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Presented by: VTB Bank, Custody

October 17, 2019 Issue No. 2019/39

Company News

Directors of prolong CEO’s contract for 5 years On October 11, 2019 the board of directors of Russian Post prolonged a contract of CEO Nikolai Podguzov for five more years. Podguzov has been the CEO of Russian post since July 2017.

Surgutneftegas gets own shares belonging to bankrupt ASB-Bank On October 11, 2019 it was reported that Russian oil and gas company acquired 19,100 own common shares, which previously belonged to bankrupt ASB-Bank, in accordance with a decision made by the Arbitration Court of the Khanty-Mansi Autonomous District on July 22. In 2005, ASB-Bank was recognized bankrupt by the Arbitration Court.

Vadim Zingman appointed as President of Alfa Group On October 15, 2019 it was stated that former Deputy CEO of Russian national air carrier Vadim Zingman was appointed to a newly created position of the president of Alfa Group. Alfa Group announces the appointment of the well-known Russian top-manager Vadim Zingman to the position of President of Alfa Group effective from October 15, 2019. Vadim Zingman will focus both on improving the quality of cross- functional links between the consortium's businesses and on organizing structural interaction with state and public institutions within the business activities of all Alfa Group companies. Zingman left Aeroflot in August.

STLC to offer RUB 15 bln of 6-year bonds on October 18, 2019 On October 15, 2019 a banking source said that ’s State Transport Leasing Company (STLC) would offer at least RUB 15 bln of 6-year exchange bonds on October 18. The first coupon guidance amounts to a premium of no more than 116 basis points over 6-year government OFZ bonds. The issue carries quarterly coupons. The issue is to be repaid in installments, 20% of the face value on the date of the eighth, 12, 16, 20 and 24 coupons. The technical placement is preliminarily scheduled for October 29. Brokerage company Region, Otkritie Financial Corporation Bank, VTB Capital, Gazprombank and are the organizers.

Bank Trust wants to sell off RUB 62.2 bln shares of RussNeft On October 15, 2019 it was stated that Bank Trust, a non-core assets bank created by Russia’s central bank, offered all its cumulative preferred shares of oil company RussNeft in an auction with a starting price of RUB 62.2 bln. The offer comprises two lots each worth RUB 21.1 bln, and a lot worth RUB 20.03. Bids are collected until November 12. The results will be summed up on November 14.

Lukoil to cancel 25 mln shares bought back under public offer On October 16, 2019 the board of directors of Russian oil company recommended cancelling 25 mln shares after buying them back under a public offer at RUB 5,300 apiece. Should the decision be approved by the shareholders at an extraordinary meeting slated for December 3, bids to sell the shares will be accepted from December 27, 2018 through January 25, 2020, and the payment will be sent no later than on February 7.

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Dividends/coupons may return to previous dividend policy in 2020 On October 15, 2019 Vladimir Yevtushenkov, key owner of Russian multi-industry holding Sistema, stated that the company plans to return to dividend payments in accordance with the current dividend policy in 2020. Due to the necessity of reducing its debt after payments to Bashneft, Sistema was forced to deviate from its dividend policy and pay dividends below its level. According to the dividend policy adopted in April 2017, the size of final payments for the year is defined so that the total amount of final and interim dividends corresponds to the highest of the two indicators: a dividend per share of RUB 1.19 or a dividend yield of 6% of the weighted average annual price of Sistema’s shares. Yevtushenkov also said that Sistema is considering integrating two more assets into pharmaceuticals holding Alium that was created on the basis of Obolenskoye and Binnopharm. Sistema holds 26.3% in Alium, while VTB has 38.5%, and a consortium headed by the Russian Direct Investment Fund (RDIF) owns 23%.

Moscow Exchange to pay at least 60% of IFRS net profit in dividends On October 15, 2019 it was reported that the supervisory board of the approved a new policy, which envisages that the company would try to spend the entire cash flow on dividends, and the lower limit of dividend payment was increased to 60% from 55% of the net profit under International Financial Reporting Standards (IFRS). The supervisory board has also approved a new development strategy until 2024. The corporate strategy is centered around five key priorities, two of which relate to areas of responsibility and three that focus on areas of growth. The primary pillars for the company are two areas of responsibility: core markets penetration and culture of innovation, trust and responsibility. Continued growth of Moscow Exchange’s business will be supported by the implementation of initiatives in three additional areas: market gateway, balance sheet management and financial platform.

