E L B A N I A T S U S R O F K R O W E M A R F A Y T I L I T R E F L I O S INТEGRATED REPORT 2021 Contents Strategic Report 34 Chairman’s statement 38 CEO’s statement 42 Business environment 46 Market overview 54 The Company’s role in the industry 56 Strategy 68 Strategic risks 4 About this Report 7 Material topics 9 Stakeholder engagement Company Profile 14 Our history 16 Key activities in 2021 18 Key highlights 20 Our mission and values 24 Business model 26 Geographical footprint 28 Investment case and credit ratings Performance Review 80 Financial performance 88 Operational performance 93 Customers and product management 104 Research and education 114 Supply chain 122 People development 138 Industrial safety 156 Environmental review 190 Contributing to local communities PhosAgro is a vertically integrated Russian company and one of the world’s leading producers of phosphate-based fertilizers. For interactive version of the report, please visit www.phosagro.com Corporate Governance 202 Chairman’s statement Corporate governance framework 204 212 Board of Directors 240 Executive bodies 246 Corporate controls 252 Ethical practices 262 Remuneration report Share Capital 268 Ownership structure 269 Share performance 270 Debt management 271 Analyst coverage 271 Dividend policy Relationship with shareholders and investors 273 Appendices (stand-alone document) Additional Information 278 Financial statements Changes in the status of conformity with the Corporate Governance Code (CGC) principles in 2021 329 Independent limited assurance report 326 334 GRI content index 343 SASB content index 345 TCFD recommendations 346 Glossary 347 Contacts About this Report GRI 2-1, 2-3, 2-2 Letter from the CEO The report was pre-approved by PhosAgro’s Board of Directors on 03 March 2022 (Minutes dated 05 March 2022). It is our pleasure to welcome you to the 2021 integrated Annual Report (the “Report”) of PJSC PhosAgro (PhosAgro). PhosAgro is a vertically integrated Russian company and one of the world’s leading producers of phosphate-based fertilizers. Boundaries This Report provides insight into the performance of parent company PhosAgro and its subsidiaries (jointly referred to as “PhosAgro Group”, the “Group”, or the “Company”). The key subsidiaries of the Group and PhosAgro’s stake in these subsidiaries are presented in the Group’s 2021 IFRS consolidated financial statements. There have been no significant changes to the Group’s size, structure or ownership during the reporting period. The boundaries of the Group companies covered in this Report differ from those Standards GRI 2-5 The Company maintains an annual reporting cycle, with the previous report released on 28 April 2021. The Report highlights how we integrate ESG principles into everything we do. The Company’s financial reporting follows the annual cycle too. The cover of the Report symbolises the scientific approach, a man's knowledge, intelligence and strength to till the land and grow crops on fertile land. The picture of a hand is also a symbol of the so-called "carbon handprint", that is, of all the positive actions a person takes to reduce their carbon footprint. in consolidated financial statements when it comes to specific non-financial disclosures. To ensure compliance with the materiality principle, we determined such boundaries in a way that this Report describes all material aspects of PhosAgro Group. Boundary 2: PhosAgro and Apatit, including its branches and standalone business units. Boundary 3: Apatit, including its branches and standalone business units. For more information on specific disclosures The data disclosed in this Report includes information on: and their boundaries used in this Report, see the GRI Indicator section on page 334. Boundary 1: PhosAgro and companies that are part of the group to which PhosAgro belongs (the scope of disclosure in IFRS consolidated financial statements). The following sources of guidance and requirements were used when drafting this Report: Joint-Stock Companies of Non-Financial Information Pertaining to Their Activities No. IN-06-28/49 dated 12 July 2021, > the Bank of Russia’s Regulation on > the Listing Rules of the Moscow Exchange, Disclosure of Information by the Issuers of Issue-Grade Securities No. 714-P dated 27 March 2020, > the Bank of Russia's Letter No. 06-52/2463 On Corporate Governance Code dated 10 October 2014, > the Bank of Russia's Letter On the Disclosure in the Annual Report of a Public Joint-Stock Company of a Report on Compliance with the Principles and Recommendations of the Code of Corporate Governance No. IN-06- 28/102 dated 27 December 2021, > the Bank of Russia’s Information Letter on Recommendations on Disclosure by > the Guide to Listing of the London Stock Exchange, > the AA 1000 and ISO 26000 standards, > CDP – Carbon Disclosure Project standards, > the Value Reporting Foundation, > the Task Force on Climate-Related Financial Disclosures (TCFD). information disclosures prepared under the related GRI Standards (the “sample information”) has been assured by AO PricewaterhouseCoopers Audit (AO PwC Audit) in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The Independent Limited Assurance Report and the GRI Content Index are both available in the Report. Financial results in the Report have been disclosed based on the IFRS consolidated financial statements of the Group for 2021 audited by AO PwC Audit in accordance with the International Standards on Auditing. The Company has reported in accordance with the GRI Universal Standards which will take effect from January 2023. Appropriateness of the selected qualitative and quantitative The Company takes into account and implements global best practices in sustainable development. stages. In March–April, we began a trial of the new +10 m level at the Kirovsky mine. It is expected to compensate for the levels being shuttered and even increase the mine’s overall output. Contracts for most materials and equipment necessary to carry out major repairs were made in advance. In the near future, we will do an additional analysis of feasibility and potential timelines for new investment projects. PhosAgro does not plan to optimise headcount, and all our social and charitable projects will carry on. Coupled with February’s salary indexation, this will go a long way towards keeping the people socially protected and ensuring stability in our regions of operation. However, Russian businesses may be experiencing a negative knock-on effect from the US, EU, and other sanctions. The Russian economy’s prolonged exposure to such restrictions might result in a material impact on financial and logistics processes and domestic customers’ ability to pay. It may also become harder for us to raise capital. Overall, PhosAgro is going to continue delivering on its commitments to the personnel, regions of operation, creditors, and partners both in Russia and abroad. Mikhail Rybnikov CEO and Chairman of the Management Board from 11 March 2022 15 April 2022 PhosAgro’s 2021 Annual Report was pre- approved by the Board of Directors on 3 March 2022. The end of February brought a set of new, unprecedented challenges for our Company. From 10 to 14 March 2022, four directors left their positions: Irina Bokova, Andrey A. Guryev, Andrey G. Guryev, and Xavier Rolet. Andrey A. Guryev also stepped down as PhosAgro’s CEO and Chairman of the Management Board. We are revising our market outlook. Having been plunged into this challenging macroeconomic environment, we are looking towards our high degree of vertical integration and self-sufficiency in raw materials to pull us through. This is what enables us to maintain business continuity and stable supplies amid the growing global fertilizer shortage. At the same time, we are keeping our finger on the pulse, and should any new restrictions be introduced in our markets, we will be able to promptly redirect our exports elsewhere, as well as increase supplies to the priority domestic market. A highly diversified debt portfolio and comfortable net debt to EBITDA ratio of 0.8x (as at the end of 2021) underlie the Company’s financial resilience. No big payments on our corporate debt are scheduled for this year, and we do not plan any new borrowings. PhosAgro’s revenue is largely FX-denominated, which represents a hedge against risks. We also consider our rouble liquidity to be sufficient for sustaining the Company’s operations. Current investment projects, in particular, a new plant being built in Volkhov, are in their final About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 4 5 About this Report Letter from the Chair of the Board of Directors’ Sustainable Development Committee In this report, we have endeavoured to paint as comprehensive a picture of PhosAgro in 2021 as possible. In doing so, we strive to match the holistic approach the Board of Directors and management takes to steering this one-of-a-kind company. Indeed, in a business environment defined by the persisting COVID-19 pandemic and great uncertainties, highly changeable domestic and global legislation, and increasing public attention to food security, climate change and corporate social responsibility, it would be nigh impossible to remain successful without adopting such a holistic approach. This year, the Company celebrated its 20th anniversary. It is an important milestone, where we, on the one hand, cast our minds back and take stock, while, on the other, look boldly to the future and set new ambitious goals. daily hard work you put in to ensure the Company’s sustainable development, which in turn trickles down to all stakeholder communities and regions. In the end, only you decide whether we reach our environmental, climate and social goals. And if 2021’s impressive results are anything to go by, it appears you have made your decision. In keeping with this past-conscious and future-forward ideology, we have chosen to look at all of PhosAgro’s activities through the lens of the product life cycle, much in tune with our “from mine to plate” principle. When disclosing the Company’s operational results, we have done our best to comply with the TCFD non- financial disclosure principles, such as strategy, governance, risks and opportunities, performance and metrics. This approach has enabled us to take a 360-degree view of our value chain make-up and its links, as well as to show how effective corporate governance facilitates internal synergies. On behalf of the Board of Directors, I would like to thank PhosAgro Group’s employees and managers for the Irina Bokova Chair of the Board of Directors’ Sustainable Development Committee from May 2019 to 15 March 2022 Material topics GRI 3-1, 3-2 Defining material topics: approach and steps In 2021, we revised our approach to identifying material topics to be disclosed in an integrated report. We used our previous experience of working with stakeholders and actively built on it. We managed to draft a more relevant list of material topics as we included more ESG ratings in our score analysis, obtained a Second Party Opinion (SPO) based on five ESG indicators from a leading sustainability agency, worked to advance the UN Sustainable Development Goals (SDGs) and the UN Global Compact, and identify any new non-financial disclosure requirements. Evolution of our approach to selecting material topics Source of data for selecting material topics Stakeholder surveys (within the Company) 2019 2020 2021 Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment Stakeholder surveys (outside the Company) Conducting a survey of key stakeholders to find out how important and relevant these topics are for them Conducting a survey of key stakeholders to find out how important and relevant these topics are for them Conducting a survey of key stakeholders to find out how important and relevant these aspects of the Company’s operations are for them Investor material topic surveys None Analysis of global and local ESG ratings and rankings None Conducting a survey of investors on a list of ESG- related questions jointly with IR Obtaining a five-component SPO to map out KPIs as part of the preparation for issuing green finance instruments Planning a survey of investors on a list of ESG-related questions in cooperation with IR for 2022 Analysing reports and questionnaires of global ESG rankings (MSCI ESG Research, Sustainalytics, CDP Climate Change) Expanding the range of global ESG ranking questionnaires (MSCI ESG Research, Sustainalytics, CDP Climate Change, CDP Water Security, Standard & Poor’s Corporate sustainability assessment (S&P CSA), RAEX) Analysis and prioritising of the UN SDGs None Setting UN SDG priorities on a PwC-led project in late 2020 Analysing the activities to advance the UN SDGs, revising their scope, and conducting social responsibility research together with the Donors Forum About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 6 7 About this Report Our work to define material topics resulted in a materiality matrix based on the entire range of stakeholder interests and opinions related to the Company’s disclosures. A disclosure approach focused on a product’s lifecycle enables us to provide the most complete and well-structured information about the Company’s performance in 2021, while maintaining a balance between the interests of diverse stakeholder groups. For more information, see the GRI Indicator section on page 334 Key changes in 2021 reporting that deserve a special mention s n o i s i c e d d n a s t n e m s s e s s a r e d o h e k a t s n o e c n e u fl n l I h g H i 207 304 417 418 304 417 402 415 406 405 414 410 301 408 409 407 416 411 206 w o L Low 413 204 413 204 205 201 403 205 404 401 203 303 306 308 302 202 305 305 403 303 401 404 202 302 High 1Disclosure of our sustainability metrics in this Report is prepared in accordance with the revised GRI Universal Standards early adopted by the Group. In line with the revised GRI requirements, we excluded three GRI standards from the list of material topics: > Environmental Compliance (GRI 307) and Socioeconomic Compliance (GRI 419) were replaced with Compliance with Laws and Regulations (GRI 2-27) which became a part of General (Universal) GRI 2 standard wich is mandatory for disclosure; > Human Rights Assessment (GRI 412) is has been covered by general (universal) GRI standards. As these standards are no longer subject to the materiality assessment process, we did not include their respective indicators in our matrix, but disclosed them in the Report. 2 40 GRI indicators underwent external independent limited assurance procedures by AO PwC Audit. Significance of economic, environmental and social impacts, including human rights impacts Material topics Less relevant topics Economic Category 206 Anti-competitive behaviour Economic performance 201 202 Market presence 203 204 205 207 Indirect economic impacts Procurement practices Anti-corruption Taxes Energy Environmental Category 302 303 Water and waste water 304 305 Biodiversity Emissions 306 Waste 308 Supplier environmental assessment Social Category 401 403 Occupational health and Employment safety Training and education Local communities 404 413 417 Marketing and labelling 301 Materials 402 Labour/management relations 405 Diversity and equal opportunity 406 Non-discrimination 407 408 409 410 411 414 415 416 418 Freedom of association and collective bargaining Child labour Forced or compulsory labour Security practices Rights of indigenous peoples Supplier social assessment Public policy Customer health and safety Customer privacy Questions and requests from interested parties can be sent to ir@phosagro.ru Stakeholder engagement Approach to stakeholder engagement; identifying and selecting stakeholders GRI 2-29 Wherever we operate, PhosAgro is an integral part of a community that includes businesses, government agencies, NGOs and individuals – locally, globally and nationwide. Our ability to listen and understand, be quick in our response, and effectively work with a wide range of stakeholders is key to the approach we use in doing business. It provides a solid foundation for delivering on strategic SDGs. For us, engagement with stakeholders begins when we realise our common goals and interests. A stakeholder is a person or organisation that has an interest in what we do. Stakeholders also include persons or organisations that may be affected by our activities or can influence our business decisions. Understanding stakeholder views facilitates many processes. It helps us develop new products for our customers, raise awareness among farmers about modern agricultural practices and techniques, work with researchers to present ambitious innovative projects connecting science and business and, most importantly, make informed practical choices to improve economic, social and environmental conditions where the Company can make a difference. PhosAgro’s framework for stakeholder engagement management covers relevant areas on all tiers of corporate governance, with the Board of Directors as the supreme body responsible for this process. The Sustainable Development Committee considers matters related to stakeholder engagement at least twice a year. On the day- to-day level, this matter is handled by dedicated functions that have annual plans based on an analysis of material topics, survey results, known expectations and other factors. In our engagement with our stakeholders, we strive to be constructive, open and principled. Thus, we work hard to build relationships with people at all government levels in the countries where we operate and ensure that we strictly comply with all applicable regulatory requirements. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 8 9 About this Report For more details, see page 273 Investment and finance community The core of our business philosophy is our commitment to creating shareholder value and ensuring sustainably high returns on investment, including regular dividend and coupon payments, strict compliance with our loan obligations, and a responsible financial policy. Company's stakeholders For more details, see page 190 Regional governments and local communities We are a major taxpayer whose payments to regional and local budgets have a direct impact on the socioeconomic environment across our footprint. As a responsible long-term partner, we also allocate significant funds to support local communities, contribute to charitable causes and develop social infrastructure. For more details, see page 114 Suppliers and contractors A socially responsible and efficient supply chain is a key value creation tool in today’s economy. Our priority is to purchase goods and services from responsible suppliers and contractors who provide top quality on the most attractive terms and adhere to responsible business principles. We also place a special emphasis on expanding our cooperation with local suppliers to maximise the benefits we can bring to their regions. For more details, see page 93 Consumers We are committed to building mutually beneficial long-term relationships with our customers by gaining a deep understanding of their needs, using advanced information and education technologies and providing advisory services. Other crucial qualities we seek to demonstrate are flexibility and sympathy amid market volatility. In July 2021, for example, PhosAgro announced a decision not to change its mineral fertilizer prices. Investment and finance community Employees and trade unions Regional governments and local communities International organisations Suppliers and contractors Research community Consumers Business and industry associations For more details, see page. 122 Employees and trade unions PhosAgro has one of the most professional and successful teams in the industry. Our employees and their families can expect not only safe working conditions without injuries or health hazards, but also job security, competitive pay, professional development and access to social programmes matching PhosAgro’s level. For more details, see page 112 International organisations As a leading global producer of fertilizers, PhosAgro cannot afford to, and will not, stand on the sidelines when it comes to addressing today’s key global challenges, such as climate change, soil depletion and contamination, and hunger. We work with FAO, UNESCO, UNEP and United Nations Global Compact and take part in other international projects and initiatives to help solve these and other problems for the good of humanity. For more details, see page 104 Research community Science is what underpins our industry, and PhosAgro is fully aware of the key role that scientists and researchers play in creating breakthrough agricultural solutions. We seek to support promising studies by leveraging our R&D capabilities and prolific partnerships with the Russian Academy of Sciences, Russian State Agrarian University – Moscow Timiryazev Agricultural Academy, International Union of Pure and Applied Chemistry and others. For more details, see page 104 Business and industry associations In our opinion, making the business community act in concert is a natural way of solving acute social issues – and the most effective one. In line with this approach Andrey Guryev, PhosAgro’s CEO, became head of the RSPP Coordinating Council for COVID-19. PhosAgro also plays an active role in the International Fertilizer Association, Russian Association of Fertilizer Producers and other key business unions. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 10 11 About this Report Nowadays, we are facing unique challenges, such as climate change, soil degradation, and water scarcity. At PhosAgro, we are convinced that the solution to these challenges rests on our ability to combine the hands-on experience and knowledge we have accumulated over the past 20 years with groundbreaking research. Siroj Loikov, Member of the Management Board, First Deputy CEO of PhosAgro Science-based approach PhosAgro runs the Samoilov Scientific Research Institute for Fertilizers and Insectofungicides (NIUIF) and PhosAgro Innovation Centre, unique research centres that are unparalleled nationwide. Thanks to developments by the Company’s scientists, 2021 saw PhosAgro’s sales of ultra-modern fertilizer grades created over the last five years reach RUB 71 bln, or 17% of total revenue. Technological innovations and advances implemented throughout our production cycle also has a positive effect worth tens of billions of roubles. 176% Growth in the output of fertilizers with micronutrients in 2021 K2O 17 S, % 6 N, % 13 Zn, % 0.6 P2O5, % 17 B, % 0.15 Y N A P M O C E L I F O R P 14 Our history 16 Key activities in 2021 18 Key highlights 20 Our mission and values 24 Business model 26 Geographical footprint 28 Investment case and credit ratings 12 12 13 13 Об отчете О компании Стратегический отчет Обзор результатов Корпоративное управление Акционерный капитал Финансовая отчетность Дополнительная информацияАкционерный капитал Our History 2001 Foundation of PhosAgro 2003–2004 Integrated Cherepovets production site created 2005 PhosAgro’s distribution network tops the market in Russia and the CIS 2009 Cherepovets production site becomes the largest sulphuric acid producer in Europe 2011 IPO1 on the London Stock Exchange 2012 New urea unit launched in Cherepovets 2013 Green Chemistry for Life programme launched together with UNESCO 2017 New ammonia and urea unit launched in Cherepovets 2018 PhosAgro Innovation Centre created 2019 Strategy to 2025 adopted 2020 Green procurement system introduced Climate and Water Strategies adopted 2021 New plant launched in Volkhov PhosAgro celebrates its 20th anniversary Production of fertilizers and phosphate-based products, mt Reduction of unit pollutant emissions, kg per tonne of finished and semi-finished products 3.4 Balakovo: production of MCP Cherepovets: sulfuric acid production; energy complex Cherepovets: Launch of ammonia and urea area 1.5 >200% 10.5 1,9 Cherepovets: 1st of four new sulfuric acid production lines Balakovo: 2nd production line for MCP Balakovo: development programme completed 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 0.8 -58% Reduction of pollutant emissions per tonne of finished and semi-finished products from 2008 (max level) to 2021 1 Initial Public Offering. Phosphate-based fertilizers Nitrogen-based fertilizers Other products 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 14 15 Company Profile Key Activities in 2021 Contract signed to provide the mining and processing plant at the Kirovsk branch of Apatit with green energy from TGC-1 hydroelectric power plants MSCI ESG Research upgraded PhosAgro’s sustainability rating from BBB to A Strategic agreements signed at the St Petersburg International Economic Forum to develop new agribusiness services with Demetra-Holding, expand the use of green energy with TGC-1, and develop agribiotechnologies and support agricultural education with Innopraktika Moody’s affirms PhosAgro’s Baa3 rating PhosAgro and the Food and Agriculture Organisation of the United Nations (FAO) expand cooperation in global soil protection ISO 9001:2015 and ISO 14001:2015 certification of quality management systems completed at all PhosAgro’s production facilities About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information The United Nations once again names PhosAgro a Global Compact LEAD company PhosAgro Group becomes first in Russia to achieve certification under the national standard for improved production Sustainalytics gives PhosAgro the highest ESG rating in the global agrochemical sector January April May June July August September October December Fitch affirms PhosAgro’s investment-grade BBB- rating with a stable outlook PhosAgro and the Russian Academy of Sciences launch a project to build a carbon farm in the Vologda region PhosAgro places USD 500 mln worth of seven-year Eurobonds at 2.6% per annum, a record- low rate for a Russian company PhosAgro becomes CGI Russia’s general strategic partner in the chemical industry PhosAgro Group’s facilities set a new historical record for annual output (10.5 mt) PhosAgro Group becomes first in Russia to achieve certification under the Vitality Leaf international environmental standard First stage of PhosAgro’s new mineral fertilizer plant commissioned in Volkhov Standard & Poor’s affirms PhosAgro’s investment-grade BBB- rating with a stable outlook PhosAgro Group announces a decision not to change its domestic mineral fertilizer prices Aluminium fluoride plant fully upgraded at the Cherepovets production site 16 17 Company Profile Key Highlights Financial highlights Sustainable development indicators Adjusted net profit, RUB bln Dividend payments, RUB bln Pollutant emissions, kg per tonne of finished and semi-finished products GHG emissions (Scope 1), kg per tonne of finished and semi-finished products Waste water discharge, m3 per tonne of finished and semi-finished products Revenue, RUB bln 2021 2020 2019 2021 2020 2019 420.4 253.9 248.1 Operational highlights Output by key product, kt Sales by key product, kt 2021 2020 2019 2021 2020 2019 10,480 10,164 9,682 2021 2020 2019 130.2 43.3 37.1 10,434 10,139 9,638 72.3 38.9 32.3 2021 2020 2019 2021 2020 2019 0.801 0.892 0.888 2021 2020 2019 132.7 140.1 143.3 Share of recycled and decontaminated hazard class 1–4 waste, % Employee satisfaction and loyalty, % Average annual training hours per employee, hour 2021 2020 2019 2021 2020 2019 39.1 37.6 34.5 LTIFR, per 1 mln man-hours Accidents (corporate staff) 2021 2020 2019 2021 2020 2019 0.85 0.52 0.59 2021 2020 2019 57 63 60 0 0 3 5.42 5.57 4.68 95.0 79.5 92.4 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 18 19 Company Profile Our Mission and Values Our mission Caring for Earth fertility for prosperous lives The Company acknowledges its responsibility for the global food security and efficiently works towards this cause The Company offers eco- efficient fertilizers, as well as delivery services and optimal application solutions. We work for those who feed the world Our vision Our values Global presence Organic growth and development Healthy lifestyles and occupational health and safety Eco-efficiency Social responsibility Innovation and digital transformation Teamwork As strong team players, we look to ensure smooth cooperation of all our business units Expertise Everyone at PhosAgro is a qualified professional in what they do Leadership Our goals are ambitious as we strive for professional excellence and continuous self- improvement Reliability We always honour our obligations and are a reliable partner About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Ethics We support human integrity, fostering moral standards and ethics, spiritual values, dedication at work, and respect for family values Improvement and innovation Development is ongoing at PhosAgro, with every procedure relentlessly improved and refined Safety We promote and share a safety culture within the Company to ensure safe working conditions 20 21 Company Profile Navigator on UN SDGs 17 UN SDGs are the most important benchmark in our making both strategic and day- to-day management decisions. Committed to the Company’s mission and values, which are underpinned by our Strategy to 2025, we look to contribute to, and monitor the progress against, targets of our eleven priority UN SDGs. PhosAgro directly contributes to 11goals out of the 17 UN sustainable development goals Target 2.4 Fertilizers help increase food production and ensure the availability of nutrients required for human health. Together with UNESCO and FAO, we implement projects to promote conservation agriculture and equal opportunity and ensure that farmers in developing countries have access to science-based agricultural practices. For more details, see page 104 Targets 3.4 and 3.9 Our production facilities comply with requirements regarding the use of best available techniques for reducing pollutant emissions and environmental impact. For more details, see page 156 Target 11.3 We ensure comfortable living conditions by investing heavily in housing construction, transportation and social infrastructure. We also support local entrepreneurs by creating a responsible supply chain (taking into account ESG aspects). For more details, see page 190 Target 12.4 We make an essential contribution to the circular economy of food security, human health and well-being. Our products carry eco-labels that attest to their safety. Together with our suppliers and customers, we implement initiatives to improve ESG metrics, including supplier ESG assessment and ranking. For more details, see page 93 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Target 4.4 Our social priorities include providing full- time employment opportunities, training and building a team of professionals, and supporting schools and colleges in regions where the Company operates (to promote modern education). Together with UNESCO, we run the Green Chemistry for Life programme to support young scientists. For more details, see page 136 Targets 6.1 and 6.3 Under the Company’s Water Strategy, we reduce fresh water withdrawal and consumption by increasing recycling, i.e. water reuse in industrial processes. We implement zero discharge technologies. For more details, see page 183 Targets 13.1 and 13.2 We take tangible practical measures under our Climate Strategy, which includes a climate risk analysis, GHG emission reduction programme (supported by the Energy Efficiency Strategy) and low-carbon transition plan. For more details, see page 163 Target 15.1 Our Innovation Centre and Scientific Research Institute work to create smart next-gen eco-efficient fertilizers. For more details, see page 108 Making a positive impact Minimising the negative impact Targets 8.3, 8.5 and 8.8 We aim to have zero fatalities, demonstrate top health and safety performance across the key indicators and comply with the highest standards in this area. For more details, see page 138 Target 9.1 We make a significant contribution to the development of regional infrastructure. The Company is streamlining product shipments to reduce their carbon footprint and embracing the best available techniques to support a circular economy, cut emissions and waste, and reduce water use. For more details, see page 156 We are among the 37 Global Compact LEAD companies Target 17.16 We ensure a long-term positive impact of social investing by building ties with local communities and working with UNESCO, FAO and the United Nations Environment Programme (UNEP) to promote educational projects across our footprint in Russia and abroad. For more details, see page 112 For more information on how we set UN SDG priorities, see the Sustainability section of the Company’s website For more information on SDG 2, see the Commitment to UN goals section of the Company’s website 22 23 Company Profile Business Model We use Market and technology insights Management, production and sales competencies Energy and water Mineral resources and materials Partner, supplier and customer relationships Public and private infrastructure Finances PhosAgro Group’s business model is based on the simple idea that we must better than our competitors understand the ever-changing customer needs and respond to them quicker using a wide product range, large distribution network and robust logistics. This requires flexible high- tech production facilities, high self-sufficiency in quality raw materials, deep vertical integration and, most importantly, continuous feedback from end customers and analysis of our product performance. All this helps PhosAgro Group maintain a low cost position in the industry, while also ensuring top quality and unique eco-efficiency of its fertilizers. We leverage our competitive advantages and seek to meet the highest operational standards throughout our product lifecycle. For more information on the Company’s Strategy to 2025, see the Strategic Report section on page 56. PhosAgro’s competitive advantages urces P r o duction Mineral re so L o g i s t i c s P r o d u c t i o n Applicatio n Sales We secure Sustainable soil fertility Large-scale purchases of local products and services Sustainably high returns on investment Basis for making safe food products Consistent tax payments and local community development Contribution to international programmes addressing global challenges Well-paid jobs and social benefits Educational initiatives and upskilling opportunities New research and technological innovations Product development Mineral resources Production Logistics Sales Application Target 2.4 Target 12.4 We operate the industry’s largest research centre at Samoilov Scientific Research Institute for Fertilizers and Insectofungicides, Russia’s oldest of its kind (founded in 1919) Apatite-nepheline ore of magmatic origin, which is unique in terms of quality and safety and does not have as much cadmium or other heavy metal content as would be dangerous for health, with a reserves-to-production ratio (RPR) of 60 years High vertical integration (% of total demand): Wide product range: Ultra-modern product offering: Own production 52 fertilizer grades of all kinds 17% grades developed in the last five years account 100% of phosphate rock 79% 94% 55% ammonia sulphuric acid ammonium sulphate Target 8.3 Target 3.9 Target 9.1 Target 2.4 Large-scale upgrade and construction programmes in Cherepovets, Volkhov and Balakovo 24.7 mtpa Strong commitment to reducing emission intensity and waste water discharges, and improving energy efficiency High throughput capacity on key rail routes 11.8 mt phosphate rock and nepheline concentrate + 0.8% 7.9 mt 2.4 mt phosphate- based fertilizers nitrogen-based fertilizers + 4.2% + 0.4% Reliable delivery: a large own fleet of railcars and port terminals on key export routes 31 distribution centresin Russian regions Largest distribution network in Russia Global presence and diversified exports Strong position in the premium European market shipping to sales of >100 countries 2.8 mt Target 17.16 Service model for customers: our product is a combination of a fertilizer and our agronomic expertise, all available in a digital environment PhosAgro’s agronomic service: training, agronomic advice and support for customers Digitalisation of sales and customer services: >100 online lectures for 21 agricultural universities independent online platforms 3 on fertilizer sales ths 8.6 mobile app downloads +99% к 2020 1.7 ths online requests +244% к 2020 7.8 ths unique Agro Calculator users Research and education on page 104. Operational performance on page 88. Customers and product management on page 93. Operational performance on page 88. Environmental review on page 156. Geographical footprint on page 26. Strategy on page 64. Operational performance on page 88. Geographical footprint on page 26. Customers and product management on page 93. Strategy on page 63. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 24 25 Company Profile Geographical Footprint Upstream and downstream R&D Logistics With an up to 6.5 mtpa port transhipment capacity across key export routes, the Company can ensure a reliable supply to foreign customers and guarantee timely delivery against its contractual obligations. Distribution PhosAgro Group’s network of sales offices is the largest in Russia and covers most of the world’s key agricultural regions, making the Company’s quality products available to farmers across the globe. GRI 2-1, 2-6 PhosAgro Group’s eco-efficient mineral fertilizers and feed phosphates are sold all over the world via an extensive distribution network relying on the Groups’s robust logistics infrastructure. Our key production facilities (including mining and processing assets), port terminals and research centre are located in Russia. A flexible business model, well-thought-out production and sales strategy and deep knowledge of customer preferences help us maintain a strong position across the main fertilizer markets, primarily in Russia and other premium markets. supplies countries 100+ >18 ths 10.3mt employees sales in 2021 Bayonne (France) Hamburg (Germany) Zug (Switzerland) São Paulo (Brazil) Belgrade (Serbia) Minsk (Belarus) Murmansk Kirovsk Kotka (Finland) Vistino Warsaw (Poland) Vilnius (Lithuania) Volkhov Moscow (Head Office) Cherepovets Bucharest (Romania) Orel Ryazan Kursk Nizhny Novgorod Belgorod Lipetsk Voronezh Tambov Penza Kazan Saransk Rostov-on-Don Samara Krasnodar Stavropol Bykov Otrog Volgograd Yekaterinburg Novosibirsk Nur-Sultan (Kazakhstan) Barnaul Cape Town (South Africa) Limassol (Cyprus) Singapore The Volkhov branch (Volkhov, Leningrad region) is Russia’s only producer of sodium tripolyphosphate and one of Russia’s leading producers of mineral fertilizers. The Kirovsk branch (Kirovsk, Murmansk region) is the world’s leading producer of high-grade (P2O5 content of at least 37.5%) phosphate rock and Russia’s only producer of nepheline concentrate. It develops six Khibiny deposits: Kukisvumchorr, Yukspor, Apatitovy Cirque, Rasvumchorr Plateau, Koashva and Njorkpahk. Apatit (Cherepovets Vologda Region) is Europe’s biggest producer of phosphate-based fertilizers and of phosphoric and sulphuric acids, as well as one of the Russian leaders by NPK1, ammonia and ammonium nitrate output. PhosAgro Group runs Samoilov Scientific Research Institute for Fertilizers and Insectofungicides (Cherepovets, Vologda region), Russia’s only research centre specialising in this area and one of the largest in Europe. Founded in 1919, this institute paved the way for the country’s strong mineral fertilizer industry. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information The Balakovo (Bykov Otrog, Saratov region) focuses on phosphate-based fertilizers (a leading producer in Europe) and feed phosphates (a leading producer in Russia, and the country’s only manufacturer of feed monocalcium phosphate). Krasnoyarsk In 2021, we reorganised our distribution in Siberia and the Russian Far East, establishing a regional sales office in Novosibirsk to spur business development in promising agricultural regions everywhere between the Urals and the Pacific. Ussuriysk For more information on our geographical footprint, please visit the Company’s website 1 Nitrogen-phosphorus-potassium fertilizers. 26 27 Company Profile Investment Case and Credit Ratings 45.6% EBITDA margin 60years The mine life of mineral resource base About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 1 A global producer of high-quality phosphate-based fertilizers 2 Unique resource base and sector-leading margins PhosAgro is Europe’s largest producer of phosphate-based fertilizers1 and a top 5 global producer of DAP/MAP2 by capacity. ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, ISO 14024:2018, GMP+ (B2), (B1), (B4) certifications that attest to the high quality of products and management efficiency throughout their lifecycle. The Company successfully passed a certification audit for compliance with the International Fertilizer Association’s Protect and Sustain standard. The audit was conducted by SGS, the world’s leading inspection, verification, testing and certification company. Customer focus. A leading supplier of all types of mineral fertilizers in the Russian market in aggregate terms. An extensive domestic sales network and trading offices in all key export markets. Netback-driven sales model with a global presence. Products exported to European Union customers have been registered pursuant to Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation and Authorisation of Chemicals (REACH). The technologies used at PhosAgro’s production sites meet the highest global standards. Unique mineral resource base. The mine life is estimated at around 60 years. Important food safety factor. Thanks to its magmatic origin, phosphate rock mined on the Kola Peninsula boasts exceptional purity. EBITDA margin, % 2019 2020 2021 Wide range of ready-to-use solutions for farmers. Our in-house R&D function enables us to develop and launch new fertilizer grades in a prompt manner in order to deliver the crop nutrient solutions our customers need. No. 1 globally as a producer of high- quality phosphate rock (P2O5 content at 39% and above). Self-sufficiency in major inputs: 100% in phosphate rock, 79% in ammonia, 94% in sulphuric acid. One of the highest gross margins in the phosphate segment. 30.5 33.7 45.6 14.9 18.1 12.4 26.2 27.5 38.0 22.8 13.7 24.4 18.1 13.6 24.1 31.1 30.3 45.0 (1.3) 15.5 27.2 1 By total production capacity for DAP/MAP/NP/NPK/NPS. 2 Monoammonium phosphate / diammonium phosphate. top 5 global producer of DAP/MAP2 by capacity No.1 No. 1 globally as a producer of high-quality phosphate rock PhosAgro Peers 28 29 Company Profile Transparent ownership structure with >30%of shares in free float 3 Eco-efficient fertilizers 4 Sound capital allocation in highly effective investment projects 5 Well-balanced corporate governance Investment projects may get a go-ahead subject to their high IRR1 (20%+), compliance with the BAT and sustainability criteria along with the CAPEX/EBITDA target, and a comfortable net debt / EBITDA covenant headroom. Seven (70%) independent non-executive directors on the Board of Directors Credit rating 31.12.2019 31.12.2020 31.12.2021 Stable credit ratings Green One GRI 417-1 Vitality Leaf In the reporting year, products made at the Company’s sites in Cherepovets and Volkhov successfully passed voluntary certification under the Vitality Leaf framework. This ISO 14024-compliant framework was designed to assess a product’s environmental safety throughout its lifecycle, including mining and processing of raw materials, their delivery to the plant, storage, transportation and use of finished products, and packaging recycling. In 2021, PhosAgro Group became first in Russia to achieve certification under the national standard for improved production. As a result, we will be able to use eco-labels that prove this and were adopted with support from all members of the Russian Association of Fertilizer Producers. Today, all of the products made at our mineral fertilizer facilities have been certified under R 58658–2019, which has introduced the world’s most rigorous limits on heavy metal and arsenic content. This is a testament to the unique eco-efficiency of our products, which can now be labelled with the green brand. GOST Green labelling guarantees that Russian-made mineral fertilizers conform to the most stringent international requirements for environmental safety, including the EU’s recent restrictions on the content of heavy metals, such as cadmium, lead and arsenic, in fertilizers. Breakdown of CAPEX2, RUB bln 1.3 11.1 23.9 1.1 10.8 30.0 2.0 20.1 30.4 2020 2021 2022 (plan) Non-industrial construction Projects to support existing capacity Investment projects 1 Internal Rate of Return. 2 CAPEX excluding capitalised repairs. Six Board committees meeting on a regular basis with five of them chaired by independent directors ВВВ− ВВВ− Ваа3 Ваа3 ВВВ− ВВВ− ВВВ− Ваа3 ВВВ− A reasonable Board composition Place of residence Increasingly higher ESG ratings ESG rating 2019 2020 2021 Russian Federation Gender split Other countries Women Men 3 SUSTAINALYTICS materially amended its methodology in 2019. The indicators currently reflect the level of unmanaged ESG risks. The decrease in the absolute value of the score reflects a position improvement. 4 PhosAgro was first included in the rating in 2021. 5 This publication contains information developed by Sustainalytics (www.sustainalytics.com). The information and data are property of Sustainalytics and/or its third party suppliers (Third Party Data) and provided for informational purposes only. They do not intend to endorse any product or project, do not constitute investment advice and are not warranted as to their completeness, timeliness, accuracy or fitness for a particular purpose. The terms of their use are available on the website https://www.sustainalytics.com/legal-disclaimers Climate Water BB ВВВ С F B- F A B C4 5 45.2 3 26.9 3 22.8 3 Percentile among all companies globally (100 for the worst performance, 1 for the best performance) Percentile among all agrochemical producers globally (100 for the worst performance, 1 for the best performance) 69 45 33 31 3 1 n/a n/a 46 4 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 30 31 Company Profile Growing sales in premium markets The Company’s strategic goal is to increase sales in priority markets to 11.6 mt by 2025. One of the expected drivers is our position as a producer of fertilizers that are free of heavy metals harmful to human health and soils. In 2021, PhosAgro’s sales in premium markets almost hit 10.3 mt. 20% Minimum IRR of development projects C I G E T A R T S T R O P E R Innovation and digitalisation Drones and new digital technologies open up unprecedented opportunities for farmers to improve crop yields and profit margins. Drones are able to collect data on soils and plants in real time. Once analysed, it can promptly suggest responses to nutrient deficiencies, as well as to the risk of fungus or diseases. This data can also be fed into our Agro Calculator, which will help determine what fertilizers are necessary. Agro Calculator is powered by algorithms based on years-long research by D.N. Pryanishnikov All-Russian Research Institute of Agrochemistry, the International Plant Nutrition Institute (IPNI), and expertise of our in-house agronomic service. NO3 3.6 P2O5 30.6 K2O 280 Humus, % 13 34 Chairman’s Statement 38 CEO’s Statement 42 Business Environment 46 Market Overview 54 The Company’s Role in the Industry 56 Strategy 68 Strategic Risks 32 33 33 33 Об отчете О компании Стратегический отчет Обзор результатов Корпоративное управление Акционерный капитал Финансовая отчетность Дополнительная информацияАкционерный капитал Chairman’s Statement Dear colleagues, 2021 was of particular significance for PhosAgro as it marked the 20th anniversary of the Company and the 10th year of our public listing on London Stock Exchange. Over these 20 years, we have demonstrated consistent growth and solid results, and 2021 was no exception. As the pandemic persisted, we continued to focus on occupational disease prevention initiatives to ensure the health and safety of our employees and the residents of the cities where we operate. All the while, we maintained an uninterrupted supply of environmentally friendly fertilizers to farmers both worldwide and in Russia, our priority market. I believe that we successfully navigated through all of the last year’s challenges and managed to consolidate PhosAgro Group’s leadership in the industry. 10.3 mt all-time high fertilizer output in 2021 Strategic investments in capacity expansion In spite of all the difficulties we faced in 2021, our resilient business model and unique resource base, as well as coherent and professional guidance from the management team led by Andrey Guryev, helped us make considerable progress on the Strategy to 2025. We continued to implement our key investment projects in line with the strategy which views the 20% increase in fertilizer and feed phosphate production by 2025 as the Company’s main growth target. In 2021, the PhosAgro Group invested RUB 41.9 bln (excluding capitalised repairs) in strategic projects, with an additional RUB 250 bln earmarked for investment over the next five years. The launch of a new sulphuric acid plant with a daily capacity of 3.3 kt (SK-3300) and reconstruction of the Kriolit railway station marked the completion of a large-scale development programme at PhosAgro’s Cherepovets production site and became a significant milestone of 2020 for the Company. Previously, as part of the investment programme worth more than RUB 120 bln (PhosAgro’s total investments for the past seven years are estimated at RUB 240 bln), the Company commissioned a 760 ktpa ammonia plant and a 500 ktpa granulated urea unit. As a result, the production site’s fertilizer output hit the all-time high of 7.6 mt in 2021. All this led to an increase in tax contributions and the creation of over 650 jobs for highly qualified employees. But PhosAgro Group’s ambitious investment programme does not stop there. Key future projects include the completion of an advanced phosphate-based fertilizer facility and support infrastructure in Volkhov, as well as further development of the mining segment, first phase of construction of a new ammonia and urea facility in Cherepovets, and initiatives to boost output at the Balakovo branch of Apatit. These and some other projects will be included in the updated version of the Strategy to 2025 to be reviewed by the Company’s Board of Directors in spring 2022. I am convinced that successful implementation of the investment programme will enable PhosAgro Group to increase its growth rates and ramp up the production of environmentally friendly fertilizers that are free of toxic substances (including cadmium) harmful to human health and soils. Such endeavours are of critical importance in light of the food safety challenges posed by the pandemic and mounting concerns around global food quality and safety. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 34 35 Strategic Report Fertilizer market and PhosAgro Group’s performance From the beginning of 2021, demand for mineral fertilizers in international markets grew steadily, driven by a substantial increase in global prices and the need for popular grains and oilseeds, which account for over 50% of fertilizer use worldwide. Higher agricultural prices, in their turn, pushed up the demand for fertilizers. This market environment satisfied all the required conditions for PhosAgro Group’s productivity improvement efforts to pay off and fully translate into the Company’s operational results. ~18%of products manufactured by the Apatit mining and processing plant using green power Results Contribution to sustainability GRI 2-22 PhosAgro has always been a champion of sustainability. In 2021, we scaled up the use of green power in agrochemical production by signing a contract for the supply of hydroelectric power with TGC-1, which covered around 18% of products manufactured by the Apatit mining and processing plant. During the 24th St Petersburg International Economic Forum, PhosAgro and TGC-1 had entered into an agreement designed to boost the share of green energy used in the production of mineral fertilizers. The 2021 green energy supplies totalled approximately 300 mln kWh. In 2021, we also published our first ever report in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which discloses the Company’s FY2020 results. The report provides information on how climate issues are integrated into PhosAgro’s strategy, corporate governance and risk management. In December 2021, PhosAgro and the Food and Agriculture Organisation of the United Nations (FAO) announced plans to extend their cooperation in the protection of the planet’s soils. At this new stage, the FAO and PhosAgro intend to focus on soil pollution issues, including contamination with heavy metals. Over the next two years, PhosAgro will provide another USD 1.2 mln in funding for the initiative. This will bring PhosAgro’s total contribution to the project to USD 2.4 mln by 2023. We are happy that food safety concerns are being addressed at the international level. In 2021, the European Commission made a significant step forward by introducing drastic caps on the content of toxic cadmium in certain food products within the European Union. As a producer of environmentally friendly fertilizers with a perfectly low cadmium content, PhosAgro fully supports this initiative designed to protect public health and to boost food safety. We are glad to see that Russia is also becoming increasingly concerned with food safety issues. In June 2021, Russia’s President signed Federal Law No. 159-FZ On Agricultural Products, Raw Materials and Food with Improved Environmental Characteristics that will come into effect on 1 March 2022. This law allows for environmentally safe products to be sold under the national green brand, which will enable consumers to make responsible food choices while also increasing the competitiveness of Russia’s agricultural industry. All our sustainability efforts do not go unnoticed by the international expert community. Sustainalytics, a leading independent ESG research, rating and data firm, improved PhosAgro’s rating in their ESG risk management framework from 27.3 to 22.8, placing the Company among the world’s 30 top-performing chemical companies – ahead of all global agrochemical producers. Furthermore, CDP upgraded PhosAgro’s climate change score from B- to B, and its water security score from F to C, while MSCI ESG Research highlighted the Company’s leadership position and reaffirmed its A rating. In September, the United Nations confirmed PhosAgro’s Global Compact LEAD status, which underscores the Company’s high sustainability. Today this honour is held by just 38 organisations worldwide. 