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Presented by: VTB Bank, Custody

December 19, 2019 Issue No. 2019/48

Market News

Russian firms and banks to pay 16% more dividends in December–January On December 16, 2019 the Central Bank said in a research note that Russian companies and banks plan to pay RUB 418 bln in dividends in December 2019 and January 2020, a 16% rise on the year.

Russia’s Finance Ministry places RUB 27 bln OFZ bonds In December 18, 2019 it was stated that ’s Finance Ministry had placed RUB 26.725 bln of OFZ 26227 government bonds with fixed coupon income maturing in July 2024 at an auction on December 18. Demand for the bonds totaled RUB 49.273 bln. The cut-off price amounted to 105.44% of the face value and the weighted average price was at 105.5056%. The cut-off yield stood at 6.11% annually. The ministry also placed RUB 29.483 bln of OFZ-PD 26230 government bonds maturing in March 2039 with a cut-off price of 112.6115% of the face value, the weighted average price of 112.7202% of the face value and the cut-off yield of 6.64% annually. Demand for the bonds amounted to RUB 41.691 bln. The authority said earlier it planned to offer a total of RUB 420 bln of OFZ bonds in October–December. On December 19, 2019 the ministry said in a statement that it had fulfilled the 2019 domestic debt program. The annual plan compliance stands at 99.96% of a RUB 2.084 trn goal.

Company News

Delo Group says closes RUB 60 bln purchase of 50% in TransContainer On December 13, 2019 it was stated that Delo Group of Russian tycoon Sergei Shishkaryov, had closed a RUB 60.3 bln acquisition of 50% plus two shares in container operator TransContainer from Russian Railways. It was said in the statement that Delo Group had closed an acquisition of a controlling stake in TransContainer, whose shares were registered on the account of Delo-Tsentr in the register of the public joint stock company. Shishkaryov said earlier that the group planned to finance 25–30% of the deal with its own funds and finance the remaining part with a loan from Sberbank. After that, Delo Group opened a RUB 30 bln credit line with Sberbank to partially finance the deal. Yenisei Capital of tycoons and holds 24.5051% in TransContainer. Another large shareholder of the company is Russia’s second largest bank VTB, which bought a 24.84% stake from Far Eastern Shipping Company (FESCO) in October 2018 and planned to resell it.

CEO says FESCO redeems debts to holders of RUB bonds On December 16, 2019 CEO of Russia’s Far Eastern Shipping Company (FESCO) Alexander Isurin told reporters that FESCO had redeemed its debts to holders of the company’s RUB-denominated bonds, and may consider new issues in April–June 2020 as a part of debt restructuring to VTB Bank. FESCO had outstanding debt on two issues of RUB bonds. International rating agency Fitch put the company’s non- restructured debt at RUB 378 mln in June saying it is owned by individuals. The company planned to finish the buyback of the remaining bonds until the end of 2019. Isurin said that they had redeemed everything and there are only two things left. First, there are bondholders who didn’t respond and bring back RUB 17 mln of Eurobonds. Their money was left at the notary, they can come and get the money under the final offer. And also there is a legal dispute that FESCO want to close, but the CEO mentioned it is not seen as violation. FESCO plans to return to discussion of new bond issues in April–June 2020. Isurin said it is one of the options to refinance a loan, and added that the company would consider the European markets as well.

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SUEK to buy WGC-2’s Krasnoyarsk plant for RUB 10 bln On December 17, 2019 Kommersant business daily reported that Russia’s Siberian Coal Energy Company (SUEK) had agreed with power utility Wholesale Generating Company-2 (WGC-2) of Gazprom Energoholding a RUB 10 bln sales deal for 1.26-gigawatt (GW) Krasnoyarsk GRES-2 plant. Gazprom Energoholding is to receive the first RUB 5 bln tranche in January 2020. The deal should be closed until the end of 2019. The Krasnoyarsk GRES-2 is Gazprom Energoholding’s only asset in Siberia. The sources told Kommersant that financial group Safmar of tycoon Mikhail Gutseriyev was a contender for the Krasnoyarsk GRES-2 even though it’s a non-core asset for the company. Safmar’s subsidiary Russian Coal covers up to 30% of the plant’s demand for coal with supplies from the Pereyaslavky coal mine, and the sources told the business daily that the coal producer may lose its contracts if the plant’s owner changes. However Safmar representative has denied reports about its interest in the purchase of the Krasnoyarsk GRES-2 power plant from Wholesale Generating Company-2 (WGC-2). The share of SUEK’s assets in Siberia will rise by 2.43 percentage points to 23.44% following the purchase of Krasnoyarsk GRES-2, and the company will top power utility T Plus by its combined power generation capacities, occupying the sixth place with 17.42 GW. Gazprom Energoholding and SUEK declined to comment, while Safmar and the Federal Antimonopoly Service did not respond to a request for comment.

