SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly

Presented by: VTB Bank, Custody

February 13, 2020 Issue No. 2020/05

Please be advised that February 23 rd is a public holiday (“Motherland Defender’s Day”) in . Please note that February 24 th is an official day off.

Company News

Former CEO of TransContainer to become vice president of On February 6, 2020 Sergei Shishkaryov, President of Delo Group, stated that Pyotr Baskakov, the former CEO of Russian railway container operator TransContainer, would become a vice president of the operator’s largest shareholder Delo Group and would enter TransContainer’s board of directors. Delo Group closed RUB 60.3 bln purchase of 50% plus two shares in TransContainer from in mid-December 2019.

Delo plans FESCO CEO Isurin as new CEO of TransContainer On February 7, 2020 it was reported that Delo Group, the owner of 50% plus two shares in Russian container shipping company TransContainer, planned to introduce current CEO of Far-Eastern Shipping Company, or FESCO, Alexander Isurin as new CEO of TransContainer. Alexander Isurin, (an executive from arms producer Kalashnikov, who left it in November 2019) Pavel Skachkov and (former co-owner of FPK Bank, which went bankrupt in 2018) Sergei Dolgov will be nominated to the management board of the company. Kommersant business daily reported earlier that Isurin might replace the current TransContainer CEO Vyacheslav Sarayev. The spokesperson also said that Delo would nominate a representative of Russian Railways and former CEO of the Underground to the board of directors of the container operator. Delo Group bought the stake in TransContainer from Russian Railways in December 2019 for RUB 60.3 bln.

Lukoil cancels 22.134 mln shares, reduced charter capital On February 10, 2020 it was announced that Russian oil company canceled 22.134 mln common shares to reduce the charter capital by 3.1% to RUB 17.3 mln. The cancellation was carried out in line with the decision of the general meeting of shareholders made in December 2019.

CEO says Golodets to become deputy CEO of Sberbank On February 11, 2020 German Gref, CEO of Russian national top lender Sberbank, stated that the bank’s supervisory board approved appointing Olga Golodets, former deputy prime minister, as the bank’s deputy CEO in charge of the medical direction.

Rostelecom holders buy operator’s extra shares for RUB 414,132 On February 11, 2020 it was reported that current shareholders of Russian state-controlled telecom operator bought 4,443 additional ordinary shares of the company for RUB 414,132 exercising their preemptive right under consolidation of mobile operator T2 RTK Holding. Rostelecom plans to close the deal on consolidation of 100% of the mobile operator, working under brand , by the end of February. The issuance of new shares is a part of the deal.

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Central bank to leave Sberbank’s capital, bill sent to government On February 12, 2020 it was reported that Russia’s Finance Ministry and the Bank of Russia developed a bill envisaging that the regulator would leave the capital of the country’s top lender Sberbank. The document defining the procedure and the conditions of selling the shares, has been sent to the government. The bill allows the central bank to sell its 50% plus one share in Sberbank to the ministry at a market price that the authority will buy using money of the National Wealth Fund. Under the bill, the regulator will make a one-time offer to the minorities of Sberbank at the price of the first sale to the ministry. The government plans to buy the shares in several stages as it is only allowed to spend the fund’s money that exceed the threshold of 7% of gross domestic product (GDP). The fund will accumulate the money enough to buy the entire stake in 12 months. The dates of the purchase will be defined later. reported citing sources that Russia’s government plans to close the acquisition by the middle of 2021, and the first stage of the deal will take place in April 2020. The central bank also plans to reduce the number of its executives on Sberbank’s supervision board to three, the nominees to the new board will be presented until March 18.

