PPF FINANCIAL HOLDINGS B.V. Annual accounts 2020 This document is the PDF/printed version of the 2020 Annual accounts of PPF Financial Holdings B.V. and has been prepared for ease of use. The ESEF package is available on the company’s website at https://www.ppf.eu/cs/companies/ppf-financial- holdings-bv and includes a human readable XHTML version of the 2020 Annual accounts. In any case of discrepancies between this PDF version and the ESEF package, the latter prevails. PPF FINANCIAL HOLDINGS B.V. Contents Table of contents DIRECTORS’ REPORT ........................................................................................................ 4 CONSOLIDATED FINANCIAL STATEMENTS ............................................................ 31 SEPARATE FINANCIAL STATEMENTS ...................................................................... 141 OTHER INFORMATION .................................................................................................. 159 AUDITOR’S REPORT ....................................................................................................... 160 PPF Financial Holdings B.V. Directors’ report Directors’ report Description of the Company PPF Financial Holdings B.V. Date of deed on incorporation: 13 November 2014 Seat: Netherlands, Strawinskylaan 933, 1077XX Amsterdam Telephone: +31 (0) 208 812 120 Place of registration: Netherlands, Amsterdam Register (registration authority): Commercial Register of Netherlands Chamber of Commerce Registration number: 61880353 LEI: 31570014BNQ1Q99CNQ35 Authorised capital: EUR 45,000 Issued capital: EUR 45,000 Paid up capital: EUR 45,000 Principal business: Holding company activities and financing thereof The management board of PPF Financial Holdings B.V. (the “Company”), is pleased to present to you the directors’ report as part of the financial statements for 2020. This Directors’ report aims to provide a comprehensive overview of significant events within the Company as well as within the group of companies with which it forms a group. Board of Directors (the “Management Board”) Jan Cornelis Jansen, director Rudolf Bosveld, director Paulus Aloysius de Reijke, director Lubomír Král, director KateĜina Jirásková, director General information The Company is the parent holding company of a group of companies (the “Group”) that operates in the field of financial services. The Group is composed of four main investments: Home Credit Group B.V., PPF banka a.s., Mobi Banka a.d. Beograd and ClearBank Ltd. The Company is a 100% subsidiary of PPF Group N.V. (together with its subsidiaries “PPF Group”). Except for the role of holding entity, the Company generates interest income from loans. The Company is not dependent on the dividend income from its subsidiaries. Home Credit Group B.V. (“Home Credit” or “HC Group”) is a leading global consumer credit provider with a focus on emerging markets. Home Credit is the parent which holds the equity stakes in leading consumer finance companies in nine key focus countries which are clustered across five regions: Central and Eastern Europe (“CEE”) which includes businesses in the Czech Republic and Slovakia; the Commonwealth of Independent States (“CIS”), which includes businesses in Russia and Kazakhstan; China; South and South East Asia (“SSEA”), which includes businesses in India, Indonesia, Philippines and Vietnam and Other, which includes projects or specific entities in other countries. The operating entities are regulated companies, fully licensed by a national government regulatory body and compliant with respective local laws. Home Credit holds banking licences in the Czech Republic, Russia and Kazakhstan. The HC Group’s mission is to transform the way its customers purchase and make the things that matter in their lives affordable in a convenient way through its omni-channel distribution model, both online and offline. In 2020, Home Credit accelerated its digital strategy with a focus on building long-term customer relationships. Home Credit also offers ancillary products and services such as relevant - 4 - PPF Financial Holdings B.V. Directors’ report potential protection products and insurance from third parties. In addition, the HC Group has grown marketplaces across the group to provide its existing customer with offers on a frequent basis. The HC Group´s inclusive approach to lending services is enabled by superior data analytics and technology to process high volumes of data concerning potential customers’ behaviour patterns and to gain strong predictive powers for deciding on potential loans. Home Credit operates in countries with high growth potential with a combined population of approximately 3.4 billion, an above average GDP growth rate and low consumer finance penetration rate. As at 31 December 2020, the companies held by Home Credit Group B.V. served almost 19 million active customers across their operations: the Czech Republic (operational since 1997), Slovakia (1999), the Russian Federation (2002), Kazakhstan (2005), China (2007), Vietnam (2009), India (2012), Indonesia (2013) and the Philippines (2013). PPF banka a.s. (the “Bank”) has been an integral part of PPF Group since 2002 and it significantly participates in its domestic and international activities. The Bank acts as PPF Group’s treasury bank, conducting international payment operations for companies within PPF Group as well as providing underwriting and other investment services, such as brokering finance in the capital markets. PPF banka’s business objects comprise all types of banking transactions and the provision of banking and financial services together with related services, on both domestic and international markets. The Bank’s services are primarily tailored to Czech clients in the municipal and corporate segments. The Bank specialises in trading on financial and capital markets in accordance with applicable legislation and on the basis of licences granted by the Czech National Bank. The Bank is the market maker for the Czech government bonds, it is very active in the field of corporate bonds, foreign exchange markets and interest rate financial derivatives. Mobi Banka a.d. Beograd, acquired in 2019, is a mobile and online bank based in Belgrade that provides its services primarily to retail customers in Serbia. ClearBank Ltd. is a start-up bank that was licensed in the United Kingdom in 2016 and focuses on providing clearing services. The Company holds a minority interest in ClearBank Ltd. For more information, visit www.ppffinancialholdings.eu Highlights PPF Financial Holdings – holding level The funding and debt structure of the Company did not change significantly in 2020. The Home Credit Group In 2020, Home Credit had to cope with a very challenging environment with the unprecedented ongoing Covid-19 global health crisis, lockdowns and regulatory measures affecting all of its markets. This challenging environment has significantly impacted the business, as it did many others around the world. During the year, measures were undertaken by governments across its countries restricting social and business activities. However, during this time, the HC Group remained fully operational and adapted to the reality of the pandemic. The primary focus was on the health and safety of its employees, and on supporting customers and partners during these challenging times. Business continuity plans were quickly activated with best practices shared across the HC Group. - 5 - PPF Financial Holdings B.V. Directors’ report The Home Credit business is subject to the general economic conditions in each of the countries where it operates. During 2020, the world and all of the HC Group markets (except China) had a significant GDP contraction due to the pandemic. In addition, consumption and retail patterns also influence the demand for its products. The lockdown measures imposed in various countries directly impacted consumer demand by limiting access to brick-and mortar stores across the HC Group markets as well as creating spending constraints but also impacted sentiment from its customer base during the year. While the impact was felt differently in each country, China was the first country impacted in February/March before other countries started seeing the impact of the pandemic. The HC Group was most impacted during the second quarter with April the worst month. During 2020, the number of credit applications the HC Group received dropped from 6.6 million in the first quarter to 2.9 million in the second quarter. While Covid-19 pandemic continued to impact countries around the world at the end of 2020, the vaccine roll-out is expected to stabilise the economic recovery. Hence, customer sentiment continues to improve with increasing credit applications standing at 4.7 million in the last quarter of the year. The pandemic severely impacted the HC Group’s new loan volumes across its footprint as well as its financial performance. The HC Group quickly implemented stricter loan underwriting and stepped up initiatives to enhance cash collection, generating a strong liquidity cushion. On the operational side, Home Credit accelerated its global digital transformation by refining its physical distribution network and leveraging innovative technology and software to improve cost efficiency. Home Credit reacted quickly to the observed risk volatility during this period by tightening its underwriting criteria. The approval rate decreased from a high 50 percent to a low 40 percent. In addition, as part of ongoing derisking efforts, products tenors were