SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly Presented by: VTB Bank, Custody August 9, 2018 Issue No. 2018/29 Internal Custody News Changes to the Russian Tax Code Please be advised that on July 24, 2018 the State Duma of the Russian Federation adopted law # 489169-7 “On changes to certain legislative acts of the Russian Federation on taxes”. In accordance with this law the rate of Value Added Tax (VAT) will be increased from 18 to 20 per cent (p. 3 art.164 of the Russian Tax Code). The changes apply to services rendered from January 1 st 2019. Thus, invoices for Custody services, which are subject to VAT in accordance with the current legislation, starting from January 1 st 2019 would be issued taking into account the rate 20 percent. Legislation Putin signs into law bill on raising Russia’s VAT to 20% from 18% On August 6, 2018 it was reported that President Vladimir Putin signed into law a bill that raises value-added tax (VAT) to 20% from 18% starting from January 1, 2019. The bill also formalizes the insurance payments to social non-budgetary state funds at 30% instead of a previously planned increase. At the same time, the bill prolongs the zero VAT rate for passenger and cargo transportation to Crimea and the city of Sevastopol by air and sets the VAT rate for air flights to the Far East at zero until 2025. Company News European Commission approves UralChem’s purchase of Uralkali On August 3, 2018 the European Commission approved a bid of Russian fertilizer producer UralChem for a stake in another fertilizer producer Uralkali. In November 2017, Uralkali’s board of directors approved the sale of no more than 10% quasi-treasury stake in the company to UralChem. According to the materials of the company as of October 20, 2017, Uralkali’s core owners were UralChem with a 20% stake, Rinsoco Trading Co. Limited with a 20% stake, while quasi-treasury shares accounted for 54.77% of the equity and 5.23% was free-float. MTS buys back 0.0443% of stock under repurchase program On August 3, 2018 it was reported that major Russian mobile operator MTS bought back through its wholly- owned subsidiary, Bastion LLC, 884,510 own shares, including both common shares and American depositary receipts (ADRs), representing 0.0443% of its capital. Bastion LLC purchases MTS shares under a repurchase plan announced on July 2 and since then has acquired 3,946,500 shares, or 0.1975% of MTS’ capital. MTS intends to buy back its stock for up to RUB 30 bln starting from July 2 during two years. Bank Saint Petersburg sets buyback price at RUB 55 per share On August 6, 2018 the supervisory board of Russia’s Bank Saint Petersburg approved a buyback price of RUB 55 per share, and plans to spend RUB 660 mln on the buyback program. The bank plans to buy back 12 mln shares, and will collect bids from September 7 through October 7. During the previous buyback program in late 2015, the bank bought bank about 3% of its shares worth about USD 600 mln. 1 Rosneft sets conditions under which it may perform buyback On August 7, 2018 Pyotr Fyodorov, Senior Vice President, stated that a bank, chosen by Russian oil major Rosneft, would buy back its general depositary receipts (GDRs) from the open market if there is a gap between the company’s fundamental and market values. On August 6, Rosneft said its board of directors had approved a USD 2 bln buyback program, which is to end on December 31, 2020 Government nominates Deputy PM Akimov to board of STLC On August 8, 2018 the Russian government nominated Deputy Prime Minister Maxim Akimov to the board of directors of State Transport Leasing Company (STLC). All other nominees to the board have previously been its members. Sistema sells MTS shares for RUB 1.07 bln under operator’s buyback On August 8, 2018 it was announced that Sistema Finance S.A., a subsidiary of Russian multi-industry holding Sistema, sold 3,947,262 ordinary shares of the country’s major mobile operator MTS to the latter’s unit, LLC Bastion, under the operator’s RUB 30 bln buyback program for RUB 1.07 bln. As a result of the deal, Sistema Group’s effective stake in MTS remained unchanged at 50.0048%. In accordance with the terms of the program, the number of shares for the purpose of the transaction was calculated based on the number of ordinary shares and American depositary shares of MTS purchased by LLC Bastion in the open market in July in proportion to Sistema Group’s effective equity stake in MTS. Tycoon Prokhorov raises indirect ownership in Quadra to 79.56% On August 9, 2018 it was reported that Russian tycoon Mikhail Prokhorov has raised indirect ownership