Baring Vostok asks court to revise sale of 9.99% in Orient Express Bank On February 12, 2020 it was stated that -based Evison Holdings Limited controlled by investment fund Baring Vostok sent a request to the Arbitration Court of the Amur Region to revise a ruling to sell a 9.99% stake in Orient Express Bank to Finvision of Artyom Avetisyan on newly discovered evidence. The request arrived to the court on February 11, consideration has not started. Evision’s lawyer Oleg Koida said that an option, under which Baring Vostok had to sell its stake in Orient Express Bank to Finvision against the will of the fund, contains a condition that it enters in force only if a debt of the First Collection Bureau to Orient Express Bank is redeemed, while Evision has recently discovered that the bank is disputing the debt. Baring Vostok is a large stakeholder in First Collection Bureau. The deal between the bureau and the bank was the reason for initiation of a criminal case against founder of Baring Vostok Michael Calvey and five more people. Investigators believe that the shares of International Financial Technology Group used as a payment by the collection bureau to the bank had a much lower price than the debt amount.

En+ Group finishes buyout of 21.37% of shares from VTB On February 12, 2020 it was reported that Russian aluminum and power producer En+ Group closed a deal to buy out 21.37% of its shares from VTB Group for USD 1.58 bln. En+ earlier attracted RUB 110.6 bln credit from Sberbank for the deal. The transaction will simplify the shareholder structure of the company without infringing the Barker Plan, which allowed lifting U.S. sanctions against En+ in January 2019 by reducing the stake of tycoon .

RysHydro says sells shares in FGC UES, , in 2019 On February 13, 2020 it was announced that Russian hydropower giant RusHydro sold minority stakes in Federal Grid Company of Unified Energy System (FGC UES), state power grid holding Rosseti, power utility T Plus, and Fortum as part of selling non-core assets in 2019. RusHydro also transferred 15 property items to the state or to municipal authorities free of charge in the year, and terminated 24 items. Sales, transfers, and termination of items reduced the company’s spending on their maintenance by RUB 80 mln per year. Until the end of 2020, the company plans to withdraw from participation in 15 companies, including mergers of power maintenance companies that service facilities of Far Eastern Generating Company.

Dividends/coupons CEO says sees no reason for to pay lower dividends On February 6, 2020 Jan Dunning, CEO of grocery chain Magnit, said that there was no reason to reduce the company’s dividends. Dunning said that Magnit could revise the plans for store launch in case of improvement of the business environment and continuation of the sales recovery. Earlier on February 6, the company said in a report that it planned to launch about 1,300 stores, including closures in 2020. In 2019, Magnit launched 2,377 stores.

FGC UES confirms plans to pay dividends for 2019 flat on year On February 7, 2020 Andrei Murov, CEO of Russia’s Federal Grid Company of Unified Energy System (FGC UES), stated that the company confirmed its plans to keep the final dividend payout for 2019 flat as compared with dividends for 2018. FGC UES paid 1.6 kopecks per common share, or a total of RUB 20.45 bln in final dividends for 2018, and paid no interim dividends for the year. In 2019, the company paid 0.88 kopecks per share, or RUB 11.23 bln, in dividends for January–September. According to FGC UES’ dividend policy, the basic level of payment to shareholders is at least 50% of net profit at the largest of the amounts reported – under Russian Accounting Standards (RAS) or under International Financial Reporting Standards (IFRS). State-owned power grid company Rosseti owns 80.13% in FGC UES, the Federal State Property Management Agency has a 0.59% stake, and minority owners hold 19.28%.

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Polyus’s board can recommend paying USD 462 mln in July–December 2019 dividends On February 11, 2020 the board of directors of Russian gold producer planned to recommend paying USD 462 mln in dividends for July–December 2019. Basing on the current number of shares, the expected amount of dividends is USD 3.5 per common share. The amount of dividend payments for the entire 2019 is thus USD 804 mln. Polyus earlier paid RUB 162.98 per share in dividends for January–June; RUB 131.11 per share in dividends for January–June 2018 and RUB 147.12 per share in final dividends for the year. Tycoon Said Kerimov holds 82.44% in Polyus.

Gazprom sees units’ dividends at 50% of IFRS profit from 2020 On February 11, 2020 it was reported that Russian gas giant expects dividends of its subsidiaries at no less than 50% of net profit calculated under International Financial Reporting Standards (IFRS) starting from 2020. Deputy CEO Famil Sadygov said that Gazprom might pay dividends for 2019 without adjusting net profit for non-monetary items or with partial adjustments, while the decision would be made in April.