Lukoil board recommends paying RUB 192 per share in January–September 2019 dividends On October 16, 2019 the board of directors of Russian oil major Lukoil recommended paying RUB 192 per share, or a total of RUB 133 bln, in dividends for January–September. The shareholders will consider the board’s recommendation at an extraordinary general meeting on December 3. The record date was set for December 20. Lukoil paid RUB 95 per share in dividends for January–September 2018 and a total of RUB 250 per share in dividends for 2018. The board of directors also approved a new dividend policy, under which the company will pay at least 100% of its adjusted free cash flow in dividends. Dividend payments will be made twice a year. Lukoil will continue to allocate 50% of its additional income from oil prices above U.S. USD 50 per barrel for dividends and 50% for reinvestment. The new dividend policy will allow Lukoil to optimize approaches to the distribution of capital.

MOESK confirms plans to pay interim dividends for January–September 2019 On October 16, 2019 Pyotr Sinyutin, CEO of Moscow United Electric Grid Company (MOESK), part of Russian power grid operator Rosseti, stated that the company would pay dividends for January–September, the first interim dividends in the company’s history. In September, the company said in a presentation that it planned to pay at least 50% of overall dividends for 2019 in dividends for January–September. For 2018, MOESK paid 71.7% of the Russian Accounting Standards (RAS) profit, or RUB 2.9 bln (5.9 kopecks per common share) in dividends, an 87% increase on the year. Rosseti owns 50.9% in MOESK, while managing company Lider owns 17.62%, Gazprombank has a 9.77% stake, and managing company Agana has 6.19%.

Rostelecom not to change dividend policy after deal On October 17, 2019 Mikhail Oseyevsky, President of Russian state-controlled telecom operator , said that the company did not plan to revise its dividend policy after consolidation of mobile operator T2 RTK Holding, working as Tele2. Media reported in July that Rostelecom might switch to paying interim dividends for January–June instead of paying for three quarters and a whole year like it did in 2018, and the move would keep flexibility in the financial policy amid the coming consolidation of Tele2. Rostelecom paid its first interim dividends of RUB 2.5 per share for January–September 2018. The final dividends for 2018 of the same amount were approved by the holders in mid-June. The executive also said that Rostelecom is developing a strategy taking into account Tele2’s consolidation, which is to be closed in January–March 2020. Under the revised financial model, the company will consider how and from which sources it will pay dividends.

Eurobonds / DRs to hold road shows for dollar Eurobond from October 16, 2019 On October 14, 2019 a banking source said that Russian metals giant Norilsk Nickel plans to hold meetings with investors, devoted to a possible offering of 5-year U.S. dollar-denominated Eurobonds, from October 16.

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The road shows will take place in Europe and the U.S. Citi, J.P. Morgan, Societe Generale, Gazprombank, ING, Sberbank CIB and VTB Capital will be the organizers

Holder says Ozon to hold IPO in London, Moscow when ready On October 15, 2019 Vladimir Yevtushenkov, core owner of multi-industry holding Sistema, Ozon’s shareholder, said that Russian online seller Ozon could hold an initial public offering (IPO) in London and in Moscow if the company is ready. Ozon CEO Alexander Shulgin said earlier that the company should raise its share on the local e-commerce market, speed up sales and improve infrastructure for an IPO. He said the company could consider the procedure in two years. Sistema and private equity firm Baring Vostok are Ozon’s main investors.

Demand for Uralkali’s Eurobonds exceeds USD 1 bln On October 16, 2019 Andrei Solovyov, director of the debt capital market department at VTB Capital, one of the placement’s organizers, said that demand for Russian fertilizer maker Uralkali’s 5-year Eurobonds exceeded USD 1 bln. On October 15, Uralkali placed USD 500 mln Eurobonds maturing in October 2024 with a yield of 4% annually. Besides VTB Capital, J.P. Morgan, Sberbank CIB, Societe Generale, Credit Agricole CIB, ING, , Renaissance Capital, UBS, and acted as 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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