22.8 Sustainalytics ESG risk management framework (ahead of all global agrochemical producers) Corporate governance The year of 2021 required that we demonstrate strong coordination and professionalism at all levels of the corporate governance framework. I am honoured to have been elected Chairman of the Board of Directors once again. Of equal importance is the fact that the remaining directors also secured re-election to the Board this time around. Given the scale of our operations and the risks that we face, the current line- up of the PhosAgro Board of Directors is very well placed to tackle the Company’s tasks and business goals. In 2021, the Expert Council of the 15th Director of the Year National Award Ceremony chose me and four other directors (Irina Bokova, Andrey Guryev, Marcus J. Rhodes and Andrey Sharonov) as recipients of the prize for our contributions to the development of corporate governance and promotion of best corporate practices in Russia. PhosAgro’s corporate governance framework is indeed impressive. This is confirmed by both the results of the Board’s self- assessment completed in early 2022 and the findings of experts assessing the entire corporate governance system. In line with the best global practices, seven out of ten current directors are independent. Independent directors chair five of the six Board committees. PhosAgro works continuously to enhance its transparency and meet the interests of all stakeholders. I am proud to emphasise the pace and quality of our development and the improvements that we bring to our corporate practices. COVID-19 response In 2021, COVID-19 remained one of the key factors to reckon with for PhosAgro Group, the industry and global community. We are firmly convinced that collaborative approach is the only way to deal with the fallout from the pandemic. That is why PhosAgro continues to cooperate with the Russian Union of Industrialists and Entrepreneurs, the Russian Association of Fertilizer Producers and the International Fertilizer Association in a bid to change the situation for the better through joint efforts. From the beginning of the pandemic until the end of 2021, the Company invested over RUB 2.6 bln to fend off the coronavirus infection. We also continue to pay close attention to maintaining herd immunity at PhosAgro Group by informing employees about the importance of vaccines, encouraging them to get a jab and providing comfortable conditions for vaccination. On behalf of the Board of Directors, I would like to thank all members of PhosAgro’s team for their joint work in these harsh times to ensure uninterrupted operation of our business and to provide farmers with environmentally friendly fertilizers, thus making a significant contribution to global food safety. Xavier R. Rolet, Chairman of the Board of Directors of PJSC PhosAgro from May 2019 to 10 March 2022 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 36 37 Strategic Report CEO’s Statement 2021marked two major events — the 20th anniversary of PhosAgro and the 10th anniversary of our public listing on the London Stock Exchange. This gives us a suitable opportunity to look at the progress we have made thus far. Since the IPO, we have more than doubled our output of mineral fertilizers and feed phosphates. From 2011 up to now, we have invested close to USD 6 bln in the Company’s development. Over these ten years, we have achieved a nearly four-fold increase in labour productivity at our production sites, while also reducing workplace injury rates by more than two thirds. PhosAgro Group’s product portfolio has quadrupled to count more than 50 grades of mineral fertilizers for different soils and crops. We have penetrated new markets and expanded our sales geography: today our fertilizers are shipped to over 100 countries. 2021 was not only a year of anniversaries, but also a year of new significant achievements. PhosAgro Group completed a number of investment initiatives, entered into important partnership agreements and demonstrated solid operational and financial results. All this was achieved by placing an emphasis on the principles of sustainability and responsible business conduct, which are deeply integrated into our strategy and day-to-day operations. RUB41.9 bln CAPEX Progress against the Strategy to 2025 PhosAgro is making considerable strides towards the goals set out in the Strategy to 2025. This document focuses on further enhancement of PhosAgro Group’s presence in its priority market (Russia) and premium export markets, as well as on the strengthening of its role as a producer of environmentally friendly phosphate-based fertilizers boasting some of the lowest cash costs in the industry. In 2021, we continued developing efficient and flexible hi-tech production capacities, while CAPEX (excluding capitalised repairs) for the reporting period amounted to RUB 41.9 bln, or 21.8% of EBITDA, which is fully in line with our Strategy to 2025. In particular, we are now completing the investment project of creating a state-of-the-art mineral fertilizer facility in Volkhov. Two start-up facilities with an aggregate capacity of over 800 kt of MAP came on stream in March and June 2021. Furthermore, new sulphuric acid production sites were built. Once the plant is complete, the facility’s capacity will increase more than four-fold. In Cherepovets, we launched a new sulphuric acid production unit with a capacity of 3.3 kt per day leveraging the best available techniques developed by the nation’s leading R&D institutions. These techniques helped significantly improve the unit’s energy efficiency and minimise emissions. The steam generated by the sulphuric acid unit is used by our heat and power plant to produce electricity, which allows us to reduce natural gas consumption and the carbon footprint of PhosAgro Group’s products. The unit will produce higher-quality sulphuric acid as a feedstock for larger volumes of environmentally friendly fertilizers. A revamped Kryolite station enabled PhosAgro Group to increase rail freight turnover at the Cherepovets site, which brought the site’s logistics capacities to a completely new level, while also improving the environmental efficiency of cargo handling. This is fully in line with our strategic goal of modernising the logistics and port infrastructure and increasing its throughput capacity by 2025. In December, PhosAgro Group also completed an upgrade of the aluminium fluoride plant at the Cherepovets site, increasing its production capacity from 57 to 73 ktpa. This helped cover 70% of the country’s demand for aluminium fluoride with locally produced feedstock, while also contributing to the resolution of environmental issues in line with the principles of circular economy: as the new plant processes fluosilicate acid, a by-product of phosphoric acid, into a marketable product, we are able to fully utilise the fluorine recovered from phosphate rock. As a result, PhosAgro Group’s output of mineral fertilizers and other products increased by more than 3% year-on-year to 10.5 mt. Strong operational performance and a favourable market environment allowed us to deliver impressive financial results in 2021: EBITDA came in at RUB 191.8 bln (up 124% year- on-year), while EBITDA margin amounted to 45.6% (vs 33.7% in 2020). About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 38 39 Strategic Report Strong performance Sustainability as a priority In 2021, we significantly ramped up our output thanks to new and upgraded production capacities. A substantial increase in global prices for key grain cereals and oilseeds and demand for mineral fertilizers drove up our margins and contributed to solid cash flows. Results I am also happy to report yet another success of PhosAgro in capital markets. The Company issued USD 500 mln in seven-year bonds at 2.6% per annum. This is a record low coupon rate for a Russian company’s USD-denominated issue of comparable maturity. The offering helped the Company reduce the total cost of its debt portfolio. RUB191.8 bln EBITDA Sustainability and responsible business conduct lie at the heart of PhosAgro Group’s strategy and business model. The key focus areas of our Strategy to 2025 include commitment to UN SDGs and meeting customer demand for phosphate-based fertilizers that are free of toxic concentrations (including those of cadmium) harmful to human health and soils. Today, as a LEAD company under the UN Global Compact, the world’s most credible platform for socially responsible businesses, PhosAgro directly contributes to 11 UN SDGs. In 2021, PhosAgro Group became Russia’s first company to pass certification under the national standard for products with improved environmental characteristics. The Cherepovets, Volkhov and Balakovo sites were certified under GOST R 58658– 2019, which has introduced the world’s most rigorous limits on heavy metal and arsenic content. This is a testament to the unique eco-efficiency of our products, which can now be labelled with the green brand. In February 2021, the European Commission adopted a Communication on the visual appearance of the label on EU fertilizing products with a cadmium content of less than 20 mg per kg of P2O5. This voluntary label will enable manufacturers (including PhosAgro Group) to raise customer awareness about the outstanding eco-efficiency of their products. Furthermore, starting from 16 July 2022, the EU will ban the sale of phosphate-based fertilizers with a cadmium content of more than 60 mg per kg of P2O5. PhosAgro Group actively supports the government’s fight against climate change. For example, PhosAgro Group entered into an agreement with the Vologda region and the Russian Academy of Sciences to create a greenhouse gas monitoring system, which represents an important step on the path towards carbon neutrality in the region and across PhosAgro’s product range. A carbon farm with a design sequestration capacity of 0.7 mtpa of CO2 will form an integral part of this new system. PhosAgro Group’s carbon sequestration project is set to become a veritable breakthrough and a model for roll-out across the nation’s other industrial regions. For the Company, this is an opportunity to produce carbon neutral fertilizers that will be required for foodstuffs with a zero carbon footprint. This is a new trend and a much desired environmental niche in the global market. I am particularly proud of the Young Global Leader title conferred on me in 2021 by the World Economic Forum and the prize in the Contribution to the Development of ESG Culture category that I received at the 15th Director of the Year National Award Ceremony. That said, PhosAgro’s championship of social sustainability would have been impossible without the joint efforts of all our team members. I would therefore like to take this opportunity to thank each and every employee of the Group for their contribution. COVID-19 response In 2021, the coronavirus pandemic continued to have the upper hand in determining how the business and global communities live and operate. All members of PhosAgro Group’s team and me personally as a chairman of the RSPP Coordinating Council for COVID-19 made consistent efforts to protect our labour force and strengthen the anti-pandemic shield put up by the government. I was also highly honoured to receive the Order of Pirogov from the President of the Russian Federation Vladimir Putin, as this award represents recognition of the contribution made by the Russian business community to the fight against COVID-19. We can safely say that PhosAgro Group is fully aware of its responsibility towards a wide range of stakeholders when it makes decisions on measures to fend off the pandemic. We seek to protect our employees and maintain uninterrupted operation of our production facilities that ensure food security for Russia and over 100 countries across the inhabited continents, while also providing support to healthcare and social institutions across the Company’s footprint. In terms of epidemiological safety, we do not only implement a wide array of restrictions and protective measures such as regular health and temperature checks, social distancing at the workplace and inside corporate vehicles, and regular COVID-19 testing, but also strive to raise employee awareness about the importance of voluntary vaccination. World-class virologists, infectious disease doctors and vaccine developers are invited to participate in meetings with PhosAgro’s staff. Employees also get information and answers to their questions through corporate media, the intranet, and guidelines, as well as during online and offline meetings. In addition, we have partnered with trade unions and local authorities. All these initiatives have enabled us to achieve an 88% herd immunity and maintain this rate with an enthusiastic attitude towards revaccination. As part of our support of local communities, PhosAgro Group participates in the #WeAreTogether nationwide campaign. The Company’s facilities collect funds to support healthcare and social institutions, volunteering centres, elderly citizens, people with limited mobility, and medical staff. I would like to thank all members of PhosAgro’s team for their dedication in the face of uncertainty, strict compliance with preventive requirements, and timely development and quick implementation of safety standards across the Group’s assets. Andrey A. Guryev, Chief Executive Officer and Chairman of the Management Board of PJSC PhosAgro from August 2013 to 10 March 2022 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 40 41 Strategic Report Business Environment December 2019 — present COVID-19 pandemic While it is still too early to speak about the final victory over coronavirus, there is substantial evidence indicating that the whole world and Russia in particular are learning how to cope with the pandemic and keep their economies afloat. The Company’s response task force continues with its efforts to curb the spread of coronavirus, and there are stringent regulations in place to ensure employee safety at the workplace. We remain in touch with regional and municipal governments, local offices of the Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor), and healthcare facilities in order to prevent and combat the coronavirus infection. Some of our employees continued to work from home. All these measures helped ensure uninterrupted operation of our production units and contractors working at the Group’s production sites. The RSPP Coordinating Council for COVID-19 led by PhosAgro’s CEO Andrey Guryev did not cease its efforts to fend off the infection. The Company is closely watching new COVID variants and proactively adjusts measures to manage the pandemic-related risks. Looking back at 2021 Spikes in global food prices We believe that global prices for food products will keep growing into 2022. According to many experts, we should expect a third inflationary wave next year caused primarily by rising food prices. High inflation rates are quickly becoming a global trend aggravated by the energy crisis and supply chain disruptions that further drive prices to unexpectedly high levels. The pandemic brought about the energy crisis, which has come to be considered as a major factor behind the increase in food inflation. With gas prices at all-time highs, some of the largest producers of nitrogen- based fertilizers in Europe and the US had to shut up shop, while China halted exports. This may lead to a situation where farmers from different regions will drastically reduce fertilizer use, with crop yields falling to inadequate levels. The Russian agricultural sector is well- positioned in this respect. Thanks to producers of mineral fertilizers, the annual fertilizer demand announced by the Russian Ministry of Agriculture has been fully satisfied. There is no shortage of mineral fertilizers either countrywide or in any particular region and no sign of it occurring in the near future, which means that there is no threat to Russia’s food security. February ------------------------------ March --------------------------------- EU resolution on voluntary green labels for mineral fertilizers Restrictions imposed by the US The European Commission published guidelines for manufacturers and market regulators with information on eco-labels for mineral fertilizers. Suppliers of fertilizers with low levels of the toxic metal cadmium (less than 20 mg/kg), including PhosAgro, can now mark their products with a special green label. The new labelling is set to help identify eco-efficient fertilizers. This is the first step in the EU’s strategy to restrict fertilizers with higher content of heavy metals, including cadmium. PhosAgro Group’s products are fully compliant with the new requirements, with the Company expecting this regulatory change to support its performance in the premium European market. The US Department of Commerce announced its affirmative final determination to impose the countervailing duties (CVD) on imports of phosphate fertilizers from Russia and Morocco. Given its commitment to fair trade practices, PhosAgro Group strongly opposed any restrictive measures that impede healthy competition. Farmers all over the world need a reliable source of quality mineral fertilizers, especially as global fertilizer prices continue to rise sharply. This is only possible in a free competitive market without artificial barriers. PhosAgro Group appealed against the imposition of duties by the US, with the decision expected in the first half of 2022. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 42 43 Strategic Report June ------------------------------------- July -------------------------------------- Federal Law No. 159-FZ On Agricultural Products, Raw Materials and Food with Improved Environmental Characteristics dated 11 June 2021 Federal Law No. 296-FZ On Limiting Greenhouse Gas Emissions dated 2 July 2021 (took effect on 30 December 2021) Today, agriculture is a promising and booming sector of the Russian economy. The creation of a green brand for products with improved environmental characteristics will further accelerate its growth. Federal Law No. 159-FZ On Agricultural Products, Raw Materials and Food with Improved Environmental Characteristics dated 11 June 2021 came into effect on 1 March 2022 and marked the emergence of a new market niche for agricultural products, raw materials, and foods under the Green One national brand. Goods with this labelling will face tougher requirements across the production cycle – from the unique environmentally safe base of raw materials in Russia’s mineral fertilizer industry to the sale of eco-friendly food products to end consumers. The Green One promoted by PhosAgro puts Russia at the forefront of a growing global movement advocating eco-friendly food and global agricultural security to achieve the UN Sustainable Development Goals. By various estimates, the global market for environmentally friendly foods exceeds USD 300 bln. As people pay increasing attention to healthy lifestyles, it is expected to keep growing in the future. Russian farmers are well-positioned to stake out a solid share of this promising market. The outstanding eco-efficiency of Russian mineral fertilizers is the cornerstone of the green brand. Nowadays, our industry provides an excellent example of innovative Russian products that are sought after globally. The international demand for fertilizers is skyrocketing, and domestic demand will double by 2025 (vs last year) as per estimates of the Russian Ministry of Agriculture. The law laid the foundation for Russia’s green transition by introducing, among other things, mandatory carbon disclosures and a register of GHG emissions, while also empowering businesses to implement climate projects to reduce GHG emissions and ramp up GHG capture. In 2022, Russia plans to launch an implementation mechanism for climate projects and a carbon trade system, providing for solutions and technologies with enhanced sustainability and increased GHG capture by natural ecosystems, e.g. forests, as well as transition to capturing and processing of carbon dioxide. This law became an important part of Russia’s regulatory efforts to tackle climate change, but there are also other significant steps taken in that direction. Ahead of the COP26 summit in Glasgow, the country adopted the Low-Carbon Development Strategy to 2030, with some government support already in place for green initiatives in the private sector, including those addressing climate change. The scope of government support is subject to expansion. Publication of the European Commission’s proposals for a carbon import tax designed to ensure carbon border adjustments in the EU ВOn 14 July 2021, as part of the Fit for 55 package the European Commission published a proposal for a carbon border adjustment mechanism (CBAM), which is considered to be an essential tool for combating climate change in the EU. CBAM is expected to operate similarly to a custom duty calculated based on the amount of direct GHG emissions embedded in the product (with a possibility for indirect emissions to be partially included in the carbon regulation framework) and on the market price of mandatory carbon certificates under the European Union Emissions Trading System (EU ETS). PhosAgro Group is actively pursuing the Climate Strategy and low-carbon transition plan to reduce CO2 emissions, striving for close cooperation with the EU on this matter. In 2022, we will continue to closely monitor developments surrounding the introduction of CBAM and participate in the discussions of Russian producers on this matter. We hope that a constructive dialogue between the European partners, on the one hand, and Russia’s Ministry of Economic Development and the Russian Association of Fertilizer Producers, on the other hand, will make a positive contribution to the development of CBAM by-laws. August ---------------------------------- Limits for toxic metal concentrations in EU-marketed food products The European Commission’s Regulation No. 2021/1323 of 10 August 2021 cut the previously approved maximum concentrations of cadmium in the EU market’s foodstuffs by at least 200%. The expanded list of food products subject to cadmium content limitations includes 66 items now as opposed to 20 items in the previous version. By adopting this Regulation, the European Commission tightened limits on cadmium and lead concentrations in a wide range of foodstuffs as a way to improve the safety of EU consumers. Lower caps on cadmium content were recognised by the European Commission as an effective tool to fight growing cancer rates caused by the weekly intake of cadmium in excess of 2.5 μg per kg of body weight and its further accumulation in human body (primarily in kidneys). November -------------------------- Temporary quotas for exports of nitrogen- based and complex fertilizers in Russia The Russian government decided to introduce six-month quotas on exports of nitrogen-based and complex fertilizers by Russian producers. This move basically formalised the current split of sales between export shipments and the high-priority Russian market. The temporary measures are thus expected to produce no material effect on PhosAgro Group’s foreign trade operations, financial and operational results, or investment plans. December ----------------------- EU’s Common Agricultural Policy (CAP) reform The CAP reform was officially approved on 2 December 2021 and is expected to come into effect on 1 January 2023. The new Policy is intended to meet the following nine objectives: ensuring a fair income to farmers, increasing their competitiveness, rebalancing the power in the food chain, taking a climate change action, encouraging environmental care, preserving landscapes and biodiversity, supporting generational renewal, reviving rural areas, and protecting food and health quality. The reform is implemented under the EU’s Green Deal initiative and Farm to Fork strategy in line with their goals. Focus on the environmental friendliness of fertilizers applied in the EU implies stricter requirements for the quality of mineral fertilizers, primarily as regards the content of toxic and harmful impurities such as cadmium. July 2022 Limitations on the availability of fertilizers with a high content of toxic cadmium to come into effect in the EU The respective regulation was drafted in 2016, but the European Parliament only adopted it in 2019 following long-running discussions. According to the document, fertilizer products containing more than 60 mg cadmium per kg will be banned from the EU from mid-2022, and this limit will be further reduced in 2026 – to 40 mg per kg. PhosAgro Group’s products are fully compliant with these new standards (if not miles ahead of them), as they contain no concentrations of cadmium or other toxic substances that are harmful to human health and soils. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 44 45 Strategic Report Market Overview Macro environment 2021 saw the global economy recover despite being hit with new waves of COVID-19 towards the middle and end of the year (the spread of delta and omicron variants). According to the IMF outlook1, the global economy will grow by 5.9% and 4.9% in 2021 and 2022 respectively, which sheds 0.1–0.2% from previous projections. The downward revision of the 2021 forecast reflects a more pessimistic outlook for advanced economies (partly due to supply disruptions) and low-income developing economies predicated mostly on the pandemic taking a turn for the worse. This is partially offset by better short-term prospects for some emerging markets and developing economies that export commodities. The employment growth is expected to generally lag behind the recovery of production rates. According to forecasts, global growth rates are going to slow down in the medium term to approximately 3.3% after 2022. The output of advanced economies is projected to exceed mid-term pre- pandemic forecasts, largely thanks to robust government support and economy- bolstering measures being (and expected to continue to be) implemented in the US. In contrast, the output of emerging markets and developing economies is expected to suffer a long-term decline because of lower vaccination rates and the overall weaker government support compared to advanced economies. These economic gaps stem from major differences in the access to vaccination and government support measures. Nearly 60% of people in advanced economies have been fully vaccinated, with some of them now receiving booster shots, whereas in low-income countries, roughly 96% of the population are yet to receive their first dose. Emerging markets and developing economies, faced with greater financing challenges and higher risks of de- anchored inflation expectations, are quicker to wind down support measures despite more drastic output reductions. World Economic Outlook, October 2021 % (2021/2022 — Projections) Global economy Advanced economies Emerging markets and developing economies Another economic policy issue is supply disruptions. On the one hand, pandemic outbreaks and adverse weather conditions have led to shortages of key inputs and materials, hindering production rates in different countries. On the other hand, these shortages, coupled with unleashed pent-up demand and recovering commodity prices, have brought on rapid growth of consumer price inflation, as seen in the US and Germany, as well as in many emerging markets and developing economies. Food prices have risen most steeply in low-income countries, where food security had already been a major issue, which puts impoverished families at an even greater disadvantage and increases the risk of social unrest. (3.1) 5.9 4.9 (4.5) 5.2 4.5 (2.1) 6.4 5.1 2020 2021 2022 2020 2021 2022 2020 2021 2022 Most recent growth projections by region, % (2021/2022 — Projections) 2020 2021 2022 United States Euro Area Middle East and Central Asia Emerging and developing Asia Latin America and the Caribbean Sub-Saharan Africa (3.4) 6.0 5.2 (6.3) 5.0 4.3 (2.8) 4.1 4.1 (0.8) 7.2 6.3 (7.0) 6.3 3.0 (1.7) 3.7 3.8 Russian economy Russia leans on a solid economic foundation laid over the previous years. Modern Russia is a developing country classified by the World Bank into the upper middle income bracket, meaning the country’s catch-up potential is practically exhausted. The new COVID-19 pandemic has exacerbated the existing global economic problems and created new challenges, the main ones being risks to global macro stability, opaque post- pandemic demand landscape and business environment, technological challenges, growing trend towards economic regionalisation, and climate agenda. All of this increases the level of uncertainty for the Russian economy. Hence, the second objective, on top of ensuring target growth rates, is to increase the economy’s resilience to external shocks and make it more adaptable to change. Russian Ministry of Economic Development reports1 that the nation’s economy continued to recover in 2021. According to the report, in Q2 2021 the country’s GDP climbed back to pre- pandemic levels. In July 2021, it increased by 4.7% year-on-year (by 0.4% vs July 2019), in Q2 2021 – by 10.5% year-on- year (by 1.9% vs Q2 2019), and between January and July 2021 – by 4.8% year- on-year (by 1.1% vs the corresponding period of 2019). GDP growth in 2021 is estimated at 4.2%. The output of key non-commodity sectors (manufacturing, agriculture and construction industries) significantly exceeds pre-pandemic levels (by 4.5% on average in July and by 5% in June according to estimations). At the same time, the mining output still lags behind pre-COVID levels by over 2% under the OPEC+ deal. 4.2% GDP growth in 2021 in Russia 1 World Economic Outlook, International Monetary Fund, October 2021. 1 Forecast of Social and Economic Development of the Russian Federation for 2022 and the Target Period of 2023 and 2024, Ministry of Economic Development of Russia, September 2021. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 46 47 Strategic Report Global fertilizer demand According to the International Fertilizer Industry Association (IFA)1, global fertilizer consumption in 2020/21 stood at 203.8 mt nutrient, which is almost 12 mt (6.3%) more than in 2019/20. This is the biggest annual increase in mineral fertilizer consumption since 2009/10. The demand for nitrogen- based fertilizers, which account for more than half of global fertilizer consumption, increased by 5.0% (+5.5 mt) to 113.7 mt of N, while the demand for phosphate- based fertilizers grew by 6.8% (+3.1 mt), reaching 49.7 mt of P2O5. The demand for potash fertilizers went up by 9.1% (+3.4 mt) to 40.4 mt of K2O. Significant growth in fertilizer consumption in 2020/21 is explained by a combination of several factors: surging prices for major crops, a good fertilizer/crop price ratio (fertilizer affordability), favourable weather conditions in key markets, and stronger government support for agriculture. > Global crop prices enjoyed substantial growth in 2H 2020, underpinned in part by the growing demand for forage crops, which itself was partially caused by the recovery of hog production in China after the swine flu epidemic in 2018–2019. The United States Department of Agriculture reports a 3% and 4% global acreage expansion for grain and soy respectively in the 2020/21 crop year. > The weather conditions were favourable in key consumer markets, including India, China, Australia and South Africa. Western and Central Europe also enjoyed a spell of fine weather, which had significantly improved since the poor vegetation period of winter wheat planted in late 2019. +15% Growth of demand for fertilizers in Latin America Global fertilizer consumption estimates, mt nutrient Changes in demand geography in 2020/21 compared to the previous season, mt nutrient 188 191 204 198 204 250 200 150 100 50 0 Central and Western Europe Middle East Oceania Africa Eastern Europe and Central Asia North America East Asia Latin America South Asia (1%) (1%) 4% 3% About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 10% 13% 8% 15% 11% 2018/19 2019/20 2020/21 2021/22 outlook 2022/23 -1 0 1 2 3 4 Nitrogen-based fertilizers, N Phosphate-based fertilizers, P2O5 Potash fertilizers, K2O > COVID-related restrictions and mitigation measures introduced across the globe had a limited effect on sales, logistics, and supplies of fertilizers to farmers. In fact, stronger government support for agriculture amid the pandemic has boosted the demand for fertilizers in certain countries, even despite numerous and ever-shifting sanitary measures taking their toll on the fertilizer industry in terms of supply, transportation and delivery to farmers. Unofficial data suggests that some farmers purchased fertilizers in advance in 2020, anticipating possible supply disruptions or further currency weakening. Regionally, South Asia and Latin America accounted for nearly two thirds of the growth in fertilizer consumption in 2020/21, owing mostly to India and Brazil. The demand in Africa, Oceania, Eastern Europe and Central Asia also increased significantly. Relatively low growth rates in fertilizer consumption could only be observed in the Middle East and some parts of Europe. In relative terms, the 2020/21 demand grew particularly fast in four regions: Latin America (+15%), Africa (+13%), South Asia (+11%) and Oceania (+10%). According to preliminary IFA estimates, global fertilizer demand could decline by 3% (or by 5.5 mt nutrient) to 198.2 mt nutrient in 2021/22. In 2022/23, fertilizer consumption is expected to rebound to 204 mt nutrient, which should balance out the market and ensure a favourable pricing environment for both fertilizer and crop markets. Nitrogen-based fertilizers, N Phosphate-based fertilizers, P2O5 Potash fertilizers, K2O Global fertilizer supply In 2021, the supply of fertilizers was rather erratic due to affordability issues caused by disruptions and high raw material prices. This prompted some countries, including China, Egypt, Turkey and Russia, to intensify their self-sufficiency efforts and impose trade restrictions on fertilizer exports in the second half of the year as a means to safeguard supply for the domestic market and avoid possible shortages. Key fertilizer markets experienced some supply disruptions in 2021. The output of major types of fertilizers – urea, ammonium phosphate and potassium chloride – was lower than in 2020, according to preliminary IFA estimates. Various supply disruptions seen in different regions across all major product groups have resulted in fertilizer prices rapidly growing over the past six months. The disruptions could be classified into three main categories: physical, economic and geopolitical. > Physical disruptions hindered the production of nitrogen- and phosphate-based fertilizers in the US. In the late summer, a series of intense hurricanes caused temporary downtime at fertilizer plants in the Gulf of Mexico, halting the production of nitrogen- and phosphate-based products for several weeks. > Economic headwinds affect the production of nitrogen-based fertilizers in Europe. Shortages in the energy market led to a steep rise in prices, with Europe facing a particularly difficult situation as prices there reached an all-time high in 2H 2021. Compared to the average annual European gas price in 2020, which stood at USD 3.2 / MMBtu, regional costs of natural gas production have risen exponentially, often exceeding USD 30–35 / MMBtu throughout Q4 2021. Nitrogen fertilizer production costs have also risen rapidly in China, which relies on coal as the key feedstock. Manufacturers in both parts of the world were forced to limit production for economic reasons. For nitrogen-based fertilizers, the cost of the energy- intensive production has had a direct impact on the market. Other fertilizer markets have also become increasingly affected by energy- related headwinds: the production of phosphate-based fertilizers, for example, relies on energy-derived products – ammonia and sulphur – as raw materials. > Geopolitical tensions also took their toll on the fertilizer market in 2021, with economic sanctions imposed against Belarus being the most significant factor. In June 2021, the EU implemented sanctions against certain industries of the Belarusian economy, namely the oil, tobacco and potash sectors. The US joined in with even more crippling sanctions that pose an additional threat to supplies of Belarusian potash, especially if they restrict the ability to accept USD-denominated payments from other countries. Any escalation of sanctions could jeopardise global supplies of potash fertilizers and food security as a result. 48 49 1 Short-Term Fertilizer Outlook 2021–2022 Market Intelligence Service, IFA Secretariat, IFA Strategic Forum, November 2021. Strategic Report Phosphate rock and phosphate-based fertilizer market According to IFA’s preliminary estimates, global production of phosphate rock in 2021 stood at 211 mt, which is 4 mt or 2% more than in 2020. The growth was mainly associated with a favourable environment in the markets for phosphate-based fertilizers and other phosphate products, as well as with the recovery of China’s phosphate industry from COVID-related restrictions imposed in 2020. North African countries (Morocco, Algeria and Egypt) have also ramped up their production. Exports of phosphate rock totalled roughly 31.5 mt in 2021, up 1.0 mt from 2020, primarily due to rising demand for phosphate rock with low P2O5 content from Asian markets (India and Southeast Asia). Pricing in the phosphate rock market was influenced by shifts in global prices for end products (phosphate-based fertilizers), with the usual time lag associated with contract pricing in the majority of consumption markets. In 2021, global production of phosphoric acid increased by roughly 300 kt to 47.0 mt of P2O5, which is also explained by China recovering from production disruptions caused by the pandemic in 2020. The ramp-up in Chinese production has partially offset declines in North America and some Asian countries. 211 mt global production of phosphate rock in 2021 Global trade in DAP/MAP in 2021 was 31.7 mt, up 0.8 mt vs 2020, driven by rapid import growth rates in North and Latin America markets, particularly in 1H 2021, as well as by favourable conditions in agricultural markets. In 2021, global DAP trade shed some 0.4 mt, mostly due to lower import demand in India partially caused by insufficient subsidies on phosphate-based fertilizer imports. Exports of NPK fertilizers remained roughly flat at around 18.5 mt. Global prices for compound and complex phosphate-based fertilizers were driven by outpacing demand growth in key consumption markets, particularly in 1H 2021. The restrictions on exports of fertilizers in China to promote domestic growth, combined with a sharp increase in global energy prices, helped keep global prices for fertilizers high in 2H 2021. 18.5 mt Global trade in NPK fertilizers 31.7 mt Global trade in DAP/MAP in 2021 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Phosphate rock prices, FOB Morocco (32% Р2О5), USD/t Global DAP/MAP prices in 2021, FOB Baltic, USD/t 175 155 135 115 95 75 1000 800 600 400 200 January February March April May June July August September October November December January February March April May June July August September October November December 47.0 mt of P2O5 global production of phosphoric acid 62.2 mt global output of compound fertilizers (DAP/MAP) in 2021 Preliminary data suggests that the global output of compound fertilizers (DAP/ MAP) in 2021 totalled 62.2 mt, roughly the same as in 2020. Higher DAP/MAP output in China and Russia was negated by the decline in North Africa and North America due to process-related stoppages. In 2021, global production of complex NPK fertilizers increased by roughly 2.0 mt (to 98.1 mt) primarily on the back of production recovery in China, which also offset lower numbers in Europe in the second half of the year. Global NPK prices (15-15-15), FOB Baltic in 2021, USD/t 700 600 500 400 300 200 January February March April May June July August September October November December 50 51 Strategic Report Ammonia and urea market Preliminary estimates suggest that global ammonia production shrank to 180 mt in 2021, down 3% year-on-year, due to disruptions in production and supply caused by technical reasons in the first half of the year and higher global energy prices, particularly in the natural gas market in Europe and Asia and the coal market in China. Merchant ammonia trade, which is largely influenced by industrial consumption, is expected to recover to nearly 19 mt in 2021, nevertheless falling short of the previous peak in 2018 (20 mt). This is associated with import demand recovering in the US, India, Southeast Asia and Europe, especially in the second half of the year following a decline in domestic production due to a surge in natural gas prices. Greater import demand for merchant ammonia was mostly being offset by increased supply from Algeria, Indonesia and Russia, despite lower exports from the Middle East. Merchant ammonia prices were largely determined by an unbalanced supply/demand landscape and a significant increase in global natural gas prices. The global urea market also exhibited a downward trend. In 2021, global urea production stood at around 171 mt, almost 4.0 mt down vs 2020, driven by production cuts in China, Europe and several Asian countries going through a record-high growth of energy prices and subsequent reduction in capacity utilisation. Global urea trade volumes also declined by around 2.0 mt mainly because of lower import demand from India, despite other major import markets (Europe, North and South America) increasing their imports due to cuts in domestic production and other factors. Global urea prices were driven both by seasonal changes in the demand landscape in the first half of the year and by record- high price spikes in the second half caused by high energy prices and restrictions on urea exports in China to ensure domestic supply. Ammonia prices in 2021, FOB Baltic, USD/t 1,050 900 750 600 450 300 150 January February March April May June July August September October November December 180 mt global ammonia production in 2021 171 mt global urea production in 2021 Potash fertilizer market The potash market is an exception to thedownward supply trend of 2021. According to preliminary estimates, global potash production stood at around 69 mt, almost 2.0 mt more than in 2020, mainly due to a ramp-up in production in Russia and Belarus. Global trade volumes for potassium chloride also increased on the back of outpacing growth of import demand in North and South America as well as in Southeast Asia. At the same time, the sanctions imposed against Belarus, which accounts for almost 20% of global potassium chloride exports, pose a significant threat to the potash fertilizer market going forward and have already played a major part in the spike of potash fertilizer prices in 2021. 69 mt global potash production in 2021 Urea prices in 2021, FOB Baltic, USD/t MOP prices, FOB Baltic, USD/t 930 780 630 480 330 180 700 630 560 490 420 350 280 210 140 January February March April May June July August September October November December January February March April May June July August September October November December About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 52 53 Strategic Report The Company’s Role in the Industry Top-5 World’s №1 producer of high-quality phosphate rock (P2O5 content at 39% and above) global producer of DAP/MAP by capacity Europe’s largest producer of phosphate-based fertilizers1 №1 A leading supplier of all types of mineral fertilizers in the Russian market in aggregate terms №1 in Europe in terms of urea and mineral fertilizer capacity concentrated at one production facility (Apatit, Cherepovets) One of the global leaders in production of major types of fertilizers in terms of profitability The only Russian and one of the leading European producers of monocalcium phosphate feed grade and liquid complex fertilizers 1 By total production capacity for DAP/MAP/NP/NPK/NPS. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 54 55 Share of PhosAgro’s supplies in the key sales markets (share of DAP/MAP/NPS/NPK supplies in total regional imports, 2021 estimates), % 56 18 13 6 7 Russia2 Europe Latin America Africa India 2 Share in the total volume of deliveries. Global DAP production cost curve, FOB production, kt 0 10,000 20,000 30,000 Source: CRU Industry Cost Curves 2021 Global urea production cost curve, FOB production, kt 0 20,000 40,000 60,000 80,000 100,000 Source: CRU Industry Cost Curves 2021 Strategic Report Strategy Strategy to 2025 In 2021, PhosAgro continued to make good progress towards the goals of Strategy to 2025 approved by the Company’s Board of Directors in 2019. The new strategic cycle envisages construction of high-tech production sites and further ramp-up of agrochemical output. In this context, 2021 marked an important milestone, with production hitting a record high of 10.5 mt. I Importantly enough, sustainability principles and are deeply integrated in all of the Strategy aspects Expansion of the foothold in premium markets Increasing sales in priority markets Higher share of premium fertilizer brands in the sales mix PhosAgro’s contribution to the UN Sustainable Development Goals ESG Alignment of production and sales Boosting logistics efficiency Reduction of transportation costs Developing port infrastructure Zero workplace incidents and injuries Reduced emissions and water use, waste recycling Operating efficiency and production growth Stronger operating efficiency Higher self-sufficiency in feedstock Capacity expansion About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information ESG agenda Capital investments Addressing environmental efficiency, climate issues, energy and resource saving is integral to the Company’s Development Strategy. Every addition to our production capacities is designed to employ the best available techniques and operated in strict compliance with the applicable sustainability standards. PhosAgro’s framework for assessing promising investment projects is based, among other criteria, on their potential environmental impact. In 2021, we created a methodology for incorporating the carbon price into the system for evaluating the climate impact as a factor in our final investment decisions. This methodology is currently in the process of approval. In 2020, the Board of Directors completed the integration of PhosAgro’s climate and environmental agendas into its business strategy by approving Climate and Water strategies that set measurable, achievable targets for minimising the Company’s environmental footprint through specific initiatives. We are committed to making our operations as green and energy-efficient as possible. Based on this approach, in 2021 we re-equipped the aluminium fluoride shop in Cherepovets with a view to maximising the use of waste in production. The project is in line with the principles of circular economy and contributes to UN SDG 12 as regards the sustainable management of chemicals and all wastes throughout their life cycle. A disciplined approach to CAPEX The minimum project IRR of 20% Annual CAPEX budget of up to 50% of EBITDA More efficient working capital management Expenditures1, RUB bln Item Investment projects Maintenance Non-industrial construction Total 2019 actual 2020 actual 2021 actual 20.8 13.3 1.9 23.8 10.4 2.1 30.0 10.8 1.1 2022 plan 30.4 20.1 2.0 36.0 36.3 41.9 52.5 Financing of key projects in 2021, RUB bln Investments in development, RUB bln +28% 23.8 30.0 30.4 2.6 2.3 12.5 30.0 11.4 1.2 1 Excluding capitalised repairs. 2 Other investment projects: ramp-up of phosphate- based fertilizer capacities in Cherepovets modernisation of Ammonia-3 Plant in Cherepovets with an increase of capacity to 2,350 tpd, retrofitting of MFPU No. 1 to switch to MAP production in Volkhov, increased output of sulphuric acid in Balakovo Capacity ramp-up programme in Volkhov The second stage of development at the Balakovo site Development of the ore and raw material base in Kirovsk Aluminium fluoride production in Cherepovets Other investment projects2 2020 Actual 2021 Actual 2022 Plan 56 57 Strategic Report Increasing sales in priority markets Targets — 2025 Status-2021 Target performance / above-target performance Progress Expansion of the foothold in premium markets Sales volume, mt Russia and the CIS North and South America Europe 3.7 3.5 3.1 2.9 3.5 2.8 Number of distribution and logistics centres 35 31 Total storage capacity, kt >650 765 Higher share of premium fertilizer brands in the sales mix Liquid complex fertilizer storage capacity, kt 62 66 Share of complex fertilizers (NPK/NPS/PKS) in total output 43% (5 mt) 35% (3.6 mt) Progress Progress Boosting logistics efficiency Reduction of transportation costs Increased reliance on own rolling stock Use of innovative railcar fleet Alignment of production and sales Rail infrastructure throughput at key production sites, mt 28.3 24.7 Developing port infrastructure Efficient mix of port capacities in terms of costs and supply reliability, mt 5.6 4.5 Operating efficiency and production growth Capacity expansion Production of phosphate rock, mt Phosphate rock processing, mt Stronger operating efficiency 11.1 10.7 8.6 7.9 Implementation of organisational development projects with an IRR of above Mineral fertilizer and feed phosphate production, mt 11.6 10.3 20% in line with the BAT and sustainability criteria New promising projects Apart from projects envisaged by the Strategy to 2025, the Company also considers and implements new promising initiatives with a significant business and environmental potential. These projects meet the criteria approved by the Board of Directors as part of the Strategy (IRR above 20%) and aim to promote further development in line with the Company’s strategic priorities – progressive production growth, innovative and ESG-compliant products and processes, and operating efficiency. The second stage of re-equipping the aluminium fluoride shop in Cherepovets IRR 20% Project schedule: 2021 Targets: Investments: Increase in aluminium fluoride production by 26% (15 kt) 2.9 RUB bln Status: All production facilities were launched in November 2021 Maintaining high feedstock self-efficiency Ammonia Sulphuric acid 76% 79% 91% 94% Ammonium sulphate 75% 55% Updating the Strategy to 2025 and stating the 2030 vision The world has changed a great deal since 2019, when we adopted our Strategy to 2025. Today, we are dealing with new risks and witnessing new opportunities. Hence, the need to refine our strategic calculations and plans. We are currently working on an updated version of Strategy to 2025 and further to 2030. It will be made available before the year’s end. A special emphasis in the updated strategy will be made on the ESG agenda that has been deeply integrated in all aspects of our activities and has become a key element of PhosAgro’s business philosophy. