaction is estimated at RUB 10.2 bln at a ruble rate as of the offer date, March 29. In March, the company said the deal of Investment holding Safmar acquiring M.Video might be closed in May.

United Wagon Company to offer 2.5 mln extra shares at On April 18, 2017 it was announced that Russian rail car producer United Wagon Company plans to issue up to 2.5 mln common shares and offer them on the Moscow Exchange during a secondary public offering (SPO). The start of the offering is slated for the end of April, but the final term will be set by the board of directors. The board will also set the offering price on the basis of the market price. In 2016, United Wagon Company sold 6.9% of its increased capital during an SPO to raise RUB 5 bln. The company held the SPO at RUB 640 per share on the Moscow Exchange, and it allowed the company to raise its equity to RUB 80 bln. Before the 2016 SPO, the major shareholders of United Wagon Company were ICT Holding Ltd., which owned a 49.98% stake through United Wagon Plc, and investment company Ronin Trust with a 13.1% stake. The company also said in June 2016 that United Wagon Plc purchased RUB 1 bln worth of its shares at the SPO to maintain its 49.98% stake.

VTB’s former executive Shumeiko becomes ’s vice president On April 19, 2017 it was stated that Anna Shumeiko, former vice president of Russia’s VTB Bank, had been appointed as a vice president of state-controlled telecom operator Rostelecom and head of the company’s president staff. Shumeiko will be in charge of organizing work of the company’s president and management board, controlling the fulfillment of their decisions and improving effectiveness of the management system, among others. Rostelecom’s Vice President Artemy Prokopenko will focus on government relations, including issues of industry regulation. In March, Prime Minister Dmitry Medvedev signed an order to appoint Mikhail Oseyevsky, also a former top manager at VTB Bank, as Rostelecom’s head. Oseyevsky replaced Sergei Kalugin who became a deputy communications minister.

UWC schedules SPO for April 26-May 5, 2017 On April 20, 2017 it was reported that Russia’s United Wagon Company (UWC) scheduled a secondary public offering (SPO) 2.5 mln new shares for April 26-May 5 on the Moscow Exchange.

Zhukovsky airport owner can hold IPO On April 20, 2017 Gediminas Ziemelis, Chairman of the board of directors of Avia Solutions Group (ASG), stated that the owner of Moscow Region’s Zhukovsky airport is to hold an initial public offering (IPO), possibly, in Moscow. The airport was launched in May 2016.

AvtoVAZ to begin private offering of new shares on April 21, 2017 On April 20, 2017 it was announced that Russian car producer AvtoVAZ plans to start offering new shares privately on April 21. The company’s shareholders earlier voted for an issue of 9.25 bln shares to offer at RUB 10.3 per share via a private subscription. In October, AvtoVAZ shareholders approved the company’s right to issue 15 bln common shares at RUB 5 per share and a public offering of 3.281 bln additional shares. The company later raised RUB 26.141 bln via a sale of 2.9 bln shares. AvtoVAZ’s major shareholder, Alliance Rostec Auto B.V., a joint venture between state industrial corporation Rostec and the Renault- Nissan alliance, with 74.5%, bought 1.654 bln shares for RUB 14.89 bln. Renaissance Securities acquired 1.25 bln shares for RUB 11.251 bln. Investment company Renaissance Capital acquired a 24.09% stake in AvtoVAZ.

Dividends/coupons VSMPO-Avisma may pay RUB 1,300 per share in dividends for 2016 On April 14, 2017 the board of directors of titanium giant VSMPO-Avisma recommended paying RUB 1,300 per share, or a total of RUB 15.07 bln in dividends for 2016. The record date for the dividends is set at June 5. In 2015, the company paid its first ever January-June dividends of RUB 788 per share, or a total of RUB 9.085 bln. The company also paid RUB 458.22 per share, or a total of RUB 5.283 bln, in final dividends for 2015. In September 2016, shareholders of VSMPO-Avisma approved paying RUB 816 per share, or a total of RUB 9.408 bln in dividends for January-June 2016. State industrial corporation Rostec owns 25% plus one share in VSMPO-Avisma, while Expotrade, controlled by VSMPO-Avisma’s management, owns 65% in the company.

