SSEECCUURRIIITTIIIEESS MMAARRKKEETT NNEEWWSSLLEETTTTEERR weekly Presented by: VTB Bank, Custody June 8, 2017 Issue No. 2017/21 Company News Summa eyes consolidating 100% in UGC during privatization On June 2, 2017 Leila Mammed Zade, CEO of Russian multi-industry holding Summa, stated that the group was interested in consolidating a 100% stake in the United Grain Company (UGC) and would participate in its privatization. The government, which holds 50% plus one share in UGC, plans to privatize the company in 2017-2019. Summa owns a 50% minus one share stake. TMK may offer more extra shares to reduce debt On June 2, 2017 Vladimir Shmatovich, deputy CEO for strategy at Russian oil and gas pipe producer TMK, said that the company might make a new additional share offering in order to reduce its debt. Holding SPO in February allowed the company to raise liquidity of its shares to 30% from 17%. The company believes this will bring effect and allow us to hold the next SPO at a higher price. TMK may offer Eurobonds worth USD 400-500 mln by the end of this year. Gazprom Neft approves RUB 65.36 mln new shares of Moscow refinery On June 5, 2017 the board of directors of Gazprom Neft, the oil branch of Russian gas producer Gazprom, approved the purchase of RUB 65.36 mln worth of new shares of its affiliate, the Moscow Refinery. Mail.Ru Group’s board joined by 3 executives from major holder MegaFon On June 5, 2017 it was reported that shareholders of Russian Internet giant Mail.Ru Group endorsed a new lineup of its board of directors, which comprised three representatives of its major holder, mobile operator MegaFon, including CEO Sergei Soldatenkov. The two other new members are MegaFon Chief Operating Officer Anna Serebryanikova and Chief Commercial Officer Vlad Wolfson. Mail.Ru Group’s co-founder Dmitry Grishin was re-elected as the board’s chairman. At the beginning of 2017, MegaFon acquired 63.8% of voting shares of Mail.Ru Group for USD 740 mln. Polyus to offer 7% of shares in SPO on London, Moscow exchanges On June 5, 2017 it was announced that gold producer Polyus plans to offer 7% of its shares under a secondary public offering (SPO) on the London Stock Exchange and the Moscow Exchange. A banking source said that the company started a pre-marketing campaign and would hold a roadshow for the offering in the next two weeks. Another financial source said that the price range would be announced next week. About USD 400 mln worth of new shares and existing securities, including global depositary receipts (ADRs) trading in London, are expected to be offered. The company’s major shareholder Polyus Gold International Limited (PGIL) controlled by businessman Said Karimov and holding 91.73% in Polyus and Polyus Gold plc are the selling shareholders. Goldman Sachs, J.P. Morgan, Sberbank CIB and VTB Capital act as global co- coordinators and co-bookrunners, while BMO Capital Markets, Gazprombank and Morgan Stanley act as co- bookrunners. PGIL may provide an option for 10% of the offering to organizers. Polyus will use the funds for debt repayment, funding operating activities and fields development projects, capital expenditure and other general corporate purposes. 1 Sistema says Rosneft’s suit hurts capitalization of company On June 5, 2017 Mikhail Shamolin, President of multi-industry holding Sistema, said that a RUB 106.6 bln suit of oil companies Rosneft and Bashneft against Sistema hurt its capitalization. In May, Rosneft filed the suit seeking to recover an alleged loss incurred by Sistema and its unit Sistema-Invest, which Rosneft believes were involved in asset stripping of Bashneft in 2009-2014, when they owned a controlling stake in the company. On May 24, Rosneft requested the Arbitration Court of the republic of Bashkortostan to raise claims under the suit to RUB 170.6 bln. Sistema still believes that the claims are illegal and plans to stand its ground and use all possible legal ways for that. Sistema transformed Bashneft into one of the best performing oil companies and improved its value for all investors and counteragents, including Russia as a receiver of taxes, and the next owner of the company. Shamolin said that all corporate actions mentioned in the suit were aimed at maximizing Bashneft’s value prior to a potential IPO at international markets. Reorganization of Bashneft was done specifically with that goal in mind and in full compliance with Russian legislation. On June 2, Rosneft CEO Igor Sechin said that an amicable deal with Sistema was possible. Shamolin said that Sistema was ready to discuss the amicable deal, but there had been no dialogue between the companies. Renova Group seeks control over Petropavlovsk On June 5, Kommersant business daily reported that multi-industry holding Renova Group of businessman Viktor Vekselberg