NLMK can pay RUB 5.16 per share in dividends for October–December 2019 On February 12, 2020 the board of directors of Russian steelmaker (NLMK) approved paying RUB 5.16 per share, or a total of RUB 30.925 bln, in dividends for October–December. NLMK paid RUB 5.8 per share in dividends for October–December 2018. In 2019, the company paid RUB 3.22 per share, or a total of RUB 19.298 bln, in dividends for July–September, RUB 3.68 per share, or a total of around RUB 22.06 bln, in dividends for April–June, and RUB 7.34 per share, or a total of RUB 43.99 bln, in dividends for January–March. Vladimir Lisin holds around 81.4% in NLMK through Fletcher Group.

Cherkizovo can pay RUB 60.92 per share in 2019 dividends On February 13, 2020 the board of directors of Russian meat producer Cherkizovo Group recommended paying RUB 60.92 per share in dividends for 2019. The shareholder register for the dividends will be closed on April 7. The company paid RUB 48.79 in dividends for January–June 2019. Cherkizovo Group’s shareholders earlier approved paying RUB 101.63 per share, or a total of RUB 4.468 bln, in dividends for 2018. The family of the group’s founder Igor Babayev controls 89.5% in the group.

Gazprom Neft sees dividends of at least 50% of net profit from 2020 On February 13, 2020 Alexei Yankevich, Deputy CEO for Economy and Finance, stated that Russian oil company would start paying at least 50% of the net profit calculated under International Financial Reporting Standards (IFRS) in dividends from 2020. Gazprom Deputy CEO Famil Sadygov said that dividends of companies in which Gazprom owns 100% will amount to 100% of IFRS net profit, and dividends of companies where Gazprom owns less than 100% will start at 50% of the net profit. Gazprom owns 95.68% of Gazprom Neft’s shareholder equity, while free-float accounts for the remaining 4.32%.

Eurobonds / DRs Gazprom board approves EUR 6 bln Eurobond placement in 2020 On February 7, 2020 the board of directors of Russian gas giant Gazprom approved the placement of up to EUR 6 bln of Eurobonds in 2020. The bonds will be denominated in euros or an equivalent currency, and each issue will mature in no less than three years.

Russian agricultural company Don Agro holding IPO on Singapore’s stock exchange On February 10, 2020 it was reported that Russian agricultural holding Don Agro was taking bids in the framework of an initial public offering (IPO) on the Singapore’s stock exchange. The issuer, affiliate Don Agro International Limited, is offering 23 mln shares with a price guidance of SGD 0.22 per security. The bidding book will be closed on February 12. Yevgeny Tugolukov holds a 92.3% stake in the company. His stake can fall to 78.2% of the extended capital of the company after the placement.

Polyus may redeem USD 700 mln Eurobonds with own money in 2020 On February 11, 2020 Mikhail Stiskin, Senior Vice President for Finance and Strategy, said that Russian gold producer Polyus plans to redeem almost USD 700 mln of Eurobonds with its own funds in 2020. Polyus Finance Plc placed the USD 750 mln 7-year Eurobond issue with a coupon of 5.625% in April 2013. In September 2019, the company announced a buyback of up to USD 72.5 mln of the Eurobonds. Earlier on February 11, the company said in its financial report for 2019 that its net debt shrank by 1% in October– December 2019 to USD 3.285 bln as of the end of the year, with the ratio of net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) decreasing to 1.2x from 1.5x.

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Gazprom to start road show of dollar Eurobonds on February 13, 2020 On February 12, 2020 a banking source said that Russian gas giant Gazprom would start a road show for U.S. dollar Eurobonds in Boston, New York, and London on February 13. The road show will finish on February 17, and the company may offer Eurobonds with maturity from 10 to 12 years depending on market conditions. Gazprombank, J.P. Morgan, and will act as the organizers.

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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