2

Rosneft board of directors to recommend 2016 dividends on April 24, 2017 On April 18, 2017 it was reported that the board of directors of Russian oil major plans to meet on April 24 to discuss recommendations for dividends for 2016 and the date of an annual general meeting of shareholders. In early April, Rosneft CEO Igor Sechin said the company’s management supported the idea of the core shareholder, state energy holding Rosneftegaz, to pay 35% of the net profit in dividends for 2016. Previously, the company paid RUB 11.75 per share in dividends for 2015, which is a 43% increase on the year and accounts for 35% of the company’s net profit calculated under International Financial Reporting Standards for the year. The total dividend payout for 2015 amounted to RUB 124.5 bln. According to materials of Rosneft, the company’s major shareholders are Rosneftegaz with 50%, BP Russian Investments Limited with 19.75%, and QHG Oil Ventures Pte. Ltd. with 19.5%.

NCSP may pay RUB 0.78 per share in dividends for 2016 On April 18, 2017 the board of directors of Russia’s Novorossiysk Commercial Sea Port (NCSP) recommended paying RUB 0.779 per share, or a total of RUB 15 bln, in dividends for 2016. The record date for dividends is set at May 29. Shareholders will discuss the recommendation at an annual general meeting on May 18. The board made the recommendation taking into account the dividends for January-March 2016 of RUB 1 bln and the dividends for January-June 2016 of RUB 8.994 bln. NCSP’s major shareholders are multi-industry holding Summa Group and oil pipeline monopoly which own 50.1% of the company on a parity basis. Transneft also controls another 10.5% of shares, and the Russian government holds 20% of shares that are to be privatized.

Kuzbass Fuel Company may pay RUB 596 mln in dividends for 2016 On April 18, 2017 the board of directors of Russia’s Kuzbass Fuel Company, also known as Kuzbasskaya Toplivnaya Company, recommended paying RUB 6 per share, or a total of RUB 595.55 mln in dividends for 2016. The shareholders will discuss the recommendation at an annual general meeting on May 25. The last time the company paid any dividends was in 2015, when it distributed RUB 2.5 per share in dividends for January-March. Kuzbass fuel Company did not pay any final dividends for 2014 and 2015. Kuzbass Fuel Company’s key shareholders are CEO Igor Prokudin with a 50.001% stake and Chairman of the board of directors Vadim Danilov with 15.61%.

CEO says TransContainer may pay 25% of RAS net profit in 2016 dividends On April 18, 2017 Pyotr Baskakov, CEO of Russian railway container operator TransContainer, said that the company’s management would propose paying no more than 25% of the company’s net profit calculated under Russian Accounting Standards (RAS) in dividends for 2016. In 2016, TransContainer’s RAS net profit jumped 42.2% on the year to RUB 2.631 bln. In June 2016, shareholders of TransContainer decided against paying dividends for 2015, but later, at an extraordinary general meeting, they approved paying a total of RUB 4.83 bln in dividends, including RUB 1.33 bln in dividends for January-June 2016 and dividends using undisbursed profit of previous years. United Transport Logistics Company of Russia, , and Kazakhstan owns 50% plus two shares in TransContainer, but earlier said it plans to get the stake back. Far Eastern Shipping Company (FESCO), part of Summa Group, owns 25.07%, and private pension fund Blagosostoyanie has 24.5%.

Government to offer ALROSA’s 2016 dividends of 50% of IFRS profit On April 19, 2017 Anton Siluanov, the finance minister and chairman of the supervisory board of uncut diamond giant ALROSA, stated that the Russian government would offer the company to pay 50% of its net profit calculated under International Financial Reporting Standards (IFRS) in dividends for 2016. Previously, the company paid RUB 2.09 per share, or a total of RUB 15.392 bln in dividends for 2015, which accounted for 50% of its IFRS net profit for the year. In 2016, the net profit of ALROSA jumped more than fourfold on the year to RUB 133.471 bln. The government owns 33% in ALROSA, the Yakutia republic 25% plus one share, the districts of the republic hold 8% and the rest is in free float.