Gazprom’s directors to discuss new dividend policy on December 24 On December 17, 2019 it was stated that the board of directors of Russian gas giant Gazprom will meet on December 24 to discuss a new dividend policy. On December 12, Gazprom’s executive management approved a new dividend policy of the company envisaging paying at least 30% of the adjusted net profit under International Financial Reporting Standards (IFRS) for 2019, at least 40% for 2020 and at least 50% for 2021 in dividends. The directors will also discuss the investment program and budget of the company for 2020.

Globaltruck unit buys back 0.33% stake in parent company On December 17, 2019 it was stated that Globaltruck Logistic, affiliate of Globaltruck, bought back 0.33% in the parent company from November 12 till November 29. The RUB 386 mln buyback program is in force from November 11, 2019 until May 31, 2021 or until the limit is reached in price or the amount of shares. Under the program the company buys its shares at no more than RUB 132 per security.

Qiwi board chair Kim to replace CEO Solonin on January 15, 2020 On December 18, 2019 it was said in a statement that Boris Kim, a founding member of Russian payment system operator Qiwi and chairman of the board since 2013, will become CEO from January 15, 2020, after resignation of Sergey Solonin, who had served in this capacity since 2012. Solonin will continue to serve as a member of the board and has been appointed its executive chairman. In this position, he will continue to be closely engaged in management of the company, concentrating primarily on Qiwi’s long-term strategy, including expansion into new business models and niches. Kim will remain a member of the board but will step down from his role as chairman of the board and member of the compensation committee of the board from January 15, 2020. Maria Shevchenko was appointed as deputy CEO and will focus on compliance, legal and back-office operations and support Kim in running day-to-day administrative and operational functions of the group together with other members of the senior management team. A spokesperson for Solonin said the businessman will keep control over the company, but can sell some shares. The spokesperson added that the sale of a controlling stake is out of the question, there is no such intention. He mentioned that Sergei believes in the company and is sure that it will evolve as swiftly as it does now. The spokesperson stressed, however, that the market will change dramatically again in several years, and so that Qiwi is ready for it, Solonin intends to invest his full time in long-term strategic planning for five years and more. Kim’s promotion will be logical in the strategy of the group’s development and will enhance business results, the spokesperson said, adding that Kim has recently sold a minor stake of shares. He mentioned that Kim registered 750,000 shares under the (SEC) rule 144a, and 46,000 are sold at the moment. The sale was planned and has personal reasons. The sale does not mean leaving or Kim’s intention to quit the business.

US Justice Department clears Tenaris to buy Russia’s TMK unit On December 18, 2019 it was stated that the U.S. Justice Department had approved an acquisition of IPSCO Tubulars by Tenaris from Russian oil and gas pipe producer TMK. The proposed transaction was entered into on March 22, 2019 pursuant to a stock purchase agreement between TMK, one of the world’s leading producers of tubular products for the oil and gas industry, and a wholly owned subsidiary of Tenaris, an international producer of seamless and welded pipe. According TMK, the deal is planned to be closed soon. TMK agreed to sell 100% in its U.S. subsidiary IPSCO Tubulars to Tenaris for USD 1.209 bln. TMK grew 11.53% to 57.38 rubles on 10:28 a.m., time, on the Moscow Exchange.

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Rosseti plans to raise dividend payments gradually On December 18, 2019 CEO of Russian state power grid operator Rosseti Pavel Livinsky said in an interview to Rossiya 24 television channel broadcast that the company aims to raise its dividend payments gradually. He added that this is how the economy works. Rosseti have already paid a record amount of RUB 5 bln in dividends and is now aimed at raising the dividend flow based on its operations. Livinsky told reporters that he thinks the company’s shareholders will see this intention in the results of the company’s work this year and in the years to come thanks to steady implementation of the plans, which are a new dividend policy, a new development program, and a new stock option program. Rosseti did not pay dividends for 2018, but paid RUB 5.03 bln in dividends for January–March this year, including 2.443 kopecks paid per ordinary share and 7.997 kopecks paid per preferred share. The Federal State Property Management Agency controls 88.04% of Rosseti’s shareholder equity.