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 58 59 Strategic Report Increasing sales in priority markets UN SDG: SDG 2.4 Expanding sales of eco-efficient mineral fertilizers and developing innovative plant nutrition systems SDGs 13.1 and 13.2 Producing mineral fertilizers which enhance the quality of soils as natural sinks of СО2 and help reduce GHG emissions and adapt to climate change Expansion of the foothold in premium markets The Company’s strategic goal is to increase sales in its priority markets by 2025: up to 3.7 mt in Russia and the CIS, 3.5 mt in North and South America, and 3.1 mt in Europe by strengthening its position as a producer of fertilizers that are free of heavy metals harmful to human health and soils amid toughening of the EU cadmium regulations. We are well on course to achieve this goal, with strong sales in priority markets despite the introduction of a countervailing duty by the US in 2021. Given the unique eco- efficiency of our products, we are optimistic about reaching our Strategy to 2025 goals with respect to the Company’s sales in the European market. The sales breakdown of premium markets is generally in line with our strategy, with minor differences attributable to changes in the market environment and the netback-driven sales model. PhosAgro fertilizer and feed phosphates structure in premium markets, kt 2021 actual 2025 strategy 1,055 2,919 10,257 3,461 1,255 3,700 11,555 3,500 2,822 3,100 Progress towards our targets About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Premium markets Russia and the CIS Europe North and South America Other 43% Share of complex fertilizers 2025 strategy 35% Share of complex fertilizers 2021 actual From 2018 to 2021, a total of over RUB 2.5 bln was invested in the development of the Russian regional network. In 2021, the network’s total storage capacity exceeded 765 kt, including 66 kt for liquid mineral fertilizers (a new record for Russia). The number of distribution and logistics centres rose to 31. In 2022, PhosAgro Group will focus on further expanding its distribution network, and developing existing and launching new logistics centres in the regions with the greatest agricultural growth potential. SDGs 6.3, 12.4, 15.1 Promoting and raising awareness about best farming practices and developing the service model PhosAgro Group is successfully increasing the profitability of its sales by active involvement in the most high-margin markets and through boosting sales of premium mineral fertilizer grades, primarily complex fertilizers The ongoing expansion of storage and logistics capacities in Russia is in line with our strategy Indicator Distribution and logistics centre (DLC), kt Storage capacity, kt Liquid complex fertilizer storage capacity, kt 2021 Goal 2025 31 765 66 35 >650 62 Higher share of premium fertilizer brands in the sales mix In 2021, the share of complex fertilizers in production and sales saw a slight year-on-year decrease. This is due to the strong growth in Europe and Latin America, markets that traditionally consume large volumes of dual fertilizer grades. As a result, monoammonium phosphate and diammonium phosphate had the highest margins in the reporting year. We expect this positive trend to continue in 2022. Change in the product structure of the premium segment, kt Fertilizer grades Urea / AN / AS MCP APP NPK/PK/PKS MAP/DAP Total Share of complex fertilizers, % 2021 actual 2025 strategy 2,495 405 206 3,586 3,565 10,257 35 2,620 472 213 4,980 3,270 11,555 43 60 61 Strategic Report Innovative products developed by PhosAgro Group In 2021, the share of complex fertilizers in production and sales saw a slight year- on-year decrease. This is due to the strong growth in Europe and Latin America, markets that traditionally consume large volumes of dual fertilizer grades. As a result, monoammonium phosphate and diammonium phosphate had the highest margins in the reporting year. We expect this positive trend to continue in 2022. Sales of fertilizers produced over the last five years (2017–2021) amounted to RUB 71 bln, or 17% of total revenue. Strong R&D capabilities of NIUIF and PhosAgro Group Engineering Centre and the flexibility of production capacities achieved through a fundamental overhaul in recent years, allow the Company to deliver a high share 1,691.1 kt Production of fertilizers with micronutrients in 2021 Urea with urease inhibitor 11.2 16.9 40.0 60.3 of new grades. All of these give PhosAgro a competitive edge and help the Company meet the growing demand for the specific grades that are best suited to certain crops, soils, and farming practices. Fertilizers with micronutrients Fertilizers with micronutrients can be accumulated by plants and are considered one of the most potent ways to combat malnutrition and reduce nutrient deficiencies. In recent years, PhosAgro Group has been aggressively ramping up its production of this promising type of mineral fertilizers. Urea with urease inhibitor Tighter environmental regulations in the EU are shaping a new market for eco-efficient fertilizers, such as urea with urease inhibitor. The effects of use include an up to 98% reduction in gaseous losses of nitrogen and a 5% boost in crop yields as urea remains in effect in the soil for extra 7–14 days, thus extending the period of incorporation or RUB71 bln1 Sales of fertilizers developed by PhosAgro for the last five years irrigation. The Company started producing this innovative high-performance fertilizer in 2020 and expect a strong demand in the coming years. Biological and biomineral fertilizers PhosAgro’s Innovation Centre also focuses on developing biostimulants and biomineral fertilizers as part of the Green One for eco- friendly agricultural products. Work is ongoing to create special biological and biomineral fertilizers. Biotechnology advances are set to greatly boost crop yields without damaging ecosystems and bring the agriculture to a whole new level of development. Given the limited soil resources and the strong population growth, biotechnology is key to achieving the global food security. Fertilizers with micronutrients, kt 2019 actual 2020 actual 2021 actual 2022 plan 524.2 621.3 1,691.1 1,519.1 2021 2025 Urea with urease inhibitor, kt Emission reduction in CO2 equivalent, kt 1 Due to accounting features, the revenue shown in the table does not take into account the margin of traders included in the PhosAgro Group. PhosAgro Group’s digital ecosystem In 2021, the target audience had over 4.5 million interactions with PhosAgro’s digital ecosystem (+57% year-on-year). Late last year, the number of active users of PhosAgro’s digital services exceeded 13,500. There are 600 active personal accounts registered with the Russia/ CIS online trading platform (each user makes 1.2 orders annually on average) and 1,164 active users of the AgroResult app (each user makes 2.5 settlements monthly on average). Pro Agro, the Company’s YouTube channel, has 11,820 subscribers. In 2021, we added six languages to our website (the total number was 14 as at the end of 2021). The Field Trials section on our website became an important element of communication with our customers in the domestic market. In 2021, the number of visits to the Russia/CIS platform that converted to requests rose from 2.4% to 3%, while the number of online requests to purchase fertilizers amounted to 1,678 (up 99% year-on-year). To further improve our Agro Calculator, we introduced recommendations in 2021 for seasonal nutrition systems covering four crops (sugar beet, corn, soybean, and rapeseed). In its second season, our YouTube channel featured twelve playlists, individual thematic videos, and blogger endorsements. User statistics (almost 12,000 subscribers and over 5.4 million views) show that, in 18 months, we were able to create a popular agronomic YouTube channel highlighting PhosAgro’s expertise in plant nutrition systems. Consultancy Agronomic YouTube channel Fertilizer ordering Agro Calculator / monitoring and scouting Information Website available in ten languages Service and support Online fertilizer sales platform Farmer’s personal account About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 62 63 Strategic Report Boosting logistics efficiency UN SDG: SDG 9.1 Developing rail infrastructure and contributing to the development of local communities through our value chain Enhancing port network, along with offering employment opportunities, developing infrastructure and implementing social investment programmes SDG 12.4 Managing chemicals and wastes wisely throughout their life cycle, including transportation Reduction of transportation costs Rail transport accounts for the most part of PhosAgro Group’s domestic shipments (ca. 99%). In 2021, transportation volumes totalled 23.1 mt, up 3% against 2020. Rail shipments are also subject to key measures aimed at reducing transportation costs. Ensuring a reliable and secure supply is a top priority for us. In 2019–2021, we significantly increased reliance on our own rolling stock, buying mostly innovative railcars with a higher capacity and longer run life. Increased reliance on PhosAgro’s own rolling stock means: > higher cost efficiency, as corporate railcars are cheaper in use than third-party rolling stock; > enhanced safety of operation and more reliable supplies, as PhosAgro’s production and logistics processes are less dependent on third-party services; > positive environmental effect, as the use of innovative rolling stock with higher cargo tonnage per railcar and train reduces the impact on the environment per tonne of cargo. 99%Rail transport accounts for the most part of the Company’s domestic shipments Other efforts to cut logistics costs in 2021: > signing a long-term (until 2024) service agreement; Given these results, we are considering further purchases of railcars. For example, the Company has already decided to acquire 1,000 extra mineral hoppers between 2022 and 2024. > securing tariff preferences for the shipment of liquid sulphur and sulphuric acid; > reducing the rates for using third-party rolling stock, outsourcing shunting services. Alignment of production and sales Rail infrastructure throughput capacity at the Company’s fertilizer hubs is critical to efficient transportation. Thanks to our investment programmes, we have been able to expand throughput capacity to or above target levels over the last three years. Cherepovets As the Kryolite station has come on stream, long trains (71 railcars vs the standard 56) now run along the Apatity–Cherepovets–Ust- Luga–Apatity loop. With this loop, created under an ambitious joint project with Russian Railways, long trains account for 65% of PhosAgro Group’s transportation volumes. The decision to electrify the Kryolite station during its construction enabled PhosAgro to spare diesel locomotives, resulting in a positive economic and environmental effect. The project came to an end in late 2021, with the station operating as planned. Without reliable, flexible, and cost- efficient logistics, it is impossible to ramp up supplies to premium markets to any tangible extent and maintain sales margins. Our key logistics efforts focus on cutting transportation costs, ensuring alignment of production and sales, and developing port infrastructure. Balakovo In 2021, an upgrade in Balakovo prompted us to start planning the development of infrastructure that would facilitate shipments of a new feedstock and allow for increased transportation of finished products. By 2025, we expect to ramp up rail infrastructure throughput capacity at the Balakovo branch to 8 mtpa vs 6.7 mtpa as at the end of 2021. in operation: European Sulphur Terminal in the Baltic Sea and Murmansk Bulk Terminal in the Barents Sea. Kotka Terminal (Finland) to be put into operation for transhipment ofpremium fertilizer brands. The new transhipment destinations enable the Company to optimise empty runs and come closer to achieving even more ambitious goals of increasing the train carrying capacity. The joint project between PhosAgro Group and Russian Railways provides for both companies’ infrastructure upgrades and aims to start operating 100-car trains on the Apatity–Cherepovets–Ust- Luga–Apatity loop as early as in 2023. If successful, this project will make transportation of phosphate rock and mineral fertilizers much more efficient, both economically and environmentally. Key to this endeavour has been the already launched Kryolite station in Cherepovets designed to service 100-car trains. Performance against targets, mtpa Volkhov In 2022, we plan to expand the Volkhov production site’s rail infrastructure throughput capacity to 3.6 mtpa from 2.64 mtpa as at the end of 2021. The project is on schedule, with the first stage already completed. Apatit and Russian Railways agreed on a deal to co-finance the development of public infrastructure as part of the second stage. In line with the arrangement, 70% of the investment will be made by Russian Railways and 30% by Apatit. Developing port infrastructure In addition to developing logistics and sales infrastructure across Russia, our priority market, we are working to increase the reliability and efficiency of our exports by both reducing transportation costs and providing state-of-the-art transhipment capacities. Our strategic aim is to develop and maintain a balanced port sales network in terms of costs and reliability with a capacity of at least 5.6 mtpa. To achieve this aim, in 2021 the Company signed a number of transhipment contracts covering 4.5 mtpa of fertilizers effective through 2024. As of today, our overall capacities reach 6.5 mtpa (expandable to 8.5 mtpa in case of robust export growth). PhosAgro is a strong contributor to the project that will see the erection of Ultramar Terminal in Vistino, Leningrad region. In the long term, these ports will be active in addition to the major ports currently Rail infrastructure throughput 2021 plan 2021 actual 2025 plan Cherepovets branch Balakovo branch Volkhov branch 14.9 15.2 16.5 6.7 6.7 8.0 2.6 2.6 3.8 Switching to long trains (100 railcars in length) 2020 Kriolit station launched (Apatit) 2022 Port infrastructure improvement in Vistino with the Northern park to be launched (phase 2) 2023 Revamp of the Aykuven railway station (Kirovsk Branch of Apatit) 1) Higher traffic speed 2) Quicker railcar turnaround 3) Environmental effect Ust-Luga Ports of discharge Apatity Cherepovets About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 64 65 Strategic Report Operating efficiency and production growth UN SDG: Capacity expansion Higher self-sufficiency in feedstock Despite short-term volatility concerns, mineral fertilizer demand is set to demonstrate solid growth in the long term. In order to respond to stronger demand, PhosAgro focuses on expanding capacities to produce its key products. Strong vertical integration is PhosAgro’s major competitive advantage. With our phosphate rock reserves covering 100% of the Company’s needs for raw materials required for phosphate-based mineral fertilizers, we are ramping up the production of other key commodities, thus increasing our self-efficiency in feedstock. SDG 8.3 Maintaining and developing existing operations and creating innovative facilities Progress towards our targets Feedstock self-efficiency, % SDG 12.4 Making eco-efficient products in line with sustainability requirements and maximising the use of production waste in further processes Indicators Ammonia Production, mt Consumption, mt Sulphuric acid Production, mt Consumption, mt Ammonium sulphate Production, mt Consumption, mt 2021 strategy 2021 actual 2025 strategy 84% 1.9 2.3 95% 7.4 7.8 47% 0.3 0.6 79% 1.9 2.5 94% 7.4 7.8 55% 0.3 0.5 76% 1.9 2.5 91% 7.8 8.6 75% 0.7 0.9 Progress towards our targets, mt Indicators 2021 strategy 2021 actual 2025 strategy Production of nitrogen-based fertilizers Production of phosphate-based fertilizers and MCP Production of phosphate rock In-house processing of phosphate rock 2.2 7.7 10.5 7.9 2.4 7.9 10.7 8.0 2.6 8.9 11.1 8.4 7.9 mt Production of phosphate-based fertilizers and MCP in 2021 2.4 mt Production of nitrogen-based fertilizers in 2021 Stripping and mine development preparations: +10 m at the Kirovsky mine First start-up facility Development of the Volkhov branch IRR of 27% IRR of 20% Project schedule: 2022 Targets: Ore reserves 95 mt Project schedule: 2021 Targets: Fertilizer output increase by 881 kt Investments: RUB 36 bln Status: First ore mined in February 2022 Investments: RUB 30.7 bln Status: General scope of work to switch production units No. 2 and 3 to MAP completed For the third stage (production of water-soluble MAP), launch is scheduled for December 2022 Capacity ramp-up of the SK-20 sulphuric acid unit to 3.3 kt per day (Balakovo) Capacity ramp-up of the Am-3 unit to 107% IRR of 27% Project schedule: 2023 Targets: Monohydrate output increase by 350 kt Investments: RUB 3.2 bln Status: Earthwork completed. Design documentation development in progress, tender procedures and equipment procurement underway IRR of 20% Project schedule: 2022 Targets: Output increase by 53 kt Investments: RUB1 bln, including technology costs Status: Works to replace the СО2 gas recovery system packed bed and catalyst reloading completed. Debottlenecking soon to be completed. Production launch scheduled for April 2022 Operating efficiency improvements At PhosAgro Group, we are implementing a whole range of projects and initiatives to improve our technologies and organisational approaches to optimise production processes. All of these projects meet the threshold 20%+ IRR requirement and criteria of best available technologies and sustainability. Some of the initiatives include: Underground mining control (second stage completed in 2021) > Ore output at the combined Kirovsky mine increased by 10%. > Production capacity of underground loaders at the Kirovsky and Rasvumchorrsky mines increased by 15%. > Unique reporting system introduced, including e-reports, equipment performance reports, monitoring reports, and calibration reports. Digital twin in transport logistics (in progress) > Development of five-year target model concept for transport logistics management. > Reduction of costs associated with transporting feedstock and finished products. > Improvement of railcar turnaround by one day. > Improvement of transportation efficiency by using various modes of transport (rail, road, river, and sea). > Better transportation management. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 66 67 Strategic Report Strategic Risks Key risks associated with PhosAgro’s activities Robust risk management is a sine qua non for PhosAgro to achieve its strategic goals and sustainable development. We continuously develop and improve our risk management framework, which enables us to identify external and internal risks in a timely manner and develop effective mitigants. h g H i t c a p m I i m u d e M w o L 1 4 2 10 15 Low 17 18 6 21 3 9 7 8 11 13 12 14 16 22 Medium Probability 19 5 20 High List of key risks for 2021 Strategic risk 1 2 3 4 19 20 21 Strategic planning risk Failure to deliver on SDGs Social risk HR risk Climate risk Infectious disease risk Sanctions risk Production risk 5 6 7 Production risk Health and safety risk Environmental risk Financial risk 16 17 18 22 Credit risk Currency risk Commodity risk Interest rate risk Operational risk 8 9 11 12 Project risk Business processes and systems risk Information security risk Economic security risk Regulatory risk 10 13 14 15 Tax risk Regulatory risk Corruption risk Reputational risk Material strategic risks Risk Description Risk mitigants Key indicators / risks materialised / changes in the risk Strategic planning 1 Risk associated with the adoption of an incorrect strategic decision and ensuing management decisions, resulting from an erroneous assessment of internal and external factors that have an impact on the Company’s prospects for development and its ability to achieve strategic objectives. The Company actively monitors both internal and external factors that could impact the strategy. PhosAgro also takes a systematic approach to assessing the potential costs and benefits of new strategic projects to facilitate and improve the decision-making process. In 2021, PhosAgro started updating its strategy to 2030 to reflect the latest changes in the external and internal environments. Downside deviations of actual strategic performance from targets No material risk events occurred. The update of the Company’s strategy helps mitigate this risk. Change in the risk: Failure to deliver on ESG and sustainable development goals 2 Risk factors include failure to set ESG targets and Sustainable Development Goals (SDGs) or update them in a timely manner, as well as the lack of resources and processes necessary to achieve these targets and goals. The Board of Directors’ Sustainable Development Committee helped set and prioritise SDGs and strategic ESG targets. To achieve the same, PhosAgro developed and is successfully implementing the low- carbon transition plan, the Climate Strategy, the Water Strategy, the Energy Efficiency Programme, and other initiatives. Downside deviations of actual ESG and SDG performance from targets. No material risk events occurred. Change in the risk: – Significant work done in this area has enabled the Company to materially improve its ratings and become a leader in ESG. For more information on the Company’s activities and indicators in this area, see page 22 Social 3 Risk of an adverse social environment in the regions of operation Downside deviations of actual ESG performance (social dimension) from targets. No material risk events occurred. Change in the risk: – With its commitment to the principles of partnership and cooperation between private business and the government, the Company runs a number of social programmes on a proactive basis. Social projects are designed, among other things, to support local authorities in promoting sports and culture, and enhancing the public utilities and opportunities for growth in the cities where the Company operates. Sustainable development in the regions of operation is one of the key goals the Company pursues in its community activities. For more information on the Company’s activities in this area see the Contributing to Local Communities section on page 190 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 68 69 Strategic Report Risk HR 4 Description Risk mitigants Developments and decisions related to the hiring, development and retention of employees PhosAgro Group runs independent and joint programmes seeking to attract young talents, including those from other regions, develop employees’ skills and enhance employee motivation as a way to improve retention and efficiency rates. Given the rising number of employees working from home, PhosAgro Group has introduced an online personnel appraisal system along with additional qualification criteria. For more information on the Company’s activities in this area, see the People Development section on page 122 Key indicators / risks materialised / changes in the risk Personnel turnover and skill mismatch No material risk events occurred. The ongoing correction in the labour market contributes to higher exposure to this risk. Change in the risk: Production 5 Technical/industrial disruptors of production processes, unscheduled equipment downtime PhosAgro Group seeks to ensure uninterrupted operation of machinery and reduce unscheduled equipment downtime. To that end, the Company invests in the construction and upgrade of equipment and carries out preventative maintenance and major overhauls by relying on backup equipment and a reserve pool of components, accessories and spare parts. PhosAgro Group’s insurance programme covers the risk of production disruptions. Unscheduled equipment downtime No material risk events occurred. Change in the risk: – Key indicators / risks materialised / changes in the risk Exceeding maximum permissible levels of negative environmental impact. No material risk events occurred Regulators’ actions to tighten control over the environmental footprint contribute to higher exposure to this risk. Change in the risk: About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Risk Description Risk mitigants Environmental 7 Risk of potential environmental damage resulting from the Company’s operations PhosAgro Group has put in place the Environmental Policy, the Water Strategy, and the Code of Conduct for Counterparties setting out key environmental requirements for suppliers and contractors. PhosAgro conducts regular analysis and assessment of its impact on the environment. The environmental impact is mitigated through the upgrade of treatment and warehousing facilities and the implementation of energy efficiency programmes. PhosAgro Group implements projects to address all the main areas of environmental impact (water use, greenhouse gas and other emissions, waste, biodiversity). The Company partners with the UNESCO and the International Union of Pure and Applied Chemistry (IUPAC) to provide research grants as part of the Green Chemistry for Life project seeking to protect the environment and human health through energy efficient processes and eco-efficient technologies based on innovative solutions. PhosAgro’s investment projects harness the best available techniques to reduce unit feedstock and energy costs while also cutting unit emissions of regulated substances. The Company discloses its environmental impact minimisation goals and performance in line with applicable laws and as part of global initiatives (CDP, TCFD). For more information on the Company’s activities in this area, see the Sustainability Report: Environmental Review section on page 156 Health and safety risk 6 Risk associated with injuries, occupational illnesses, accidents and incidents at production facilities, and non- compliance with statutory requirements in the realm of health and safety. PhosAgro Group enforces health and safety in workplaces in line with applicable laws and best global practices. To that end, the Company trains staff in health and safety and regularly checks their knowledge, promotes safety culture, and makes sure that all contractors adhere to the health and safety standards. In addition, safety audits and inspections ensure compliance with applicable regulations and OHSAS 18001 requirements. Tasks and measures to reduce the corresponding risks in various PhosAgro Group’s activities are defined in its health and safety documents. For more information on the Company’s indicators in this area, see the Health and Safety Review section on page 138 Workplace injuries and other incidents 2021 saw some risks materialise in terms of workplace injuries. The Company carefully investigated each accident, with remedial action plans developed to prevent their recurrence. Change in the risk: – Project 8 Risk associated with delays and budget overruns in construction and upgrade projects, along with failure to deliver project efficiency targets. PhosAgro Group strives to adhere to approved project budgets and schedules and to take a unified implementation approach leveraging a variety of project management tools. All projects go through a multi-step review and approval process. For large-scale and strategically important projects, dedicated project management offices are set up. The Company regularly monitors progress against project budgets and deadlines. Downside deviations of actual project efficiency indicators from targets. No material risk events occurred. Change in the risk: – 70 71 Strategic Report Risk Description Risk mitigants Business processes and systems 9 Inefficiency or disruption of the Company’s business processes, including risks related to counterparties and supply chain. GRI 207-2 Tax 10 Potential claims lodged by tax authorities in response to the Company’s failure to correctly file tax returns or pay taxes in due time PhosAgro seeks to maximise efficiency of all its business processes and systems. Business process efficiency reviews are conducted on a regular basis to identify potential bottlenecks and develop and implement efficiency improvement initiatives. PhosAgro Group strives to minimise the risk of disruptions in supplies of key raw materials to its production facilities. To that end, PhosAgro Group uses multi-stage tender procedures and enters into long-term contracts with its most reliable suppliers. In addition, it continuously works to optimise the logistics infrastructure and ensure sufficient rolling stock. The Company also monitors its IT infrastructure on an ongoing basis and carries out a number of initiatives to mitigate risks associated with business process disruptions caused by technological factors or cyberattacks. PhosAgro Group complies with tax legislation in the countries where it operates. The Company tracks all changes (including the planned ones) in tax laws, analyses the law enforcement practices, and seeks clarifications from the government on taxes. In addition, law and accountancy experts are engaged to advise on the administration of applicable tax laws. The Company also has a tax monitoring system in place to quickly identify and minimise tax risks in coordination with the Federal Tax Service of Russia. Key indicators / risks materialised / changes in the risk Downside deviations of actual business process indicators (by focus area) from targets. No material risk events occurred. Change in the risk: – Tax claims No material risk events occurred. Change in the risk: – Information security 11 Losses incurred on PhosAgro Group’s property and assets as a result of unauthorised access to its information systems or disclosure of confidential data PhosAgro Group implements a number of initiatives to prevent unauthorised access to its information systems and disclosure of confidential data. A wide variety of technical and software solutions, including those based on encryption, are used to control access to information resources and systems. Access rights are granted to specific user groups. There is a clear definition of what constitutes confidential information and how it should be handled. The Company undertakes regular audits to ensure strict compliance with the Company’s confidentiality policy. In December 2021, the Company’s Board of Directors adopted the Information Security Policy. Unauthorised disclosure of confidential data, unauthorised access to IT systems. No material risk events occurred. Change in the risk: – Risk Description Risk mitigants Economic security 12 Losses incurred on PhosAgro Group’s property and assets as a result of economic crimes committed by employees or third parties, including fraud and theft. The Company takes steps to prevent potential damage to its property and assets as a result of economic law infringements, including by introducing access authorisations to the Company’s administrative and production facilities, clearly differentiating between responsibilities as part of contract or transaction execution, vetting counterparties before signing a contract, and putting in place a dedicated hotline. Moreover, additional checks are undertaken by a variety of PhosAgro Group’s functions. Key indicators / risks materialised / changes in the risk Theft and fraud incidents. No material risk events occurred. Change in the risk: – Regulatory 13 Corruption 14 Untimely receipt/extension of licences; legislative changes that might bring about higher cost of doing business, restrictive policies by regulators, weaker equity story of the Company and/or adverse transformation of the competitive landscape. PhosAgro is in full compliance with applicable laws. To make sure it gets timely updates on potential legislative changes, the Company closely tracks initiatives of legislators, the government and regulators, and takes part in discussing such initiatives and drafting relevant recommendations in partnership with professional associations. PhosAgro Group prepares and submits documents in due time to receive or extend licences required for its business. Deviations related to regulatory compliance. No material risk events occurred. Change in the risk: – Losses resulting from non- compliance or inadequate compliance with applicable anti-corruption laws by PhosAgro Group or its employees (penalties levied against the Company by state authorities and other damages) PhosAgro Group makes sure its facilities and partners fully comply with applicable anti-corruption laws. To that end, it provides training in combating corruption and administrating the anti-corruption law, and promotes zero tolerance towards corruption among the Company’s employees and partners. Among other things, the Company has approved the Anti-Fraud and Anti- Corruption Policy, the Code of Ethics, and the Regulations on Conflict of Interest. PhosAgro Group’s counterparties are obliged to declare their compliance with anti-corruption laws. The Company is a member of the Anti- Corruption Charter of Russian Business. Corrupt practices, conflicts of interest. No material risk events occurred. Change in the risk: – About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 72 73 Strategic Report Risk Description Risk mitigants Reputation 15 Damage caused to the Company’s business reputation as a result of misleading or defamatory information or allegations about the Company made publicly available, leakages of confidential information, and breaches of business ethics on the part of the Company’s employees. In its operations, PhosAgro demonstrates commitment to transparency by disclosing all relevant material facts and circumstances. The Company has adopted an information policy and a media engagement policy. Information about the Company is available on its website and in the mass media. PhosAgro provides comments in response to media enquiries and regularly monitors coverage in both Russian and international (social) media. To protect its business reputation, the Company has approved the Code of Ethics setting out unified rules for PhosAgro’s employees based on the principles of integrity, good judgement, fair play and partnership and designed to support the Company’s success. Key indicators / risks materialised / changes in the risk Stakeholder confidence No material risk events occurred. Change in the risk: – Risk Description Risk mitigants Currency 17 Financial losses arising from unfavourable changes in FX rates against the Company’s base currency. In the context of oil price volatility and fluctuations of the rouble exchange rate against major international currencies, the Company seeks to align the currency breakdown of its debt financing with the FX structure of its sales. As of now, most of PhosAgro’s debt is denominated in US dollars as a natural hedge against predominantly USD-denominated sales. The Company carefully tracks analyst forecasts and factors that may influence the rouble exchange rate against major currencies. If need be, PhosAgro can hedge its FX positions either fully or partially. For more information on the Company’s activities and indicators in this area, see the Financial Risk Management. Currency Risk section of the Notes to the consolidated financial statements on page 316 Key indicators / risks materialised / changes in the risk Adverse changes in exchange rates No material risk events occurred. Change in the risk: – Credit 16 Financial losses caused by the failure of buyers, commercial contractors and other financial counterparties to fulfil their financial obligations to PhosAgro Group in full and on time PhosAgro has approved policies on managing credit risks to institutionalise a number of credit risk mitigation techniques, including deliveries against full or partial prepayments with full or partial insurance of credit risks, use of letters of credit, and factoring (securitisation) of accounts receivable. Providing advance payments to suppliers and contractors is only considered after the counterparties have proved their reliability or after they have offered adequate bank guarantees for advance payments that exceed approved internal limits. The Company partners with banks, financial organisations and insurance companies that boast a high level of financial stability and meet the criteria set out in the Company’s treasury policy. PhosAgro monitors all covenants under the existing loan agreements on an ongoing basis. For more information on the Company’s activities and indicators in this area, see the Financial Risk Management. Credit Risk section of the Notes to the consolidated financial statements on page 318 Overdue accounts receivable, provision for bad debt. No material risk events occurred. Change in the risk: – Commodity 18 Losses associated with unfavourable changes in the market prices for mineral fertilizers and other products or a hike in prices for key feedstock and equipment sourced by PhosAgro Group. Adverse changes in product and feedstock prices No material risk events occurred. However, potential correction in mineral fertilizer prices following their strong growth in 2021 contributes to a moderate increase in this risk. Change in the risk: In the context of heightened price volatility in the core product markets, PhosAgro Group takes consistent steps to optimise its sales structure in terms of the fertilizer grade offering and regional sales focus as a way to maximise the Company’s margins. PhosAgro Group also continues to increase the share of sales to end consumers, improve production efficiency and offer its customers add-on services such as packaging, blending and storage. PhosAgro Group has offices in Buenos Aires (Argentina), Belgrade (Serbia), Hamburg (Germany), Bayonne (France), Zug (Switzerland), Limassol (Cyprus), Vilnius (Lithuania), Warsaw (Poland), São Paulo (Brazil) and Singapore. With a foothold firmly established in the priority export markets, the Company can respond more quickly to changes in the market demand and customer needs. To reduce its feedstock and equipment expenses, PhosAgro Group invites multiple suppliers to take part in tenders, enters into long-term supply contracts and develops lasting relationships with its suppliers. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 74 75 Strategic Report Risk Description Risk mitigants GRI 201-2 Climate 19 Risks associated with changes in natural processes or phenomena as a result of climate change (physical factors) or with political, economic, financial or other decisions made by governments, multilateral organisations, financial institutions, or producer or consumer associations or other NGOs to curb climate change by reducing GHG emissions through carbon border adjustment or restrictions on the use of fossil fuels or non-renewable energy (transitional factors). Processes to identify and assess climate change risks are being integrated throughout the value chain and form an integral part of PhosAgro Group’s risk management and internal control framework. The Board of Directors approved PhosAgro’s climate strategy, the key elements of which are analysis of climate risks and opportunities, scenario analysis, science-based targets, and a low-carbon transition plan. In accordance with the climate strategy, priority actions are being taken to develop and implement the following measures: direct (Scope 1) emission reduction programmes; an internal energy efficiency programme, and communication with energy suppliers to improve the climate profile of energy supplies (Scope 2); and a supplier and customer engagement plan and supplier ESG ratings (Scope 3). Thanks to these actions, the Company has improved its ratings for climate disclosure (CDP) and sustainable development (Sustainalytics, S&P, and MSCI ESG). Key indicators / risks materialised / changes in the risk Adverse deviations resulting from climate impacts (by focus area). In 2021, there were severe weather events, with effects including heat waves and squalls. However, at this stage it is quite difficult to assess the extent to which this weather was caused by climate change. In any case, PhosAgro Group did not incur any significant losses associated with these natural phenomena. At the same time, potential changes related to transition climate factors contribute to higher exposure to this risk. Change in the risk: Risk Description Risk mitigants Sanctions 21 Foreign sanctions imposed on the Group’s companies The global nature of international economy and increased geopolitical tensions create a background for various sanctions to be imposed on the Russian economy and the Company’s foreign operations by individual countries or their groups. PhosAgro Group’s flexible production and sales model would help minimise any negative impact should such a risk event occur. Interest rates 22 The Company borrows money to finance its investment programme and working capital requirements, including via floating interest rate loans. Rising floating rates might lead to higher debt service costs and adversely impact the bottom line. Should the Company accumulate significant floating interest rate borrowings, it would hedge this risk using interest rate derivatives. PhosAgro closely monitors and manages its fixed-to-floating debt ratio to mitigate interest rate risk. For more information on the Company’s activities and indicators in this area, see the Financial Risk Management. Interest Risk section of the Notes to the consolidated financial statements on page 318 Key indicators / risks materialised / changes in the risk Losses associated with sanctions. No material risk events occurred. At the same time, increased geopolitical tensions contribute to an increase in this risk. Change in the risk: Losses associated with changes in interest rates. No material risk events occurred. Change in the risk: – About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Infectious diseases 20 Risks associated with the outbreak and spread of infectious diseases that pose a threat to business continuity. 2021 saw further spread of a newly discovered coronavirus (COVID-19) around the world. Confirmed cases, business process disruptions. PhosAgro Group has been taking a set of measures to prevent mass infection and to support vaccination among its employees and local communities in its regions of operation (jointly with government agencies). Thanks to these measures, PhosAgro Group managed to minimise the pandemic’s negative impact on its operations, ensure business continuity and deliver on its business targets. The Company’s successful experience of COVID-19 response and the procedures it has established help react to further developments associated with COVID-19, as well as to other infectious disease outbreaks. The number of confirmed cases among PhosAgro Group’s employees in 2021 generally follow overall trends in the Company’s regions of operation. At the same time, by quickly developing and putting in place anti-COVID-19 response measures, PhosAgro Group ensured business continuity and delivered on its targets. Change in the risk: – 76 77 Strategic Report E C N A M R O F R E P W E I V E R Unique mineral resource base. The mine life is estimated at around 60 years. Thanks to its magmatic origin, phosphate rock mined on the Kola Peninsula boasts exceptional purity. High-quality phosphate rock (P2O5 content at 39% and above). Efficient products for bumper crops In 2021, PhosAgro was at its best in many respects. The Company continued to strengthen its industry-leading profitability through cost control programmes and financial and investment discipline. Our objective is to set new standards for the industry in terms of product eco-efficiency as a way to promote public health, protect the environment, and prevent air and water pollution. We are integrating sustainability principles into all aspects of our operations. 80 Financial performance 88 Operational performance 93 Customers and product management 104 Research and education 114 Supply chain 122 People development 138 Industrial safety 156 Environmental review 190 Contributing to local communities 78 79 79 79 Об отчете О компании Стратегический отчет Обзор результатов Корпоративное управление Акционерный капитал Финансовая отчетность Дополнительная информацияАкционерный капитал Financial performance Key external drivers of financial results Other drivers of PhosAgro's outstanding financial performance in 2021 along with an increase in sales and competitive cost levels include: In 2021, the Company’s EBITDA more than doubled year-on-year to a record RUB 191.8 bln. PhosAgro also remains a leader among its direct competitors by EBITDA margin, which grew to 45.6% in 2021. The robust growth was driven by historically high output and sales volumes and favourable conditions in global agricultural markets. Our financial performance reached record highs for the second consecutive year. Importantly, this upward trend comes on the back of an increase in fertilizer output and sales, supported by our ability to maintain competitive cost levels and our long-term investment programme. In addition, our strong performance in 2020–2021 is driven by favourable price conditions in the global markets. In the reporting year, we continued implementing our development projects and increased investment in fixed assets, including capitalised overhauls, by 17% year-on-year to RUB 48 bln. These funds were allocated to finance the final stage of construction of an advanced production facility in Volkhov and other projects under PhosAgro’s long-term development programme. Despite significant spending on PhosAgro Group’s development, our efforts to improve efficiency and sustainability of all business processes coupled with a flexible sales system focusing on the most profitable markets resulted in an 83% year- on-year growth of free cash flow to a record of RUB 78 bln. As at the end of 2021, our net debt to EBITDA ratio decreased to a comfortable level of 0.8x vs 1.8x as at 31 December 2020, mainly due to robust financial performance and a well-balanced investment programme. We expect the favourable trend in agricultural markets to continue into 2022 due to low carry-over stocks of key crops (primarily grain cereals and oilseeds). This will help maintain stable earnings for farmers and fertilizer demand. Restrictions on fertilizer exports from China and Russia aimed at bolstering domestic supply will be an additional factor supporting prices, especially during the seasonal spikes of activity in the key markets. The continued price volatility in the global energy markets that is particularly expected in the European natural gas market will be one of the main price factors for the global merchant ammonia and nitrogen-based fertilizers markets. Alexander Sharabaiko Deputy CEO for Finance and International Projects significant growth in fertilizer consumption, especially in Latin America, Africa, South Asia and Oceania, due to a good fertilizer/crop price ratio (fertilizer affordability), favourable weather conditions in key markets, and stronger government support for agriculture; restrictions on exports of phosphate-based fertilizers from China to bolster domestic supply; growth of global crop prices, underpinned in part by the increasing demand for forage crops, which itself was partially caused by the recovery of hog production in China after the swine flu epidemic in 2018–2019. Revenue analysis RUB191.8 bln Record-high EBITDA in 2021 Revenue for 2021 grew by 65.6% year-on-year and amounted to RUB 420.5 bln. The growth was mainly associated with PhosAgro Group’s record output of finished products, the recovery in global fertilizer prices during the year and strong demand from end consumers on the back of low inventory levels in key markets. FY 2021 financial and operational highlights, RUB mln1 Item Revenue EBITDA2 EBITDA margin Net profit Adjusted net profit3 Free cash flow Net debt 12M net debt / EBITDA Sales volume, kt Phosphate-based fertilizers and feed phosphates Nitrogen-based fertilizers Total fertilizers Other products RUB 420.5 bln Revenue for 2021 +66% Growth year-on-year 2020 2021 Change y-o-y, % 253,879 85,659 33.7% 16,921 43,370 42,519 420,488 191,810 45.6% 129,674 130,205 77,857 31.12.2020 31.12.2021 156,875 153,718 65.6 123.9 11.9 p.p. 666.3 200.2 83.1 0.80 2021 Change y-o-y, % 1.83 2020 7,669 2,286 9,955 184 7,762 2,495 10,257 177 1.2 9.1 3.0 (3.8) 2.9 Total fertilizers and other products 10,139 10,434 1 RUB/USD exchange rate: average rate in Q4 2021 – 72.6; average rate in Q4 2020 – 76.2; rate as at 31 December 2021 – 74.3; rate as at 31 December 2020 – 73.9. 2 EBITDA is calculated as operating profit adjusted for depreciation and amortisation. 3 Adjusted net profit means net profit less foreign exchange gain or loss from financing activities About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 80 81 Performance Review Revenue breakdown by key product, RUB bln Item Phosphate-based products Nitrogen-based products Other Total Revenue breakdown by region, RUB bln Region Russia Europe South America North America India Africa CIS Asia 2020 2021 85.1 66.5 41.9 12.3 21.6 12.3 10.5 3.6 110.5 116.8 103.9 31.8 19.8 17.9 12.2 7.7 Operating costs analysis Cost of sales, RUB mln Item 2020 2021 Change y-o-y, % Depreciation and amortisation Materials and services Phosphate rock transportation Repair Drilling and blasting Other materials and services Raw materials Ammonia Sulphur and sulphuric acid Potassium Natural gas Ammonium sulphate Salaries and social contributions Electricity Fuel Products for resale Customs duties Freight, port and stevedoring expenses Russian Railways and operators’ fees Other Total 23,743 40,937 8,134 10,134 3,168 19,501 24,812 47,084 9,105 11,373 3,486 23,120 35,514 63,534 4,802 4,360 12,253 12,342 1,757 13,807 6,311 3,885 9,333 1,482 19,128 11,452 1,111 14,277 17,707 16,574 12,635 2,341 15,286 6,740 5,578 12,725 2,483 28,587 10,728 1,250 166,703 218,807 4.5 15.0 11.9 12.2 10.0 18.6 78.9 197.3 306.1 35.3 2.4 33.2 10.7 6.8 43.6 36.3 67.5 49.5 (6.3) 12.5 31.3 2020 203.6 38.7 11.6 253.9 2021 Change y-o-y, % 333.0 71.9 15.6 420.5 64 86 35 66 In 2021, cost of sales grew by 31.3% year- on-year to RUB 219 bln, mainly on the back of higher sales volumes and increased prices for key feedstocks. Raw materials costs added 79% year-on- year and amounted to RUB 63.5 bln as a result of a significant increase in the global prices for all key inputs, including sulphur and sulphuric acid, ammonia, potassium, ammonium sulphate and natural gas. Despite the higher costs, PhosAgro remains one of the industry's most efficient players and leads the pack globally in terms of production costs. The main way we ensure effective cost control is by sourcing the key inputs and materials from domestic suppliers. EBITDA EBITDA in 2021 vs actual 2020, RUB bln 85.7 2.5 147 (46.4) 3 191.8 2020 Sales volumes Fertilzer prices Costs FX 2021 2021 EBITDA (plan/actual), RUB bln + 20,282 (+12%) 171.528 101 24.692 1.546 (6.925) 409 459 191.810 In 2021, EBITDA more than doubled year-on-year and reached a record RUB 191,8 bln. EBITDA margin for the reporting period grew to 45.6%. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 12M 2021 plan Sales volume Price FX rate (73.3>37.7) Prices for raw materials Fixed costs 12M 2021 actual FX gain/ loss from operating activities Free cash flow EBITDA to FCF conversion in 2021, RUB bln 191.8 0.2 (32.0) (28.8) (4.9) 126.2 (48.4) 77.9 In 2021, the Company’s free cash flow increased by 83.1% year-on-year and amounted RUB 77.9 bln Capital investments for the year amounted to RUB 48.0 bln and were focused around completing the construction of a large production facility in Volkhov, wrapping up the project to expand aluminium fluoride capacity in Cherepovets, and developing the ore and raw material base in Kirovsk. EBITDA Adj. WC Tax paid Interest paid OCF ICF FCF Debt At the 2021 year-end, our net debt to EBITDA ratio was 0.8x vs 1.8x as at 31 December 2020, primarily thanks to EBITDA growth and a well- balanced investment programme. Net debt as at 31 December 2021 was slightly down year-on-year at RUB 153.7 bln. In September 2021, the Company’s SPV issued a USD 500 mln 7-year Eurobond with a coupon rate of 2.6%, listed on the Irish Stock Exchange. Loans and borrowings breakdown by rate type as at 31 December 2021, % 5 95 Floating rate Fixed rate 82 83 Performance Review Loans and borrowings breakdown by currency as at 31 December 2021, % Repayment schedule, RUB bln Loans Bonds 12.7 11.6 16.9 3.9 11.3 2.3 - - 37.1 - 37.1 - - 37.1 2 7 91 RUB-denominated EUR-denominated USD-denominated 2022 2023 2024 2025 2026 2027 2028 2022 2023 2024 2025 2026 2027 2028 Generated and distributed direct economic value, mln RUB GRI 201-1 Item Direct economic value generated Revenue from sales Revenue from other sales Revenue from financial investments Revenue from sale of assets Economic value distributed Operating expenses, including: wages and other payments to employees social expenses Payments to providers of capital: payments to shareholders payments to creditors Tax expenses and other payments to government: including income tax expense Economic value retained Stakeholder Wide range of stakeholders Suppliers and contractors Employees Shareholders and creditors Government 2019 249,583 239,130 8,995 1,458 0 (243,077) (194,090) (24,706) (2,661) (32,244) (4,635) (12,108) (9,724) 6,506 2020 254,854 242,262 11,617 975 0 (247,254) (193,263) (28,540) (2,570) (38,852) (4,132) (11,007) (8,045) 7,600 2021 422,459 404, 849 15,639 1,971 0 (363,715) (250,101) (32,781) (3,378) (72,260) (4,335) (37,019) (31,073) 58,744 Tax policy Management approach GRI 207-1 In 2021, the topic of taxes was for the first time identified as material for disclosure based on polling of executives and key stakeholders on significant aspects of the impact of the Company’s operations on the society and the environment, as well as following the analysis of the requirements of international ESG rating agencies. For more information on our approach to identifying material topics to be disclosed in an integrated report, see the About this Report section. In 2021, the Company drafted a tax strategy, which will be discussed at the next meeting of the Audit Committee and presented to the Board of Directors in the first half of 2022. The tax strategy is updated and refined as necessary, but at least once every two years. Our approach to taxation was developed in accordance with the Company’s Strategy to 2025 and combines social responsibility for developing and maintaining the well-being of regions across PhosAgro’s footprint, minimising tax litigation risks, and maximising the use of the Company’s leverage toolkit stipulated by law for actively investing companies, in particular Investment Protection and Promotion Agreements (IPPAs) and Special Investment Contracts (SPICs). The Group’s taxation principles Centralisation and alignment The Group follows a unified and consistent tax policy aligned with its sustainability targets and ensures that all of its companies take a uniform approach to meeting tax legislation requirements. Legality Group companies rigorously comply with the Russian tax legislation, international agreements and other taxation acts, as well as the legislation of foreign jurisdictions in the Group’s geography, including the EU legislation. Integrity real economic substance of the Group companies’ business operations. Group companies do not carry out transactions with a primary purpose of tax savings, nor do they employ aggressive tax planning practices. Group companies are located in the jurisdictions of their actual operations. The Group comprises no companies registered in offshore zones recognised as such by the Russian Federation or in territories that do not exchange tax information with the European Union. Effectiveness The Group’s tax strategy is implemented rationally, taking into account the interests of investors and shareholders, as well as the Group’s long-term strategic development goals. The Group relies on a leverage toolkit that complies with the applicable laws and includes Investment Protection and Promotion Agreements (IPPAs) and Special Investment Contracts (SPICs). Due diligence Group companies undertake all necessary measures to avoid entering into transactions with counterparties whose activities may indicate dishonesty or evasion of tax liabilities (obtaining an unjustified tax benefit). The Group has supplier screening procedures in place to verify the business integrity of its future counterparties before entering into agreements. Planning To fulfil its fiscal obligations in an efficient and timely manner, the Group procures to plan and forecast tax payments with respect to external and internal factors likely to affect its tax burden, as well as to monitor their performance. Openness GRI 207-3 Taxes are calculated and paid based on the The Group complies with international requirements for public disclosure, including annual publications on payments to the government in line with the UK Financial Conduct Authority’s Disclosure and Transparency Rules. PhosAgro seeks to build an open dialogue with the general government to foster a favourable business and social environment across its footprint. Group companies assist tax authorities in their tax control efforts by addressing their enquiries in full and on time, providing access to information and disclosing tax information in strict compliance with international reporting standards and applicable laws where they operate. Starting from 1 January 2021, tax monitoring was introduced at Apatit, the Group’s key production asset, which accounts for more than 80% of the Group’s total tax payments. Such tax control initiative consists in voluntarily providing tax authorities with real-time access to accounting and tax records (in lieu of in-office and on-site audits). Tax monitoring will be rolled out at PhosAgro starting from 1 January 2023. To minimise possible differences in connection with market price definition and controls, Group companies enter into pricing agreements with tax authorities. Contributing to the making of the government tax policy The Group takes an active part in shaping and implementing the government tax policy, as well as in discussing and development tax legislation. The Company’s representatives participate in four working groups that help the Russian Ministry of Taxation ensure tax transparency: Integration of Taxpayers’ Accounting Systems as part of Tax Monitoring Initiative under Tax-3 AIS, Internal Control and Risk Management System, Tax Register Standards and Requirements, Control Procedure Standards. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 84 85 Performance Review As an active member of the Russian Union of Industrialists and Entrepreneurs (RSPP), the Group helps develop and review legislative initiatives, while also promoting its agenda in key focus areas. The Group also joined the RSPP’s Social Charter of the Russian Business. the Tax Administration Office under the Legal Department. It also oversees the Tax Planning and Tax Risk Management Unit (part of the Economics Department) and the tax function of the Department of Accounting and Tax Records at Apatit which is part of the Group that holds its key production assets. with tax laws and prepare reliable financial statements on time. The Group discloses material tax risks so identified. The accuracy of information disclosed by the Group in its financial statements is confirmed by an external auditor. The Company’s financial statements are available on its website: Flexibility (promptitude) The Group promptly adapts its tax policy to changes in tax laws and practices and accordingly fine-tunes its accounting policy. Independent approach to intra-group pricing The Group is best positioned to comply with both national and international transfer pricing requirements, with controls in place that help assess the efficiency of arm’s length pricing and traders’ margins in export supply chains The Group has a tax risk management and internal control system in place GRI 207-2 PhosAgro’s Board of Directors determines the key principles of, and approaches to, risk management and internal controls and reviews quarterly reports on key risks, including tax risks. The key objectives, roles and responsibilities for the risk management and internal control system are set out in the Group’s Risk Management and Internal Control Policy. The Company takes a conservative approach to tax matters and seeks to minimise possible disputes with tax authorities. Group’s tax function Group companies run their own tax functions in line with this strategy The internal tax control system is subject to annual assessment, monitoring and audit, with an action plan to be developed to improve its efficiency. PhosAgro’s Board of Directors is in charge of strategic tax planning. Strategic tax planning and guidance in Russia is the responsibility of In case of material tax risks, Group companies take steps to mitigate or eliminate the same to ensure compliance www.phosagro.com. Group companies have developed and adopted a set of corporate legal information and explanatory measures intended to enhance high ethical standards of our shared corporate culture and to minimise risks of employee involvement in illegal activities, including in tax evasion. The Group has internal and external mechanisms in place for seeking advice on ethical and lawful behaviour and matters related to organisational integrity. Any Group employee, as well as any member of the Board of Directors and Management Board who has become aware of any actual or potential violation of law, including tax laws, is obliged to give a prompt notice of the same to the PhosAgro Hotline. RUB 35.1bln Total amount of taxes paid in 2021 The key subsidiaries whose payments in 2021 are disclosed in the table below and their jurisdictions are listed in note 33 to financial statements. GRI 207-4 metrics, will be disclosed in full starting from 2022, following adjustments to the Company’s accounts and records. Payments made in 2021, RUB Payment type Total Russia Rest of the world Including Switzerland Poland France Income tax VAT 28,735,968,675 28,401,440,415 334,528,260 136,977,010 59,179,526 314,898 (11,812,679,063) (12,520,017,776) 707,338,713 178,124,867 524,432,926 196,547,190 Personal income tax 4,298,126,240 3,984,664,584 313,461,655 187,089,040 19,972,095 10,876,768 Social contributions 7,331,606,366 6,895,734,742 435,871,624 284,826,147 27,795,231 36,592,645 MET Property tax Pollution fees Land tax 3,390,504,629 3,390,504,629 1,025,227,238 1,023,322,461 206,774,612 199,636,309 228,761,729 228,761,729 Water use charges 50,343,097 50,343,097 0 1,904,776 7,138,303 0 0 Transport tax Water tax 14,691,497 14,551,268 140,229 2,813,264 2,813,264 Regular subsoil use fees 2 2 0 0 Other taxes 45,960,947 33,000,868 12,960,079 Tax fines and penalties 4,482,606 4,091,543 391,063 Dividend income tax 1,590,791,000 1,590,791,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,500 0 0 0 0 0 0 21,181 3,251,517 0 0 354,762 0 Total 35,113,372,837 33,299,638,134 1,813,734,702 787,017,064 631,400,959 247,940,281 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 86 87 Performance Review Operational performance 10.5 mt Total agrochemical output The development of the Volkhov facility was the Company’s key investment project in the reporting year. Worth over RUB 30 bln, it provides for ramp-up of the site’s production capacity to about 900 kt of phosphate-based fertilizers per year and construction of the necessary infrastructure. In 2021, we fully completed the first and the second stages. We also continued to enhance health and safety at our facilities, but there is still room for improvement in this area, as we seek to completely eliminate workplace injuries among both PhosAgro and contractor employees. In 2021, we carried on with the effort to increase workplace safety among contractors and plan to further strengthen this work in 2022. Mikhail Rybnikov First Deputy CEO, Executive Director of PhosAgro until 10 March 2022 In 2021, the Company delivered outstanding production results. Sound investments in our facilities and technological improvements have helped us create a seamless and well-balanced value chain from ore mining to packaging and delivery of end products. We can promptly and efficiently adjust its capacities to meet the demand for any of our products, responding to market dynamics for the benefit of our shareholders. Total agrochemical output reached an all time high of 10.5 mt. Phosphate-based fertilizers have been growing at a rate of over 4% for the second year in a row, driven by a nearly 9% increase in the output of phosphoric acid, a key ingredient of phosphate-based fertilizers, following upgrades of production units and improved equipment utilization. The production of sulphuric acid increased by almost 8% due to the Cherepovets unit reaching its full capacity and a new unit coming on stream at the Volkhov facility. In the nitrogen- based fertilizer segment, commercial ammonium sulphate saw the most significant growth with output more than doubling to reach 74 kt. Strong customer focus helped us promptly respond to demand changes in key markets and increase total fertilizer sales by 3% year-on-year to a record 10.3 mt primarily in the most popular and high-margin products. Nitrogen-based fertilizers showed the best results, with sales growing by more than 9% year-on-year. Product portfolio Our customers are at the heart of our business. In 2021, we had 52 fertilizer grades in our portfolio. A significant portion of our offering consists of newest fertilizer grades developed over the past five years. PhosAgro is the largest producer of liquid nitrogen-phosphorus fertilizers in Russia Mineral fertilizers Feed additives Concentrates Industrial phosphates > High-grade phosphate rock Sodium tripolyphosphate (STPP) Nitrogen-phosphorus and complex fertilizers Feed grade urea Nitrogen-phosphorus and complex fertilizers with micronutrients Monocalcium phosphate feed grade > Syenite alkali aluminium concentrate > Nepheline concentrate Nitrogen-based fertilizers Liquid complex fertilizers Industrial products About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 88 89 Performance Review Upstream and downstream Upstream Apatit’s Kirovsk branch mines apatite- nepheline ore at six fields of the Khibiny depositin Russia’s Murmansk Region using both underground and open-pit mining methods. PhosAgro Group’s feedstock reserves are of igneous origin, which means that they do not have concentrations of toxic heavy metals. The Company’s phosphate rock is extremely rich in P2O5. The mineral resource base at one of the world’s richest and purest deposits is expected to last for about 60 years. The decrease in reserves compared to 2020 is primarily due to the transfer of balance reserves for underground mining at the Koashva deposit to off- balance reserves following the examination by the State Commission on Mineral Reserves of the feasibility study with calculation of reserves. There were no significant changes at other deposits. To support growing production of phosphate-based fertilizers, PhosAgro adopted a programme in 2019 to increase the mining of apatite-nepheline ore to 41 mt by 2027. It envisages major investments in the expansion of existing and construction of new mining capacities, as well as in upgrading purchasing advanced equipment to ensure safe and efficient ore production. PhosAgro Group ore reserves as at 1 January 2022 Deposit Kukisvumchorr Yukspor Apatitovy Cirque Rasvumchorr Plateau Koashva Njorkpahk Total Balance reserves, kt (A+B+C1+C2) Average P2O5 content, % 359,212 467,853 93,104 86,859 258,073 60,326 1,325,427 14.16 13.79 13.75 10.64 17.21 13.84 14.35 Technologies In 2021, the Company produced 38.4 mt of apatite-nepheline ore, compared to 37.65 mt in 2020. In the reporting year, we switched to remote drilling of deep wells at the Rasvumchorrsky mine, a project similar to that previously implemented at the Kirovsky mine. We also renewed our dump truck fleet for open pit mining (Vostochny mine) to increase technical availability and utilisation ratios of the equipment. On top of that, we continued to implement our sustainable development strategy. In January 2021, the mining and processing plant of Apatit signed a contract to receive electricity from the TGC-1 hydroelectric power plants. In the reporting year, green electricity supplies to the plant totalled 299 MWh. Chemical production Feedstock Feedstock production, kt Item Ammonia Phosphoric acid Sulphuric acid Ammonium sulphate Total 2020 2021 Change y-o-y, % 1,970.3 2,716.8 6,815.6 293.9 1,931.1 2,952.0 7,352.2 259.0 11,796.6 12,494.3 (2.0) 8.7 7.9 (11.9) 5.9 Phosphate-based fertilizers Phosphate-based fertilizer production, kt Item DAP/MAP NPK NPS APP MCP PKS Total In 2021, the production of phosphate-based fertilizers grew by 4.2% year-on-year to 7.9 mt helped by increased output of phosphoric acid. The output of DAP/MAP fertilizer brands increased by 14.1% to exceed 3.6 mt. The rapid growth rates of DAP/MAP fertilizers was due to launching and ramp-up to full capacity of MAP production at 2020 2021 Change y-o-y, % 3,164.4 2,840.3 928.9 205.8 392.1 46.4 3,610.7 3,111.3 561.6 208.6 390.6 10.8 7,577.9 7,893.6 14.1 9.5 (39.5) 1.4 (0.4) (76.7) 4.2 the Volkhov facility, and the higher demand and prices for bicomponent fertilizers in 2021. NPK production in 2021 rose by 9.5% year-on-year to 3.1 mt, while the output of NPS and PKS dropped by 39.5% and 76.7% respectively amid lower margins in the global market. Nitrogen-based fertilizers Nitrogen-based fertilizers production, kt About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information In 2021, the production of phosphoric acid, the key feedstock used in phosphate- based fertilizers, reached 3 mt, increasing by 8.7% year-on-year on the back of earlier production unit upgrades and increased equipment utilisation efficiency. In 2021, sulphuric acid production surged by 7.9% year-on-year to 7.4 mt driven by the ramp-up to full capacity of the new unit in Cherepovets and the commissioning and reaching the design capacity of a new unit at the Volkhov facility. Ammonia output decreased slightly year- on-year to 1,931 mt, due to scheduled maintenance in August–September 2021. However, PhosAgro Group was still able to exceed the planned yearly output of 1,906 mt. In the phosphate segment, production grew by 4.2% In the nitrogen segment, production grew by 0.4% In 2021, production in the nitrogen segment went up by 0.4% year-on- year reaching 2.4 mt. PhosAgro Group continued to increase the output of commercial ammonium sulphate by more than doubling it year-on-year to 74.1 kt. The production of ammonium nitrate grew by 0.5% to 694.8 kt, while urea output in 2021 saw a slight planned decrease to 1.643 mt. 90 91 In 2021, the production of phosphate rock and nepheline concentrate increased by 0.8% year-on-year to 11.8 mt Ore processing Production volume, kt Item Phosphate rock Nepheline concentrate Total 2020 2021 Change y-o-y, % 10,541.4 10,675.5 1,159.4 1,123.1 11,700.8 11,798.6 1.3 (3.1) 0.8 Item 2020 2021 Change y-o-y, % Ammonium nitrate Urea Ammonium sulphate Total 691.5 1,679.1 31.7 694.8 1,643.2 74.1 2,402.3 2,412.1 0.5 (2.1) 133.8 0.4 Performance Review Sales Sales of phosphate-based fertilizers in 2021 amounted to 7.8 mt, a rise of 1.2% year- on-year. The increase comes on the back of the consistently high demand for these fertilizers in Russia and Latin America. We were able to meet the growth in demand by boosting the production of MAP in 2021 after launching a new facility at the Volkhov facility. In the nitrogen segment, sales were up by 9.1% year-on-year, primarily due to a high seasonal demand and the availability of fertilizers for end users. In 2021, our total fertilizer sales increased by 3% year-on-year to a record 10.3 mt. Sales by key product, kt Item Phosphate rock Nepheline concentrate Total Phosphate-based fertilizers DAP/MAP NPK NPS APP MCP PKS Total Nitrogen-based fertilizers Ammonium nitrate Urea Ammonium sulphate Total Total fertilizers Other products STPP Other Total other products 2021 Change y-o-y, % 2020 3,151.8 1,159.0 2,677.6 1,125.2 4,310.8 3,802.8 3,203.4 2,924.6 912.2 200.3 378.6 49.8 3,564.5 3,011.1 566.8 206.3 405.2 8.5 7,668.9 7,762.4 618.6 1,649.0 18.1 2,285.7 9,954.6 93.3 90.4 183.7 798.0 1,616.3 80.2 2,494.5 10,256.9 94.4 82.9 177.3 (15.0) (2.9) (11.8) 11.3 3.0 (37.9) 3.0 7.0 (82.9) 1.2 29.0 (2.0) 343.1 9.1 3.0 1.2 (8.3) (3.5) Customers and product management Contribution to the UN SDGs 2021 highlights to96% Increase in customer satisfaction index PhosAgro becomes first in Russia to achieve certification under the national standard for improved production. Improved customer support: website in 15 languages, development of online trading platforms and Agro Calculator. 82 Net Promoter Score Strategy One of the major challenges faced by the world today is producing sufficient amount of quality and safe food accessible to all. According to the UN, the world population is expected to reach nearly 10 billion by 2050. However, the environmental and social issues reflected in the UN SDGs are far from being promptly and effectively addressed. In this context, we realise PhosAgro’s strategic and globally important mission of supplying safe and eco-efficient fertilizers for the agricultural industry to ensure food security in Russia and across world. We believe that tackling global problems is only possible through open dialogue, cooperation, and building synergies between all stakeholders. This approach lies at the heart of our interaction with customers. We are committed to responsible use of our products making sure they are safe for people and the environment. Product life cycle management at PhosAgro is in full compliance with applicable Russian and international standards and regulatory requirements. We seek to minimise any potential negative impact of our products on safety, health and the environment throughout the value chain, from product development to the end of its life cycle. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 92 93 Performance Review To provide consumers with safe, eco-efficient, and quality innovative products and services, the Company's Strategy to 2025 has identified the following focus areas: The product management framework can be seen in the chart below: Development of digital technologies in agriculture Enhancement of PhosAgro’s competitive strengths to boost crop yields and quality in the near term as the world's leading supplier of eco-efficient phosphate fertilizers for farmers Expansion of PhosAgro Group’s involvement in programmes to protect human health and the environment, ensure food security and combat soil degradation Development of circular economy and increased recycling, including the use of waste generated by PhosAgro Group Design of innovative products that meet customer requirements and enable farming with due consideration of environmental factors, the climate agenda and need to reduce greenhouse gas emissions in the value chain, as well as soil and crop requirements An open dialogue with customers helps us understand their expectations for products and services, management system, expectations and, in some cases, their vision of future products. This valuable information creates a solid foundation for the Company’s further strategic growth and new product development. > open dialogue with stakeholders regarding their expectations and satisfaction with PhosAgro Group's products and services; > integration into the quality management and environmental management systems. PhosAgro Group's responsible production management framework is based on the following principles: > compliance with Russian and international standards and regulations; > accurate tracking of materials, elements and substances from product development to the end of life cycle; > open and transparent information about the properties and quality of products for customers and other stakeholders; PhosAgro Group’s vertically integrated business model is a key competitive advantage. PhosAgro’s upstream assets benefit from extensive and high-quality resource base boasting unmatched purity. Our downstream assets are located close to key mineral resources used in fertilizer production. At PhosAgro Group, we have a product management framework that relies on the assessment of product life cycle. It covers all production facilities and stages of product life. > Regulations and other requirements; > Expectations of stakeholders; > PhosAgro’s strategic initiatives > Marketing products meeting customer requirements; > Taking into account feedback; > Information support; > Digital services for customers > Elaboration of production requirements and opportunities; > Product research and development; > Ensuring production safety and product use in compliance with regulatory and other requirements > Drafting documents; > Registration tests and receipt of permits The product management framework conforms to ISO 14040 and ISO 14044, and its efficiency is underpinned by PhosAgro Group’s existing quality and environmental management systems. In 2021, the environmental management system and the quality management system were certified across the Group's production facilities and were found to be in full compliance with ISO 14001 and ISO 9001, respectively. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 94 95 Performance Review development Planning is an important element of PhosAgro Group’s management system. Planning involves complex and comprehensive research to determine a set of criteria for the development of a future product, including: > stakeholder requirements and opinions about products and services; > regulatory requirements applicable to activities and products; > market expectations, requirements and trends; > innovative methods and technologies of production, including those aimed at ensuring greater safety of the product and its manufacturing processes for humans and the environment; > opportunities for implementing the circular economy principles and contributing to UN Sustainable Development Goals. PhosAgro’s quality management system throughout the product life cycle to meet the stringent quality requirements for the end product, from ore and material selection to end product research. Importantly, the quality management system guarantees product safety and full compliance with all requirements for hazardous substances for humans and the environment Management approach Interaction with customers and product safety are closely related issues regularly discussed by the Board of Directors’ committees and submitted to the Board of Directors for consideration. Each facility has designa ted staff members to maintain the quality and environmental management systems, which includes implementing initiatives, Risks and opportunities The Company has a risk management system in place to identify and mitigate product related risks in cooperation with customers. product and customer related objectives ( for more information, see the Strategic Risks section, page 68): performing internal audits, updating records, collecting and providing input data for review by top management to improve governance across the board. Every year, the quality and environmental management systems undergo an external audit by an independe nt firm to confirm their compliance with ISO 9001 and ISO 14001. The systems are supported by internal and external audits that help promptly reveal areas for improvement and introduce best practices into management systems. Development of products and manufacturing processes is implemented in partnership with the Samoilov Scientific Research Institute for Fertilizers and Insectofungicides (NIUIF), Russia's only institute specialising in this area. 7 environmental risk; risk related to business processes 9 and systems; 13 regulatory risk. 1 risks associated with chemicals management and product safety; 2 risks associated with customer satisfaction and innovation; 3 risks associated with ensuring ethical research and production principles. The Company develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. Regulatory environment and management of risks associated with chemicals. The Company constantly monitors regulatory and other requirements and products 0.2 mg per kg PhosAgro Group's unique phosphate-based fertilizers have perfectly low cadmium average content Directors. In 2021, we revised our Code of Ethics to state our position on this matter. In line with its Code of Ethics, PhosAgro does not conduct experiments on animals, except as required by law; when conducting an expert examination of fertilizers, the main method of evaluating information on the toxicity and hazard of a multi- component substance to animals is to analyse information from national and international databases, as well as information on previously registered fertilizers. Presently, there are very few alternatives to animal research that are recognised by the government. We are doing our best to expand the range of allowed research methods and reduce experiments on animals. PhosAgro Group facilities ensure timely receipt of all necessary licences for their activities to strengthen public Agrochemistry, Rosprirodnadzor and Lomonosov Moscow State University, and Rospotrebnadzor, respectively. operations and products. All PhosAgro PhosAgro Group is committed to reducing hazardous substances in its activities. We ensure full transparency with respect to the chemicals we use and the content and properties of our products. Regulations and certain requirements applied to mineral fertilizers in Russia We tap our extensive knowledge base and technologies to design products that are safe for the environment and people. In strict compliance with the regulations, all PhosAgro products undergo the necessary environmental and toxicological tests as part of their registration process before being marketed to our customers. Mineral fertilizers produced by PhosAgro Group are subject to mandatory state registration of agrochemicals by the Russian Ministry of Agriculture. All grades of PhosAgro mineral fertilizers registered in Russia underwent a mandatory examination for compliance with toxicological and hygienic, biological, environmental, and sanitary and epidemiological standards. The examination was performed by experts of the F.F. Erisman Federal Research Centre of Hygiene, D.N. Pryanishnikov All-Russian Research Institute of PhosAgro Group's unique phosphate- based fertilizers have perfectly low cadmium average content (0.2 mg per kg), making them among the safest in the world. On 5 June 2019, the European Council and European Parliament approved the EU Regulation 2019/1009 (FPR) on fertilizers (also known as EU Fertilizing Products), establishes new EU-wide rules for CE-marked fertilizers. The regulation provides for reducing cadmium content in EU fertilizers, by introducing a single cap at 60 mg per kg of P₂O₅ and banning inorganic fertilizers in EU with a cadmium content above that cap starting from 16 July 2022. Going forward, the regulation provides for gradual reduction of cadmium content to 20 mg per kg of of P₂O₅. The plans of cutting the cap to 40 mg per kg of P₂O₅ have been already announced. At the same time, the French Agency for Food, Environmental and Occupational Health & Safety (ANSES) has already issued recommendations for a cadmium content in inorganic phosphate-based fertilizers of less than 20 mg per kg of P₂O₅. Thus, PhosAgro Group's phosphate-based fertilizers have a much lower cadmium content in our product slogan: Pure minerals for healthy lives We are committed to the ethical principles of animal welfare and seek to avoid using animals for research. This issue is addressed at the highest level by the Company’s Board of About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 96 97 Performance Review Voluntary ESG certification of products GRI 2-28, 417-1 In 2021, PhosAgro Group became Russia’s first entity certified under the national standard for improved production. This will enable the Company to eco-label its products. Certificates numbered 1, 2 and 3 were issued to PhosAgro's Cherepovets, Volkhov and Balakovo sites respectively. Today, all of the products made at our mineral fertilizer facilities have been certified under GOST R 58658–2019, which has introduced the world’s most rigorous limits on heavy metal and arsenic content. This is a testament to the unique eco-efficiency of our products, which can now be labelled with the green brand. Eco-friendly products and responsible consumption are currently gaining momentum in Russia and abroad, with more consumers setting great store by environmental properties of a product. This is confirmed by international and Russian research: > over 44% of Russians trust eco-labels, while 42% pay a premium for more environmentally friendly products and packaging (Green Response, 2021); > Three in five global consumers are interested in learning more about where their food comes from and how it is made. Three in four global consumers expect companies to invest in sustainability (Innova Consumer Survey, 2020); > Some 37% of Russians are likely to opt for goods and services provided by a responsible business, should they all be in the same price range (Romir jointly with Plan B and SKOLKOVO Sustainable Business Lab, 2019). PhosAgro Group has become the first company in the Russian mineral fertilizer industry to receive a certificate of compliance harm the environment and people. The requirements imposed by the Ecological Union on the content of most heavy metals align with the EU directive due to be enacted on 16 July 2022. with the Ecological Union’s Vitality Leaf standard and the right to use the internationally recognised eco-label on its products. This is a credible testimonial to the outstanding eco-efficiency of our mineral fertilizers. It is worth noting that the Ecological Union uses a science-based approach grounded in a comprehensive life cycle analysis to evaluate products, projects and services. Certificate for compliance with the Standard STO-56171713-023- 2020 (Mineral fertilizers. Requirements for environmental safety and assessment methods): > developed by the Ecological Union; > recognised by the Global Ecolabelling Network (GEN)1; > authorises the use of internationally recognised Vitality Leaf eco-label. Going forward, PhosAgro Group’s fertilizers that have successfully completed certification will bear the Vitality Leaf eco-label. The Vitality Leaf eco-label on PhosAgro’s fertilizers confirms that: > these fertilizers are essential to sustainable agriculture, as they are a part of sustainable intensive farming practices; > they do not contain any heavy metal concentrations such as cadmium, chromium, mercury, or nickel, which can > fertilizers come with precise dosage recommendations, which serve to preserve soil fertility; > the production cycle is designed to ensure a sustainable use of resources and apply the best available techniques; > the feedstock suppliers have passed all environmental safety checks, as PhosAgro Group has put in place the Green Procurement system. Eco-labelling is an opportunity to make an informed choice in favour of PhosAgro products with internationally recognised environmental credentials. Additionally, PhosAgro’s Green Label environmental claim asserts that the product is free from dangerous cadmium concentrations capable of harming soils. Finally, our products are labelled with an EU pictogram developed under Regulation (EU) 2019/1009 and ensuing rules for voluntary labelling of safe fertilizers in terms of heavy metals content. > 44% of Russians trust eco-labels 1 Global Ecolabelling Network (GEN) Russia is represented in the GEN only by the Vitality Leaf eco-label operated by the Ecological Union. Apart from that, the non-profit association includes internationally recognised Type I eco-labels focusing on life cycle analysis such as the EU Flower (EU countries), Blue Angel (Germany), Nordic Swan (Nordic countries), etc About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 98 99 Regulations and certain requirements applied to mineral fertilizers by the European Union, REACH, and SVHC PhosAgro Group’s products exported to European Union (EU) customers were registered pursuant to Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation and Authorisation of Chemicals (REACH). Effective since 1 June 2007, REACH replaced previous EU legislation on chemicals. REACH seeks to ensure a higher level of safety and to protect human health and the environment. For companies, REACH conformity means greater responsibility for assessing the risks associated with the use of chemicals and providing users with relevant safety information. Companies producing or importing 10 tonnes or more of hazardous substances per year are required to submit not only technical data, but also a chemical safety assessment (CSA). All information on such substances is communicated by PhosAgro Group in full to the regulators. Pursuant to Regulation (EC) No. 1907/2006 (REACH), Apatit’s products contain no substances which are subject to restrictions on their sales in the European Union (EU). We produce ammonium nitrate (AN) CAS N 6484-52-2 EC No. 229-347-8, which is subject to para 58, Annex XVII of REACH. However, it does not apply if a fertilizer conforms to specifications defined in Annex III to Regulation (EC) No. 2003/2003 of the European Parliament and of the Council. To confirm compliance, samples of ammonium nitrate are sent quarterly to the Inspectorate Estonia AS lab for detonation resistance and oil retention tests. The results are formalised by a protocol for compliance with the requirements of Annex III of Regulation (EC) 2003/2003. In addition, para 30 of Annex XVII to REACH lists substances specified in Part 3 of Annex VI to Regulation (EC) No. 1272/2008 and classified as toxic to reproduction, Category 1A/1B. These include sodium tetraborate which is on the list of Substances of Very High Concern (SVHC) and is classified as a reproductive toxicant, Category 1В, but the restrictions only apply to individual concentrations in the mixture above 4.5%. We produce NPK fertilizers with boron that contain sodium tetraborate at a concentration of 2–3%. Therefore, the special concentration level as defined in Part 3 of Annex VI to Regulation (EC) No. 1272/2008 is not reached. Thus, PhosAgro Group faces no restrictions under Annex XVII of Regulation 1907/2006. The quality and safety of mineral fertilizers produced by PhosAgro Group is confirmed by state registration certificates, declarations of conformity, and safety data sheets. According to expert reviews, new fertilizer grades are effective and environmentally and toxicologically safe. The products are properly classified, labelled and packaged in accordance with Regulation (EC) No. 1272/2008 (CLP Regulation). All types of manufactured fertilizers have safety data sheets (SDS). Performance Review Results Consumer research – 1 As part of the research, PhosAgro Group analysed consumer awareness of products and services, their preferences for new products and assessed attitudes to the Company’s environmental initiatives. In 2021, the Company took a set of measures to make information about PhosAgro Group’s products and services more accessible. Customers enjoy our digital services, which are complementary to PhosAgro’s core products and allow us to expand consumer opportunities, including by offering faster access to the relevant information and competencies of PhosAgro Group experts. During the COVID-19 pandemic, these services have been particularly effective and have flourished. PhosAgro Group’s digital services in 2021, see the Strategy section on 56. For more information on PhosAgro Group Innovation Centre provides expert support to consumers and is also engaged in: > promotion of new products; > promotion of core assortment in other countries (including registration tests); > on-demand expertise for other related business units; > preparation of agrochemical materials; > participation in educational programmes. Ensuring customer satisfaction is key for PhosAgro Group’s operations. Customer satisfaction is assessed in accordance with the requirements of ISO 9001 Monitoring of customer satisfaction helps obtain unbiased data on the performance of the quality management system, collect comments, search for the root cause of inconsistencies and timely develop corrective actions. We also take on board our customers’ wishes and suggestions, which are duly considered to boost customer satisfaction, expand our product range, acquire new customers and tap into new markets, both domestic and international. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Conducted from June to November 2021, the survey was organised as part of regional field days, PhosAgro field days, Chemistry, Yug Agro, and Golden Autumn exhibitions, as well as via the corporate website. During the survey, we measured the following indicators: > awareness of the Company’s products and services; > awareness and attitude towards > media preferences; environmental initiatives in Russia as a whole and those carried out by PhosAgro Group; > attitude towards new fertilizer brands and selection criteria.. > the degree to which different factors influence the decision to buy fertilizers; Surveying method: questionnaire (paper/digital). Key conclusions of the survey Key conclusions Additional information Survey participants are positive about environmental initiatives in Russia and can identify the Company’s green label; respondents also consider PhosAgro Group’s products to be eco-efficient. >60% of respondents have heard of the Russian law On Agricultural Products, Raw Materials and Food with Improved Environmental Characteristics. >70% of those surveyed support the creation of a green brand for domestic agricultural products. For agricultural producers, the main criterion for choosing fertilizers is quality. In this regard, it is very important that the respondents' first association with PhosAgro Group's fertilizers is quality. According to the survey results, quality (>80% of respondents) and user experience (80% of respondents) are the factors that most influence consumer choice. Consumer awareness of PhosAgro Group’s brands has increased significantly over the past year. Networking at specialised events and the printed catalogue remain the most preferred channels for learning about products; with that, consumers have become way more interested in digital channels (website, email newsletters, YouTube channel) over the past year. Almost all respondents (90%) expressed interest in fertilizers with controlled and prolonged effect. > 70% of respondents are familiar with PhosAgro Group’s digital ecosystem When choosing new products, attention is paid to increasing yield targets and economic efficiency. This was reported by about half of the respondents. About 40% are eager to introduce new practices. Environmental safety Quality and efficiency Product awareness Development and launch of innovative products The survey of consumers’ opinion on PhosAgro Group and its products explicitly confirms that: > the implementation of Strategy to 2025 is fully consistent with stakeholders’ needs and expectations; > environmental properties of products, their quality and eco- efficiency, as well as PhosAgro Group’s efforts to promote its green label and the new paradigm with respect to agricultural products, raw materials and food with improved characteristics are of importance for consumers; > digitalisation and digital services are as essential as in-person interaction and are an effective channel of communication with a variety of stakeholders 100 101 Performance Review Consumer research – 2 Additional research included an analysis of consumer requirements and expectations in terms of product quality, assortment, and output. The research was carried out by means of an online consumer survey both in Russia and abroad. number of customer satisfaction criteria, including: The data obtained serves as the basis for the annual assessment of customer satisfaction. > quality of the products supplied; > packaging of the products supplied; > product range; In 2021, the survey covered 11.8% of PhosAgro Group’s total customer base by revenue, with 24% of them being from Russia and 76% from abroad. The respondents were asked to rate their satisfaction level on a scale from 1 (the lowest score) to 5 (the highest). The survey used a > promptness of request handling and quality of support and consultation by trading offices. Key results of the customer satisfaction survey Customer survey result >70% 73% 76% 77% Survey participants are positive about the quality of PhosAgro Group’s products, with more than 70% of respondents giving the highest score to this criteria. 73% of survey participants said that they were fully satisfied with the quality of packaging, giving it the highest score. PhosAgro Group’s product range fully meets the expectations of 76% of respondents; PhosAgro Group is developing new brands and some consumers are positive about their potential release. Consumers who took part in the survey praised PhosAgro Group’s handling of requests: it was rated as fully meeting expectations by over 77% of customers . Satisfaction with product quality Satisfaction with packaging Satisfaction with product range Promptness of request handling and quality of support and consultation by trading offices Degree of consumer satisfaction from 2019 to 2021, % 2021 2020 2019 Following the customer satisfaction survey, corrective measures were developed, with their effectiveness to be evaluated in the next research cycle. 96 94 97 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 102 103 18% are “neutrals”: they are not dissatisfied, but neither are they completely sure that they would recommend PhosAgro Group. The percentage of “neutrals” was significantly higher in general than in Russia, where customers are noticeably more loyal to the brand. Brand loyalty a ssessment In addition to the basic criteria underpinning the quality management system, the findings of the survey were studied in terms of behavioural characteristics and customer loyalty to the brand. For this purpose, the net promoter score (NPS), an index that measures customer loyalty to a product or company, was calculated. It totalled 82 for the Russian and foreign customers. This is a very high score, which means that many respondents are likely to recommend PhosAgro Group and our products to their friends. 82% of respondents can be categorised as “promoters”, or highly loyal customers. The prevalence of “promoters” shows that PhosAgro Group has a competitive edge in terms of a hefty share of loyal customers and the possibility of growth through customer recommendations. It was essential for us not only to have our performance evaluated against various criteria, but also to get a deep understanding of what lays behind respondents’ high scores. The main aspects that consumers cited as the most motivating for being loyal to PhosAgro Group were as follows: > value for money; > quality products (the most popular answer); > quality service (agricultural support, logistics and speed of delivery); > personnel qualification; > reliability and convenience of cooperation; > customer focus, flexibility; > innovativeness; > good packaging. At the same time, we received a number of comments on isolated matters. They were investigated as part of the quality management efforts, with appropriate corrective measures further developed. Some consumers noted that our product range is not wide enough. We are actively working to improve the situation; under the Strategy to 2025, the Company plans to introduce 50+ new product grades to the global market, including not only fertilizers, but also complementary products, such as crop protection agents.. Performance Review Research and education Management approach Our innovation, product development and education management system is seamlessly integrated into our quality management system, which is aligned with ISO 9001:2015. Management approach to innovation, product development, and education Global Sustainable Development Goals (SDGs) Research and education is an integral part of our operations. PhosAgro Group strives to ensure efficient and safe agricultural production and develops new innovative fertilizers while also working to minimise the environmental impact of mineral fertilizer application and production. In doing so, the Company relies on Russian and international experience and leading research and production practices. 17% of total revenue RUB 71.2 bln was generated by sales of fertilizers produced for the last five years The use of phosphogypsum in agriculture was recognised as a best practice by International Fertilizer Association (IFA). 2021 highlights ̃ х3 The growth in the output of mineral fertilizers with micronutrients almost to 1.7 mt (vs 621 kt in 20202). Urea with urease inhibitor was marketed Strategy Our Strategy to 2025 envisages efforts to increase the share of innovative products, develop technology and production, and ramp up potential for cooperation with stakeholders and partners in the area of innovation and research. Another important focus under this strategy is to ensure efficient production and its compliance with high standards for environmental responsibility, circular economy principles, and safety. 1 Due to certain aspects of accounting, the revenue does not include the margin of PhosAgro Group’s traders 2 For grades registered as fertilizers with micronutrients in 2020, production output since 2021 is presented PhosAgro Group runs the Samoilov Scientific Research Institute for Fertilizers and Insectofungicides (NIUIF), Russia's only institute specialising in this area. The Group actively cooperates with the Russian Ministry of Agriculture, the Russian Academy of Sciences, federal research centres, universities, innovation funds, and international R&D organisations (UniLaSalle Polytechnic Institute (France), University of Belgrade, Poland's Research Centre for Cultivar Testing, Mendel University in Brno (Czech Republic), Lithuanian Research Centre for Agriculture and Forestry, Latvia University of Life Sciences and Technologies, University of Tartu (Estonia), and Brazil’s Federal University of Lavras). Moreover, in 2018, PhosAgro Group set up the Innovation Centre to create cutting-edge products and technologies in partnership with research institutions in Russia and abroad. The NIUIF and PhosAgro Innovation Centre bring together researchers, engineers, and experts from various areas. With PhosAgro Group pursuing ambitious development goals, its business units have been attracting new highly qualified experts. In 2021, the average staff headcount at PhosAgro Group’s R&D units reached 427 employees. Furthermore, the Company has a competence centre that employs a broad range of experts. The tasks of this centre include: Risks and opportunities The following strategic risks affect our research and educational objectives ( for more information, see the Strategic Risks section on page 68): 1 strategic planning risk; 13 regulatory risk; 19 climate risk. Activity specific risks are listed below: > non-compliance of products’ manufacturing process and their use with carbon footprint standards and other environmental aspects associated with the adoption of the European Green Deal (primarily the From Farm to Fork Strategy) and potential similar restrictions in other markets; > insufficient environmental friendliness of production processes; > inability to ensure full compliance of plant nutrition systems with specific farming practices; promotion of new products; promotion of core assortment in other countries (including registration tests); on-demand expertise for other related business units writing/editing agrochemical materials; monthly reviews on cadmium and other pollutants; participation in educational programmes. PhosAgro is working closely with international organisations to provide broad support to humanitarian and research-intensive projects. > inability to accommodate customers’ expectations of advisory support regarding the use of products. The Group develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. Research and education fall within the remit of the Technical Development Department and are discussed at the meetings of the Sustainable Development and Strategy Committees of the Board of Directors. These matters are subject to an annual review by the Board of Directors . About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 104 105 Performance Review Performance NIUIF performance in 2021 Sulphuric acid production Phosphoric acid НThe NIUIF is a leading research centre that explores sulphuric acid technology and production and supports facilities countrywide. In 2021, in addition to providing services to PhosAgro Grooup sites, the institute also carried out a review of process and technical solutions of engineering documentation of one the leading manufacturer of non-ferrous metals. The findings resulted in expert opinions and recommendations on technologies used in the project, process solutions, equipment selection and configuration, construction materials, and production technologies. The second stage of creating in-house production of high-performance vanadium sulphuric acid catalysts, carried out jointly with the Boreskov Institute of Catalysis (Siberian Branch of the Russian Academy of Sciences), included provision of input data for a feasibility study. This work will continue in 2022. The development of sulphuric acid production (in particular SK-650 and SK-20 in Balakovo, SKU-23/40 boiler furnace in Volkhov) is being monitored and provided with advisory support across all of PhosAgro Group’s major production facilities. The installation of the SK-800 sulphuric acid production unit in Volkhov was supported with R&D and advisory services during boiler efficiency testing. Some of the work will continue in 2022. As part of R&D support for phosphoric acid production, the NIUIF kept up efforts to monitor and analyse the efficiency of raw material processing, as well as develop hemihydrate and dihydrate production of wet-process phosphoric acid across all of PhosAgro Group’s sites. In Cherepovets, Balakovo, and Volkhov, the NIUIF developed vacuum evaporation of wet-process phosphoric acid. In particular, core engineering solutions were developed to design a vacuum-evaporating unit with a capacity of 50 ktpa of P2O5 as part of wet-process phosphoric acid production in Cherepovets and to expand the capacity of dihydrate technology systems EFK-1, EFK-2 to 311 ktpa of P2O5 in Balakovo. Production of mineral fertilizers At the Cherepovets facility, the NIUIF is working to intensify MFPU-2 operation that uses a catalytic converter. The NIUIF staff also provide R&D support for the commissioning and start of crystalline ammonium sulphate production and develop core technical solutions for the reconstruction of magnesium additive injection systems for MFPU. In Volkhov, the NIUIF is responsible for R&D support of production at MFPU Sections No. 1 and No. 3, as well as for utilising capacity and reaching production targets at MFPU Section No. 2. In Balakovo, we are also planning to develop and implement a technology involving ammoniator- granulators and drum driers to develop production of mineral fertilizers. The range of the NIUIF activities features, among other things, R&D support and advisory services with regard to product quality requests, preparation for and participation in pilot production of new fertilizer grades, examinations and lab tests of fertilizer samples. 11 methods of quantitative chemical analysis developed and certified in 2021 In 2021, the NIUIF employees developed and certified eleven methods of quantitative chemical analysis to ensure analytical monitoring of production processes, with five methods certified at a federal level. We developed the industry’s first simulator to train granulation operators. Last year, we had an in-depth study of physical and chemical properties inherent in monocalcium phosphate to reduce caking tendency during transportation and storage. The NIUIF is a leading research centre that explores sulphuric acid technology and production and supports facilities countrywide. Development of advanced types of fertilizers and other products In 2021, the NIUIF and Moscow Timiryazev Agricultural Academy continued with research efforts to explore potential for developing innovative grades of slow and controlled-release fertilizers produced by applying inorganic coatings/shells. Cultivation tests brought positive results and enabled us to file national patent application No. 2021126117 “A Method to Produce Slow and Controlled-Release Fertilizers”. This work will continue in 2022. The NIUIF employees explored available technologies and developed core technical solutions to produce water- soluble monocalcium phosphate as both an end product and feedstock for water-soluble NPK fertilizers. They also developed technical solutions to upgrade sodium tripolyphosphate production and create a product with a low bulk density at the Volkhov production site. The NIUIF held a set of studies to refine a technology for injecting zinc-containing additives into mineral fertilizers. Cultivation tests were carried out to assess the impact of zinc-containing fertilizers on the accumulation of biomass and plant nutrients. In 2022, the NIUIF will further assess the impact of technological processes on agrochemical performance of zinc-containing fertilizers. Environmental R&D, including with a focus on the use of recycled materials The NIUIF staff took part in the upgrade and improvement of scrubbing systems at the PhosAgro Group’s production facilities in Cherepovets and Balakovo. In particular, they put forward suggestions on reducing aggregate dust emissions from MFPU No. 3, block 2.70 in Cherepovets. As part of the programme to develop the Volkhov branch, the NIUIF provided R&D support for water circulation facilities after the implementation of a zero-discharge production scheme. Its employees also support design and construction of a neutralisation station and slaked lime station in Volkhov. The technical upgrade of the Balakovo branch also saw the water use system improve. Jointly with St Petersburg Mining University, the NIUIF monitored the condition and stability of dump sites in Balakovo. In 2022, the NIUIF will further provide R&D support for the design of a unit for the integrated treatment of by-products from wet-process phosphoric acid – fluosilicate acid and phosphogypsum production (based on the NIUIF technology), as well as for the design of aluminium fluoride shop reconstruction with increased capacity. In the reporting year, the NIUIF developed a technology for hydrogen sulphate treatment of Kola nepheline concentrate with production of aluminium hydroxide and by-products. 2022 will see the NIUIF staff advance this technology further. The NIUIF will further develop a technology to produce crystalline ammonium sulphate by processing phosphogypsum and carbon dioxide. In 2022, we also plan to focus on developing an action plan to optimise the use of chemical reaction heat, reduce natural gas consumption and, consequently, greenhouse gas emissions at the fertilizer drying stage in Cherepovets. The NIUIF employees are developing measures to improve the quality of marketable silica gel and studying recovery and processing of waste water phosphorus. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 106 82 107 Performance Review PhosAgro innovation centre Development of new products PhosAgro Group's portfolio includes 52 fertilizer grades In the reporting year, more products with innovative properties were developed. Urea with urease inhibitor – a product with a positive climate profile that improves the plants’ nutrient uptake through controlled release – was brought to the market We plan to develop and market 50 new grades by 2025, and 70 by 2030, including innovative biomineral fertilizers, fertilizers with inhibitors and ameliorants, as well as fertilizers with prolonged effect. By 2025, PhosAgro Group looks to start producing three fundamentally new products: ApaSil, biologised fertilizers, and BioCPA (crop protection agents). Furthermore, urea with urease inhibitor, which is already registered in Europe, is currently pending registration to be supplied in the Russian market. Phosphogypsum In December 2021, a working group of the International Fertilizer Association (IFA) recognised PhosAgro Group’s production of improved phosphogypsum and its use in agriculture as a best practice. Phosphogypsum is a valuable by- product of the production of mineral fertilizers. It includes, among other things, such elements as calcium, sulphur, phosphorus, zinc, silicon, magnesium, copper, which are important for the soil. The use of phosphogypsum enhances the soil structure, its water and air permeability, improves leaching highly soluble salts, and shapes favourable conditions for the development of soil biota. Phosphogypsum makes it possible to increase productivity of arable lands and reduce the cost of crop production. For several years now, PhosAgro Group’s R&D and production units have been working to make this valuable product, which used to be regarded as waste, a marketable commodity. The certification was completed in 2019. The Balakovo branch became the first to start commercial production of marketable phosphogypsum with improved properties. In 2021, 40.5 kt of phosphogypsum was supplied (vs 8.7 kt in 2020). Apart from being a new revenue source, phosphogypsum contributes to circular economy principles and, thus, to PhosAgro Group’s ambitious environmental goals. Another important factor is potential large-scale application of phosphogypsum in order to reuse 20 m ha of salinised land currently incapable of being cultivated. Chemical amelioration, which is required to reuse this land, cannot proceed without certain products, including phosphogypsum. Production of mineral fertilizers with micronutrients, kt 2021 20201 2019 1,691.1 621.3 542.2 Sales of fertilizers produced for the last five years (2017–2021) amounted to RUB 71.2 bln, or 17% of total revenue. Strong R&D capabilities and the flexibility of production capacities achieved through a fundamental overhaul in recent years allowed the Company to deliver a high share of new grades. All of these give PhosAgro a competitive edge and help PhosAgro Group meet growing demand for the specific grades that are best suited to certain crops, soils, and farming practices. Investments in R&D activities and development of new products, RUB mln 2021 2020 2019 1,416.8 1,845.9 1,642.1 16.9% Share of revenue generated by sales of cutting-edge fertilizer grades developed and brought to the market in 2017–2021 Trends in demand for innovative products and eco-efficient fertilizers with improved characteristics over the recent years show that farmers opt for a more targeted approach to their agricultural tasks PhosAgro Group promotes innovations in agriculture, including by way of providing farmers with access to its broad range of products, services, and digital resources. Revenue generated by sales of cutting-edge fertilizer grades developed and brought to the market in 2017–2021, RUB mln Item Diammonium phosphate 18.1:46.2 dark Diammonium phosphate 18.1:46.5 dark Diammonium phosphate 18.2:46.2 green Nitrogen-phosphorus-potassium diammophoska fertilizer 10.3-26.4-26.4 light brown Sulphur-containing nitrogen-phosphorus-potassium fertilizer NPK(S) 8-20-30(2)+0.5Zn grade Prilled urea without processing with anticaking agents Nitrogen-phosphorus-potassium fertilizer 12-32-16 Nitrogen-phosphorus-potassium fertilizer 12-32-16 light brown Granulated urea Feed grade urea Nitrogen-phosphorus-potassium fertilizer 12:15:21 Nitrogen-phosphorus-potassium-sulphur fertilizer NPK(S) 9-22-29(2) grade Sulphur-containing nitrogen-phosphorus fertilizer NP+S=20:16+16 Sulphur-containing nitrogen-phosphorus fertilizer NP(S) = 14-40(7) grade Sulphur-containing nitrogen-phosphorus fertilizer NР+S(Zn) 14:40+7(1.0%) grade Ammonium sulphate Ammophos 10-46 grade NPK fertilizer 4:12:32 grade with ammonia spirit Total Revenue 23,832.1 10,223.2 1,668.7 3,740.2 1,152.0 4,469.3 4,071.9 967.4 15,356.5 514.6 455.4 1,342.7 69.8 869.3 558.4 1,387.2 432.1 88.7 71,199.4 1 For grades registered as fertilizers with micronutrients in 2020, production output since 2021 is presented. Note: due to certain aspects of accounting, the revenue does not include the margin of PhosAgro Group’s About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 108 109 Performance Review Cooperation in innovation The Company's strategy for developing new products relies on cooperation with leading scientific and research centres. PhosAgro Innovation Centre cooperates with more than 15 federal research centres and institutes. Partner non-government development institution and National Intellectual Development Foundation (NIDF)» Project Cooperation roadmap for 2021–2023 Activities in 2021 We have embarked on implementing the cooperation roadmap. 30 agricultural universities in Russia made part of PhosAgro’s nationwide educational network 5,773 participants of online lectures Partner Russian Academy of Sciences Project Cooperation across a range of areas related to the climate agenda and low-carbon transition plan Activities in 2021 At the conference, mineral fertilizer producers, agricultural market participants and leading representatives of the scientific community discussed national and regional issues of low- carbon development in Russian agriculture and related industries. A comprehensive study was carried out and a detailed terms of reference prepared for the forestry and agricultural parts of the farm. Work on the cloning of deciduous trees specific to the Vologda region was launched to grow plantations of mixed forests. In addition, scientific experiments were launched and are being successfully conducted at Nemchinovka Federal Research Centre jointly with RAS scholars, with a farming station set up for new crops with full crop rotation. 15 federal research centres and institutes are involved in the project. PhosAgro and the Russian Academy of Sciences (RAS) announced at the conference the launch of a project to create a carbon farm in the Vologda region. The project is a pilot in the joint work to create a system of regional monitoring of greenhouse gas emissions. A working group of 93 experts from 19 RAS institutes was set up to implement the carbon farm project. Partner Partner universities Plans for further cooperation with the RAS in 2022: > further progress in implementing the carbon farm project and equipment procurement; > further progress in implementing other projects involving leading Russian scientists to develop and promote innovative products jointly with PhosAgro, for example: > developing biotechnologies and feed additives; > testing and registering new biomineral fertilizers; > building a pipeline of new promising projects. Project Creating PhosAgro’s nationwide educational network across 30 agricultural universities in Russia Activities in 2021 Activities and results in 2021: > vocational profiling organised > building PhosAgro's knowledge > more than 100 online lectures were held for 21 agricultural universities; > the lectures draw 5,773 students and teachers from across Russia and the CIS; > the lectures covered multiple themes, including agrochemistry and agronomy, crop production, innovations and digitalisation in agriculture, economics, law and responsible farming; > capabilities for conducting scientific experiments were set up at PhosAgro Educational Centre’s Phyto-Class of the Moscow Timiryazev Agricultural Academy, including those for students’ thesis projects; jointly with teachers of the Moscow Timiryazev Agricultural Academy was made available to school students; > PhosAgro Educational Centre offers ongoing further education courses, hosts open days by major employers, holds meetings for young scholars and conferences, and offers lectures recordings. Programme expansion plans for 2022: > integrating PhosAgro's educational programme into the curriculum of 30 Russian agricultural universities; > increasing the enrolment of PhosAgro’s lectures to 10,000 students per year; and lecture base; > setting up ten PhosAgro educational centres in Russian agricultural universities by 2023; > expanding the programme to 250 lectures (vs 103 lectures in 2021); > launching PhosAgro's e-learning platform with certificates recognised by our partners and employment opportunities for graduates. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 110 111 Performance Review PhosAgro's international humanitarian projects PhosAgro runs multiple humanitarian projects focused on building a modern education and science framework. In line with our strategic goals, we support young scholars and their projects addressing the challenges of biodiversity conservation, environmental well-being, sustainable development and the circular economy. Lobbying expenses in 2021 amounted to RUB 26.4 mln Project Activities in 2021 Partner Project Activities in 2021 GRI 2-28 Partner UNESCO Green Chemistry for Life, a joint grant programme by PhosAgro, UNESCO and IUPAC IUPAC Summer Schools on Green Chemistry project run jointly by PhosAgro and IUPAC UN Food and Agriculture Organisation (FAO) International Fertilizer Association (IFA) United Nations Global Compact The project for Development of Sustainable Agriculture through the Implementation of the Global Soil Doctors Programme and the Creation of the Global Soil Laboratory Network (GLOSOLAN) As a core member of the IFA, PhosAgro Group contributes to the association by providing expert advice on a wide range of topics As a Global Compact LEAD company, PhosAgro contributes to the initiative by providing expert advice on a wide range of topics > The final selection of project applications was held as part of the seventh round of the Green Chemistry for Life grant programme implemented jointly by PhosAgro, UNESCO and IUPAC. > Eight talented scholars from countries across Africa, Asia, Europe and Latin America (Armenia, Brazil, Vietnam, Italy, Malaisia, Croatia, Tunisia, South Africa). were named winners by the International Scientific Jury. > The grant awards ceremony is planned for 2022. > Over the nine years of the programme's existence, its International Scientific Jury considered more than 800 applications from young scientists representing 125 countries. More than 40 scholars from 29 countries received grants. > The fourth training session of the Summer School was held in an online-offline hybrid format. > It draw more than 150 young scientists and 40 teachers from 30 countries. > Since 2018, Summer School sessions have been held annually with PhosAgro Group’s support, attracting hundreds of talented scholars from emerging and transition economies. Over the past few years, four training sessions were held, bringing together over 400 young specialists from 60 countries.. > Phosagro Group assists FAO in implementing the Global Soil Doctors Programme and creating the Global Soil Laboratory Network (GLOSOLAN), which comprises over 800 laboratories in 150 countries. > PhosAgro and FAO agreed to extend their partnership for the development of sustainable agriculture until 2023. PhosAgro Group’s total contribution to the project will reach USD 2.4 mln by 2023. > PhosAgro participated in FAO's international conference on soil protection as part of the World Soil Day celebrations. > PhosAgro participated in the Global Symposium on Soil Biodiversity hosted by FAO. > Throughout the year, PhosAgro's experts actively contributed to the work of the IFA committees on agriculture, safety and environmental protection, international trade, communications and PR. > PhosAgro was commended as a leading responsible producer in the fertilizer industry at the IFA Strategic Forum held annually. > PhosAgro Group’s agricultural use of improved phosphogypsum certified in Russia was recognised as best practice at the IFA Working Group Meeting in December 2021. > PhosAgro was for the third time recognised as a UN Global Compact LEAD company. This enhances the Company's business reputation globally, reinforces its competitive strengths and increases public trust in PhosAgro, while also helping to boost existing and forge new partnerships. > As part of the UN Global Compact, PhosAgro endorsed the CEO Water Mandate, joining the global initiative of business leaders committed to advancing water stewardship. > PhosAgro solidified its commitment to the UN Global Compact by joining the Water Resilience Coalition and Climate Ambition action platforms. > The Global Compact Network Russia, in partnership with PhosAgro and with the support of Accenture and SAP, launched a regional track of the SDG Ambition accelerator programme in Russia and Belarus Institute of Chemistry and Sustainable Development at Mendeleyev University of Chemical Technology Partnership in promoting basic sciences and research in chemistry and related fields to further sustainable development globally International Competence Centre for Mining Engineering Education under the auspices of UNESCO The Centre is based at St Petersburg Mining University and plays an important role in implementing the UN Sustainable Development Goals, such as improving the quality of education, combating climate change, and protecting and restoring ecosystems European Sustainable Phosphorus Platform (ESPP) Partnership on the European political, scientific and technical agenda for the sustainable use of phosphate resources. Safer Phosphates, an international alliance of environmentally friendly fertilizer producers Partnership in protecting human health and agricultural ecosystems from contamination with heavy metals > In order to develop students’ professional knowledge of advanced technological processes in green chemistry, PhosAgro partnered with the Institute of Chemistry and Sustainable Development to organise a series of webinars for Bachelor's and Master's Students at the UNESCO Chair of Green Chemistry for Sustainable Development at Mendeleyev University of Chemical Technology. > Webinars focused on the following global challenges: natural resource management, carbon free technologies, green guidelines, waste recycling, etc. > The focus areas were aligned with the UN’s 17 Sustainable Development Goals. > PhosAgro is a member of the Centre's Steering Committee and actively participates in its activities. > PhosAgro Group took part in the 4th Russian–UK Raw Materials Forum, supported by the International Competence Centre for Mining Engineering Education under the auspices of UNESCO. The forum was attended by 35 speakers, including representatives of 25 leading Russian and UK mining companies. The forum’s audience exceeded 800 people. > PhosAgro Group took part in the 8th Russian–German Raw Materials Forum, supported by the International Competence Centre for Mining Engineering Education under the auspices of UNESCO. > PhosAgro’s employees participated in the professional certification programme to earn verification of their qualifications with international requirements for a mining engineer. > PhosAgro Group's research on its use of phosphogypsum in road construction was published in the ESPP newsletter on best practices in phosphogypsum application. > Drafting the article “Sustainable crop production: decreasing phosphorus rates or splitting phosphorus application?” for the Soil P legacy collection. > At the ESPP online conference, a report titled "Sustainable crop production: decreasing phosphorus rates or splitting phosphorus application?” was presented, featuring the results of PhosAgro Group’s European field experiments conducted at a branch of the Lithuanian Research Centre for Agriculture and Forestry. > In November 2021, Safer Phosphates (where PhosAgro is a member) and OPERA, a research centre of the Università Cattolica del Sacro Cuore (Italy), published the white paper "Cadmium Limits in Phosphorus Fertilizers". This research focuses on cadmium and its negative effects on soils, food and the human body. > It calls for the introduction of evidence-based levels for cadmium in fertilizers to ensure food safety and protect human health. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 112 113 Performance Review Supply chain Global Sustainable Development Goals (SDGs) Strategy PhosAgro Group’s procurement system seeks to ensure that the Group’s subsidiaries receive required resources, materials, and services with adequate quality, in full, and at reasonable prices. However, there is much more to the principles and business processes underlying our procurement activities. We believe that running a supply chain in an efficient and responsible manner is the cornerstone of the PhosAgro Group’s sustainable development. In 2021, our procurements of goods and services exceeded RUB 150 bln. Thousands of our suppliers and contractors benefit directly from these investments, and so do their employees, who have to provide for their families. We contribute to the public budget at various levels. But what is even more close to our heart is that the tools that we employ, including our environmental and social assessment of suppliers, as well as anti-corruption mechanisms, directly promote sustainable values across the Russian business community. These values are the bedrock of our business philosophy. We work to ensure that our procurement activities have a sizeable positive impact on all our stakeholders. 2021 highlights Share of local suppliers 19% 20% Share of procurement from SMEs 50% Share of counterparties which have completed ESG assessment Management approach GRI 2-6, 3-3, 204 Procurement principles Be legitimate, competitive, and transparent Factor in the requirements for specifications, quality, customer service, delivery, reliability, eco- friendliness and total cost of equipment and materials ownership, along with compliance and social matters Use the best-fitting, sustainable business solutions Protect PhosAgro Group’s reputation Comply with PhosAgro Group's existing procedures and best practices. reliability, and customer satisfaction. In 2021, the strategies covered 16 categories of raw materials, 15 categories of materials and equipment, two categories of works and services. > IT solutions. Procurement is managed through IT solutions. One of such solutions is SAP Process Mining by Celonis, a powerful software for analysing and streamlining procurement across multiple processes, including demand forecasting, analysing data after inventories have been issued for production, as well as identifying bottlenecks and procedural violations. > Robotisation. Robotic solutions reduce lead time for day-to-day and routine tasks and eliminate overlapping functions. 4) PhosAgro is committed to its anti- corruption policy. In our relationships with counterparties, we rely on the Anti-Corruption Charter of the Russian Business and, thus, mitigate the risk of fraud and/or corruption on both sides. 5) Procurement activities take account of PhosAgro Group’s existing requirements, procedures, and methods based on good business practices. 1) Interaction with suppliers is based on full transparency in decision- making, market and formula pricing, and long-term relationships. Procurement procedures are competitive, with bidders submitting their applications on the electronic bidding platform and a dedicated commission put in charge of organising tenders for petroleum products, materials and equipment, works and services. PhosAgro Group has in place documented procedures for assessing and selecting suppliers. 2) Procurement activities ensure that PhosAgro Group receives the required amount of quality feedstock, materials, equipment, and services when and where it needs, supplied by a responsible partner that meets deadlines, provides good customer service, and offers a good price. To this end, all procured goods undergo a thorough selection process based on requirements for: > quality; > sustainability; > reliability; > human rights. 3) Cutting-edge solutions allow building best available procurement models, comparing prices with other suppliers within the system and in the market in general. Key solutions in procurement. > Development and implementation of category strategies. This approach to procurement is designed to enhance quality, About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 114 115 12345Performance Review Key policies and ethical compliance PhosAgro Group’s fundamental documents for supply chain management: PhosAgro's Anti-Corruption Policy; PhosAgro’s Code of Ethics; Code of Conduct for Counterparties. All the above regulations are available on the Company's website and counterparties are required to read them upon registration at PhosAgro Group’s electronic bidding platform ( for more information, see Familiarising Business Partners with the Company’s Anti- Corruption Standards and Procedures on page 256). The standard form contract for counterparties stipulates their compliance with the Code of Ethics and Code of Conduct for Counterparties. PhosAgro Group may refuse to cooperate with suppliers or business partners discriminating against their or their subcontractors’ employees or using forced labour. Factors affecting procurement Corporate culture Global transformation Building up a pool of suppliers 1 The Department works on a strategy for each procurement category to develop the supplier pool EBP 2 At the initial stage, suppliers face a filtering barrier upon their registration on the EBP. It provides for documented checks. As a result, the Company creates a pool of reliable counterparties. ESG 3 ESG questionnaire for counterparties to improve the discipline of suppliers and put in place additional checks for accessing the Company’s platform and participating in tenders Procurement PhosAgro Group has a dedicated hotline, and counterparties are expected to report in good faith any concerns related to the Group’s activities (including the supply of goods and services to the Company) along with potential violations of the Regulations on Conflict of Interest and other bylaws, laws, other regulations, or ethical standards. Today Tomorrow > Business partnership with the customer > Focus on strategic categories > Digitalisation > Goal: operational efficiency > Cost reduction > Re-engineering and complete automation, single digital strategy > Amendments to the HR policy, enhancing appeal of the procurement function > Localised pool of suppliers to mitigate cross-border risks. A new global objective of the procurement function is to ensure that supply chains are resilient > Shifting the focus from the art of negotiation towards risk management and problem solving > Situational management – prompt response to emerging global challenges > Development of the Sustainable Development and Green Procurement Policy Sustainable development Market Digital transformation About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Efficient structure Deputy CEO of Apatit is at the helm of the Procurement Department. At PhosAgro, we have both a centralised procurement function at our primary production site in Cherepovets (Vologda region) and local procurement units at our branches in Kirovsk (Murmansk region), Balakovo (Saratov region), and Volkhov (Leningrad region). The organisational structure of the Procurement Department covers three major areas: raw materials and fuel, equipment and materials, works and services. For each area there are units engaged in routine procurement and dedicated teams responsible for category strategies. There are individual units within the procurement function that focus on tender procedures, capital procurement, support of supplies, planning and analysis. The function has in place key performance indicators (KPIs) aligned with the Group’s business objectives to assess the effectiveness of its employees. KPIs are individual, and their caclulation accounts for the personal contribution of each employee. A development plan can be introduced at all levels in line with an employee’s or task group’s initiatives and projects, thus improving engagement and motivation. The performance of the Group’s procurement function is subject to annual review by the Board of Directors, while the key role in this process is assigned to its Sustainable Development Committee. After the review, the Board suggests recommendations on key development areas and ways to improve the Procurement Department’s efficiency. Risks and opportunities The following strategic risks affect our procurement objectives (for more information on them, see the Strategic Risks section on page 68): 14 corruption 17 FX risk 18 commodity risk Procurement-specific risks are: > late delivery of raw materials, commodities, and equipment, including as a result of supply chain disruptions related to COVID-19; > violations of ESG principles by counterparties, including breach of human rights, use of child and forced labour, non-compliance of goods and services with environmental standards, etc.; > quality of raw materials, commodities, and equipment, dissatisfaction of the internal customer. PhosAgro Group develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. 116 117 Performance Review Results Supplier environmental and social assessment Reduction of GHG emissions and carbon footprint GRI 308, 308-1, 308-2 We consider procurement to be one of the most effective tools for implementing the Company’s sustainability strategy and promoting responsible business principles within the Russian business community and society as a whole. We therefore pay particular attention to ensuring that our suppliers and contractors adhere to sustainability principles throughout their operations. In 2020, based on the principles of sustainable development set forth in the Code of Conduct for Counterparties, PhosAgro developed a system to evaluate suppliers against ESG criteria that cover environmental issues, social responsibility and quality management. The assessment is based on the Sustainable Procurement Indicators checklist, which contains 61 ESG indicators, and a procedure for their evaluation depending on the category of suppliers/contractors. This assessment system includes criteria/requirements in six key aspects of ESG, providing a multifaceted view of counterparties’ performance: > environment; > occupational health and safety; > human resources; > permits; > quality control; > corporate governance quality;. In 2021 the counterparty assessment system was automated, which significantly increased the coverage of ESG evaluation ESG evaluation indicators in 2020–2021, % Average counterparty rating (on a 100 point scale), points 2021 2020 ESG evaluation coverage by counterparties 50% 2% Current supplier engagement projects: > The use of white cast iron liners post-consumer recycling for procured big bags. and steel grinding balls of the 5th hardness group is being considered, which would improve wear resistance and reduce material consumption and, accordingly, carbon footprint. > A project to transition the key lime supplier’s production from coal to gas is en route to being greenlit, which will reduce air emissions according to preliminary estimates. are by-products for suppliers. This reduces the environmental footprint, as these materials would otherwise be disposed for the lack of external demand. We are exploring the possibilities of further ramping up the processing of such raw materials. 54% 64% > To enhance the ESG strategy with regards to packaging sustainability, we are considering implementing > Throughout production, PhosAgro Group procures and processes large volumes of raw materials that ESG evaluation coverage by procurement volume Share of producers of raw materials, fuels, energy and commodities among counterparties with an implemented and certified environmental management system that complies with ISO 14001 or a similar standard 24% 4% 30% 27% Since the supplier evaluation system includes environmental requirements, it is fair to say that all participating suppliers and contractors (3,031 counterparties) were assessed for environmental impact. Thirty percent of evaluated counterparties are producers of raw materials, fuels, energy, and commodities with an implemented and certified environmental management system that complies with ISO 14001 or a similar standard. The reporting year saw revision of the supplier audit procedure, with ten technical audits conducted, which included ESG criteria. The obtained results demonstrate that suppliers are enhancing their sustainability and identifying areas for further improvements. The audits unveiled no environmental or social violations. Contract templates were also updated in 2021 to include a clause with a reference to the Code of Conduct for Counterparties. The clause formalised the counterparties’ duty to adhere to the principles set forth in PhosAgro’s Code of Conduct for Counterparties, including the obligations to observe and respect human rights, treat employees and partners with dignity and respect and never engage or otherwise participate in human trafficking, slavery, child labour, or any other form of forced labour. GRI 204-1 Procurement in 2019–2021, RUB mln Other counterparties SME 2021 2020 2019 120,088 29,918 83,865 20,203 57,487 32,713 Procurement from SME in 2021, % Other counterparties SME 20% 80% About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 118 119 Performance Review Cost budget in 2021 In 2021, PhosAgro Group’s procurement costs totalled RUB 150 bln, of which RUB 131.9 bln is the Procurement Department’s cost budget. Raw materials and fuel accounted for over 60% of procurement costs. The 31% year-on-year increase in costs was mostly associated with higher prices for major categories of raw materials and logistics expenses, coupled with intensive implementation of investment programmes. Service procurement KPI Breakdown of Procurement Department expenses in 2021 RUB150 bln PhosAgro Group’s procurement costs RUB131.9bln Procurement Department’s cost budget 20% Services 65% Raw materials and fuel 15% Materials and equipment Average number of tender participants in the reporting period, units Tender price reduction in the reporting period, % Holding tenders on time, % Bidders’ motivation assessment with respect to procurement quality, score Scale Worst Critical Target 3 5 90 3.5 5 7 95 4.5 7 12 100 5 Actual 5 10 99 5 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Over the years, PhosAgro Group has been effectively expanding industrial cooperation with manufacturers to support small and medium-sized enterprises (SMEs) by engaging them as suppliers. In 2020, the government of the Vologda region, Apatit, Severstal and Urban Development Agency signed the Synergy of Growth 2.0 agreement to expand business cooperation between the region’s SMEs and leading companies. Mutually beneficial partnerships between Apatit and SMEs contribute to the sustainable development of the local economy and society, serving the interests of all parties involved. To find reliable partners and foster win-win long-term cooperation with local suppliers, we regularly: > convene online meetings with well as the Urban Development Agency in Cherepovets; > hold roundtables to exchange experiences; > participate in exhibitions and strategic sessions. representatives of local businesses and regional branches of the Russian Union of Industrialists and Entrepreneurs, as Year after year, PhosAgro Group maintains a high share of local suppliers in its supply chain and is determined to raise it further. Procurement in 2019–2021, RUB mln. Indicators Number of counterparties in 2021, units 2021 procurement volume 2020 procurement volume 2019 procurement volume Procurement Department highlights Total 3,350 150,006.7 104,069.3 SMEs 2,332 29,918.4 20,203.7 Local 772 28,330.4 23,467.2 90,201.3 32,713.4 18,705.8 Imports 110 4,389.3 2,878.5 3,820.6 Share of local counterparties 19% Share of SMEs 20% Share of imports 3% Number of counterparties 3,350 Procurement Department objectives Total automation and robotisation of procurement processes 2050 procurement 2022 Digital transformation Procurement development Human resources Sustainable development > Advancement of SAP > Transparent business > Management culture Process Mining by Celonis partnerships > Further process > Long-term contracts > Implementation of a grading system robotisation (feedstocks, services) > Further development and implementation of an automated procurement workstation > Further development of category strategies > Expansion of the ESG evaluation coverage > Development of an ESG training programme for counterparties > Mutual improvement agreement for services, feedstocks and inventories Higher speed, better results 120 121 Performance Review People development UN sustainable development goals (SDGs) 2021 highlights GRI 2-30 >18 ths Employees Strategic goals Employee satisfaction and loyalty, % +20% Average training hours per employee 2021 Strategy to 2025 57 65 Average annual training hours per employee 2021 Strategy to 2025 95 123 2021 accolades > PhosAgro won the 1st place in the Region category of the nationwide HR Brand Award. > PhosAgro Group’s Mentoring project secured 3rd place in the Leaders of the Future category of the Creating the Future competition – a nationwide employee best practice award. More investments in social programmes for our employees х3.5 times 100% Staff coverage by collective bargaining agreements > Maxim Nadezhin, a researcher in the quality and standardisation department at NIUIF, was recognised as a winner of the Engineer of the Year contest Management approach We believe that a robust performance management system that covers all levels – from individual employees to PhosAgro Group as a whole – is key to the Group’s continued growth in line with its goals and vision. The Group leverages a diverse set of tools, approaches and automated solutions to assess staff performance. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Strategy PhosAgro relies on talented, professional, and committed employees that share our corporate goals and values. Our people are the backbone of our success. The Company’s entire HR framework is geared towards recruiting, supporting and motivating such employees to achieve the most ambitious professional goals. To this end, we continuously foster a culture of safety, equality and respect, provide ample opportunities to develop new competencies and offer competitive salaries and social benefits. We seek to deliver on our targets by running the following programmes: > Implementing a remedial action plan based on the annual employee survey results > Developing and implementing online training courses on personal competencies > Developing and implementing > Developing a system of corporate e-learning modules on blue-collar jobs, occupational safety, and managerial skills; introducing an innovative approach to professional training (virtual reality simulators, 3D models for training, production training grounds for improving workplace safety skills, etc.) libraries, guidelines, and knowledge management at large > Employing interpersonal training tools, such as mentoring, coaching, and supervision > Enabling and assessing the application of skills acquired by the staff involved in real business operations and project activities. Integrated HR management framework Unit Key responsibilities The Board of Directors Remuneration and Human Resources Committee > Supervision over the introduction and implementation of the Company’s remuneration policies and various incentive programmes; > Performance appraisal in respect of executive bodies and key executives, including the assessment of their performance against the targets set forth in the long-term incentive programme; > Succession planning for executive bodies and other key executives Management Human Resources and Social Policy Department of Apatit > Strategic development of HR processes > Development and implementation of process methodology > Optimisation, automation, and digitalisation of HR processes > Functional management of HR services in the regions Operations Local human resources and social policy departments > Implementation of the Personnel an incentive framework Management Policy > Recruitment for vacant and key positions > Organisation and implementation of initiatives for occupational training and competency building > Development and management of > Social support for PhosAgro Group’s employees in accordance with the collective bargaining agreement 122 123 Performance Review HR management principles Non-discrimination policy and human rights The Code of Ethics GRI 3-3, 406 GRI 405, 405–1 In April 2021, the Board of Directors approved the revised version of the Personnel Management Policy which enshrines the following focus areas: > organisational change management system; > personnel attraction and recruitment system; > personnel training and development system; > incentives and rewards system; > social benefits system; > corporate communication system; > working hours and leisure; > respect for human rights and non- discrimination. In 2019, we approved a transparency statement under the UK Modern Slavery Act. In 2021, the Board of Directors approved the amended transparency statement under the UK Modern Slavery Act, outlining the Company’s actions to prevent all forms of modern slavery and human trafficking within PhosAgro Group and its supply chain. In 2020–2021, over 12,000 employees received additional human rights and corporate ethics training. All relations between PhosAgro and its employees are strictly regulated by the Labour Code of the Russian Federation and adhere to the requirement to provide employees with a timely notice of material changes in employment terms thus respecting human rights. We negotiate collective agreements with trade unions that address issues such as working conditions and compensation for employees at each of our production sites (usually for a three-year period, covering 100% of the employees of Apatit, its branches and standalone business units). Most of these agreements are three-year. We expect our employees to treat their colleagues and everybody else, including customers, suppliers and other stakeholders, with due professionalism, respect and fairness. We consider unacceptable any restriction of employee rights or freedoms, whether at workplace or in any other job-related environment. Over the past nine years that we have been conducting employee loyalty and satisfaction surveys and collecting feedback from anyone who wishes to express their opinion, not once have we received negative feedback or report of violation of human rights. This clearly indicates that all obligations to the Group’s staff are respected and met. PhosAgro Group is committed to respecting employees’ human rights as required by the International Bill of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work, including zero discrimination, not using child or forced labour, respecting their right to exercise freedom of association and collective bargaining, and creating a safe and favourable working environment for both its own employees and the employees of its contractors, which are also expected to comply with such requirements and regulations. PhosAgro Group appreciates and encourages diversity among its employees. We maintain our commitment to an equal opportunities policy and do not tolerate any discrimination or privacy violations in respect of our employees. Our goal is to keep our working environment free from restrictions based on nationality, gender, age, faith or other grounds as required by the applicable laws. Any decisions regarding promotion, hiring, remuneration or benefits are based solely on the employee’s qualifications, performance, skills and experience. In 2021 PhosAgro Group’s respect of human rights was once again assessed by the Board of Directors and the Remuneration and Human Resources Committee, with special attention paid to diversity, gender equality and staff appointments. The discussion led to the key conclusion that every employee who works dutifully and has professional skills and competencies may apply for any position within the Company, including an executive one. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information PhosAgro adopted a Code of Ethics in 2014 and updated it in 2021. It applies to all employees and is the Company’s primary document that clearly outlines its corporate culture, together with all basic requirements for PhosAgro employees, and establishes rules and regulations for individual and collective behaviour within the Company. It covers all professional and business relationships, both at PhosAgro and with business partners and other external parties. When agreeing and concluding contracts with external contractors, it is an imperative for us to cover arrangements and commitments related to mutual respect of human rights and compliance with PhosAgro’s Code of Ethics. Commitment to these principles ensures that all our employees take pride in their work and are keen to communicate with colleagues, feel comfortable in a team and can grow both professionally and personally. They help PhosAgro to avoid unjustified risks, maintain long-term business growth, strengthen our position in the Russian and foreign markets, and increase the Company’s value for shareholders and other stakeholders. Responding to the way people have to communicate in the wake of the turbulences and working remotely in 2021, we are active in introducing cutting- edge technologies in corporate communications. These include enhanced personal accounts for the employees, a corporate mobile app with self-service options, and a chatbot, along with new capacities we added to our corporate portal. Risks and Opportunities The following strategic risks affect our HR objectives ( the Strategic Risks section, page 68): for more information, see 3 social risk; 4 HR risk; 20 infectious disease risk HR specific risks are listed below: > risks related to human rights and ethical standards; > risks related to workforce sufficiency, competence and development; > risks related to the provision of competitive incentives and social support to staff. The Company develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. Open communication channels GRI 2-25, 2-26 Access to multiple communication and feedback channels within PhosAgro Group allows our employees to resolve employment and other job-related issues. Some of the formats are Q&As in the corporate newspaper, town-hall meetings for staff and management, corporate portal, and a hotline. Any employee or other stakeholder can use PhosAgro Group’s whistle- blower hotline to report human rights violations or discrimination of any nature, or to communicate any other issues or concerns related to employer-employee relationships. Since the start of the monitoring in 2019 through 2020, our employees reported no human rights violations via the hotline. Annual employee survey Over the past nine years, PhosAgro Group has been conducting annual employee surveys which serve as a basis for subsequent remedial action plans designed to address employee concerns and requests. 2021 was no exception, with a major set of initiatives implemented. For more information on these initiatives, see the Industrial Safety section on page 153. 82 124 125 Performance Review Gender equality PhosAgro Group’s gender ratio: an overview 20% of women on the Board of Directors (2 out of 10) 22% of women among managers of all levels 21% of women in the Company’s Talent Pool (6 out of 29) 33% of women in the Company’s total headcount > identifying leaders among young professionals; > involving young professionals in tackling relevant operational challenges faced by the Company and the industry as a whole by using real cases; > transferring the experience and knowledge accumulated by the Company’s management and leading employees to young professionals. Share of women taking part in corporate programmes, % High-Potential Graduates Corporate training initiatives 38% 26% 27% 30% 2021 2020 Women taking part in external events Women taking part in corporate events CASE-IN International Engineering Championship. League of Young Professionals. Autumn Cup (October 2021) The championship aims to foster the professional and personal development of young professionals. PhosAgro team сonsists of four people: two men and two women. Best Professional contest: Laboratory- Based Chemical Analysis category 11 female finalists Young Manager – 2021 competition (2021 superfinal) 11 finalists: seven men and four women. The event was won by Olga Ovcharenko, Head of the Chemical Water Treatment and Water Supply Section at the water supply and treatment shop of the Balakovo branch. Goals: > assessing and developing hard and soft skills and leadership of young professionals; Young Manager – 2022 competition Men – 47, women – 12. Results GRI 2-7 Average headcount in 2021, people2 Region Saratov region Murmansk region Moscow region Leningrad region Vologda region Other Total Productivity, t per person1 1,958 1,889 1,874 Men Women Total 1,290.7 6,044.4 218.2 826.9 3,210.0 658.6 626.8 2,059.5 167.3 533.2 2,425.0 260.3 1,917.5 8,103.9 385.5 1,360.1 5,635.0 918.9 12,248.8 6,072.1 18,320.9 2019 2020 2021 Mentor of the Year first corporate contest (superfinal was in December 2021) 10 men, 2 women To enhance women’s social security in accordance with the applicable laws, the Company: > does not use female labour for manual lifting or carrying weights exceeding maximum allowable limits; > releases women from their job duties and transfers them, subject to their medical reports, from production sites to lighter- duty positions; > provides women, at their request, with a parental leave until the child reaches the age of three; > prohibits business trips, overtime or night work, work on weekends and public holidays for pregnant women, except when there are a written consent and no contraindications; > safeguards employment of pregnant women, with their employment contracts terminated only in the event of liquidation of the facility, as well as that of women having children up to three years of age and single mothers having children up to 18 years of age. In 2021, the Company had an average headcount of 18,320.9 people. In 2020, the Company had an average headcount of 17,891.0 people Average headcount2, % Age Under 25 25–34 35–44 44–55 Over 55 Category Blue-collar workers White-collar workers Executives Education3 Higher Basic vocational Secondary Secondary vocational 2020 2021 Men Women Men Women 3.3 20.9 22.8 14.1 3.7 42.6 11.7 10.6 25.4 17.8 10.1 11.5 1.9 10.1 12.4 8.4 2.3 15.0 17.2 3.0 20.3 5.3 3.4 6.3 3.5 19.2 23.2 14.6 4.0 41.9 12.0 10.7 25.4 17.1 10.2 11.8 2.0 9.8 12.5 8.6 2.5 15.2 17.2 3.0 20.3 5.3 3.6 6.2 1 Apatit, including its branches and standalone business units 2 PhosAgro and Apatit, including its branches and standalone business units 3 Based on the classification of education levels. For employees who were recognised as having incomplete higher education in previous periods, the most recent complete education is used. Data for 2020 and 2021 is shown on a comparable basis About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 126 127 Performance Review Headcount by region, employment type and employment contract as at 31 December 2021, people1 The increase in the 2021 headcount was mainly due to the implementation of investment projects and development of production facilities. Gender Full employment Partial employment Permanent contract Fixed-term contract M F Total M F Total M F Total M F Total M F Total M F Total M F Total 3,302 2,719 6,021 1,330 703 2,033 923 606 1,529 6,107 2,293 8,400 211 165 376 2 9 11 11,875 6,495 18,370 1 3 4 2 7 9 0 1 10 11 1 1 0 4 21 25 3,233 2,501 5,734 1,282 649 1,931 830 540 1,370 5,623 2,161 7,784 209 164 373 2 8 10 11,179 6,023 17,202 70 221 291 50 61 111 93 66 159 485 142 627 2 2 4 1 1 700 493 1,193 GRI 2-7 Region Vologda Saratov Leningrad Murmanskaya Moscow OTHER (Stavropol, Krasnodar, Kursk, Tambov, Berezniki) TOTAL GRI 405–2 Due to the nature of our operations, there are generally more male employees than female ones. At PhosAgro Group, we believe that professionalism, sustainably strong performance and adherence to corporate values are the essential prerequisites and the only guarantee of promotion and career advancement. Our regulations on 11.2% Key personnel turnover indicator in 20213 labour relations, remuneration and social benefits cover all of the Group’s employees and underpin the principle of equitable remuneration and performance rewards. We comply with the principle by implementing a remuneration framework that offers equal pay to employees in equivalent positions, regardless of their gender. Key personnel turnover indicators3, people > cooperating with universities. GRI 401–1 2021 11.2% 2020 8% Joiners Leavers Turnover 3,806 3,078 3,123 2,750 2 Senior management include N, N-1 and N-2 managers (CEO, functional manager, head of production site, chief engineer of the company (branch), director of subsidiary (affiliate, managed company), advisor to the CEO). The management levels are determined by the respective order. 3 PhosAgro and Apatit, including its branches and standalone business units. Key personnel turnover indicators by age group, gender and region see on page 342. 4 Based on the generally accepted concept, which describes a person or group of persons living in a certain territory, without taking into account the ethnic and cultural composition, the local comunity means employees whose region of registration coincides with the region of the facility's location. 1 Phosagro and Apatit, including its branches and standalone business units.Average headcount is calculated in accordance with the instruction to fill in Federal Statistical Observation Form No. P-4 Staff and senior management2 hired from the local community3, % GRI 202-2 Region Vologda region Leningrad region Moscow region Murmansk region Saratov region Average by all regions Share of staff hired from the local community4 in total headcount Share of senior management hired from the local community in total headcount 94 82 79 90 97 91 48 22 92 63 44 61 Up to97% of on-site employees are hired locally The Company’s key production sites are located in the Murmansk, Vologda, Leningrad, and Saratov regions. As a major contributor to the local economy and one of the largest taxpayers in these regions, PhosAgro makes a significant social impact across its geography. In developing our production and creating new jobs, we seek to prioritise local residents when filling our vacancies. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Recruitment As part of its comprehensive recruitment approach, PhosAgro Group continuously monitors the labour market in Russia and beyond for skilled staff and efficient managers with experience at leading global companies, always determined to excel in their roles and be one step ahead of the curve. Our talent attraction and recruitment priorities: > cooperating with schools across our regions of operation; > cooperating with technical colleges; In 2020, PhosAgro Group introduced a training system for recruitment professionals to improve the hiring process. The system includes: > a competency model for recruitment professionals; The course will help improve employee competencies, making talent recruitment more effective. In 2021, we launched multi-stage comprehensive training in recruitment for managers. The 80+ enrollees praised the course, which covered such topics as: > the labour market environment and short-term outlook; > what is important for candidates; > key parameters in CV vetting; > the right way to use the CV during an interview; > interview stages; > three-level candidate screening; > the Moment of Truth technique: how to spot a liar; > job tests and the right way to compile one; > gathering references for experienced candidates; > common managerial mistakes in recruitment. The training took place in interactive format and involved homework and a variety of hands-on activities. > performance evaluation of employees responsible for recruitment; > ongoing training and further improvement courses for recruitment professionals. In 2020, we launched a training course comprising four modules: Module 1. Candidate flow generation Module 2. Candidate evaluation methods Module 3. Persuasive arguing skills Module 4. Analytics and additional methods to fill vacancies 128 129 Performance Review Training and evaluation Due to the COVID-19 pandemic and external restrictions in 2020, personnel training, evaluation and development all went online, helping to develop distance learning and evaluation. In 2021, we continued to deploy automated solutions and services for effective personnel evaluation. These tools help quickly identify risk areas in personnel management and fine-tune the cycle of management initiatives for higher operational efficiency. We introduced motivation and commitment assessment, a number of personality questionnaires and tests, and a mechanism to gauge employee satisfaction with the teamwork between functions. This mechanism is designed to provide information that can be used to develop action plans for improving this cross- functional performance within our diversified group of companies. Our focus on training and developing our people also helps us hedge against a potential shortage of talent at all management levels. In 2021, PhosAgro Group made substantial progress in this area by increasing the average training hours per employee by 20% year-on-year. Number of training hours GRI 404–1 Assets Volkhov branch Balakovo branch Kirovsk branch Apatit (Cherepovets) Additional online training for employees Apatit and branches total 95.1Average hours of training per employee in 2021 Our corporate training framework relies on the following principles: > clear alignment with the Group’s strategy; > assessing and prioritising actual training > introducing the most advanced and efficient tools from an economic and methodological perspective; > developing new formats; needs of various staff categories; > using an individual approach to young talent; > planning, coordination, quality and efficiency > proactively identifying and developing new audit; leaders to succeed current ones.. Average per employee in 2020 Average per employee in 2021 Change y-o-y, % 80.8 88.8 55.9 93.4 3.5 79.5 109.4 72.7 61.8 123.9 4.3 95.1 Training hours breakdown by employee gender and category1, % Category blue-collar workers white-collar workers managers total Hours, total Hours per person M F Total 514,799 109,457 109,886 186,735 100,882 30,668 701,534 210,339 140,554 734,142 318,285 1,052,427 M 107.8 72.4 83.5 96.6 F 94.7 53.2 81.9 75.0 36 (17) 11 32 23 20 Total 104.0 61.7 83.2 88.8 Number of training courses per capita2 Assets Volkhov branch Balakovo branch Kirovsk branch Apatit Group total Additional online training Group total including additional online training 2019 552 2,393 2,771 8,769 14,485 n/a 2020 2021 1,609 2,638 5,405 6,518 16,170 21,566 1,678 2,604 8,758 11,728 24,768 16,276 37,736 41,044 In 2021, PhosAgro Group continued to explore new opportunities for organising its personnel training and development processes. We did not stop nurturing talent but rather leveraged the external circumstances related to restrictions on mass events to streamline this training. Most in-person events went online, allowing us to deliver on our training plans in less time and at a lower cost. The Our employees highly appreciate the new opportunities they have for self-development and training using distance learning technologies, which allows them to train and improve their competencies anywhere at any time. The Group’s personnel training budget for 2021 was spent by 80.5%, with all the planned training activities implemented to the required extent Training expenses, RUB ‘0002 Training expenses per employee, RUB ‘0002 236,089 199,684 235,216 21.7 11.8 13.6 2019 2020 2021 2019 2020 2021 1 Apatit, including its branches and standalone business units 2 Apatit, including its branches and standalone business units About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 130 131 Performance Review Retraining and development GRI 404-2 PhosAgro relies on its Talent Pool initiative as a means of identifying talented staff with the potential to expand their roles and step into senior positions, and it provides additional training to help them achieve these goals. The programme includes management training courses on personal and business skills such as decision-making, leadership and delegation, conflict management, project management, communication skills and staff mentoring. Since 2020, PhosAgro Group has been active in implementing a mentoring programme for senior and middle management, with the senior executives (mentors) sharing their expertise and knowledge and taking the Company’s management culture to the next level. This is unique opportunity for those included in the talent pool to learn the skill of management from the best professionals. The programme involves over 30 top managers of PhosAgro Group with more than 120 meetings held between its participants in 2021. All people involved in the programme to develop a pool of senior executive candidates undergo comprehensive training that covers such topics as management (including practical tools), public speaking, and English. Six top management appointments were made from within this pool. Line Manager programme for middle and junior managers As part of this programme, line managers take part in training and development initiatives on the following topics: Project results > personnel management, planning, > analysis and decision-making; goal setting, organisational activities and oversight; > effective communication; > focus on results; > mentoring. Virtual teaching package In 2021, we put a lot of effort into rolling out a virtual teaching package and launching a distance learning system. This was needed because of: > the transition to remote work; > demand for a specific range of professions; > a large number of trainees required; > employees’ aspirations for self-learning and keeping their knowledge up to date 10Сorporate and job-agnostic courses competencies 1. A matrix of 24 corporate, job- agnostic and job-specific competencies developed. 