Bashkortostan eyes Bashneft’s dividends for 2016 flat on year On April 19, 2017 a representative of the government of the republic of Bashkortostan said that the republic expects oil company Bashneft to pay the same amount of dividends for 2016 that it paid for 2015. Bashneft paid RUB 164 per share, or a total of RUB 29.132 bln in dividends for 2015, including RUB 7.25 bln to Bashkortostan. The company’s net profit attributable to shareholders fell 9.4% on the year to RUB 52.696 bln in 2016, as calculated under International Financial Reporting Standards (IFRS). Oil major Rosneft owns 50.08% in Bashneft, while Bashkortostan owns 25% plus one share.

3

Severstal may pay RUB 24.44 per share in dividends for January-March 2017 On April 19, 2017 the board of directors of Russian steelmaker recommended paying RUB 24.44 per share, or about RUB 20.5 bln, in dividends for January-March. Severstal paid RUB 8.25 per share, or a total of RUB 6.91, in dividends for January-March 2016. Shareholders will consider the recommendation at an annual general meeting on June 9. The register for the meeting will be closed on May 15. If the decision to pay dividends is approved, the record date will be June 20.

Sberbank’s board recommends RUB 6 per share in dividends for 2016 On April 20, 2017 German Gref, CEO of Russia’s top bank Sberbank, stated that the bank’s supervisory board recommended more than tripling the dividend payout on the year to RUB 6 per share on 2016 results, or 25% of the net profit calculated under International Financial Reporting Standards (IFRS). The record date for dividends is set for June 14. He also said that the decision to pay 25% of the net profit calculated under IFRS was a compromise between interests of shareholders and provision of long-term stability of the bank. Previously, Sberbank paid RUB 1.97 per share, or a total of RUB 44.5 bln, in dividends for 2015. The bank’s IFRS net profit more than doubled on the year to RUB 541.9 bln in 2016. Russia’s central bank owns a controlling stake in Sberbank, foreign companies 45.60% local companies 1.5% and other private investors 2.9%.

Eurobonds / DRs Polyus to hold SPO in Moscow, London in May-June 2017 On April 17, 2017 a banking source said that Russian gold producer Polyus plans to hold a secondary public offering (SPO) on the Moscow and the London stock exchanges at the same time in May-June. A road show is not scheduled yet. The minimum amount of the offering is to satisfy the requirements of the first tier listing of the Moscow Exchange. In April 2016, the Moscow Exchange included Polyus’ shares in the first level of the list of securities admitted to trading. One of bourse’s requirements to an issuer of such securities is that no less than 10% of shares must be in free float. At present, Polyus’ free float amounts to about 5%. The source said that Polyus sees the London trading floor as an opportunity to address a larger number of investors. Goldman Sachs, JP Morgan, Sberbank CIB, VTB Capital, Gazprombank, Morgan Stanley and BMO will act as organizers. The board of directors of Polyus approved offering 28.6 mln shares in December 2016. In April, the company cancelled 63.082 mln treasury shares after a merger with Polyus-Invest. As a result, Polyus’s capital is split into 127.545 mln shares. Earlier in April, China’s Fosun agreed to buy a 20- 25% stake in Polyus for up to USD 2 bln.

PhosAgro to hold dollar-Eurobond road show from April 20, 2017 On April 18, 2017 a banking source stated that Russian fertilizer producer PhosAgro plans to hold a road show of U.S. dollar-denominated Eurobonds from April 20. Meetings with investors will be held in Moscow, London and the U.S. The company may offer securities with a maturity of 4-5 years. Citi, Sberbank CIB, VTB Capital, Merrill Lynch, SG CIB, UBS, and will act as organizers.