Sberbank says closes acquisition of 36% in Mail.ru co-owner On December 19, 2019 Russia’s Sberbank said in a statement that it had acquired 36% in MF Technologies, a co-owner of Internet company Mail.ru Group from Gazprombank and state industrial corporation Rostec for RUB 11.3 bln to get one seat on its board of directors. Mobile operator MegaFon now owns 45% in MF Technologies, Sberbank 36%, Rostec 10% and USM Holdings 9%. Sberbank nominated its first Deputy Chairperson Lev Khasis for the seat on Mail.ru Group’s board. In November, the bank signed legally binding documents to buy 35% in MF Technologies from Gazprombank and 1% from Rostec. MF Technologies controls 58.3% of votes in Mail.ru.

Rostelecom holders approve extra share issue to consolidate Tele2 On December 19, 2019 it was stated that Russian state-controlled telecom operator Rostelecom’s shareholders approved an additional share offering at RUB 93.21 apiece to consolidate mobile operator T2 RTK Holding, known under brand Tele2. The decision was approved on December 18, at an extraordinary meeting. The shares in the volume of up to 1.2 bln units will be placed privately in favor of VTB Bank. According to earlier reports, the bank could spend 66 billion rubles on the purchase. Rostelecom’s current shareholders have the preemptive right to buy the new shares. Consolidation by Rostelecom, which owns 45% in T2 RTK Holding, of the remaining 55% comprises three parts and amounts to RUB 132 bin in total. The first part is cashless and envisages swapping 10% of Rostelecom’s common shares, which are on the books of its unit Mobitel, for 10% in T2 RTK Holding. The second part is an acquisition of 27.5% for cash to be raised via the additional share offering. The third part is an acquisition of 17.5% for cash to be borrowed to the tune of RUB 42 bln. At present, the remaining 55% of the asset belong to Tele2 Russia Holding AB, a consortium in which VTB Bank has 50%, Alexei Mordashov’s Invintel B.V. has 40%, and Yury Kovalchuk’s Bank Rossiya has 10%.

TransContainer, FESCO to compete for 25% in Russkaya Troika On December 19, 2019 it was stated that Russian leading railway container operator TransContainer and Far Eastern Shipping Company (FESCO) were approved for participation in an auction for 25% plus one share in railway operator Russkaya Troika. The auction’s organizer is VTB Bank. Russian Railways owns a 25% plus one share stake in Russkaya Troika, which it plans to sell at the auction, and FESCO owns the remaining 75% minus one share. The starting price is RUB 622 mln, and the minimum price is RUB 527.304 mln. Russian Railways already tried to sell Russkaya Troika several times, but no one participated in the previous auctions. FESCO said previously that it planned to consolidate 100% in the asset, but will not participate in the auction because it has a preemptive right for the stake. The company will have the right to buy Russkaya Troika at a price offered by TransContainer during the auction.

Dividends/coupons Shareholders of Mostotrest fail to approve January–September dividends On December 16, 2019 it was stated that the shareholders of Russian construction company Mostotrest had failed to approve dividends for January–September at an extraordinary general meeting on December 13 due to the lack of quorum. The board of directors earlier recommended paying RUB 1.29 per share, or a total of RUB 3.186 bln, in dividends for January–September. Mostotrest did not pay dividends for 2018. Arkady Rotenberg controls 94.2% in the company through TFK-Finance, and the rest is free-float.

Novoship shareholders approve RUB 12.9 per share in January–September dividends On December 16, 2019 it was reported that the shareholders of Russian shipping company Novoship, a unit of Sovcomflot, had approved paying RUB 12.9 per share, or a total of RUB 4.072 bln, in dividends for January–September. The record date is December 24. For January–September 2018, the company paid RUB 1.23 bln, or RUB 3.9 per share, in dividends. The company also paid RUB 2.5 per share in final dividends for 2018.

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Norilsk Nickel owners approve paying RUB 96 bln in January–September dividends On December 17, 2019 it was stated that the shareholders of Russian metals giant Norilsk Nickel had approved paying RUB 604.09 rubles per common share, or a total of around RUB 95.59 bln, in dividends for January–September. The record date is December 27. The company paid RUB 883.93 per share, or a total of RUB 139.88 bln, in dividends for January–June. Norilsk Nickel’s major shareholders include Vladimir Potanin’s Interros with 34.6% and Oleg Deripaska’s UC RUSAL with 27.82%.

Eurobonds / DRs buys back USD 69.48 mln of 2022 Eurobonds On December 18, 2019 it was stated that Russian container terminal operator Global Ports had bought back USD 69.48 mln of Eurobonds maturing in 2022. The Eurobonds worth USD 350 mln were sold in April 2016 at 6.872%. After the buyback Eurobonds worth USD 203.607 mln remain in circulation.

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.

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