2. Teaching packages developed for 15 corporate and job-agnostic competencies (20% of the theoretical course). 3. Ten distance learning courses developed for corporate and job-agnostic competencies, with five more to follow. 4. A tool to create online courses for nine job-specific competencies under development. A personal account was developed for the system and made available for pilot operation at all sites. It features mandatory multi-sectioned courses, courses to develop additional competencies, process flowcharts, student atlases, etc. We also plan to convert 100% of the theoretical course to distance learning covering four professions under a pilot project, with a view to scaling it up and using the format for the 55 most needed professions. Mentoring In 2021, we continued to implement mentoring in the workplace as part of a dedicated programme. The programme’s key objectives have not changed and are to: > create a system to accumulate Group-wide expertise to help develop the competencies of new hires; > identify, evaluate and develop the initial potential of employees and leverage their professional experience in line with the Group’s requirements; > improve labour productivity; > reduce workplace injuries; > improve professional skills of employees; > reduce the number of errors, defects and other failures at work. To organise the process, we identified a pool of mentors (over 1,500 people so far). The main selection criteria included: When implementing the programme, we developed and approved the mentor’s competence model and evaluated most of the participants using competency-based interviews. That was followed by comprehensive training covering all participants to improve knowledge and personnel development and training approaches. The modular mentoring programme is promoted at every production site of the Group by issuing certificates and badges for programme graduates, placing information about the best mentors on stands at business units, holding awareness meetings with mentors at business units, publishing stories in corporate print outlets, setting up and running Mentoring groups on social media. In 2021, we held the first Mentor of the Year corporate contest. > qualifications and professional experience; The contest aims: > perception by the team; > leadership and training skills; > commitment and motivation to share experience and knowledge. > to develop and promote mentoring and make it more prestigious; > to drum up interest in and encourage mentoring; > to reward and recognise mentors for their significant contributions to fostering young talent. A total of 78 mentors from across the branches applied to represent their business units in the contest, filling out questionnaires that also served as self-presentations. The best mentors from all of the Group’s locations went on to compete in the grand final at its Sosnovka Recreational Compound. The eleven finalists shared their experience, discussed the programme’s implementation, shared their insights on how to address issues and tried to prove their worth and win. The mentoring programme serves to improve the professionalism of our employees and reduce personnel turnover and recruitment costs, while at the same time enhancing employee loyalty and engagement. The programme has played a major role in building the Group’s profile as an attractive employer. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 132 133 Performance Review Personnel Assessment To assess HR management and make efficient decisions in this area, we continuously monitor employee performance metrics and analyse the structure of staff costs, labour productivity, along with the performance of social, training and other programmes. Personnel evaluated in 2021, people Assets Volkhov branch Apatit (Cherepovets) Kirovsk branch Balakovo branch Group total Personnel evaluated in 2021, % GRI 404–3 Assets Volkhov branch Apatit (Cherepovets) Kirov branch Balakovo branch Total for the Group Incentives and rewards Our robust system of rewards is aligned with the Company’s performance and motivates all employees to improve their performance in order to achieve our business goals. It ensures: > decent pay; > implementation of incentive programmes using a transparent system of KPIs to calculate managerial rewards; > implementation of incentive programmes to motivate blue-collar employees to deliver against their targets; > availability of financial and non-financial rewards; > employee coverage by social programmes; Managers White-collar workers Blue-collar workers Men Women Men Women Men Women 34 43 71 29 2 9 5 8 12 31 48 19 177 24 110 8 36 25 9 78 63 14 134 33 244 19 1 79 20 119 Managers White-collar workers Blue-collar workers men 3.28 1.04 1.31 2.37 1.49 women 0.19 0.22 0.09 0.65 0.20 men 1.16 0.75 0.88 1.55 0.93 women 0.77 0.87 0.46 0.74 0.66 men 6.09 0.34 2.47 2.70 2.06 women 1.84 0.02 1.45 1.63 1.00 > availability of benefits for certain employee Average monthly pay, RUB categories; > adherence to global best practices on benefit packages. RUB1.3 bln Social investment 2019 2020 2021 2019 2020 2021 Apatit and its branches Group (excluding foreign traders) Total 138 134 362 118 752 Total 13.3 3.2 6.7 9.6 6.3 87,191 96,401 106,006 83,770 92,442 111,288 Ratios between the standard entry-level wage and the established minimum wage in the Company’s regions of operation1 GRI 202–1 Men 1.06 1.00 2.30 1.33 1.18 Women 1.04 1.00 1.32 1.17 1.18 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Region Saratov region Murmansk region Moscow region Leningrad region Vologda region Social benefits and employee guarantees We also provide social support to our employees, increasing amounts of financial aid, health resort rehabilitation and corporate housing programmes. In 2021, we implemented major projects worth over RUB 300 mln to improve working conditions at our facilities. For example, repairs were carried out on lounge, shower and meeting rooms, staircases, and corridors in administrative and production facilities. Social investment, RUB mln Programme Financial aid to employees Recreation, rehabilitation, health resort treatment and VHI Improvement of working conditions Corporate housing programme Other social benefits and guarantees Corporate and cultural events Support to the trade union (special purpose funding and bonuses) Total 1 PhosAgro and Apatit, including its branches and standalone business units 2020 2021 Change y-o-y, % 48.3 225.3 80.7 67.5 84.6 72.3 151.9 731.3 64.7 359.5 302.1 76.5 227.7 134.2 188.6 1,353.3 34 59 253 13 169 86 24 83 134 135 Performance Review Investing in PhosAgro Group's future talent PhosAgro Classes and PhosAgro Schools Agro Class project We continue to implement the PhosAgro Schools career guidance project. Since 2013, the Company has invested over RUB 600 mln in it, including RUB 400 mln spent on renovations and equipment. In 2022, we plan to ramp up our investment by 2.5 times, with Kirovsk and Apatity schools among the beneficiaries. PhosAgro Schools intend not only to develop educational and research auditoria and labs, but also to implement career guidance projects and give students, teachers and parents a better understanding of PhosAgro Group and its corporate culture. Since 2019, the Group has employed 53 participants of the PhosAgro Classes programme who graduated from universities that had courses relevant to our core activities, including 26 hires in 2021. All of them will pursue engineering careers, having demonstrated a high level of qualification from their first days on the job. We expect to hire around 30 former PhosAgro Classes students in 2022 and over 100 more by 2025. More than 100 PhosAgro Classes 2021 graduates have been admitted to higher educational institutions, with St Petersburg Mining University enjoying the highest popularity among them (18 graduates). Since 2015, over 700 graduates of PhosAgro Classes have been enrolled in higher educational institutions, with technical careers gaining more traction among them every year. In September 2021, 125 new students started their 10th grade programme at PhosAgro Classes, marking the ninth admission round since the project launch. 53 participants of the PhosAgro Classes programme were employed by the Group since 2019 Launched in 2020, the Agro Class project is based on a trilateral agreement signed by PhosAgro, Voronezh Secondary School No. 102 and Voronezh State Agricultural University. The project focuses on facilitating early specialism in school education, career guidance for schoolchildren, their motivation to choose an agricultural profession and obtain the necessary in-depth knowledge in natural and exact sciences. The project targets 10th and 11th graders of Voronezh Secondary School No. 102. In 2020, the programme’s first students were enrolled in the 10th grade. In 2021, 22 Agro |Class students were promoted to the 11th grade and 15 were enrolled in the 10th grade. The Company helped procure RUB 456,000 worth of research equipment in the reporting year. The first Agro Class will graduate in 2022. We plan to monitor whether any of these students are admitted to universities relevant to our core activities and support them during their first year there. Collaboration with universities We maintain strong relationships with 33 industry-specific universities as part of our commitment to improving access to quality education and supporting academic research. As part of its collaboration with universities, PhosAgro Group: > sponsors advanced training for graduates of PhosAgro Classes in the fields relevant to PhosAgro (subject to their commitment to future employment at the Company); > offers scholarships to the most talented students (based on exam results); High-Potential Graduates > invites students to see the industry in practice at one of the Group’s many companies; > offers students a job in one of the Group’s popular specialisations after they graduate; > allocates money for repair and equipment of chemistry laboratories at dedicated universities. We have cooperation agreements and roadmaps with many universities. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information We build upon the foundation laid by PhosAgro Classes and PhosAgro Schools by partnering with universities through our High-Potential Graduates programme as an avenue to better reach university students interested in working at PhosAgro Group. We offer programme recruits a competitive salary, as well as relocation and housing support, and we assign them a mentor upon their arrival at the workplace. The programme’s key tasks are to build a talent pool for key positions within the Group and to identify career paths for young talented professionals to prepare future executives. Number of people recruited to the High-Potential Graduates programme Collaboration with technical colleges Since 2013, as part of its focus on nurturing talent from secondary schools to employment, PhosAgro Group has been partnering with technical colleges across its footprint, including: > Kirovsk branch of Murmansk Arctic State University (Kirovsk, Murmansk region); > Cherepovets College of Chemistry and Technology (Cherepovets, Vologda region). > In 2021, more than 130 students were trained for and received some of the key blue-collar jobs at PhosAgro Group. Our collaboration with technical colleges cover: > setting up testing grounds and labs for students to acquire hands-on experience using real equipment; > internship programmes at PhosAgro’s facilities with highly- qualified mentors; 2021 2020 2019 80 71 63 > undergraduate and graduate thesis research; > sports, educational and research initiatives, competitions, Olympiads. PhosAgro Group also supports a regional Training Centre at the Cherepovets College of Chemistry and Technology. In 2021, PhosAgro Group recruited 80 young specialists through the High- Potential Graduates programme. This brought to 458 the total number of graduates who have joined the Group through this initiative since its inception in 2012. Over 300 of these employees are still with PhosAgro Group today, pursuing careers in such areas as mineralogy, geology, hydraulic engineering, chemistry, thermal energy and electricity production, rail transport, open-pit and underground mining, and mine surveying. Of the programme participants still employed at PhosAgro as at December 2021, over 35% had received promotions and/or had been included in our talent pool, and many of them had successfully completed the projects assigned to them upon recruitment. 136 137 Performance Review Industrial safety 2021 highlights -75% reduction in severe injuries (three cases in 2021 vs twelve in 2020) -37% reduction in road traffic accidents across the Group (19 cases in 2021 against 29 in 2020, none involving injuries or major damage) 0 industrial accidents lost time injury frequency rate (LTIFR) at the Balakovo branch of Apatit 0 fires Global Sustainable Development Goals (SDGs) Strategic goals: to reduce workplace injuries by 10% annually to reduce the number of incidents by 10% annually Strategy PhosAgro Group employs over 18,000 people. The headcount of our contractors working temporarily at our production sites and other facilities reaches many thousands as well. All employees of PhosAgro Group and its contractors need to go back from work to their loved ones in perfect health. This is the underlying principle of all our efforts to ensure safe, healthy and comfortable workplace conditions. PhosAgro Group is consistently improving its safety culture, employee responsibility and awareness, hazard identification procedures and danger prevention measures by putting managers at all levels in charge and studying and applying best health and safety practices. We apply continuous efforts to identify and reduce health and safety threats to PhosAgro Group employees, contractors and visitors to the Company’s sites. Our Strategy to -2025 focuses on fostering a safety culture and adhering to the highest occupational health and safety standards. We have also adopted a Health and Safety Strategy, which defines key focus areas and targeted initiatives to reduce the risks associated with various operations. In 2021, we kept implementing it. Our key aim is to avoid any fatalities and take a leading position among the best health and safety performers. The Company’s relevant goals and objectives, both strategic and day-to- day, are based on huge volumes of data derived from internal and external audits, inspections, incident investigations, employee recommendations and feedback. Management approach Health and safety management system GRI 403-1 We pay special attention to making our health and safety management system compliant with applicable laws and the highest international standards. To this end, we have introduced a multi- tier health and safety management system involving managers of all levels. In 2008, the Group introduced an integrated health and safety management system which has been subject to annual recertification by an independent certification authority. In 2021, Apatit’s Cherepovets site was certified for compliance with ISO 45001:2018. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 138 139 Performance Review Health and safety management system Occupational health services GRI 403-3 Organisational unit Key responsibilities Occupational health services play a key role in ensuring safety at our facilities. and other internal regulations; > preventing workplace injuries, Apart from applicable laws, these activities are regulated by: > sets strategic priorities and develops > reviews executive management's relevant policy; health and safety reporting Their main objectives are: occupational diseases and work- related illnesses and improving workplace conditions; The Board of Directors Environmental, Health and Safety Committee of the Board of Directors and Sustainable Development Committee of the Board of Directors > taking steps to ensure workers’ compliance with health and safety requirements; > monitoring workers’ compliance with OHS laws and regulations, the collective agreement, OHS agreement > advising workers on, and raising their awareness about occupational health and safety; > studying and disseminating best OHS practices and promoting occupational health. > health and safety SOPs at the facility (shop) level; > production SOPs; > worker health and safety instructions; > corporate standards; > process regulations; > accident management action plans, etc. Key OHS focus areas and initiatives in 2021 Key targeted OHS programmes in 2021: Improving contractor safety practices > Internal investigations of every > Improving the safety of working at accident, including micro- and minor injuries, aimed at identifying the root causes. > “Golden Rules” of OHS. > Assessment of potential contractors for compliance with the Group's OHS requirements. > Improving contractor safety practices. > Health and safety training for employees. heights (including a theoretical course, drills at the Vysota (Height) training centre and with mobile simulators). > Gas safety. > Improving transport safety. > Identifying and managing production process risks. > Development of gas and mine rescue, fire-fighting and fire prevention services. > Risk assessment procedure, including > Programme to improve contractor fatal hazard protocols. safety practices. We consider the safety of contractors’ employees temporarily working at our production and other facilities an indispensable component of our OHS strategy. ESG assessment is a key factor in contractor selection ( for more information, see the Supply Chain section on page 118). Management Executive bodies > define and oversee the health and safety policy; > review all on-site incidents involving people and machinery on a weekly basis OHS Department > supervises OHS management functions across the Group’s companies to implement OHS policies and strategies; > cooperates with external consultants to implement the best practices of OHS management; > conducts audits and inspections at > collects data and prepares OHS the Company’s sites reports for the Management Board and the Environmental, Health and Safety Committee; Operations Heads of production sites > oversee OHS policies and strategies at respective production sites; > develop and implement response measures following internal and external audits and accident investigations Operational OHS staff Local OHS management functions > monitor the site’s compliance with OHS regulations and corporate standards; > interact with relevant regulatory authorities on behalf of the site and facilitate inspections; > develop targeted programmes, > conduct internal inspections and conduct training and stage initiatives; audits and present analytical reports to the local management. > LOTO system. > Efforts to strengthen the role of OHS officers. > Public scrutiny system. > OHS incentive system for employees. > OHS communication system. Since 2014, health and safety committees have been functioning at the Group’s companies. They are both an integral part of our OHS management system and a form of employee participation in it. In its work, the Committee relies on the principles of social partnership. In 2021, we revised the regulation on the health and safety committee. Now, it meets on a monthly basis (previously, at least once in three months) to review reports on 14 focus areas: > PPE effectiveness > Education and training > Contractors’ safety > OHS leadership, promotion and communication > Industrial safety > Fire safety > Transport safety > Safety Culture Transformation Project > LOTO system implementation – stage 2 > “Golden Rules” of OHS. > Assessment of workplace conditions, and healthcare > Trade union > Accident/incident investigation > Safety assessments and audits Workers are represented at committee meetings by heads or representatives of local unions. Channels for health and safety feedback: > regular local OHS meetings; > OHS meetings on production sites, in departments and at facilities; > union and union committee meetings (for feedback from OHS officers); > one-on-one meetings, and supervision; > OHS training sessions and briefings; > industrial and fire safety drills; > corporate e-mail; > corporate periodicals; > health and safety committees; > employee surveys and OHS questionnaires. Employees can also use the Public Scrutiny application to submit their health and safety proposals. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 140 141 Performance Review Our OHS agenda is integrated into contractor relationships at all stages: 1 Contractor selection 2 Preparation for work > OHS requirements included in the specifications. > OHS qualification assessment to establish the status of potential contractors: “Qualifies” for contractors with which agreements are permitted; “Does not qualify” for contractors with which agreements are not permitted. > Tender committee meeting (companies with higher qualification scores are prioritised). > The selected company receives a copy of the contractor safety requirements together with a notice of the tender results. > Drafting and negotiating the documents required for work (project implementation and task plans, obtaining permits, etc.). > Providing contractor data and supporting documents, as well as an order/instruction on employee allocation for the contracted activities. > Maintaining digital systems designed to automate data exchange and facilitate cooperation between the contractor and the Group (PhosAgro’s official website and contractor’s account in the OEBS corporate information system). > Introductory briefings and pass issuance. > Examination of the working site to identify key risks, preventive measures and possible impediments to work. > Assessment of the contractor’s readiness to work by its safety officer and representatives of the Group’s business units (including visits to the contractor’s premises). > Audits of compliance with the contract, and organisational and technical documents (project implementation, work and task plans, etc.). > Contract award. > Designating the contractor’s safety officer under each contract. contractor employees under the Vysota (Height) programme with drills at the training site of PhosAgro Education Centre. before work. 3 Contractor supervision > When performing work / providing services at the Company’s premises, the contractor must ensure full-time employment of one or more OHS officers. > OHS compliance audits are carried out: > daily by heads and employees of business units; > by the contractor’s OHS officer during visits to the site; > by OHS Department officers. > Contractor audit reports accompanied by photos and/or charts (if any). with the findings of audits, incident investigations, etc.). > Danger prevention measures before resuming the work, control over addressing the drawbacks identified by audits. > Informing legal staff of all contractor violations with a view to applying penalties (including removal of the employee from the Company’s premises and possible termination of the contract). > Qualification reassessment (including changing the contractor’s OHS status upon complementing the information of the assessment questionnaire > Meetings with contractors’ responsible employees. 4 Preparation for work > Work acceptance. > Contractor performance assessment. The performance assessment results are later used in contractor selection based on the evaluation of their health, safety and environmental management systems and current OHS statistics. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Internal and external industrial safety audits In line with statutory requirements, PhosAgro Group is subject to scheduled external audits by Russian authorities, including the Federal Service for the Supervision of Environment, Technology and Nuclear Management (Rostekhnadzor), State Labour Inspectorate, Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor), the Ministry for Civil Defence, Emergencies and Elimination of Consequences of Natural Disasters (EMERCOM). We may also engage consulting companies, or international associations of which the Group is a member to conduct additional external audits of compliance with international standards, or as part of a special assessment of workplace conditions. In 2021, state supervisory authorities carried out 132 audits at Apatit and its managed companies. The reduction in the number of audits (from 146 in 2020) was due to our COVID-19 response, which saw audits, including scheduled ones, cancelled or postponed. We also run internal audits conducted by our OHS departments and directorate, managers and employees exercising production H&S control. After external and internal audits, the Company issues orders and instructions outlining remedial action plans and establishing the deadlines and responsible persons. Identified breaches are remedied within the Risks and opportunities agreed time limits, and gaps that can be eliminated at no additional cost are addressed immediately. The Company has a procedure for drafting, submitting and reviewing reports on internal and external OHS audits. The results of all internal and external assessments and audits are recorded in the Safety and Instructions (Shift Assignments) management systems for further analysis, gap identification and elimination monitoring. We also submit all relevant reports to state supervisory bodies and statistical agencies in accordance with the Russian laws. The following strategic risks affect our OHS objectives ( for more information, see the Strategic Risks section on page 68): 6 health and safety risk; 20 infectious disease risk. changes. OHS-specific risks are: > occupational risks of the Group’s business units, including occupational disease risks; > safety culture risks, including OHS communications and safety incentives; > risks of OHS-related regulatory The Group develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. 142 143 > Providing opportunities for training > Briefings on labour, road and fire safety, etc. 4 HR risk; Performance Review Results Hazard identification, risk assessment, and incident investigation GRI 403-2 Performance analysis, revision and setting strategic OHS goals Forecasting and assessment of key OHS risks Control, analysis and investigation of accidents Development and implementation of OHS initiatives PhosAgro Group has implemented a system- based approach to hazard identification, risk assessment, and incident investigation as a fully integrated process. This approach seeks to integrate occupational health and safety management into the Group’s overall business processes. We have adopted a system that moves through a “plan–do–check–act” cycle, promoting leadership and best practices through meaningful consultation and participation of employees from all job levels in the Group. We are constantly working to assess and mitigate risks. We perform risk assessment and identify material risks using our proprietary methodology. Following hazard identification and risk assessment, the unit’s OHS officer compiles a List of Occupational Risks, which is then used as a basis for the Group’s List of Material Occupational Risks. Risk assessment takes into account the following aspects: > degree of personnel exposure; > impact on personnel; > frequency of occurrence; > compliance with the applicable regulatory and other OHS requirements. In accordance with an established procedure, information about incidents is provided by eyewitnesses to the supervisors in charge and by those supervisors to the dispatcher of the enterprise. Next, the dispatcher notifies the designated persons using text messages and phone calls. Industrial accidents and incidents are investigated in accordance with legislative requirements and internal procedures to determine the root causes. The Company encourages its staff to disclose information on potential sources of danger to employee health and life. For better OHS efficiency, and to automate and streamline the relevant processes, we have introduced and now use the Safety and Instructions (Shift Assignments) management systems. Both systems include a Risk Management module. The module enables internal check list-based OHS assessment at all units of Apatit. The module’s new underlying principles help enhance production H&S control, while its new functions facilitate operation, monitoring and analysis. PhosAgro Group has a formal procedure for addressing workplace hazards. When a hazard is identified, employees are required to suspend work and report it to their supervisors directly or via the Public Scrutiny mobile app (on an anonymous basis if necessary). The supervisor uses the report to assess the risk and develop a remedial action plan. Public Scrutiny mobile app LOTO system 1 2 3 4 Download the app to a mobile device and create an account. If a hazard is identified, create a report in the app, adding the required data (location, description, suggested remedial actions) and taking a photo of the hazard. Save the report and send it for processing. The app can also be used to suggest improvements. Track the report and its status in the app or management system. Receive feedback (unless the report was anonymous) and a confirmation of hazard elimination, status of the suggested improvement. In 2021, PhosAgro Group successfully continued the implementation of a LOTO system that helps avoid hazards associated with unauthorised use of energy (electricity, gases, liquids, etc.) and ensure the proper shutdown and prevent the restart of dangerous equipment before maintenance and repairs are complete. 253 internal training sessions and two joint training sessions with EMERCOM Emergency response procedures At our sites, we have introduced the following emergency response and prevention measures compliant with the Russian laws: > accident management action plans for all hazardous industrial facilities as defined by the Russian laws; > training sessions, test alerts for different scenarios, and emergency response exercises, with EMERCOM and other services also taking part. In 2021, the Company arranged 253 internal training sessions and two joint training sessions with EMERCOM; > Apatit’s programme for developing gas and mine rescue, fire-fighting and prevention activities for 2019–2022. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 144 145 Performance Review Transport safety In 2021, we carried on with our efforts to ensure safety of passenger and cargo transportation. The systematic efforts made by the OHS Department and transport departments to mitigate traffic accident risks include drafting In 2019–2021, Apatit and its branches managed to reduce the number of traffic accidents by 26% (to 37 from 50). internal regulations to ensure safe operation of motor vehicles, self-propelled machines and rail transport and performing targeted and full-scope inspections of vehicles used by our contractors, subsidiaries. In 2021, for example, we created mobile teams at the Volkhov and Kirovsk branches of Apatit to monitor compliance with the laws and internal regulations on road traffic safety and inspect vehicles on a daily basis (*earlier such teams were formed at Cherepovets-based Apatit and its Balakovo branch). Vehicle safety inspections Indicators Number of inspections Number of violations Violation frequency rate Penalties, RUB '000 Road and rail accidents per year Road accidents Rail accidents 2021 2020 2019 2019 2020 2021 4,120 7,188 13,845 1,259 1,300 2,073 0.31 0.18 0.15 4,559 6,067 8,900 2021 2020 2019 19 29 44 18 16 6 Goals and metrics Senior executives (management of the Company and its business units, as well as their direct subordinates) recognise the importance of OHS and are committed to safety and ready to take necessary managerial decisions. Since 2014, PhosAgro Group has had a system of KPIs that uses uniform standards linking the size of management remuneration to the efficiency of OHS measures, among other things. In particular, the Group established the following KPIs with regard to OHS: > LTIFR covering all staff categories; > number of action items from improvement notices issued by supervisory authorities that have not been implemented on time; > zero accidents; > number of injuries among contractor employees; > zero fatalities among contractor employees. Work-related injuries GRI 403-9 We were deeply saddened by the fatality involving a contractor’s employee which occurred at the production site of Apatit’s Volkhov branch during unscheduled cleaning of process equipment in December 2021. The investigation has been completed. We have thoroughly analysed the circumstances of the fatality and communicated conclusions and recommendations on preventive measures to the management and employees of the facility and contractors. This tragedy clearly shows the importance of further improving contractor safety practices. In 2021, PhosAgro Group continued its efforts to perfect the health and safety management system and made considerable progress in reducing injuries: > severe injuries reduced by 75% – to three cases from twelve; > incidents reduced by 75% – to two cases from eight; > zero accidents; > zero fires; > no traffic accidents with injuries or major damage. At the same time, the reporting year saw an increase in the number of minor workplace injuries. The total number of injuries was 41 (against 32 in 2020), of which 24 (against 22 a year earlier) happened to employees working for contractors, subsidiaries and affiliates. Across the Staff of JSC Apatit and its Kirovsk, Balakovo and Volkhov branches, the overall LTIFR1 was 0.85 (against 0.52 a year earlier), with the Cherepovets site of Apatit slightly improving its result from 0.42 to 0.40, and Balakovo branch achieving a zero LTIFR (against 0.48 in 2020). However, higher LTIFRs at the Kirovsk and Volkhov branches did not allow us to achieve our goal of improving the Group’s overall performance in the reporting year. We see this as a major shortcoming, and our action plans for 2022 reflect the absolute need to eliminate it. We also expect that active measures to improve the labour safety of contractors will soon start producing the intended outcome. Most of the injuries in 2021 were caused by falling while in motion (mainly due to haste, failure to apply the three-point rule, or use of gadgets while moving) or by moving or rotating objects and equipment. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information LTIFR, per 1 mln of hours worked Assets JSC Apatit Kirovsk branch Balakovo branch of Apatit Volkhov branch of Apatit Total: Fatalities as a result of work-related injury, per 1 mln of hours worked Staff Employees Staff of external contractors (including subsidiaries, affiliates and managed companies) LTIFR, per 1 mln of hours worked Staff Employees2 Employees + staff of external contractors (including subsidiaries, affiliates and managed companies)3 2019 2020 2021 0.56 0.75 0.48 0 0.42 0.47 0.48 1.37 0.40 1.18 0.00 2.28 0.59 0.52 0.85 2019 2020 2021 0.16 n/a 0 0 0.08 0.03 2019 2020 2021 0.59 0.52 0.85 n/a 0.69 0.81 1 Lost time injury frequency rate, excluding fatalities. 2 Staff of JSC Apatit and its Kirovsk, Balakovo and Volkhov branches. 3 Staff of JSC Apatit and its Kirovsk, Balakovo and Volkhov branches; staff of external contractors carrying out work for PhosAgro Group companies; staff of internal contractors (subsidiaries, affiliates and managed companies). 146 147 Performance Review High-consequence work-related injuries (excluding fatalities), per 1 mln of hours worked Staff Employees Staff of external contractors (including subsidiaries, affiliates and managed companies) 2019 2020 2021 0.11 0.21 0.05 n/a 0.25 0.07 19.9 mln hours worked by employees Hours worked by employees Employees 2019 2020 2021 18,567,299.61 19,091,953.05 19,893,115.33 Staff of external contractors (including subsidiaries, affiliates and managed companies) n/a 24,359,432.13 29,207,298.96 Work-related injuries in 2019–2021 1 2 0 2 Branches of Apatit Subsidiaries and affiliates External contractors 0 2 0 2 Branches of Apatit Subsidiaries and affiliates External contractors 9 1 0 2 Branches of Apatit Subsidiaries and affiliates1 External contractors JSC Apatit Balakovo branch Volkhov branch Kirovsk branch JSC Apatit Balakovo branch Volkhov branch Kirovsk branch JSC Apatit Balakovo branch Volkhov branch Kirovsk branch Number of injured Minor injuries Serious injuries Fatal injuries Total 3 – 4 9 7 14 – – – 1 1 1 – – – – 0 1 3 0 4 10 8 16 Number of injured 2 – 2 2 7 5 1 1 – 2 6 2 – – – – – 2 3 1 2 4 13 9 Number of injured Minor injuries Serious injuries Fatal injuries Total 4 0 0 5 5 5 0 1 0 1 1 6 0 0 0 3 0 2 4 1 0 9 6 13 1 The above data include the following subsidiaries and affiliates: Tirvas, Gorny Tsekh, PromTransPort, Korporativnoe pitanie, Construction Materials Centre, DROZD-Khibiny, NIUIF, Aeroport, SMART, Teleset, Khibiny Electricity Retail Company, Ecoprom, PhosAgro Education Centre, Mekhanik, PhosAgro Engineering Centre, Trading House PhosAgro. Some of them are non-profit organisations or are not subsidiaries or affiliates of Apatit. Work-related ill health GRI 403-10 In 2021, the Company recorded 30 cases of occupational diseases, with the Kirovsk branch of Apatit accounting for 87% of them. No cases of death as a result of occupational diseases were recorded. Subsequent to the investigation of occupational diseases, the following initiatives were introduced in line with the orders on measures to prevent occupational diseases: Starting from 2021, PhosAgro Group has been analysing cases of occupational diseases and looking for ways to manage the risks of their occurrence. The main causes of occupational diseases are: > hard labour; > vibration (general or local); > noise. > ensuring regular medical examinations in a timely manner; > timely maintenance and inspection of equipment; > control of PPE use at workplaces with higher risk of occupational diseases; > oversight of compliance with the work and rest regime and regulated workplace breaks > compliance with sanitary rules at workplaces with higher risk of occupational diseases; > unscheduled special audits of working conditions at workplaces with higher risk of occupational diseases caused by harmful and/or hazardous production factors. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Work-related ill health Cherepovets site Kirovsk branch Volkhov branch Balakovo branch 2017 2018 2019 2020 2021 0 37 0 0 0 50 0 0 0 27 0 0 0 23 0 0 4 26 0 0 OHS expenses, RUB mln Assets JSC Apatit Kirovsk branch of JSC Apatit Balakovo branch of JSC Apatit Volkhov branch of Apatit Total1 2019 2020 2021 1,094 911 407 189 884 1,593 402 150 1,397 1,770 471 203 2,601 3,030 3,840 The significant increase in OHS expenses at Apatit's Cherepovets site (by 58% as compared to 2020) was due to the purchase of equipment for the LOTO project. The increased costs at the Volkov branch of Apatit (by 35% as compared to 2020) were related to the hire of a considerable number of new employees on the back of new production site launches and an associated increase in PPE, training and medical support costs. 1 The total may differ from the sum of parts due to rounding. 148 149 Minor injuries Serious injuries Fatal injuries Total Actual OHS expenses of PhosAgro Group Performance Review Changes to labour safety promotion programmes > a new incentive programme, The Best Business Unit of the Enterprise, was launched; Worker participation, consultation, and communication on occupational health and safety Revised Golden Rules In 2021, we adopted a revised version of our Occupational Health and Safety Golden Rules. The rules were formulated following the extensive analysis of information about injuries, incidents and accidents occurred at our production facilities and are intended to focus the attention of the Company’s and third-party contractors’ staff on safety issues. The Golden Rules are mandatory for all the employees of PhosAgro Group and its contractors, as well as for the Group’s visitors, and any failure to comply with them is considered a serious violation of labour discipline. The Golden Rules provisions are communicated to the employees at the introductory OHS briefings. Incentive programmes The Group has developed OHS promotion programmes to maintain each PhosAgro Group employee’s interest in ensuring their own safety and the safety of those around them, as well as to encourage the employees to take initiative and implement OHS improvements. In 2021, the employee labour safety promotion regulations were revised as follows: > teams making it to the final of CEO's OHS Achievement Award contest will receive bonuses (RUB 50,000 per team); > frequency of bonus payments under individual incentive programmes was changed from once every six months to once a quarter; > bonuses under the Safety Ideas programme were increased from RUB 10,000 to RUB 30,000. At the moment, the promotion programme includes: > individual incentive programmes (Best OHS Employee and Safety Ideas); > collective incentive programmes (CEO’s OHS Achievement Award, and Best OHS Business Unit). Individual Collective Safety Ideas (Cherepovets site – Kirovsk branch – Balakovo branch – Volkhov branch) Once a quarter RUB 30,000 + RUB 5,000 for every idea implemented Best OHS Business Unit (Cherepovets site – Kirovsk branch – Balakovo branch – Volkhov branch) Once a year (January) RUB 100,000 Best OHS Employee (Cherepovets site – Kirovsk branch – Balakovo branch – Volkhov branch) Once a quarter RUB 35,000 / RUB 10,000 / RUB 5,000 for the 1st, 2nd and 3rd places respectively CEO's OHS Achievement Award (1 winner from the Company) Once a year (February) RUB 125,000 + RUB 50,000 for teams participating in the superfinal Roll-out of the OHS remote monitoring system at the Cherepovets site of Apatit Starting from 2021, Apatit’s Cherepovets site (fluosilicate acid storage facility of the aluminium fluoride shop) participates in Rostechnadzor’s experiment to roll out an OHS remote monitoring system under Russian Government Decree No. 2415 On Experimental Roll-out of the Industrial Safety Remote Monitoring System dated 31" December 2020. The experiment provides for the development of stand-alone remote monitoring technology for hazardous production facilities, and a relevant legal framework. As assumed, the technology will improve the overall reliability and monitoring efficiency of safety systems, and help reduce the associated paperwork and bureaucracy. GRI 403-4 For better OHS communication with employees, we have adopted Regulations on the OHS Communication System. Pursuant to the Regulations, the OHS communication system is divided into internal and external communications, and provides for a feedback procedure. Internal OHS communication is achieved through: > health and safety bulletin boards, posters and other visuals; > health and safety committees; > corporate television (screens), intranet > Group management meetings and conferences to discuss the health and safety performance of our enterprises; regular OHS meetings in departments, on production sites and at facilities; site, e-mail; > corporate periodicals; > preventive practices by OHS officers (including one-on-one meetings, training, mentoring, supervision, etc.). Worker training on occupational health and safety GRI 403-5 In 2021, 7,800 PhosAgro Group employees were trained in occupational health. PhosAgro Group keeps working to improve OHS competencies and knowledge of its staff. Employees of the Group undergo online and in-person training arranged at our PhosAgro Education Centre. > Health and safety promotion at Apatit > Occupational health and safety communication system > Occupational Health and Safety Golden Rules. Whenever required, the courses developed earlier are updated following changes in the law and the Group’s internal regulations. Our e-courses are easy to understand since they are made in the form of illustrated slides with key highlights on them. In particular, we offer an e-course on corporate OHS standards. It is followed by tests to check the knowledge and understanding of the standards and requirements. In 2021, we updated and rolled out the following e-courses: > Working at heights > Road traffic safety system at Apatit and its branches > Contractor safety requirements > LOTO system in maintenance and repairs In 2021, we revised and rolled out three e-courses on the key occupational health and safety regulations: > Investigation and communication of occupational health and safety accidents/incidents > Management of contractors’ organisational and technical documents. PhosAgro Education Centre organises OHS training, including that in basic fire safety and electrical safety, industrial safety pre-certification sessions, drills at the Vysota training centre, and safety training sessions to develop employee hands-on knowledge and skills. All our employees, from managers to blue-collar staff, receive occupational health and safety briefing and training as required by the Russian laws. Furthermore, the employees of the Group and some contractors are offered a number of additional courses. To improve OHS training and remind employees about workplace safety, PhosAgro Education Centre creates animated videos. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 150 151 Performance Review Raising awareness about OHS To keep our employees well-informed about our safety measures, PhosAgro constantly develops and updates OHS check lists, presentations and other visual materials that emphasise the crucial information employees must rely on in various situations, including working on particular assignments, in order to stay safe. In 2021, the Company put in place check lists/ presentation materials covering the following issues: > Rules for working in winter / safe driving and walking in winter > Safe use of stairs / flights of stairs > Safety briefings on operating an angle grinder > Golden Rules > Compliance with epidemiological restrictions, etc. In October 2021, select business units of Apatit launched monthly briefings. The key objectives of such briefings are: > revising industrial dangers/hazards, OHS requirements (as set out in the Company’s internal regulations, OHS guidelines, technical and operational documents), and safe work practices; > fostering leadership skills among mid-level managers; > developing managers’ communication skills. We plan to roll out this initiative to all business units in 2022. Promotion of worker health GRI 403-6, 403-7 PhosAgro Group places a strong emphasis on disease prevention, health improvement, and high-quality affordable healthcare for the employees of all its production sites. The Group takes part in the Health 360 programme run by the Russian Chemists Union to promote annual health self- assessments based on a dedicated questionnaire. In 2021, the Company developed a unified policy to be approved in 2022 to manage health and well-being of its employees envisaging an ambitious plan to carry out dedicated programmes. All our employees benefit from long- term voluntary health insurance (VHI) covering a broad range of risks. The benefits include: > health resort (rehabilitation) treatment at corporate resort centres in our regions of operation and countrywide; > treatment (expensive, dental, medical counselling); > services of outpatient clinics and health posts at the Company’s production facilities. On-site clinics can provide accident and emergency care and specialist advice from a therapist, endocrinologist, neurologist, ophthalmologist, dentist and other doctors. PhosAgro Group’s production sites organise initial and regular check-ups and examinations of staff involved in potentially hazardous and/or dangerous activities. Since 2010, the Company has been running a programme to improve social and working conditions by conducting annual scheduled repairs in all buildings housing social and sanitary facilities, canteens, and workplaces. PhosAgro has invested over RUB 1.8 bln in this programme since 2010. In 2021, the Company made further progress on its Occupational Health and Preventive Healthcare Programme by focusing on making workplaces more comfortable and putting in place break rooms. In doing so, we wanted to create the best conditions for employees to unwind, get away from the stresses of the job, restore productivity, and take part in psychotherapeutic activities involving emotional hygiene. These initiatives enable employees to carry out health self-assessments and get medical assistance as soon as the first negative symptoms develop. Furthermore, our employees will be able to monitor/check their health under various circumstances (emotional and physiological, after work) and report reliable information to their physician. Psychological Relief Room, another project aimed at reducing employee’s emotional stress, kicked off in 2021 at Apatit’s Balakovo branch. Going forward, the project will be extended to other facilities of the Group. In 2021, Balakovo branch saw another pilot project designed to promote telemedicine by providing employees with broad and prompt access to medical services, while also reducing personal contact and the number of visits to medical facilities. The technology has become particularly relevant during the COVID-19 pandemic. Starting from 2022, employees of all PhosAgro Group's facilities have access to Telemed, a telemedicine service offered by SOGAZ. Furthermore, DOCTIS, a project offering online counselling on critical issues, is piloted jointly by DobroService and Doctor Nearby. Dietary/health meals and milk are distributed to employees working in harmful conditions. Food quality is monitored on an ongoing basis under the supervision of a trade union. On top of that, we have a dedicated working group that attends all of Apatit’s sites to assess food quality and canteen conditions on an annual basis. As part of healthcare initiatives, staff canteens provide nutrition according to Diet No. 10 targeting patients with cardiovascular diseases. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 152 153 Performance Review The traffic light food labelling is underway, with the pilot project completed in 2021 at Balakovo branch. Corporate fitness centres at PhosAgro facilities include gyms, fitness halls, air rifle shooting ranges, as well as game halls (volleyball, badminton, basketball, futsal, table tennis, billiards, and darts) and swimming pools. Under the health improvement programme, employees can visit both on-site and off-site fitness centres and pools on beneficial terms. We also make efforts to support our employees’ mental health and well-being by giving them an opportunity to seek help from an on-site psychotherapist or ask for online counselling. Automated registration of calls was introduced, and a free hotline was put in place. The counselling is also available via the corporate e-mail and messengers. The Company produced three videos addressing the issue of stress during the pandemic, which describe the ways by which COVID-19 is transmitted and relevant preventive measures, as well as motivational postcards with information on how to withstand stress. Heads of production participate in trainings to prevent emotional burnout and encourage collaboration within the team. As part of the Week of Mental Health, we took steps to remind our employees of the need to practice emotional hygiene. Key projects in 2021 Apatit's target programme for developing gas and mine rescue, fire-fighting and prevention activities for 2019–2022. Apatit's target programme for developing gas and mine rescue, fire-fighting and prevention activities for 2019–2022 is ongoing at Cherepovets production site. In 2021, similar programmes were completed at Kirovsk, Volkhov, and Balakovo branches. Programme results: > improved training facilities and equipment of gas/mine rescue and fire- fighting units; > re-equipped gas/mine rescue and fire-fighting units, purchased new equipment and machinery. > enhanced quality of hands-on training for young hires; As part of the programme, headcount of the respective business units increased by 92 people to 456 employees. The total amount of funds allocated for the programme stands at approximately RUB 237 mln. > achieved compliance with gas, mine, fire rescue, and personnel training regulations; Purchased: 392 units of gear 579 units of equipment 17 units of machinery Two buildings were renovated to accommodate a gas rescue squad. 