would endeavor to obtain control over Petropavlovsk Plc, which operates gold deposits in Russia and in which Renova holds a 22.34% share stake and a 6.88% convertible bond stake. The newspaper said that Renova and friendly funds Sothic Capital Management and M&G Debt Opportunities, part of Prudential, jointly holding about 40% in Petropavlovsk, require a change of the board of directors. According to the sources, if the companies win at the next, June meeting of shareholders, Zoloto Kamchatki, Renova and Petropavlovsk may merge. Moreover, some Kommersant’s sources said that preliminary talks are being held on a possible merger of the consolidated company with Russian tycoon Roman Abramovich’s Highland Gold and GV Gold, belonging to owners of Lanta Bank, including businessman Sergei Dokuchayev. Renova reportedly needs the deals to protect investment amid controversies with Petropavlovsk’s founders Peter Hambro and Pavel Maslovsky holding over 9% and to raise Zoloto Kamchatki’s liquidity. A source said that Renova would need support of the minority holders as it was unable to vote. Another source added that the Kamchatka-based company might be valued at USD 500 mln. The completion of Petropavlovsk’s project to build a pressure oxidation chamber until 2019 may become a key factor of consolidation with Highland Gold. GV Gold may be interested in Petropavlovsk’s listing on the stock market. The companies declined to comment. A spokesperson for Highland Gold said the information was market speculations, and a source close to Renova said the company did not need any assets and it was not in talks with anyone. Novatek buys back 359,000 common shares on May 29-June 2, 2017 On June 5, 2017 it was reported that Russian independent gas producer Novatek bought back 163,000 common shares, including in the form of global depositary receipts (GDRs), from May 29 through June 2. Novatek announced USD 600 mln buyback program in June 2012 with possible prolongation. The program has been rolled over annually since then and on May 10, prolonged until June 7, 2018. UralChem says sale of TogliattiAzot shares is impossible On June 6, 2017 a representative of fertilizer producer UralChem, an owner of a minority stake in Russian fertilizer company TogliattiAzot, said that the plant’s shares cannot be put for sale due to a court decision that seized management rights of shares and property of the plant. Earlier on June 5, Vedomosti business daily reported citing sources that the family of Vladimir Makhlai was looking for a buyer of 71.5% in TogliattiAzot and Renaissance Capital had received a mandate for the sale of the stake in February. The representative said that the company had not received any purchase offers for the stake in TogliattiAzot. Under the fraud case launched in 2012 by UralChem court arrested in absentia TogliattiAzot’s Board of Directors Chairman Sergei Makhlai, his father Vladimir Makhlai, and Ameropa’s owner Andreas Zivy. Investigators estimated financial damage inflicted to the company at USD 3 bln, and seized RUB 12.5 mln worth of shares in TogliattiAzot. 2 Qatari QIA denies buyback option in Rosneft sale agreement On June 8, 2017 it was reported that Qatar Investment Authority’s (QIA) contract to acquire a 19.5% stake in Russian oil major Rosneft had no buyback option. It was mentioned that according to the agreement, under which Rosneft’s shares had been sold, neither Rosneft nor Rosneftegaz nor the Russian government have the right to buy back the shares directly or indirectly. The consortium controls the future property corresponding to the shares exclusively. QIA added that it consulted with the best international legal, accounting and investment banking companies while structuring and closing the deal to ensure it is in line with all applicable U.S. and E.U. requirements and rules. The Wall Street Journal said the deal had a 10-year buyback option. It quoted sources as saying that buyback was discussed between Russian President Vladimir Putin and Qatari Emir Tamim bin Hamad Al Thani and they agreed that Russia will buy back at least part of the interest. The government sold the stake in Rosneft to a consortium of commodity trader Glencore and the QIA for EUR 10.5 bln in December 2016. On June 5 Egypt, Saudi Arabia, Bahrein and the United Arab Emirates declared a break in diplomatic relations with Qatar, accusing Doha of supporting terrorist organizations. The eastern part of Libya, Yemen, Maldives and Mauritius later said they broke relations with Doha as well. Dividends/coupons VTB Bank may double dividends in 2017 On June 1, 2017 Andrei Kostin, CEO of Russia’s VTB Bank, stated that the bank might double dividend payments for 2017 if its net profit, calculated under International Financial Reporting Standards (IFRS), exceeds RUB 100 bln.