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Home , Mikhail Gutseriyev, Mikhail Prokhorov

SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly

Presented by: VTB Bank, Custody

March 29, 2018 Issue No. 2018/11

Company News

Russian antitrust allows Onexim Group to buy 100% in IFC Bank On March 23, 2018 it was reported that ’s Federal Antimonopoly Service allowed ’s Onexim Group to acquire a 100% voting stake in International Financial Club (IFC Bank). According to the central bank, Prokhorov owns 27.74% in IFC Bank through Cyprus-based Onexim Holdings Ltd. Winterlux of owns 19.71%, businessman holds 39.42% and Yekaterina Ignatova 13.14%.

Central bank orders Asian-Pacific Bank to change owners, up capital On March 23, 2018 it was announced that the central bank asked Asian-Pacific Bank, Russia’s 60th largest bank by assets as of February 1, to change shareholders, the largest of which is former owner of retailer Azbuka Vkusa Andrei Vdovin, and to raise its shareholder equity before April. Previously, the central bank allowed Asian-Pacific Bank to delay provision of reserves against a loan provided to defunct subsidiary M2M Private Bank to the beginning of 2018, but the bank created reserves only against 80% of the loan. Asian- Pacific Bank asked for more time, and the regulator set the deadline for March 31. The reserves will also force the bank to raise capital in line with the central bank’s orders. After the failure of M2M Private Bank, the regulator ordered owners of Asian-Pacific Bank to cut their stakes in the bank to no more than 10%. Previously, Vdovin, Alexei Maslovsky, and Peter Hambro owned 22.5% in the bank each, but in December 2017 they cut their stakes to a combined stake of 8.24% controlled through company PPFIN Region, while British Virgin Islands registered company Shelmer Holding Ltd acquired 31.8% in the bank. Shelmer Holding Ltd is owned by Maxim Chernavin, who was previously listed as an expert at Latvia’s Bank M2M Europe controlled by Vdovin. In September 2017, Vdovin sold the bank. A source familiar with employees of the central bank said that the regulator wants a new face to become a shareholder of Asia-Pacific Bank and to raise its capital. The bank fruitlessly looked for an investor throughout 2017. Vdovin said he was unaware of the situation and redirected the request for comment to Asia-Pacific Bank’s President Andrei Novikov. Novikov said that he was not allowed to comment on restricted documents, but added that the bank had violated no rulings of the central bank. A source close to Asia-Pacific Bank said that the bank is able to create reserves against losses on M2M Private Bank, but that it may be only the beginning, as the central bank is now inspecting the condition of the bank, which is to be completed in April.

Lukoil board to approve USD 3 bln buyback program soon On March 23, 2018 Alexander Matytsyn, First Vice President of Russian oil major , said that the company’s board of directors was expected to approve the first, USD 3 bln buyback program in the near future. Matytsyn said the company could start the buyback program already in 2018. In January, Lukoil’s board of directors approved redemption of a part of treasury shares and a buyback program. CEO said then the company plans to spend USD 2-3 bln on the buyback over five years and redeem a 10% treasury stake by the end of 2018.

ALROSA board approves buying 10% in ALROSA-Nyurba On March 26, 2018 the supervisory board of Russian uncut diamond giant ALROSA approved buying 10% in its unit ALROSA-Nyurba to boost its stake in the company to 97.49%. At present, ALROSA is holding talks with the government of the republic of Yakutia about the possibility of buying a 10% stake in ALROSA- Nyurba. A purchase of the stake in the company is a logic step in a way to consolidate producing assets on the balance of ALROSA, which will have a positive impact on the company’s operating efficiency and

1 investment attractiveness. The deal is expected to be closed in the first half of 2018. ALROSA-Nyurba was created in 1997 for the development of the Nyurbinskoye and Botuobinskoye fields in Yakutia.

Pharmstandard shareholders approve spinning off non-core assets On March 28, 2018 shareholders of Russian pharmaceutical company Pharmstandard approved reorganization of the company through spinning off investment company Vector-Biopharm. The new company will be registered in July. Viktor Kharitonin will become the only beneficiary of the both companies because another beneficiary Yegor Kulkov lost his status after a change of the shareholder structure of Augment Investments Limited, Pharmstandard’s controlling owner.

DIA becomes owner of 99.9% shares in Promsvyazbank On March 29, 2018 it was reported that Russia’s Deposit Insurance Agency (DIA) has become the owner of over 99.9% shares of Promsvyazbank. Promsvyazbank has been undergoing a bailout through the Banking Sector Consolidation Fund since mid-December 2017. The central bank said earlier in March that the DIA would buy Promsvyazbank’s additional shares for RUB 113.4 bln and would own almost 100% in the bank. In January, the government decided to establish a bank for the defense order and other large-scale state procurement operations on the basis of Promsvyazbank.

Watchdog, Schlumberger settle main issues on EDC deal On March 29, 2018 Andrei Tsyganov, Deputy Director of the Federal Antimonopoly Service, stated that U.S. oilfield servicing giant Schlumberger and the service have settled main issues over a deal to buy a stake in Russia’s Eurasian Drilling Company (EDC). EDC said in July 2017 that its shareholders approved selling a 51% stake in the company to Schlumberger. The watchdog’s Director Igor Artemyev said earlier in March that Schlumberger was considering various acquisition options for a stake in EDC, including the purchase of less than 51%.