IMH to hold 5-year dollar Eurobond road show from April 20, 2017 On April 18, 2017 a banking source said that coal and iron ore maker Industrial Metallurgical Holding (IMH), formerly known as Koks, plans to hold a road show for five-year U.S. dollar-denominated Eurobonds from April 20. Meetings with investors will be held in Russia, Europe and the U.S. Citi, Renaissance Capital, Sberbank CIB and VTB Capital will act as organizers. The company also intends to buy back its dollar- denominated Eurobonds maturing in 2018.

Russian publisher Prosveshcheniye may hold IPO in 2017-2019 On April 18, 2017 Vladimir Uzun, president of management company Prosveshcheniye, said that Russian publisher of educational literature and teaching aids Prosveshcheniye plans to hold an initial public offering (IPO) in 2017-2019. The company studies two floors - the Moscow floor and the London one. Sales Director Mikhail Kozhevnikov said that the company expects revenue to reach about RUB 98 bln by 2025. Prosveshcheniye has operated for more than 86 years, and it lists companies like Express Publishing, Cornelsen, Klett, CLEInternational, Anaya, Didacta, Westermann and others among its partners. In 2016, the company produced 79 mln units of production, including 30 mln textbooks of different types and more than 48 mln units of other printed materials like workbooks and teaching aids.

4

Credit Bank of Moscow plans sub Eurobond road show on April 20, 2017 On April 19, 2017 a banking source stated that the plans to begin a road show for its subordinated Eurobonds in Asia, Europe and the U.S. on April 20. SG CIB, Credit Suisse, HSBC, Citi, J.P. Morgan, Raiffeisen Bank and brokerage company Region will act as the organizers. The bank can place indefinite-term Eurobonds with a 5.5-year buyback offer, depending on the market conditions.

Russia plans no Eurobond offering in April 2017 On April 19, 2017 Anton Siluanov, the Finance Minister, stated that the Ministry did not plan to offer sovereign Eurobonds in April, and only Russian banks might act as organizers of an offering later in 2017. Russia’s second largest bank VTB may act as an organizer, but top bank Sberbank may also take part in organization of an offering. The Russian budget envisages placement of up to USD 7 bln Eurobonds in 2017. The Finance Ministry said earlier it planned to offer USD 3 bln worth of new securities and to swap USD 4 bln worth of the securities in circulation for new issues.

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

For more information kindly contact: Anna Enfiandzhiants Evgenia Sakr Julia Dombrovskaya T +7 (495) 783 13 91 T +7 (495) 783 13 64 T +7 (4 95) 783 13 15 F +7 (495) 783 13 89 F +7 (495) 783 13 89 F +7 (495) 783 13 20 E [email protected] E [email protected] E [email protected] This document has been prepared exclusively for internal use of VTB Bank (PJSC) customers. The information should not be further distributed or duplicated in whole or in part by any means without the prior written consent of VTB Bank (PJSC). The information contained herein has been prepared on the basis of information which is either publicly available or obtained from a source which VTB Bank (PJSC) believes to be reliable at the time of publication. Information provided herein may be a summary or translation. The content of the material contained herein is subject to change without notice, and such changes could affect its validity. VTB Bank (PJSC) is not obligated to update the material in light of future events. Furthermore, VTB Bank (PJSC) does not warrant, expressly or implicitly, its veracity, accuracy or completeness. VTB Bank (PJSC) and its affiliates accept no liability whatsoever for any use of this communication or any action taken based on or arising from the material contained herein. Additional information may be available upon request. The material in this communication is for information purposes only. Therefore, this communication should not be interpreted as investment, tax or legal advice by VTB Bank (PJSC) or any of its officers, directors, employees or agents and customers should consult with appropriate professional advisers for these specific matters. Nothing expressed or implied herein is intended to create any obligation of VTB Bank (PJSC) and/or impose any liability on VTB Bank (PJSC) and/or create legal relations between VTB Bank (PJSC) and VTB Bank (PJSC) customers.

5