in power producer Quadra Power Generation to 79.56% from 24.75% through six companies. Prokhorov raised the ownership through Onexim Group Limited, LLC Onexim Group, LLC Businessinform, Onexim Holdings Limited, LLC Interkonsento, and insurance company Soglasie on July 31. Quadra also said that the combined amount of votes distributed over voting shares does not correspond to the amount of common shares as the company previously failed to pay dividends on preferred shares, turning them into voting shares. Taking that into account, Prokhorov owns 82.69% of voting stake in Quadra. Dividends/coupons Rostelecom may decide on interim dividends in October-December 2018 On August 3, 2018 Mikhail Oseyevsky, President of Russian state-controlled telecom operator Rostelecom, stated that the company intends to make a decision on interim dividends in October-December and pay them out in January-March 2019. The company’s head first mentioned the idea to pay out dividends twice a year in June and said that should the decision be approved by the government, first payments could be done upon results of January-September. Under Rostelecom’s new dividend policy, approved in March, it will distribute at least 75% of its free cash flow in dividends, or at least RUB 5 per common share, on results of 2018-2020. The firm will also spend at least 50% of the net profit calculated under International Financial Reporting Standards, but no more than 100% of this figure, on dividends. ALROSA may pay RUB 5.93 per share, of 70% of FCF, in January-June 2018 dividends On August 7, 2018 the supervisory board of Russian aluminum giant ALROSA preliminary recommended paying RUB 5.93 per share, or a total of RUB 43.674 bln, in dividends for January-June, which accounts for 70% of the company’s free cash flow (FCF). ALROSA calculated FCF on the basis of a financial report under International Financial Reporting Standards (IFRS) for the period, and is to publish it on August 24. The company also said it would pay the dividends from the net profit calculated under Russian Accounting Standards (RAS), which amounted to RUB 52.221 bln in January-July. The board also approved a new dividend policy, under which ALROSA will pay dividends twice a year on the basis of its FCF. The minimum level of dividends for a period is set at 50% of the IFRS net profit if the current and forecasted ratio of net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) does not exceed 1.5x. The previous dividend policy of ALROSA encompassed only payments of final dividends for a year amounting of at least 35% of the IFRS net profit. The company paid RUB 5.24 per share, or a total of RUB 38.59 bln, in dividends for 2017, which accounted for 50% of its IFRS net profit. The Federal State Property Management agency owns 33.0256% in ALROSA, the republic of Yakutia has 25.0002%, the districts of the republic hold 8.0003%, and a 33.9739% stake is in free float. Rosneft to decide on dividends for January-June before October 2018 On August 7, 2018 it was announced that Russian oil major Rosneft would decide on January-June dividends until the end of September. The company’s net profit amounted to RUB 309 bln in January-June, and its dividend policy encompasses paying at least 50% of the net profit in dividends no less than twice a 2 year. The company’s shareholder equity is split into 10.598 bln common shares, so the dividend payment for January-June may amount to RUB 14.6 per share. Rosneft paid RUB 10.48 per share in dividends for 2017, including interim dividends. The company’s major shareholders include state oil and gas holding Rosneftegaz with a 50.00000001% stake, British oil giant BP with a 19.75% stake, and QHG Oil Ventures Pte. Ltd., a consortium of Swiss commodity trader Glencore and the Qatar Investment Authority, with a 19.50% stake. Evraz may pay USD 577.34 mln in second interim dividends in 2018 On August 9, 2018 the board of directors of U.K.-based mining giant Evraz, which operates mainly in Russia, recommended paying USD 0.4 per share, or a total of USD 577.34 mln, in second interim dividends for 2018. The record date for the dividends is August 17, and the company plans to pay dividends on September 6. Evraz paid USD 0.3 per share, or a total of USD 429.6 mln, in interim dividends in 2017 and USD 0.13 per share or USD 187.6 mln in first interim dividends for 2018. The company’s core owner is Cyprus-based Lanebrook Ltd with a 63.79% voting stake, with businessman Roman Abramovich, Chairman of Evraz’s board of directors Alexander Abramov and President of the company Alexander Frolov as the beneficiaries.