Dividends/coupons M.Video may get back to dividend payment issue in 18 months On March 22, 2018 Alexander Tynkovan, President of Russia’s home appliances and electronic goods retailer M.Video, stated that the company might again discuss the issue of dividend payments in around 18 months after a deal to buy Eldorado from Safmar. M.Video earlier said it would buy retail chain Eldorado from their parent company Safmar for RUB 45.5 bln.

Cherkizovo to pay RUB 75.07 per share in dividends for 2017 On March 23, 2018 shareholders of Russian meat producer Cherkizovo approved paying RUB 75.07 per share, or a total of RUB 3.3 bln, in dividends for 2017. The company paid RUB 13.65 per share, or a total of RUB 600 mln, in dividends for 2016. In September 2017, the shareholders approved distribution of undistributed profit for 2014, 2015, 2016 and January-June 2017 and payment of RUB 59.82 per share, or a total of RUB 2.63 bln, in dividends. Cherkizovo Group is controlled by the family of its founder Igor Babayev, an 8% stake is owned by Spain’s Grupo Fuertes.

Lukoil management to recommend 2017 dividends above inflation On March 23, 2018 Alexander Matytsyn, First Vice President of Russian oil major Lukoil, said that the company’s management would recommend dividends for 2017 above inflation. In December 2017, Lukoil’s board of directors approved a strategic development program for 2018-2027, encompassing stable growth of dividends by inflation level. For 2016, Lukoil paid RUB 120 per share, or a total of RUB 102.067 bln, or 50% of net profit under International Financial Reporting Standards (IFRS), in dividends.

Globaltrans board recommends paying RUB 8 bln in dividends On March 26, 2018 the board of directors of Russian railway operator Globaltrans recommended paying RUB 44.85 per share or a global depositary receipt (GDR), or a total of RUB 8 bln, in dividends. The board recommended a payment of RUB 23.25 per share or GDR, or RUB 4.2 bln, in dividends for 2017 and RUB 21.60 per share or GDR, or RUB 3.9 bln, in special dividends. The shareholders will consider the board’s recommendation at an annual general meeting on April 23. Globaltrans paid RUB 39.2 per share or GDR, or a total of RUB 7 bln, in dividends for 2016. Businessmen Nikita Mishin, Konstantin Nikolayev and Andrei Filatov own 11.5% in Globaltrans each, the company’s non-executive director Alexander Yeliseyev holds 6.3%, and free float accounts for 59%.

FGC UES forecasts 2017 dividends no smaller than for 2016 On March 26, 2018 it was reported that Russia’s Federal Grid Company of Unified Energy Systems (FGC UES) expects its 2017 dividends to be no less than for 2016, or RUB 18.185 bln. The interim dividends for

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January-March 2017 amounted to RUB 1.42 bln. Investments will not exceed RUB 110 bln in 2018. Under the company’s investment program, the 2017 financing was planned at RUB 97.64 bln, the 2018 at RUB 104.3 bln and the 2019 and 2020 one at RUB 94.4 bln.

Russian Railways asks to pay dividends only on preferred shares On March 28, 2018 Oleg Belozyorov, CEO of Russian Railways, said that the company asked the Economic Development Ministry to allow it to pay dividends only on preferred shares while allocating the remaining profit for investments. State-owned Russian Railways paid RUB 5.147 bln in dividends for 2016 on common and preferred shares. In 2017, the company’s net profit more than doubled to RUB 17.5 bln, as calculated under Russian Accounting Standards (RAS).

RussNeft may pay RUB 2.3 bln on preferred shares in 2017 dividends On March 29, 2018 it was reported that oil company might pay RUB 2.304 bln on preferred shares, or around 21% of net profit under Russian Accounting Standards (RAS), in dividends for 2017. For 2016, RussNeft paid RUB 2.426 bln on preferred shares, or 18% of RAS net profit, in dividends. In 2017, RussNeft’s RAS net profit fell 22% to RUB 10.805 bln. CEO said in mid-2017 that the company plans to pay dividends on common shares from 2018 if the oil price stands at about USD 50-55 and the exchange rate of the U.S. dollar is RUB 60. RussNeft said in November 2017 that Rost Bank of Mikhail Shishkhanov became the owner of almost all preferred shares of the company, which account for 25% of its charter capital. Belyrian Holdings of the Gutseriyev family and its affiliates own 47% of the company’s common shares, or 60% of the charter capital, and Swiss trader Glencore and its subsidiaries own 33% of common shares, or 25% of the charter capital.

Gazprom management to propose keeping 2017 dividends flat On March 29, 2018 Andrei Kruglov, Deputy CEO of Russian gas giant Gazprom, stated that the company’s management would propose keeping 2017 dividends at the level of 2016, when the company paid RUB 8.04 per share, or 20% of net profit under International Financial Reporting Standards (IFRS).

Eurobonds / DRs STLC plans to offer 5-year dollar Eurobonds On March 26, 2018 a banking source said that Russia’s State Transport Leasing Company (STLC) plans to offer dollar-denominated Eurobonds with a maturity of up to five years. The deal will take place depending on market conditions. Citi, Gazprombank, J.P. Morgan, Renaissance Capital, Sovcombank, and VTB Capital will act 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 Times“ newspapers, and others.

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