396 people participated in personnel training initiatives Transformation of safety culture and OHS management system In 2021, we engaged a third-party consulting agency to complete a comprehensive evaluation of PhosAgro Group's safety culture and OHS management system, and to develop and finalise a response plan designed to improve them. According to the evaluation findings, the Group is at the “Dependent” stage (as per Bradley curve1) and demonstrates a “conscious” approach to hazard identification and risk assessment. To ensure further improvements, in 2021 we launched a three-year project called "Transformation of Safety Culture and OHS Management System". Project goals: > transforming the safety culture and developing OHS leadership; > developing, adapting and ensuring the sustainability of best practices in the field of safety culture and OHS management improvements; > learning how to arrange and carry out works associated with high OHS risks; > ensuring the sustainability of our performance and the relevance of our management system over the next five years; > reaching stage 3.1 as per Bradley curve by 2024 (in 2021, we were at stage 2.2) The project covers key business units of Apatit, its entities under management, subsidiaries and affiliates, and third-party contractors engaged by our production sites. The initial results of the project (improved safety standards for higher-risk works) are expected in the first half of 2022. 2.2 stage as per Bradley curve in 2021 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 1 Reflects evolution of safety culture and OHS system efficiency. The curve assesses the transition from external supervision to the conscious attitude of each employee towards labour safety. There are four safety culture stages: reactive, dependent, independent, and interdependent). 154 155 Performance Review Environmental review UN Global Sustainable Development Goals (SDG) Key objectives Climate 2028: gross emissions: Scope 1 — 4,175.5 kt of СО2 equivalent; Scope 2 — 794.7 kt of СО2 equivalent. 2028: gross emissions: Scope 1 — 109.1 kg/t of СО2 Status in 2021 equivalent Gross emissions: Scope 1 — 4,675.8 kt of СО2 equivalent; Scope 2 — 893.3 kt of СО2 equivalent. Scope 1 emissions — 132.7 kg/t of СО2 equivalent1 Key projects in 2021 > The Climate Agenda project was initiated to streamline the climate action management system and push forward the low-carbon transition plan. > In 2021, we started developing and prioritising technical and technological initiatives to reduce direct GHG emissions with due regard to their economics with the support of a leading global consultancy. > Output of urea with urease inhibitor (a new modern low-carbon fertilizer that helps to retain nitrogen in the soil) expanded. > TGC-1 contracted as a supplier of green energy generated by HPPs. > The actual impact of the carbon border adjustment mechanism on the Company’s operating expenses measured. Energy efficiency Reduction of Scope 2 GHG emissions to 794.7 kt of СО2 equivalent till 2028 due to the enhanced eco- and energy efficiency of the main technological processes. Scope 2 — 893.3 kt of СО2 equivalent. Self-sufficiency in electricity supplies: 40.3% > Launch of the first of two solar power stations with a capacity of 40 kW (Balakovo). > Upgrade of the ceiling lighting system, with LED lights installed (Balakovo). > Upgrade of the lighting system at the granulated sulphur warehouse, LED lamps installed (Volkhov). > Upgrade of the steam pipeline, with thermal insulation system replaced (Volkhov). > Laying a pipeline between с. 911 and 901 to save drinking water (Cherepovets). Waste reduction 2025: 40% of hazard class 1–4 waste recycled and decontaminated. 39.1% of hazard class 1–4 waste recycled and decontaminated2 > Upgrade of production facilities for aluminium fluoride (Cherepovets). > Enhanced ore processing mechanisms (Kirovsk). > Promotion of phosphogypsum as a commercial product for various uses. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Reduction of air emissions 2025: pollutant emissions — 0.80 kg/t 0.801 kg/t3 > Implementation of a Clean Air > Upgrade of gas recovery equipment nationwide initiative (Cherepovets). > Installation and upgrade of gas recovery (Balakovo). > Dust suppression of dusty surfaces equipment (Volkhov). (Kirovsk). Responsible water use 2025: waste water discharge — 4.16 m3/t. Water withdrawal — 5.16 m3/t. Biodiversity Preservation of biodiversity in regions of PhosAgro Group’s operation at a level securing sustainability. 1 The indicator was calculated as the ratio of the gross emissions under GRI 305-1 to the total output of finished and semi-finished products 2 The Group specific disclosure was calculated as ratio of class 1–4 waste recycled and decontaminated to the total volume of class 1–4 waste waste water discharge — 5.42 m3/t4 Water withdrawal — 6.48 m3/t5 > First stage of water use optimisation programme (Cherepovets). > Electricity generation based on the system of chemical water treatment and waste water reuse (Volkhov). > Assessment of risks and opportunities related to water use, setting goals for water withdrawal and waste water discharge, development of a detailed action plan for each facility. > The first reports submitted under the CDP water programme with the C rating obtained. A set of initiatives carried out: a project to support the biodiversity preservation programme in association with an R&D organisation (Cherepovets) and another one dedicated to the programme for environmental monitoring of flora/fauna and soils (Volkhov) > Development of comprehensive programmes to protect biodiversity (Cherepovets and Volkhov). > Release of young fish into water bodies across the Company’s regions of operation. 3 The Group specific disclosure was calculated as ratio of total significant air emissions to the output of products and semi-finished products 4 The Group specific disclosure was calculated as the ratio of the total volume of waste water discharged into surface waters to the total output of finished and semi-finished products 5 The Group specific disclosure was calculated as a ratio of total water withdrawal, including mining and drainage waters to the total output of products and semi-finished products 156 157 Performance Review Strategy At PhosAgro Group, we attach much importance to environmental protection and safety, as well as climate risk management, putting every effort into all of these areas to secure the Company’s sustainable development and well-being of the regions across its geography. Our Strategy to 2025 is designed to observe strict compliance with environmental responsibility standards and practices aimed at minimising the impact of the Company’s operations throughout the whole life cycle of a product, from mine to food. We strive to produce fertilizers in a safe and eco-friendly manner, thus contributing to the sustainable agricultural development worldwide. Committed to continuous improvement, the Company keeps working to lessen the environmental impact of its production operations and across the value chain. The key priorities set out in PhosAgro’s Environmental Policy are careful use of natural resources and reduction of the environmental impact. We had a comprehensive assessment of our operations, determining key focus areas of such impact, both direct and indirect, and weighed it against the UN Sustainable Development Goals (UN SDGs). Based on the assessment results, we mapped out six strategic focus areas of environment protection, including: implementing a range of projects aimed at minimising waste generation and increasing the share of recycled waste. climate; energy efficiency; waste; air; water; biodiversity. In 2020, we worked out the Climate Strategy based on PhosAgro Group’s vision and expertise in GHG emissions management. The document reviews climate risks and opportunities extensively, setting targets for GHG emissions and presenting the low-carbon transition plan. PhosAgro Group acts on the Energy Efficiency Programme designed to ensure compliance with the Climate Strategy and the Energy Efficiency and Energy Saving Policy tightly integrated into the Company’s Strategy to 2025. Strategy to 2025 also seeks to reduce waste generation substantially. Having developed a system for accumulating and analysing data on production and consumption waste from our operations, we are now Implemetation of projects at the Cherepovets site as part of the Clean Air nationwide initiative In the scope of the strategic objectives to reduce air emissions, PhosAgro Group is running a programme to re-equip production facilities and minimise pollutant emissions. In addition, we developed the Water Strategy to minimise our impact on water bodies by means of lean treatment of resources: less water withdrawal and waste water discharge. As part of the Strategy, we assessed water use risks and opportunities, set targets for water withdrawal and waste water discharge and designed a detailed action plan for each facility to achieve the targets. PhosAgro Group sticks to its biodiversity management system comprising the assessment of potential impact, interaction with a wide range of stakeholders, as well as monitoring practices. We believe that our requirements should be uniform both for us and our partners engaged in PhosAgro’s projects. Everything we require of ourselves equally applies to our counterparties and is enshrined in the Code of Conduct for Counterparties. We adopted a unified approach to environmental management that relies on: Company-wide control. Putting Strategy to 2025 into action and compliance with the Group’s Environment Policy are overseen by two committees of the Board of Directors (Environmental, Health and Safety Committee and Sustainable Development Committee) that regularly report on the Company’s progress to the Board of Directors. The Environmental Protection Department exercises executive control over the Group’s environmental activities. A unified management system. Environmental compliance. Our environmental management system relies on strict compliance with applicable laws and regulations. The consistency of PhosAgro Group’s activities aimed at environmental protection and strengthening of the Company’s environmental performance results from continuous development of the environmental management system that was certified according to the ISO 14001 standards in 2021. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Approach to environmental management GRI 3-3 Effective environmental management is key to PhosAgro Group’s long-term sustainability and indicative of the Company’s commitment to run a socially responsible business, balancing its obligations to a wide range of stakeholders. Traditionally, we put a special focus on environmental matters and stand in unconditional support of the vulnerable and rare habitats across our geography, leaving them intact and carefully treating natural systems and resources. Our operations undergo a stringent assessment for compliance with the Environmental Policy (and the Group’s other internal requirements. For PhosAgro’s Environmental Policy, see the Company's website Environmental management Our environmental management system is integrated in PhosAgro Group’s overall management framework and is a key element in our approach to managing environmental responsibility. In 2021, the environmental management system was certified across the Group’s production facilities and was found to be in full compliance with ISO 14001. PhosAgro’s environmental management system embraces all management levels and all stages of the product’s life-cycle, from R&D to manufacturing and finished product application by customers. This approach ensures uniform management requirements across all aspects of the Group’s operations. Apatit's Balakovo branch and Cherepovets site PhosAgro Group successfully passed a certification audit for compliance with the IFA (International Fertilizer Association) Protect and Sustain standard. SGS, the world’s leading inspection, verification, testing and certification company, acted as the auditor. Our facilities have also put in place a procedure to manage internal environmental audits. Every year, they develop internal audit programmes taking into account the environmental significance of the reviewed processes, changes affecting the facility and previous audit outcomes. The audits provide input data for the management to analyse environmental management efficiency. 82 158 159 Performance Review Environmental management framework Management approach Board of Directors Defines the Company’s environmental policy and sets strategic goals to ensure environmental protection and reduce the negative impact of its operations Sustainable Development Committee of Board of Directors > maintains and regularly assesses PhosAgro’s > engages with key stakeholders and fosters internal sustainability regulations and monitors their development, relevance, quality and efficiency, as well as compliance with applicable laws and internal sustainability objectives; healthy and sustainable communities across all regions of operation; > prepares recommendations to the Board of Directors on determining the Company’s strategic sustainability objectives. Environmental, Health and Safety Committee Is responsible for planning, identifying key focus areas for environmental management, tracking progress, and assessing results Apatit’s Department of Ecology and Environmental Management Is responsible for general management, organisation and coordination of efforts to continuously enhance environmental management Environmental Control and Management Servic Fulfils commitments to the ongoing environmental improvement and reduction of the environmental footprint Officers in charge of environmental protection > Production units, which have the greatest environmental impact, have introduced a procedure for identifying and assessing risks and opportunities. Based on the results, we develop measures to bring risks pertaining to significant environmental aspects to an acceptable level > Managers and experts responsible for making operational and other decisions that may adversely affect the environment take a specially designed training course in environmental safety. Our strategic environmental protection goals are set out in the Company’s Strategy to 2025, and their achievement is included in the KPIs of managers and senior executives. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Compliance Environmental compliance is key to running a responsible business. PhosAgro Group’s environmental management practices ensure our compliance with the applicable environmental and nature conservation regulations. To that end, the Group has developed an internal and external control framework, which includes internal audit and external compliance reviews, a reporting system designed in accordance with legislative requirements, and a staff training system. All our facilities that have a negative environmental impact impact are included in dedicated state registers, with relevant categories assigned to them. PhosAgro has all necessary permits in place for each of them. None of PhosAgro’s enterprises uses ozone-depleting substances in the production process. A small amount (not more than 250 kg/year) of carbon tetrachloride (CCl4) is used in laboratory testing. We do not undertake cross-border hazardous waste transportation and our production sites are not situated in protected areas. Hence, there are no significant restrictions on our operations. Spending on environmental protection, RUB mln Item Operating costs of environmental protection (form 4-OS) Investments in fixed assets aimed at environmental protection (form 18-KS) Environmental impact payments Environmental fines and damages Investments in fixed assets aimed at environmental protection (not included in form 18-KS) Total 2019 2020 2021 4,351.9 4,825.3 5,510.3 4,221.9 3,120.4 4,168.8 165.3 174.6 178.4 0.79/2.12 0.02 4,258 317.5 – – 9,059.5 8,120.3 9,860.7 Spending on environmental protection in 2021 increased due to the completion of large-scale environmental projects for which capital expenditures were included in investments in fixed assets. In 2021, PhosAgro paid RUB 7.914 mln under a claim filed by the Baltic-Arctic Interregional Department of the Federal Service for Supervision of Natural Resources to recover outstanding payments for a negative environmental impact for 2017. RUB 9.9 bln Spending on environmental protection Environmental impact payments, RUB mln Atmosphere Aquatic environment Waste Year MPE TPE O-limit SPD TPD O-limit Limit O-limit Total Over- limit Share of overlimit in total payments 2019 2.467 2020 2.901 2021 2.440 0 0 0 0 0 0.018 1.644 3.286 2.165 3.886 0 157.880 0 169.487 0 172.091 0 0 0 165.277 174.553 0 0 0 0 178.416 0.018 0.01 In 2021, over-limit payments accounted for 0.01% of total environmental impact payments. Atmosphere impact over-limit payments are attributable to an external voltage dip at PhosAgro’s nitrogen facility and an emergency at PhosAgro’s phosphate facility in Cherepovets resulting in small ammonia emissions. 160 161 Performance Review Assessment, analysis, and monitoring Continuous improvement is inherent in our environmental management. PhosAgro Group identifies areas for improvement by reviewing its management system using an effective mechanism, which includes external and internal audits of the environmental management system (EMS), activities to monitor and assess the Group's performance, including by a wide range of stakeholders, and the analysis and assessment of the Group’s performance by the Group’s management. These efforts enable the Company to work out preventive and corrective action plans and proposals on how to develop and improve the EMS. Stakeholder engagement is essential for PhosAgro Group’s planning. Public hearings PhosAgro Group public hearings coverage are a legitimate and effective mechanism for establishing dialogue with stakeholders using a discussion platform to express their opinions and make suggestions on the initiatives under consideration. This mechanism has a positive impact on the decision-making process and improves its efficiency. Engaging the general public and a wide array of stakeholders in discussion plays an important role and helps ensure that all points of view are considered. List of public hearings Indicator Number of public hearings 2019 2020 2021 13 13 15 Average number of participants per hearing 102.7 42.9 27.2 When assessing the Company’s performance, much attention is paid to the analysis of international ESG ratings and investor feedback. Risks and opportunities GRI 201-2 Environmental risk management is an integral part of the Company's risk governance framework. The following strategic risks affect our environmental protection objectives ( section on page 68): for more information, see the Strategic Risks The environmental protection risks include non-compliance with the existing regulations on environmental impact and energy efficiency issues. The Company develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. 5 production; 7 environmental; 13 regulatory. Climate Our goals: reduce total GHG emissions (Scope 1, 2, 3) by 14% by 2028 vs 2018; reduce GHG emissions (Scope 1) per tonnes of finished and semi-finished products by 31% by 2028 vs 2018. Gross and specific GHG emissions (Scope 1 and 2) across the Group Indicator 2018 2019 2020 2021 2028 Gross GHG emissions (Scope 1), kt Gross GHG emissions (Scope 2), kt GHG emissions (Scope 1), kt 4855.3 924.1 158.0 4656.3 967.0 143.3 4739.4 978.3 140.1 4675.8 893.3 132.7 4,175.5 794.7 109.1 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information risks, opportunities, governance, performance, and metrics in 2020 (for more information, visit the Company’s website). In June 2021, PhosAgro publicly declared support for the TCFD and its recommendations. The Company’s representatives are members of climate change and sustainable development task and expert groups instituted by government authorities and non-governmental organisations, and are actively engaged in discussions on current global challenges. 2020 TCFD report 2021 highlights Total Scope 1 and 2 emissions — 5,569.1 kt of CO2 eq Scope 1 emissions of СО2 equivalent — 132.7 kg/t1 > The Company increased the output of urea with urease inhibitors, a modern low-carbon fertilizer that helps deliver a material positive environmental effect by reducing emissions of nitrous oxide (N2O), which is a greenhouse gas (in 2021, emissions were reduced by 16.9 kt of CO2 eq.). > In 2021, we used green energy (hydroelectric power produced by small hydroelectric power plants and purchased from TGC-1 as part of our pilot project) to produce some 18% of phosphate rock and nepheline concentrate. > PhosAgro signed a cooperation agreement with the Russian Academy of Sciences and the Vologda region to monitor climate change and minimise the environmental impact. PhosAgro has LEAD status under the UN Global Compact and is a participant in the Climate Ambition initiative. In 2021, the Company partnered with CGI Russia (Climate Governance Initiative), an organisation established by the World Economic Forum to raise awareness and boost efficiency of boards of directors with respect to climate change. The organisation assists in developing climate strategies and implementing them, as well as integrating the climate change agenda into day-to-day and long- term business decisions. In April 2021, PhosAgro published its first TCFD report fully addressing the climate aspects of its operations, strategy, 1 The indicator was calculated as the ratio of the gross emissions under GRI 305-1 to the total output of finished and semi-finished products. 162 163 Performance Review Strategy Climate matters feature prominently in PhosAgro Group’s strategic and investment decisions, as well as in its day-to-day business management. The Company has identified, assessed, and prioritised climate risks, establishing their short, medium and long-term consequences for its production and business processes. We make our strategic plans and day-to-day management decisions with full awareness of the nature and extent of climate impact (both environmental and political) on PhosAgro Group’s business, strategy, and financial planning. The Group develops and takes systemic measures to reduce its carbon footprint and closely interacts with partners across its value chain (suppliers and consumers) and other stakeholders in Russia and worldwide. PhosAgro's Climate Strategy was developed in 2020. It is a comprehensive document setting out the Company's climate policy in the face of growing climate change and uncertainty. In December 2020, the Board of Directors approved the Climate Strategy and endorsed a low-carbon transition plan. PhosAgro's Climate Strategy is based on five main principles. Main principles of the Climate Strategy The Strategy has set the following goals: Risks and opportunities Risks Opportunities R1 — disruptions in production processes and logistics operations due to increasing acute climatic effects and other climate- related factors; R3 — PhosAgro Group’s failure to comply with regulations reducing its negative environmental footprint (following the adoption of the carbon border adjustment mechanism); R2 — flaws in supply chains, construction design, health and safety; negative environmental footprint and reduced flows of ecosystem services; lower resilience of infrastructure and communications due to increasing climatic effects; R4 — deterioration of the Company’s sustainability reputation; R5 — increased costs and losses (as a result of customers’ failure to meet their obligations, rising prices for feedstock, materials and services, higher borrowing rates) and shrinking revenues (as a result of a decline in sales, customers, countries and regions of operation). O1 — boosting PhosAgro Group’s appeal as an environmentally and climatically responsible supplier of products with a positive climate profile; O2 — improved logistics driven by the new export opportunities amid shortened seasonal freeze-up of rivers and lakes due to climate change; O3 — new financial products that open up new sources of cheaper funding (such as green bonds) for companies that embraced environmental and climate sustainability. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information PhosAgro identifies its climate risks and opportunities taking account of climate change. The process is influenced by physical (changes in natural processes or phenomena) and transitional (changes in the policy and regulation with a view to fulfilling low-carbon transition) factors of various nature. The following strategic risks affect our climate objectives ( Strategic Risks section, page 68). for more information, see the 1 strategic planning risk; 13 regulatory risk; 19 climate risk. A detailed description of climate risks and opportunities, as well as corrective measures taken in 2021 remained unchanged and is presented in the TCFD report on the Company’s website. 1 Setting up targets to reduce GHG emissions in line with the Science Based Targets initiative; using climate scenario analysis. 2 Integrating climate risks into the comprehensive risk management framework for investment and day-to-day business activities. 3 Prioritising proper organisation and management on par with technology- related measures with a view to reducing GHG emissions. 4 Identifying not only risks, but also climate-related opportunities and making long-term plans for them. 5 Promoting awareness of the Company's climate initiatives and plans, as well as cooperation in specific areas. > to reduce GHG emissions while increasing output; > to improve energy efficiency and environmental performance of the key production processes; > to reduce energy and carbon intensity per unit of output; > to enter into new emerging markets for green products; > to retain and expand the existing market niches by ensuring PhosAgro Group’s competitive edge in terms of energy and carbon intensity. PhosAgro Group is currently focused on creating particular metrics reflecting the impact of climate action in production and management processes on financial indicators. In 2021, we reassessed the impact of the carbon border adjustment mechanism (CBAM) on PhosAgro’s operating expenses. The mechanism covers Russian industrial products, including, most likely, mineral fertilizers. Given the uncertainties as to the emission scopes the CBAM will apply to, the ability to account for PhosAgro Group's individual emission levels, and the changing carbon dioxide prices, we have determined the estimated ceiling and floor of the mechanism’s impact on the Group's financial performance in 2023–2030. Climate scenario analysis The Company views climate scenario analysis as a tool to make its climate strategy resilient to uncertainties and risks related to climate change. In line with that, we adopted climate scenarios and determined respective scenario parameters that are most probable and significant for PhosAgro Group in the short, medium and long term. PhosAgro Group assessed the impact of climate-related risks and opportunities on its operations under two climate change scenarios: global warming of 2°С and 4°С. The key features of the scenarios are: > 2°С scenario is expected to result in stringent climate policy measures that will increase market volatility (goods, services, finances, etc.). This is projected to bring about low-carbon transition, putting in place mechanisms of a low-carbon economy that will slow down physical climate-related impacts going forward; > 4°С scenario is expected to result in less stringent climate policy measures as compared to the 2°С scenario, triggering faster physical climate- related changes; > it was the 2°С scenario that we prioritised under the climate strategy; > in accordance with criteria of the global Science Based Targets initiative (SBTi) and the pattern of global anthropogenic emissions according to RCP 2.6. PhosAgro identified projected changes in climate risks and opportunities under the adopted climate scenarios based on risks, opportunities, scenario parameters, and time frames. 164 165 Performance Review Highlights and performance related to climate change Processes to identify and assess climate change risks are being integrated throughout the value chain – from design, procurement and apatite-nepheline ore mining to finished product delivery. Climate risk priority map Climate risk management process is baked in the company-wide risk management processes. The assessment is carried out on a quarterly basis and covers short, medium, and long- term horizons. The Group’s climate risk management forms an integral part of its comprehensive risk management system (RMS), and meets the applicable Russian and international standards. Low-carbon transition plan The low-carbon transition plan is based on the specialised research data and aims to support economic development of PhosAgro Group that builds on the priority of keeping GHG emissions to a minimum. It is implemented to ensure that the GHG emission reduction targets are delivered across all scopes. 2021 initiatives Focus areas Introduce HR actions to support the implementation of PhosAgro’s Climate Strategy, including additional training to improve staff competence and raise staff awareness in climate change Climate-related risk and opportunities R1, R2, O1 Description and results Our employees took part in webinars dedicated to sustainable development and corporate climate responsibility. Р2 Р3 Р4 Р1 Р5 Integrate climate change factors (depending on the risks and opportunities they present) into the existing regulations and provisions R1, R2, O1 In 2021, taking into account climate factors, we updated the Company’s Environmental Policy and regulations on the Committees of the Board of Directors. Emerging Manageable Relevant Immaterial Manageable Manageable y t i l a i r e t a M Immaterial Probability Actions to deliver on the Climate Strategy In 2021, the Climate Agenda project was initiated to create the climate action management system and push forward the low-carbon transition plan. The project addresses the following objectives: Immaterial Amenable > establish a process to reduce carbon intensity per unit of output through technical and technological measures aimed at reducing direct GHG emissions; > identify a mechanism for shifting to low- carbon energy sources, purchasing green energy, and supporting projects that focus on GHG capture and carbon offset; > introduce a procedure for cooperation across the value chain involving suppliers, customers, and other stakeholders; > determine the most efficient technologies and methods available to capture GHG. Establish a task group on reduction of GHG emissions and negative effect of climate change on the efficiency of management and production processes R1, R2, R3, O1 Approve a comprehensive plan of interaction with value chain participants R1, R2, R3, R4, R5, O1, O2, O3 By initiating the Climate Agenda project we took forward thoroughly researched and technically feasible proposals to reduce the Company's climate footprint, minimise risks and maximise opportunities related to growing climate change impacts (technology, equipment, energy generation, operations, etc.). A plan of interaction with value chain participants was developed and adopted for implementation (supplier-customer interactions). Harmonise strategic documents (the Company's Development Strategy to 2025), financial planning and other policies and procedures with the low-carbon transition strategy and plan R1, R2, R3, R4, R5, O1, O2, O3 Climate risks and opportunities were assessed and integrated into the Company’s risk management framework, as well as internal regulations. Arrange for identification, assessment, management and monitoring of climate- related risks R1, R2, R3, R4, R5, O1, O2, O3 Climate change risks were integrated into PhosAgro’s risk management framework. Factor in climate change impacts in industrial engineering projects to build new facilities and upgrade transport infrastructure R1, R2 At present, there is no need to proceed with this initiative. Reference documents used in engineering provide a sufficient margin of safety, with no factors driving accelerated climate changes observed. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 166 167 Performance Review Focus areas Support R&D developments related to the use of low-carbon energy and low-carbon production Explore options for GHG capture and select the most efficient ones to be employed by the Company Climate-related risk and opportunities R3, R4, R5, O1 Description and results Plans for 2022 Focus areas Climate-related risk and opportunities Description, current status, and expected outcomes The Company increased the output of urea with urease inhibitors, a modern low-carbon fertilizer. Include climate metrics in incentive schemes of employees R2, O1 Raising the motivation of employees and improving their climate-related performance. High-level approach to designing climate-related KPIs was defined. In 2021, the mining and processing plant of Apatit (its Kirovsk branch) purchased 299 mln kWh under the agreement with TGC-1, with the energy generated by hydroelectric power plants. Therefore, the facility used green energy for 18% of its output. In 2021, the Russian Academy of Sciences, PhosAgro, and the Vologda region signed a cooperation agreement to monitor climate change and minimise the environmental impact. The project envisages efforts in low-carbon transition, including regional monitoring of GHG emissions. Promising methods of farming focused on emissions prevention and carbon sequestration by soils will be developed and implemented in Russia. New forests and fields will be planted and created in the Vologda region to capture and store carbon. Their capacity is estimated at 0.7 mt of CO2 per year. Introduce regular climate-related reporting in accordance with Russian and international standards R3, R4, O1 Since 2020, the Company has been preparing climate reports in line with the TCFD standards and is considering options to have the reports assured starting from 2022. Collaborate with international organisations and join climate initiatives R4, O1 The Company participates in Climate Ambition, an initiative launched under the UN Global Compact; teams up with Climate Governance Initiative Russia; supports the TCFD; and takes part in task and expert groups of government authorities and non- governmental organisations. Report submitted to CDP with the Company's rating upgraded to B. Develop a set of technological measures to mitigate the negative impact of climate change on production processes Develop a set of technological measures to mitigate the negative impact of production processes on climate R1, R2 R1, R2 Developing measures to mitigate climate change risks to the Group's production processes. Developing and prioritising technical and technological initiatives to reduce direct GHG emissions with due regard to their economics. The Company began the work in 2021 as part of the Climate Agenda project with the support of a leading global consultancy. Prepare feasibility studies (business projects) for innovative climate- resilient products based on carbon dioxide utilisation R3, R4, R5, O1 Diversifying production to facilitate expansion into new markets and improve the climate-related performance on the back of new products better meeting consumer needs and having a positive climate profile. Develop production in high-potential areas Reduce the negative impacts of climate change on operational processes such as disruptions in transportation of products and raw materials, increased consumption of production water and waste water, product dusting, failures to use equipment in accordance with operating instructions and failures to create proper workplace conditions. R1, R2, O2 Mitigating climate change risks to the Group's operating processes. Work is in progress to assess the risks and identify actions needed to manage them. Introduce an automated system to collect and process primary climate data R3, R4, O1 Introducing a software solution for automated collection of input data and calculation of GHG emissions (total volumes by site and product). Draft guidelines for assessing products’ carbon footprint were developed and tested using PhosAgro Group’s existing software. In 2022, the Company will refine the guidelines with the support of expert organisations, taking account of current and expected requirements for climate disclosure applicable in Russia and globally, and will look into implementation options. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 168 169 Performance Review 2021 metrics and highlights PhosAgro Group’s climate metrics are aligned with the goals of the Climate Strategy approved by its Board of Directors. PhosAgro Group is working to expand and enhance the quality of climate-related measurements, including both existing and prospective metrics. Most metrics are locked on targets which are aligned with the goals of the Climate Strategy and other commitments of the Company. The metrics are monitored and reported annually to stakeholders. The Company’s primary focus is on GHG emissions in all three Scopes (1 and 2). The Group calculates greenhouse gas emissions in accordance with the international guidelines: This includes end-to-end monitoring of raw data and analysis of supply chain participants’ data (Scopes 2 and 3). > 2006 IPCC Guidelines for National Greenhouse Gas Inventories; > The Greenhouse Gas Protocol: Scope 2 Guidance; > the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition); > ISO 14064-1 – Specification with Guidance at the Organisation Level for Quantification and Reporting of Greenhouse Gas Emissions and Removals. The targets of 14% reduction in emissions by 2028 compared to the 2018 baseline across all scopes are set in line with minimum qualitative and quantitative criteria based on RCP 2.6, a representative concentration pathway for reduction of global anthropogenic emissions, in order to keep global temperature rise below 2°C by 2100. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information List and description of existing metrics introduced in 2021 for the monitoring of performance under the climate strategy Indirect (Scope 2) GHG emissions, kt of СО2 eq.2, GRI 305-2 Metric Unit 2018 2019 2020 2021 Assets Gross global emissions (Scopes 1 and 2) per currency unit of total revenue (GRI 305-4) Gross global emissions (Scopes 1 and 2) per FTE (GRI 305-4) t of CO2 eq. / USD mln1 1,552.3 1,467.1 1,621.6 975.5 t of CO2 eq. / FTE2 331.0 321.6 319.6 304.0 Electricity purchased per unit of finished and semi-finished products ths kWh/t 0.071 0.069 0.068 0.066 Energy efficiency improvement costs Share of feedstock suppliers providing necessary input data on GHG emissions (Scope 3) RUB mln % n/a n/a 82.0 10,500.0 17.4 n/a 4.0 2.7 Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total 2018 2019 2020 2021 713.0 730.9 723.9 622.53 52.2 65.2 93.7 55.4 62.8 51.1 66.0 45.3 80.1 117.9 137.3 145.4 924.1 967.0 978.3 893.3 Direct (Scope 1) GHG emissions, kt of СО2 eq.2 GRI 305-1, 305-4 Assets Gross emissions of the Kirovsk branch, kt GHG emissions of the Kirovsk branch, kg per tonne of finished and semi-finished products Gross emissions of the Balakovo branch, kt GHG emissions of the Balakovo branch, kg per tonne of finished and semi-finished products Gross emissions of the Volkhov branch, kt GHG emissions of the Volkhov branch, kg per tonne of finished and semi-finished products Apatit (Vologda region), gross emissions, kt 2018 2019 2020 2021 583.1 636.3 646.4 665.3 53 54.7 55.5 56.7 157.9 152.6 170.0 178.6 28.4 118.4 181.5 25.7 27.9 29.6 121.3 111.4 125.5 197.4 179.5 109.2 3995.8 3,746.1 3,811.5 3,706.4 GHG emissions of Apatit (Vologda region), kg per tonne of finished and semi-finished products 295.2 261.9 246.4 227.1 Total gross emissions, kt Total GHG emissions, kg per tonne of finished and semi-finished products 4,855.3 4,656.3 4,739.4 4,675.8 158.0 143.3 140.1 132.7 In 2021, we changed our approach to calculating Scope 2 GHG emissions. Previously, we relied on emission factors from a study by the European Bank for Reconstruction and Development. In 2021, however, we started using factors defined by the International Energy Agency4, which enabled more accurate calculation of Scope 2 GHG emissions. We have chosen 2018 as the base year for calculations because it was the Company’s first reporting year and given the need to set GHG reduction targets for all three scopes based on the available emission data. In 2021, Scope 1 GHG emissions declined by 179.5 kt, or 3.7%. GRI 305-5 Energy indirect (Scope 2) emissions also dropped by 30.8 kt, or 3.3%, vs 2018 thanks to the green electricity procured by the Kirovsk branch of Apatit, as well as energy efficiency initiatives. 1 The indicator was calculated as the ratio of the sum of Scope 1 and 2 gross emissions under GRI 305-1 and GRI 305-2 respectively to PhosAgro Group revenue according to consolidated financial statements converted into USD mln at quarterly average (2018 and 2019) and monthly average (2020 and 2021) USD/RUB exchange rates 2 The indicator was calculated as the ratio of the sum of Scope 1 and 2 gross emissions under GRI 305-1 and GRI 305-2 respectively to the total number of full-time employees under GRI 2-7 3 Including electricity from renewable energy sources 4 Following the comparability principle, figures for 2018-2020 in the above table Indirect (Scope 2) GHG emissions, kt of СО2 eq.2 have been recalculated using the factors defined by the International Energy Agency 170 171 Performance Review 2021 saw PhosAgro’s self-sufficiency in electricity increase by 0.5%, to 40.3% Energy efficiency 2021 highlights GRI 302-4 In 2021, the consumption of all types of energy resources per tonne of finished and semi-finished products decreased by 3.43%, to 5.06 GJ This significant reduction was underpinned by the implementation of PhosAgro Group’s Strategy to 2025 and its Energy Efficiency Programme. In 2022, the share of in-house electricity generation is expected to grow further due to the planned launch of a 34 MW heat and power plant at the Volkhov branch. The first complex comprising two 40 kW solar power stations has been commissioned in Balakovo. In 2022, we plan to test solar power generation at Apatit’s chemical facility in Balakovo to assess the viability of a further scale-up. Energy Efficiency Programme PhosAgro’s energy efficiency strategy In 2021, PhosAgro continued to follow the Climate Strategy approved by the Board of Directors, the Energy Efficiency and Energy Saving Policy, and the Energy Efficiency Programme, which are tightly integrated into the Company’s Strategy to 2025 adopted in 2020. The Energy Efficiency and Energy Saving Policy sets out the following key goals: > continuously improving energy efficiency; > using energy resources in a sustainable and efficient manner; > streamlining the energy management process for all types of operating activities. The Company pays particular attention to energy efficiency risks: 1 Having a sufficient and reliable energy supply is a material aspect and major concern for us. We thoroughly explore all opportunities to transition to renewable energy. In 2021, we purchased electricity generated by hydroelectric power plants that had no large reservoirs and therefore no methane emissions, and implemented a solar power plant project in Balakovo. 2 Risk of Scope 2 GHG emissions being included in the carbon border adjustment mechanism in 2023–2026. PhosAgro Group’s energy efficiency directly affects Scope 2 GHG emissions, which poses a potential risk under the European Green Deal. 3 Market availability of electricity from renewable energy sources. PhosAgro Group continuously monitors the market to ensure a sufficient supply of electricity from renewable energy sources. The initiatives set out in the Energy Efficiency Programme are aimed to improve the energy efficiency of each production site and achieve strategic objectives in the following focus areas: > in-house power generation through utilisation of sulphuric acid production steam; > increase of the share of renewable energy sources; > introduction of technologies aimed at loss reduction and energy savings (e.g. LED lighting, frequency converters, less heat energy losses). In 2021, we implemented comprehensive energy efficiency projects at all of our facilities. 2021 initiatives Project Description and results Balakovo: installation of a solar power plant at Apatit’s Balakovo branch with a total capacity of 40 kW (Phase 2) Phase 2 of the project to replace third-party electricity supply with an alternative energy source (solar power plant) Balakovo: upgrade of the ceiling lighting system at the wet-process phosphoric acid production unit, with LED lights installed Volkhov: upgrade of the lighting system at the granulated sulphur warehouse, LED lights installation Volkhov: upgrade of the 4.0 MPa steam pipeline, with thermal insulation system replaced Cherepovets: installation of a new pipeline between c. 911 and 901 to save drinking water Energy savings due to replacing mercury lamps with LED ones Energy savings due to replacing mercury lamps with LED ones Heat savings Reduced water consumption, cost cutting Plans for 2022 Project Description and results Volkhov: Construction of a heat and power plant with a 34 MW high- efficiency electric turbine and a water treatment system at Apatit’s Volkhov branch Project seeks to cut electricity costs through the utilisation of process steam from the new sulphuric acid plant at the heat and power plant of Apatit’s Volkhov branch, with the objective of providing all of the facility’s consumers with steam. This will also significantly reduce the need to purchase electricity from third-party power suppliers Kirovsk: upgrade of the lighting system to LED at ANBP-2 of Apatit’s Kirovsk branch A 0.5 MW reduction in annual energy consumption, lower maintenance and repair costs Kirovsk: upgrade of drum drier sections, with thermal insulation replaced Reduced heat losses and per unit consumption of fuel oil in concentrate drying Balakovo: installation of frequency converters on chemically treated water pumps Reduced electricity consumption Cherepovets: use of circulating water to cool feed water pumps Reduced river water consumption with no discharges into the sewer system Expenditures, RUB mln 5.0 (Phases 1 and 2 in total) 2.0 1.5 4.5 0.5 Completion Q3 Q4 Q2 Q3 Q4 Expenditures, RUB mln Completion 2,941.0 Q1 42.0 7.0 2.0 3.5 Q3 Q4 Q3 Q3 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 172 173 Performance Review 2021 metrics and highlights 1 In 2021, the Company’s production facilities were 40.3% self-sufficient in terms of electricity needs, which is 0.5% more than in 2020. In absolute terms, the electricity generated by PhosAgro went up by 50 mln kWh year-on-year, driven by the commissioning of new power generating facilities at the Volkhov branch and optimisation of the heat and power plant at the Balakovo branch. Total electricity consumption grew by 79 mln kWh year-on-year, which is attributable to the commissioning of new facilities at the Volkhov branch and Cherepovets site. In 2022, the share of electricity generated in- house is likely to increase due to the planned launch of the 34 MW heat and power plant at the Volkhov branch. 2 In 2021, PhosAgro Group commissioned a complex comprising two solar power plants at the Izumrud corporate health resort in Balakovo. The first 25 kW solar power plant was installed on the roof of the resort’s medical treatment building in December 2020, with more solar panels installed on Izumrud’s hotel building during Phase 2 in summer 2021. Now, the total capacity is 40 kW. In 2022, we also plan to test the technology at Apatit’s chemical facility in Balakovo to assess the viability of a further scale-up. The energy efficiency metrics are used to monitor the Company’s progress towards its energy efficiency improvement target and set forth in PhosAgro’s Energy Efficiency Programme and Action Plan, which helps keep track of electricity generation and consumption, energy intensity, etc. 79 mln kWh Total electricity consumption growth in 2021 PhosAgro Group’s energy consumption GRI 302-1, 302-3 Indicator Electricity Purchased electricity, including Purchased from renewable sources Electricity purchased per unit of finished and semi-finished products Unit mln kWh mln kWh ths kWh / t Total for production facilities 2019 2020 2021 2,234.57 2,300.77 2,326.63 0.00 0.069 0.00 299.00 0.068 0.066 Produced (non-renewables) mln kWh 1,500.11 1,519.00 1,572.62 Electricity generated (from non-renewables), per unit of finished and semi-finished products ths kWh / t 0.046 0.045 0.045 Internal use mln kWh 3,734.68 3,819.77 3,899.26 Internal use per unit of finished and semi-finished products ths kWh / t 0.115 0.113 0.111 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Calculation methodologies The energy efficiency metrics are based on PhosAgro Group’s raw data and calculated in accordance with the approved statistical methodologies. The Group prepares its energy efficiency reports in accordance with GRI 3 Material Topics, GRI 302-1 Energy Consumption within the Organisation, GRI 302-3 Energy Intensity, and GRI 302-4 Reduction of Energy Consumption. PhosAgro’s energy consumption in 2021, GJ1 GRI 302-1 Indicator Internal use of electricity Internal use of heat energy 13,142,052 13,444,848 13,751,172 14,037,317 45,919,608 47,440,086 49,114,094 51,444,258 Internal consumption of natural gas 104,031,330 105,465,360 105,295,320 103,592,667 Internal consumption of LNG Internal consumption of fuel oil Internal consumption of heating oil Internal consumption of diesel fuel Total internal consumption Total energy consumption per unit of finished and semi- finished products, GJ/t 147,130.24 170,533.12 123,672.96 160,565 6,525,771 6,797,256 6,473,253 6,671,968 30,686 30,945 31,922 34,294 1,839,667 1,827,282 2,419,273 2,539,731 171,636,246 175,176,312 177,208,709 178,480,800 5.58 5.39 5.24 5.06 1 To convert energy consumption values into joules, the coefficients on the Berkeley Institute (USA) website were used Heat energy Produced by TPPs Produced by boilers (steam) Purchased (in hot water) Supplied (in hot water) Exhaust steam Internal consumption Internal consumption per unit of finished and semi-finished products Natural gas Production purposes LNG Consumption Fuel oil Consumption Heating oil Consumption Diesel fuel Consumption ths Gcal ths Gcal ths Gcal ths Gcal ths Gcal ths Gcal Gcal/t 2,742.82 2,435.44 2,234.32 1,121.49 1,030.34 1,237.13 406.60 155.46 374.54 200.78 438.22 161.23 7,215.41 8,091.16 8,538.81 11,330.87 11,730.70 12,287.25 0.349 0.347 0.348 mln m3 ths m3 / t 2,704.24 2,699.88 2,656.22 0.083 0.079 0.075 t t t t 3,134.80 2,273.40 2,951.57 154,132.80 146,785.80 151,291.8 703.70 725.50 779.40 40,071.98 53,054.25 55,695.87 174 175 2018 2019 2020 2021 Consumption per unit of finished and semi-finished products Performance Review Waste 2021 highlights Waste management strategy Share of recycled and decontaminated hazard class 1–4 waste, %1 GRI 306-2 2021 2020 2019 39.1 37.6 34.5 PhosAgro’s waste management is monitored on a regular basis and discussed by the Sustainable Development Committee andthe Environmental, Health and Safety Committee of the Board of Directors, with their findings communicated directly to the Board Having developed a system for accumulating and analysing data on production and consumption waste from our operations, we are now implementing a range of projects aimed at minimising waste generation and increasing the share of recycled waste. The management system covers: > an inventory of resources that are used to manufacture products and become waste afterwards; > data on the amount of waste generated from our own operations, including future waste in the form of products or their part provided to customers; > waste characteristics; PhosAgro’s Development Strategy to 2025 stipulates an increase in the share of recycled hazard class 1–4 waste to 40% > properties that limit or prevent the recycling (recovery) of the material or product or limit its useful life; > continuous monitoring of known and potential negative characteristics of certain materials after they become waste; measures to remove environmental and health hazards; > identification of activities and processes that generate significant amounts of waste. 2021 metrics and highlights Waste generation by hazard class, t GRI 306–3 Waste hazard class I II III IV V Total 2019 7.64 10.76 1,938.63 196,725.82 2020 6.48 7.61 1,070.64 180,439.54 2021 5.63 3.86 1,698.52 192,698.46 112,458,560.40 132,492,537.10 132,227,604.7 112,657,243.30 132,674,061.36 132,422,011.17 PhosAgro Group’s waste by type and disposal method, t GRI 306–4, 306-5 Disposal method 2019 2020 2021 Reused PhosAgro Group’s waste 22,868,749.9 21,877,032.2 19,203,406.7 Hazardous waste Non-hazardous waste Landfilled Hazardous waste Non-hazardous waste Landfilled at the Company's waste disposal facilities 63,533.6 51,632.9 74,266.9 22,805,216.3 21,825,399.3 19,129,139.8 89,794,090.4 110,771,883.1 112,386,304.7 122,765.0 109,096.9 113,463.9 89,671,325.4 110,662,786.2 112,272,840.8 89,671,202.4 110,662,686.7 112,272,350.3 Third-party recycled Hazardous waste Non-hazardous waste Third-party decontaminated Hazardous waste Non-hazardous waste Third-party processed Hazardous waste Non-hazardous waste Third-party landfilled Hazardous waste Non-hazardous waste 37,696.5 5,149.7 32,546.8 289.8 289.8 0 2,906.1 5.9 2,900.1 7,471.8 7,348.8 123.0 52,377.7 16,402.3 35,975.4 262.4 262.4 0 1,590.9 6.4 1,584.5 4,599.9 4,500.2 99.7 72,278 1,432.2 70,845.8 332.5 332.5 0 2,756.7 2.2 2,754.5 6,076.8 5,586.3 490.5 1 The Group specific disclosure was calculated as ratio of class 1–4 waste recycled and decontaminated to the total volume of class 1–4 waste according Note: hazardous means hazard class 1–4 waste; non-hazardous means hazard class 5 waste About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 176 177 Performance Review Reused Landfilled at waste disposal facilities Disposal of beneficiation waste and overburden at Apatit’s Kirovsk branch, t Waste 2019 Apatite-nepheline ore processing waste (tailings) Rocks and overburden mix 2020 Apatite-nepheline ore processing waste (tailings) Rocks and overburden mix 2021 Apatite-nepheline ore processing waste (tailings) Rocks and overburden mix 12,500,635.0 7,156,342.0 12,015,508.0 6,625,514.0 12,535,665.7 3,360,586.0 Waste generation, tonne per tonne of finished and semi-finished products Asset Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total 2019 8.7 0.9 0.002 0.4 3.5 Waste generation (hazard class 1–4), kg per tonne of finished and semi-finished products Asset Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total 2019 0.6 19.5 2.2 5.2 6.1 2020 10.4 0.9 0.031 0.4 3.9 2020 0.3 16.7 27.0 3.8 5.4 12,560,903.0 69,073,827.0 12,947,652.0 89,454,699.0 13,483,863.3 90,494,219.0 2021 10.3 0.9 0.003 0.4 3.8 2021 0.5 21.3 0.6 3.6 5.5 Key initiatives in 2021 Upgrade of production facilities for aluminium fluoride Promotion of phosphogypsum The Cherepovets site upgraded its aluminium fluoride plant, with its capacity expanded from 57 to 73 ktpa. This helped increase the use of fluorine extracted as part of phosphate rock processing, reduce lime consumption in treating effluents, and decrease the generation and disposal of fluorine-containing waste. Investments in the project totalled RUB 3.5 bln. Enhanced ore processing mechanisms PhosAgro and the Kola Science Centre of the Russian Academy of Sciences have signed a long-term cooperation agreement to implement a project for improving the processing of hard-to-process apatite-nepheline ores. The agreement prioritises joint projects focused on novel production technologies. As part of the initiative, KSC RAS researchers will study key industrial ores, identify optimal mineral liberation and selective flotation modes, conduct technological and mineralogical 3D mapping of ore reserves, as well as select and develop efficient and eco- friendly flotation reagents. Our project to promote phosphogypsum as a chemical ameliorant agent in agriculture first saw light in February 2021. Its initial aim was to reduce the accumulation of phosphogypsum at dump sites by promoting its use on saline soils as a conditioner and source of sulphur, phosphorus and micronutrients. To this end, we established a preparation and loading hub for bulk phosphogypsum and remodelled a railway to ensure its supply to farmers in the Moscow, Tambov, Voronezh, Lipetsk, Penza, Ulyanovsk, Samara, Saratov, and Volgograd regions. In 2019, we sold a total of 4.1 kt of phosphogypsum. In 2020, this number stood at before surging to 8.709 kt 42 kt in 2021 (of which 41 kt was sold for agricultural purposes). In November 2021, we made a decision to merge all our phosphogypsum-related operations into one project. Project goals by 2026: > improving sales volumes; > reducing phosphogypsum accumulations at dump sites; > increasing phosphogypsum recycling rates. A data analysis and target market review has identified eight focus areas for selling phosogypsum. Currently, we can cover two of them: > agriculture; > road construction. In 2022, PhosAgro Group seeks to sell around 75–80 kt and 10 kt of phosphogypsum to customers in agriculture and road construction respectively, while also expanding its customer pool. This year, we look to achieve progress in the remaining six areas as well, with R&D, state environmental expert evaluation, pilot tests, and the drafting of a relevant internal standard, specifications, and regulatory and technical documents all planned for 2022. We expect that these steps will enable us to significantly expand our phosphogypsum market reach. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 178 179 Performance Review Air 2021 highlights RUB >1 bn invested under the Clean Air initiative in 2021 Pollutant emissions, kg per tonne of finished and semi-finished products Strategy 23.7% reduction in emission intensity (to 0.8kg/t of products and semi-finished products) by 2025 vs 2018. PhosAgro Group takes part in the government’s Clean Air initiative, which aims to drastically reduce air pollution in major industrial cities across Russia. In the reporting year, more than RUB 1 bln was invested in Clean Air capital projects of Apatit’s Cherepovets site. 1.048 0.888 0.892 0.801 2018 2019 2020 2021 NOx, SOx and other significant air emissions, t 2021 metrics and highlights PhosAgro Group has developed and now maintains an emissions management process that includes assessment of planned activities, discussion of relevant matters with a wide range of stakeholders, as well as monitoring and disclosing pollutant emissions. To effectively reduce its environmental impact, the Group is running a programme to re-equip production facilities and minimise pollutant emissions. by 11% emissions reduced in 2021 vs 2017 at Apatit•s Cherepovets site as part of the Clean Air initiative GRI 305-7 Pollutants Total Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Solids Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total 2019 2020 2021 9,221.1 7,002.4 1,162.5 11,488.9 28,874.9 10,003.4 10,120.3 7,286.2 1,068.9 11,830.7 30,189.0 6,876.0 1,165.8 10,065.3 28,227.4 3,734.1 5,148.6 4,939.8 410.8 610.4 1,356.3 6,111.7 429.5 461.7 917.3 6,957.1 425.8 528.6 1,055.1 6,949.3 NOx, SOx and other significant air emissions, t Pollutants Sulphur dioxide Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Carbon monoxide Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Nitrogen oxides (NOx as NO2) Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Hydrocarbons (w/o VOCs) Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Volatile organic compounds (VOCs) Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Other gaseous and liquid pollutants Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total 2019 2020 2021 3,458.3 4,293.7 161.7 3,297.4 3,104.0 4,432.1 180.8 3,367.2 3,308.2 3,975.4 206.7 3,029.2 11,211.1 11,084.0 10,519.5 477.6 782.8 73.3 1,476.3 2,810.0 711.1 870.0 92.4 1,573.5 3,247.0 777.0 933.1 115.3 1,274.8 3,100.2 1,534.8 1,012.2 1,067.8 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 724.1 149.8 2,309.2 4,717.9 0 2.6 0.0 37.8 40.4 16.1 340.0 3.4 2.8 362.3 0.1 448.5 163.9 3,009.1 3,621.5 746.9 283.1 2,540.0 4,582.1 8.0 2.6 0.0 38.1 48.7 19.0 340.1 4.6 2.2 760.7 207.6 2,401.8 4,437.9 8.0 2.6 0.0 38.1 48.7 19.0 340.7 5.0 2.0 365.8 366.7 0.5 465.1 46.2 3,392.6 3,904.3 0.5 437.7 102.6 2,264.3 2,805.1 180 181 Performance Review Initiatives implemented in 2020–2021 to achieve the target Apatit’s Cherepovets site implemented two key projects as part of the Clean Air initiative: > an upgrade of technological system No. 3, block 2.70 at the mineral fertilizer production site (CAPEX: RUB 777 mln); > a technical upgrade of the low-capacity absorption unit, blocks 7.00 and 7.01 at the mineral fertilizer production site (CAPEX: RUB 311 mln). The total environmental effect of these measures in 2021 was a 464,9 t reduction in pollutant emissions The following projects were completed at the Volkhov branch in 20211: > Installation of equipment to treat waste gases as part of the effort to modernise the wet-process phosphoric acid production unit and increase its capacity to 450 ktpa. Expected environmental effect: maintaining per unit emission of gaseous fluorides on par with the best available techniques included in the best available technique guidelines (ITS2- 2015) (0.31 kg/t). > Installation of equipment to treat waste gases as part of the construction of an 800 ktpa sulphuric acid facility. Expected effect: ensuring and maintaining SO2 emissions on par with the best available techniques (1.292 kg/t). > A technical upgrade at the mineral fertilizer production site (with an upgrade of gas recovery equipment). Expected effect: ensuring and maintaining emissions of hydrogen chloride and fluorine compounds (expressed as fluorine) on par with the best available techniques (0.183 kg/t). Balakovo and Kirovsk branches > In 2001, the first stage of a project to re-equip technological systems No. 5 and 6 of the phosphate fertilizers unit was completed at the Balakovo branch. The second stage will be implemented in 2022 and will include an upgrade of gas recovery equipment, with the environmental effect to be determined upon completion. > Apatit’s Kirovsk branch implements annual dust suppression of dusty surfaces. In 2021, dusty surfaces of tailing dumps were chemically stabilised at ANBP-2 (631 ha in the beach area, 47.23 ha on the dam slopes, and 67 ha in the roads) and ANBP-3 (346 ha in the beach area and 51 ha in the roads). ANBP-2 saw hydroseeding of dam slopes (15 ha), while the slopes at ANBP-3 were biologically stabilised in manual mode (5.3 ha). Water 2021 highlights Water use, m3 per tonne of finished and semi-finished products 2021 2020 2019 2018 Water withdrawal1 Waste water discharge2 Strategy 303-1 Reduction in specific effluents by 2025 by 27% from the 2018 level to 4.4 m3/t of finished and semi-finished products Water is an important resource for PhosAgro Group. There is no shortage of water sources in the regions where our facilities are based. According to the Water Risk Atlas and Water Risk Filter, all PhosAgro production sites are located in areas with low or moderate fresh water scarcity. However, access to clean water is a major issue facing the world. 2021 2020 2019 2018 6.48 6.70 5.85 7.29 5.42 5.57 4.68 6.04 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information The main risks related to water consumption are water quality deterioration in water bodies across PhosAgro Group’s footprint and the Group’s non-compliance with statutory requirements for limiting negative impact on water bodies. PhosAgro Group has implemented closed-loop water recycling systems at its sites in Volkhov and Balakovo to reuse water in production processes. Going forward, we plan to improve waste water management by focusing on maximum reuse of water through closed-loop water recycling systems and better treatment of effluents discharged into water bodies in addition to ongoing monitoring of water bodies in the regions of operation. The regulatory risks include tightened waste water quality requirements, as well as restrictions on the amount of water consumed and discharged into water bodies and centralised waste water systems. To mitigate these risks, in 2020 we adopted and started implementing a water strategy that sought to reduce water consumption and discharge and improve waste water quality. The strategy is implemented at all PhosAgro Group’s sites, and we regularly analyse these measures to determine whether they are sufficient and effective enough to achieve our targets. To identify the impact of the Company's operations on water bodies, we monitor these bodies in accordance with adopted programmes by engaging our own certified laboratory and external certified laboratories. Water Strategy for 2020–2025 1 The environmental effect of the projects completed at Apatit’s Volkhov branch will be determined based on the 2022 results. 1 The Group specific disclosure was calculated as a ratio of total water withdrawal, including mining and drainage waters to the total output of products and semi-finished products 2 The Group specific disclosure was calculated as the ratio of the total volume of waste water discharged into surface waters to the total output of finished and semi-finished products 182 183 Performance Review 2021 metrics and highlights Total water withdrawal by source, ths m3 GRI 303–3 Indicators Surface water Total water withdrawal from surface sources, including: process water drinking water (internal use) drinking water (for supplies to third parties) mining water drainage water rainwater Ground water 2019 2020 2021 145,179 58,315 885 466 79,933 3,577 2,002 170,862 59,081 995 399 104,475 3,312 2,600 175,943 60,747 1,193 557 107,633 3,171 2,642 Water withdrawal from ground-water sources: 2,842 2,832 2,912 Water received from third-party suppliers Total water received from third-party suppliers, including: process water received from suppliers water from municipal supply (internal use) water from municipal supply (for supplies to third parties) waste water from other waste-water discharge systems 42,082 27,546 8,560 34 5,943 52,898 28,443 8,138 17 16,300 49,600 28,373 9,126 47 12,054 Total 190,104 226,592 228,456 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Measurement of total and specific water withdrawal including and excluding mining and drainage waters Indicators UoM 2019 2020 2021 Total water withdrawal, including mining and drainage waters Specific water withdrawal, including mining and drainage waters1 Total water withdrawal from surface sources, excluding mining and drainage waters Specific water withdrawal from surface sources, excluding mining and drainage waters2 ths m3 m3/t ths m3 m3/t 190,104 226,592 228,456 5.85 6.70 6.48 106,593 118,805 117,651 3.28 3.51 3.34 Total water discharge by source, ths m3 GRI 303–4 Indicators Water discharge into surface waters Total water discharge into surface waters, including: mining water drainage water waste water from other waste-water discharge systems Supplies to third parties Total water supplies to third parties waste water to the public water discharge system (after use) waste water to the public water discharge system (unused) water supplies to third parties from surface sources water supplies to third parties from municipal sources Total Treated effluents (reused in the production cycle) Asset Total, mln m3 Share of reused water, % Total water withdrawal by source, ths m3 2019 2020 2021 152,223 188,455 187,012 79,933 104,475 107,634 3,577 3,312 3,170 5,494 15,901 11,673 4,118 3,170 448 466 34 4,147 3,314 399 417 17 4,222 3,238 381 557 47 156,341 192,602 191,234 2019 231.5 87 2020 240.4 88 2021 244.7 87 1 The Group specific disclosure was calculated as a ratio of total water withdrawal, including mining and drainage waters to the total output of products and semi-finished products 2 The Group specific disclosure was calculated as a ratio of total water withdrawal from surface soruces, excluding mining and drainage waters, to the total output of products and semi-finished products 184 185 Performance Review Water consumption, ths m3 GRI 303–5 Total water withdrawal (all sources) Total water discharge (all sources) Water consumption 2021 2020 2019 2021 2020 2019 228,456 226,592 190,104 2021 2020 2019 191,234 192,602 156,341 37,222 33,990 33,763 Water discharge in 2021, mln m3 GRI 303–4 Indicator Waste water into surface water bodies Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Discharged without treatment (% of total water discharge) Kirovsk branch Balakovo branch Volkhov branch Apatit (Vologda region) Total Waste water discharge at Apatit Waste water discharge Kirovsk branch Discharge 1. Discharge from ANBP-3 Discharge 2. Discharge from ANBP-2 Discharge 3. Rainwater at ANBP-2 2020 2021 actual 173.9 0 0 13.1 187.0 0 0 0 0 0 173.7 0 0 14.8 188.5 0 0 0 0 0 Receiving water body Zhemchuzhnaya River Belaya River Belaya River Discharge 4. Mining waters of the combined Kirovsky, Central and Rasvumchorrsky mines Lake Bolshoi Vudyavr Discharge 6. Waters of the wells installed at the Vostochny mine to reduce groundwater level Vuonnemyok River Discharge 5. Mining waters of the Koashva and Njorkpahk open pits Discharge 8. Mining waters of the Koashva and Njorkpahk open pits Discharge 9. Waters of water-lowering wells of the Vostochny mine Apatit (Vologda region) Effluents from the phosphate facility Effluents from the nitrogen facility Lake Kitchepahk Lake Kitchepahk Vuonnemyok River Rybinsk Reservoir Rybinsk Reservoir Key initiatives implemented under the Water Strategy in 2020–2021 to achieve the target At the Cherepovets facility, the Company completed the first stage of the water use optimisation programme as part of its production upgrade. > Unit for pumping treated effluent back to the phosphate facility reconstructed, helping reduce hourly discharge into the water body by 250 m3 in 2021 (with no discharge in the dry June–July period). > Technical audit of the water use at the phosphate facility carried out. > Technical audit of the water use at the nitrogen facility carried out. > Measures taken to inspect the chemical water treatment facilities of blocks 303 and 308 and convert them to alternative sources of water supply, including treated waste water. The Volkhov branch reduced its waste water discharge by 135 m3/hour by implementing the Electricity Generation Based on the System of Chemical Water Treatment (Heat and Power Plant) project. The project involved launching a system to reuse waste water produced by the thermal power plant and perform chemical water treatment of concentrates. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 186 187 Performance Review Biodiversity 2021 highlights 2021 metrics and highlights GRI 304-2 Investment in biodiversity protection programmes, RUB mln > 1,000,000 juvenile fish were released into water bodies across PhosAgro Group’s footprint in 2019–2021. 2019 2020 2021 5.3 4.1 11.4 Strategy GRI 304-3 Comprehensive biodiversity protection programmes In 2021, the Group completed the development of comprehensive biodiversity protection programmes for the Cherepovets and Volkhov facilities. 1,031,440 juvenile fish and fry were released into water bodies across the Company’s footprint in 2019–2021. Nakhimovskoye Lake, Leningrad region Zander 28,715 Umba River, Murmansk region Atlantic salmon 5,000 Kirovsk In 2021, PhosAgro Group’s Environmental Policy was amended to focus on the Company's obligations to preserve biodiversity, natural landscapes and habitats across its footprint and prevent its projects from causing any harm to the same. Before building any new production facilities or renovating existing ones, PhosAgro Group conducts an environmental impact assessment (EIA) based on the results of engineering and environmental surveys. Assessment of the local flora, fauna and landscapes, as well as research, analysis and consideration of public attitudes towards biodiversity protection are integral to our EIA procedures. For a number of years, PhosAgro Group has been working to preserve biodiversity and replenish biological resources. In 2020, PhosAgro started developing comprehensive biodiversity protection programmes in partnership with research institutions. The effort is aimed at assessing and restoring environmental conditions across the Company’s footprint and establishing its priorities in protecting biodiversity based on indicator species monitoring. In 2021, the Company completed the development of comprehensive biodiversity protection programmes for the Cherepovets and Volkhov facilities. Together with Cherepovets State University, we conducted biological diversity monitoring in the sanitary protection zone of the Cherepovets branch, covering 18 km along eight routes and studying over 400 species of vascular plants, mosses, lichens and fungi, as well as more than 250 animal species. The research confirmed that all species were in a satisfactory condition and did not require special restoration or conservation measures. We also selected indicator species and developed a plan for annual biodiversity monitoring. At the Volkhov branch, biodiversity monitoring in its sanitary protection zone was conducted jointly with FRECOM, an independent Russian company providing environmental protection services. Following large- scale wildlife, soil and geobotanical studies, an environmental flora, fauna and soil monitoring programme was developed for the Volkhov branch’s industrial facilities. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Volkhov Cherepovets Balakovo Sheksna Reservoir, Vologda region Sterlet 3,500 Sukhona River, Vologda region Sterlet 22,933 Juvenile fish and larvae released into water bodies across PhosAgro Group’s footprint, units Apatit JSC Biodiversity Preservation Program GRI 304-3 Water body Gorky Reservoir Volgograd Reservoir, Saratov region Sukhona River, Vologda region Umba River, Murmansk region Rybinsk Reservoir, Vologda region Saratov Reservoir, Saratov region Lake Ladoga, Leningrad region Nakhimovskoye Lake, Leningrad region Sheksna Reservoir, Vologda region Total 2019 6,500 55,000 84,353 2,130 – – – – – 2020 6,500 45,911 – 4,000 654,400 26,393 2,116 – – 2021 – 55,838 22,933 5,000 – 28,151 – 28,715 3,500 147,983 739,320 144,137 Volgograd Reservoir, Saratov region Sterlet 5,601 Volgograd Reservoir, Saratov region Silver carp 25,237 Volgograd Reservoir, Saratov region Carp 25,000 Saratov Reservoir, Saratov region Carp 28,151 188 189 Performance Review Contributing to local communities PhosAgro Group makes an extensive and diverse contribution to the social and economic development of local communities in the regions of our presence: we pay taxes to local budgets, create stable and well-paid jobs for local people, and place regular orders with local businesses. As a responsible long- term partner, we also allocate significant funds to support local communities, contribute to charitable causes and develop infrastructure. Stable and successful home regions are a key driver of PhosAgro Group's sustainable development. UN Global Sustainable Development Goals (SDG) 2021 highlights +17% increase in social investments (RUB 3.8 bln vs RUB 3.2 bln in 2020) +21% increase in local procurement programmes (RUB 28.3 bln vs RUB 23.5 bln in 2020) +702 new full-time jobs Strategy Management approach Our strategy is focused on long-term social and economic development programmes in the regions, cities, towns and rural communities in which our key production units operate. We implement regional development projects with a special focus on: > Respecting the interests of, and open communication with, all stakeholders > Investments in social and infrastructure development initiatives > Charitable support of local population and communities > Improving educational potential of the regions and promoting sports and a healthy lifestyle We place a high priority on historical continuity: as a successful enduring partner of local communities in which we operate, we are committed to promoting their sustainable development. While hinging upon long-established social responsibility practices implemented by our production facilities, this partnership is perfectly tailored to meet today’s challenges and relevant stakeholder expectations. We have identified the following social investment priorities: > education; > sports and a healthy lifestyle; > social; > medicine and healthcare. In the end, every programme or initiative involving social investments should be aligned with the goals and objectives set in PhosAgro's Development Strategy until 2025 and contribute to its successful implementation. Our social investment programmes are based on public benefit priorities and opportunities to partner with regional and local government authorities, local communities, non-governmental organisations, including non-profit organisations established by the Company to this end, educational institutions and other stakeholders. lifestyles, and the cultural potential, as well as supporting veterans, the disabled and other underprivileged social groups; > establishment of subsidiaries to promote non-core activities that have economic influence on the sustainable development of local communities; We implement our social investment strategy through promoting efficient and successful cooperation with a broad range of partners in line with the highest international sustainable development standards. The key principle underlying our interaction with local communities is a meaningful dialogue through a variety of communication channels, from public hearings and the involvement of Company representatives in the work of local legislative bodies and government authorities to setting up community liaison offices and other venues for meetings with people. Our key interaction mechanisms include the following: > social and economic partnership agreements with governments of the Russian regions in which the Company operates, namely, the Murmansk, Leningrad, Vologda, and Saratov regions, as well as with the municipal authorities of five cities in the above regions; > agreements on the support and development of educational institutions; > support and establishment of non-commercial organisations to establish platforms for promoting civil initiatives of the local population, education, healthy > grant projects; > support of volunteering by the Group’s employees; > targeted assistance to people who apply directly to PhosAgro Group. Key policies and regulations GRI 203-2 All of the Group’s social investment projects and initiatives are implemented in accordance with the requirements of the Federal Law on Charitable Activities and Charitable Organisations, the Federal Law on Advertising, and other applicable laws and regulations. To ensure transparent and effective corporate governance, the Group has developed a framework of internal regulations governing charity and sponsorship, including: > Code of Ethics; > Charity policy; > Rules for the Provision of Charitable Assistance by Apatit; > Regulations on Business Unit Interaction and Document Execution for the Provision of Charitable Assistance by Apatit and the companies managed by Apatit; > Regulations on Managing Community Social Projects. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 190 191 Performance Review Organisational unit Key responsibilities Corporate level Management Board Chief Executive Officer Deputy CEO Office for External Communications > Annual budget consideration > Collection and analysis and approval > Decisions on participation in social and charitable initiatives of feedback and other relevant information on ongoing projects > Organisation of public hearings and sociological surveys > General coordination > Information support of activities related to charity, sponsorship and community investment Subsidiary level Government Relations Department > Regular communication with Information Policy Department business partners > Preparation of proposals on the basis of feedback Human Resources and Social Policy Department Social Development Departments Commission for Social Issues and Charity > Project and programme > Initial consideration of new management applications Risks and opportunities The following strategic risks affect our social investment objectives ( for more information, see the Strategic Risks section on page 68): 3 Social risk 4 HR risk 15 Reputational risk Social investment specific risks are listed below: 1 Insufficient regulation of social investment management processes 2 Performance evaluation of social investment programmes 3 Evolution of public priorities of social and economic development The Company develops corrective measures as necessary and unlocks opportunities to mitigate those risks. Below you can find more information about what we do on this front. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Results GRI 413-1 We focus heavily on evaluating the results of our social investment programmes. Assessment criteria include both objective data and stakeholder views, thus ensuring comprehensive performance assessment and monitoring the evolution of public priorities related to social and economic development. Social spending by area, % 6 11.2 1.3 0.4 12.4 12.5 56.1 Infrastructure facilities, including renovation of educational institutions Educational projects (net of renovation of educational institutions) Sports Churches Nation-wide projects Organisations of veterans and disabled people Membership fees In 2021, we partnered with the Donors Forum to run an exhaustive stakeholder survey and evaluate charity programmes and projects implemented in the regions of our footprint and supported by PhosAgro Group. The survey helped us to determine our strengths in social and charitable activities and identify the areas for further development and improvement. The successful matching of our projects and initiatives with UN SDGs was praised as a good practice. Importantly, PhosAgro Group engaged a broad range of partners in the implementation of its projects to ensure a greater social effect. At the same time, the survey showed that we had to give more focus to and consolidate information on volunteering. It has significantly developed in recent years, but the potential of this component is far from being exhausted. We also found that many of our projects would benefit from greater visibility to be achieved with more active information support. In the reporting year, we once again organised a large-scale presentation of our social projects in all cities of our presence (previously, similar presentations were held in 2016 and 2018). Such presentations have the format of charitable festivals attended by all charity recipients, with relevant project reports. We invite all city population as well as representatives of government and local authorities, public organisations and associations to attend such events. In 2021, charity festivals celebrated the 20th anniversary of PhosAgro. Our festival of social projects in Volkhov was named On the Wave of Good and the festival in Kirovsk – 20 Years of Success and Victories. Amid the challenging epidemiological situation, Doing Good Together, a festival in Cherepovets, was partially held online and broadcast in social media. In Balakovo, we used several interactive platforms to hold an online event, Good Deeds Chain. The festival closed on 13 November with a live celebration that was broadcast on both social media and TV. Following the events, we closely analyse feedback from festival participants and visitors, including social media publications, written questionnaires and statements. The results of our analysis will be used to improve the existing initiatives and implement new ones. We also collect a considerable amount of data used for analysing the effectiveness of our social investment programmes from the ongoing stakeholder feedback, including corporate newspapers, TV broadcasts, and social networking. In addition, PhosAgro Group delegates its employees to represent its interests in regional and local legislative bodies. Our work in these bodies provides us with information on the most urgent issues faced by local authorities. We include them in the agenda of joint working groups which discuss the methods and mechanisms for addressing the issues. Charitable giving and community and infrastructure investment, RUB mln GRI 203-1 2019 2020 2021 Contributions to charities, NGOs and research institutions (not related to the organisation’s commercial research and development) 597,739 624,391 755,526 Funds allocated to support community infrastructure such as recreational facilities Direct spending on social programmes, including arts and educational activities 1,414,990 1,885,719 2,052,495 840,276 720,438 939,227 Total 2,853,005 3,230,548 3,747,248 192 193 Performance Review Key social investment programmes Our Favourite Cities Our main social programme aimed at improving the quality of urban environment and promoting sustainable development of PhosAgro Group. Murmansk region As part of Our Favourite Cities programme, we participate in a public-private partnership to develop a tourist cluster in the Murmansk region, including the construction of Bolshoi Vudyavr Ski Resort, Tirvas Health Resort and Tirvas Ski Arena, the upgrade of Severnaya Hotel, the construction of unique Plateau Panoramic Restaurant, winner of the international Ski Business Awards 2021, and the ongoing renovation of the Khibiny Airport. All of these sports facilities were certified by the International Ski Federation (FIS). Over the last five years, the number of people visiting the ski resort has grown 3.5 times to record 245,000 visitors in the 2020–2021 season. In future, Bolshoi Vudyavr is expected to function as an all-year resort. PhosAgro Group has invested RUB 5 bln in the development of the ski resort and the sports and tourist cluster in the Khibiny Mountains. In 2021, we also provided assistance to local authorities in the development of an eco- park around Lastochka Equestrian Club, the construction of a new bridge over the Belaya River and the Art Skating Rink in Apatity, as well as the restoration of war graves. Saratov region In 2021, we doubled our investments in Our Favourite Cities programme. In the reporting year, we assisted local authorities in the construction and renovation of nine public gardens and parks, a monument to Fighters for Soviet Power, and the municipal beach and embankment, as well as with the installation of streetlights in a pedestrian zone leading towards the housing development area in Microdistrict 21. Land plots in this area have been allocated to large families. We financed the renovation of the City Exhibition Hall, district police station No. 2, two playgrounds (Erudites and Athletes) in Teremok Kindergarten No. 70, including the construction of a playing area and a sports zone with a race track, as well as the technological upgrade of power supply mains in the building of the Saratov Regional Centre for Psychological, Pedagogical, Medical and Social Support of Children and purchase of a car for the Centre. We also purchased an intercity bus for Art-Allez, a circus arts centre in the town of Marks. The Company financed the construction of sports grounds and playgrounds in Novaya Yelyuzan and Naumovka villages and the renovation of sports facilities for the Mayanga village school. Vologda region In 2021, we allocated over RUB 300 mln for social investment programmes in the region, up 1.5 times year-on-year. The most important (in terms of social effect) project implemented by PhosAgro Group jointly with government authorities and other companies in Cherepovets is the construction of the Northern Ring Road (estimated total project cost is RUB 500 mln). In 2021, the Group invested RUB 168 mln in the project. We also funded the construction of a playground and a public garden for family recreation and installed security cameras in the Northern Microdistrict inhabited mainly by the Company’s employees. The Company completed the renovation of a pottery for the Future Exists Charity. The pottery offers classes to more than 40 children and teenagers with autistic disorders and other health problems. We launched the construction of a dormitory for students of a technical college in the same district. The Company assisted with the renovation of five municipal schools, including two PhosAgro Schools, and five kindergartens (including the region’s kindergartens). Number of visitors to Bolshoi Vudyavr Ski Resort, 2018–2021 winter seasons, ths. 2017–2018 2018–2019 2019–2020 2020–2021 178 184 103 245.8 We also completed a renovation project for a sports school in Kaduisky municipal district. Funding was allocated for renovation of a municipal school in Nelazskoye and a municipal kindergarten in Shulma in the Cherepovetsky district. Leningrad region In January 2021, we inaugurated Dvugorye, a modern ski sports centre, and built two multi-use sports areas for football, volleyball and basketball in the 40th Anniversary of VLKSM and Yuri Gagarin parks. PhosAgro Group supported the initiative of Governor Alexander Drozdenko and undertook to restore Vladimir Pochivalov public garden, which used to be a favourite recreational area for local people. The renovation project is to be completed in 2022. We also assisted the municipal authorities in the installation of busts to commemorate the honorary citizens of the town – General Ivan Fedyuninsky, who commanded troops during World War II, and the People’s Artist and Hero of Labour Vasily Lanovoy. We financed a dewatering project and the cleaning of drain canals to prevent the flooding of private garden plots. Previously, some 120–130 out of 450 garden plots in the area had been flooded every spring. PhosAgro Group employees joined the Garden of Memory international campaign and planted 50 thujas and spruces along the plant fence facing Kirovsky Prospekt on 7 May 2021 to commemorate those killed in World War II. In the same district, we also financed: > financed the upgrade of a car park,repairs of sidewalks along the parkinglots, and the installation of "smart"bus stops with a special information system to keep passengers informed about bus arrival time; > renovationof two schools, including PhosAgro School No. 1; > preparations for the construction of a 305-apartment project for PhosAgro Group employees. Education Healthy, educated and professionally trained population is a critical driver of any region’s social and investment attractiveness. its goal, it is necessary to provide accessible sports infrastructure and engage as many children as possible in regular exercise. This task can be addressed through an effective combination of high-quality education and physical training to facilitate moral and ethical development and promote health of the younger generation. The key areas include organisation of athletic events, spiritual and patriotic training, environmental projects, artistic festivals, and mass cultural events. An important feature of the project is continuous health monitoring based on the Health Navigator methodology. It helps teachers and parents to adapt educational activities as closely as possible to specific requirements of a child’s body. In 2021, the project covered more than 6,500 children (including 150 physically disabled and handicapped ones) who practised 20 athletic disciplines in 60 sports classes. In addition, DROZD has established 11 non-sports clubs: Media School, patriotic and preliminary military training, ecology, robotics, fitness, popular science, etc. Overall, more than 50,000 participants took part in DROZD events in 2021. As part of the project, we opened a new youth cultural centre in Kirovsk and held a sports and education festival Since its establishment, PhosAgro Group has been deeply involved in the development of human potential in the regions of its operation, in particular, by helping to address the outflow of young people from small towns. The Educated and Healthy Children of Russia (DROZD) programme is PhosAgro’s key social initiative. In 2001, this was solely an extra-curricular and educational project, but later it was expanded to a programme that covered PhosAgro Classes and PhosAgro Schools alike. DROZD (Educated and Healthy Children of Russia) Project operators are independent non- profit organisations established to provide extra-curricular education and upbringing for children. The Educated and Healthy Children of Russia (DROZD) project initiated by Andrey Guryev, the founder of PhosAgro and a member of its Board of Directors, was launched in 2001. Our project is aimed at promoting a healthy lifestyle among the young. To achieve About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 194 195 Performance Review to celebrate the 20th anniversary of PhosAgro, as well as the 20th anniversary of DROZD Khibiny Autonomous Non-profit Organisation. PhosAgro Group invested over RUB 93 mln in the renovation and equipment of the centre. In April 2021, a working group of the Sports Industry Commission of the Russian Union of Industrialists and Entrepreneurs (RSPP) presented its reports on the social and sports activity in the regions of our operation. Its members praised the unique experience of the Group and proposed recommending its proven solutions to other RSPP member companies. College Classes The project is implemented at Educational Centre No. 29, Cherepovets College of Chemistry and Technology, Ivanovo State University of Chemistry and Technology and the Kirovsk branch of Murmansk Arctic State University. Its objective is to improve the quality of preliminary professional education by providing students with opportunities for continuous learning For more information, see the People ( Development section on page 136). PhosAgro Schools The project covers six schools, close to 6,000 pupils from grades 1 to 11, and nearly 400 teachers and schoolmasters across the Group’s footprint. In addition to financial support and assistance in building renovations provided to the schools, the project offers advanced programmes in natural sciences, economics, and management. In 2010–2021, PhosAgro Group invested more than RUB 248 mln in the programme (net of school renovation projects). see the People Development section on page 136. For more information, Career guidance and exhibition centres project Career guidance and exhibition centres are located in all of the four key cities across our footprint and represent a combination of a modern multimedia corporate museum and an innovative and interactive popular science centre offering advanced programmes in chemistry, biology, and related professional training. The centres are equipped with virtual and physical science laboratories designed to prepare a variety of chemical compounds, multimedia microscopes with 50,000x power, and an interactive garden where students can watch educational videos on cell life and structure and do lab experiments. There are panoramic cinemas offering career guidance and educational films, sensor tables with geographic data on minerals and countries around the world, and sensor booths to test professional aptitude. The centres are very popular with schoolchildren for being the place to learn about different professions and a major attraction for teenagers combining cultural entertainment and intellectual pastime. According to a survey, 95% of teachers have noted that pupils, who took part in the centre’s projects, displayed a growing interest in blue- collar and white-collar jobs and relevant school disciplines, such as chemistry, biology, geology, and geography. Survey findings also indicate that 98% of children have expressed a wish to revisit the centres after their participation in a career guidance project. RUB > 248 mln PhosAgro Group invested in the programme PhosAgro Schools Universities Our key partners among Russian universities include St Petersburg Mining University, Murmansk Arctic State University, Ivanovo State University of Chemistry and Technology, Kuban State Agrarian University, and Timiryazev Academy. Every year, the Company offers on-the-job training and pre-graduation internship to over 600 students from these and other universities ( for more information, see the People Development section on page 136). Spiritual Revival The main objective of the programme is to preserve and promote orthodox values, spiritual ideas, and respect for our legacy and motherland. The programme has been underway since 2001 and is implemented in cooperation with the Russian Orthodox Church, regional and local government authorities, non-governmental organisations and civil society. We assist in rebuilding and aiding 26 churches, including the Holy Trinity Church in Balakovo, a unique heritage- listed building designed by Fyodor Schechtel, a prominent architect of the early 20th century. In June 2021, a service was held in the church to consecrate the restored mosaic of the Saviour. Unique pieces of high- quality smalt for the icon had been imported from Italy. The Company also contributes to reviving a pre-revolutionary tradition of building on-site churches. The congregation of on-site churches at PhosAgro enterprises has exceeded 20,000 people and continues to grow. In October 2021, the Andreyevsky Spiritual and Educational Centre opened at the Volkhov branch of Apatit. In 2021, a cross and a foundation stone for a chapel of the Archangel Michael were consecrated at the Cherepovets site of Apatit. The new church is expected to be consecrated in the autumn of 2022, on Michaelmas. The Company organises biannual pilgrimage tours to the relics of St Nicolas the Wonderworker for Russian believers. PhosAgro Group supports the project to develop the Russian Orthodox Centre in Singapore. The Group also provides assistance to the exarchate of the Russian Orthodox Church in Southeast Asia. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Connecting Generations The programme combines the assistance to 24 non-governmental organisations of labour and war veterans as well as charitable organisations with the promotion of volunteer initiatives across the Company’s footprint. In particular, PhosAgro Group supports 10 non-governmental organisations in Cherepovets, including In the Name of Good charity, the Cultural and Recreational Centre in the Northern Microdistrict, and veteran organisations. In Kirovsk and Apatity, we provide support to six non-governmental organisations, including a volunteer centre for the Group’s pensioners. We also support four local non- governmental organisations in Balakovo and Volkhov, respectively. Volunteer initiatives We see the engagement of PhosAgro Group employees in public benefit and charitable programmes as an important means of improving social environment in the regions of our operation and are committed to focus on the promotion of volunteering. In the Murmansk region, the Group supported the creation of three volunteer centres (in Kukisvumchorr, Koashva, and Kirovsk) to work with pensioners, veterans and residents of remote communities. Any local resident can come to the centres to benefit from the services of a mini-laundry and a sewing workshop, use modern fitness equipment for exercise, play billiards, do some needlework or just enjoy a cup of tea with their good friends. Volunteers working at the centres send birthday greetings to pensioners, take care of long-livers and long-term residents, identify people in need of social assistance and submit their findings to social service centres. Volunteers also look after lonely pensioners with limited mobility (deliver food and medicines, help with correspondence, provide assistance in dealing with utility companies and social services, etc.). During the pandemic, volunteers called up elderly residents on a regular basis, distributed masks and vitamins, delivered food parcels, and provided comprehensive assistance. In the Vologda region, GTO Volunteers project run by DROZD-Cherepovets won the Best Volunteer Initiative in the Non-Government Organisation (Association) nomination at the Civil Forum. The project focuses on supporting sports classes for handicapped and physically disabled children. DROZD-Cherepovets provided them with specialised sports equipment and gear. The project also included training courses for adapted physical education teachers from Cherepovets schools and kindergartens, the Sports Club for the Disabled, and DROZD-Cherepovets. Cherepovets hosted the first festival of physical training for handicapped and physically disabled children, which brought together over 150 school children and pre-schoolers, their trainers and volunteers. 196 197 Performance Review Across cities of our footprint, volunteers from among our employees and their families take part in annual campaigns to plant trees and release fingerlings into rivers, help people with limited mobility and assist veterans in flat renovations. PhosAgro Group has joined #WeAreTogether nationwide campaign. The Company’s facilities collect funds, and any employee can fill in a simple form and make a charitable donation. The collected funds are sent to healthcare and social institutions, volunteer centres, elderly citizens, people with limited mobility, and health workers. In 2021, the money collected as part of the campaign were sent to 53 recipients across PhosAgro Group’s footprint. Promotion of sports PhosAgro Group has been traditionally supporting Russian sports on the international, national, and regional levels. We believe that supporting the first steps of young athletes in the cities of our presence is just as important as contributing to the success of record holders. PhosAgro Group has been a key partner of the Russian Chess Federation for 11 years. In June 2021, the Company once again renewed its partnership agreement with the Federation and became the general partner of the World Chess Championship held in Dubai in November. In addition, PhosAgro acts as a strategic partner of the Russian chess grandmaster Ian Nepomniachtchi, the challenger for the World Chess Championship. Andrey Guryev, Chief Executive Officer of PhosAgro until 10 March 2022: “Chess has become our traditional corporate game, an element of our corporate culture. Chess and PhosAgro have a lot in common: we always calculate a move, or rather two or three moves in advance to outdo our opponents. PhosAgro is committed to supporting Russian chess and Russian chess players. Our main goal is to return world chess crown to Russia.” Our support helped Severyanka Women’s Volleyball Club from Cherepovets to achieve the highest results in its history both in Russia and internationally. In the last seven seasons, the Club has won four gold medals, two silver ones and a bronze in Major League A, twice made it to the finals of the Russian Cup, won four gold medals in Major League B and three gold medals in First League. It can boast a constellation of athletes playing for Russian youth teams – winners and awardees of European and world championships. Severyanka also developed a training methodology and launched a Ball School project for children from DROZD autonomous organisations. As a result, DROZD students, from pre- schoolers to school graduates, play team sports. Severyanka holds annual city volleyball tournaments for children in Cherepovets and enjoys full stands of fans – mainly PhosAgro Group employees and their families – at all club fixtures in the city. PhosAgro Group supports a number of other sports organisations, including > Russian Olympians Foundation > Russian Rhythmic Gymnastics Federation > Russian Cross-Country Skiing Federation > Russian Rugby Federation > Avtodor Basketball Club (Saratov) (financed under an agreement with the State Autonomous Institution of the Saratov Region Olympic Reserve Basketball School or the Olympic Reserve School) > Proton-Saratov Volleyball Club > Turbina Speedway Club (Balakovo) > Kovrovets Motoball Club Supporting local communities during the COVID-19 outbreak In 2021, the COVID-19 pandemic continued to affect social and economic environment across our footprint, and the Group did not stand aside from the common challenge. The Cherepovets branch of Apatit continued to provide hot meals to Cherepovets health care professionals at high risk of COVID-19. 150 health workers from ambulance teams and infectious disease departments of Vologda Regional Clinical Hospital No. 2 (Cherepovets) and the COVID department of Cherepovets City Hospital received quality lunches cooked by city caterers and delivered to their workplaces. We also purchased medicines, equipment and protective gear for several municipal clinics in the city. In Volkhov, PhosAgro Group has been actively supporting social and healthcare institutions throughout the pandemic. In particular, we provided protective means and disinfectants, medical equipment, and lung ventilators to the Volkhov Interdistrict Hospital. In August 2021, we gifted a RUB 5 mln certificate to the hospital for the procurement of medicines to treat COVID patients. The Company also delivered hot meals to medical teams on call during the New Year holidays. In 2021, the Balakovo branch of Apatit continued to provide financial support to health care workers of, and purchased equipment and medicines for, hospitals and clinics in the Saratov region. Similarly, PhosAgro Group financed the same assistance, including the purchase of medicines, protective gear, and medical equipment and bonuses to healthcare workers, in the Murmansk region. Our initiatives during the pandemic have been highly appraised by the government. In October 2021, Andrey Guryev, CEO of PhosAgro and Chairman of the RSPP Coordinating Council for COVID-19, was awarded the Order of Pirogov for his considerable contribution to organising the efforts to provide medical care and prevent the spread of COVID-19. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 198 199 Performance Review Committed to the highest standards PhosAgro has been meeting high corporate governance standards since its inception. The Company’s internal standards are aligned with Russian laws, recommendations of the Bank of Russia, Russia’s Corporate Governance Code and the UK Corporate Governance Code 61.1 Corporate governance quality assessment of Phosagro Group assesment score by Sustainalytics 7.1Corporate governance quality assessment of Phosagro Group assesment score by MSCI ESG Research E C N A N R E V O G E T A R O P R O C 202 Chairman’s Statement 204 Corporate Governance Framework 212 Board of Directors 240 Executive Bodies 246 Corporate Controls 252 Ethical Practices 262 Remuneration Report 200 201 201 201 Об отчете О компании Стратегический отчет Обзор результатов Корпоративное управление Акционерный капитал Финансовая отчетность Дополнительная информацияАкционерный капитал Chairman’s Statement 2021saw important regulatory changes in corporate governance both in Russia and abroad. Amendments made recently to national legal codes around the world reflect a dominant global trend towards greater focus on sustainable development and the increasing role of the board of directors in addressing sustainability challenges. 2021 saw important regulatory changes in corporate governance both in Russia and abroad. Amendments made recently to national legal codes around the world reflect a dominant global trend towards greater focus on sustainable development and the increasing role of the board of directors in addressing sustainability challenges. The COVID-19 crisis also significantly impacted the transformation of expectations in terms of corporate governance quality. It will take time to fully understand the structural implications of the pandemic for capital markets and its long-term impact on how boards of directors operate. However, today we are already witnessing changes in these markets and the introduction of temporary corporate governance initiatives to address them. The need to adjust existing rules and practices to the post-pandemic reality is becoming increasingly obvious, especially in areas such as ESG risk management, digitalisation, audit quality, and creditors’ rights. As boards of directors are held accountable to shareholders and other stakeholders in these fields, their scope of responsibilities will inevitably be reviewed going forward. According to a PwC survey1, more than 90% of current Russian directors are convinced that the role of the board of directors will change in the future. The importance of the board’s supervisory and analytical functions will fade, replaced by a focus on visionary leadership, and boards will spend more time interacting with stakeholders and nurturing corporate culture and values. In 2020 and 2021, we saw sustainable development gain momentum, with boards getting increasingly involved in the management of sustainability issues. We expect these changes to continue in 2022, as the investment community wakes up to the new reality and stakeholder expectations shift, requiring companies to move away from simply crafting declarations to implementing practical action. Transformation of non-financial reporting is also underway, with emphasis placed on a harmonisation of standards and closer alignment with financial statements. Non-financial reporting was the main focus of one of the critical corporate government documents issued by the Central Bank of Russia in 2021 – the Bank of Russia’s Information Letter on Recommendations on Disclosure by Joint-Stock Companies of Non- Financial Information Pertaining to Their Activities No. IN-06-28/49 dated 12 July 2021. 1 PwC survey The Board of the Future By unifying international standards and supranational regulations in the realm of non-financial disclosure, the Russian regulator developed guidelines to ensure the relevance, practicality, consistency and comparability of non-financial indicators. We sought to integrate the Bank of Russia’s key recommendations into this report as much as possible, including by reflecting the double and dynamic materiality approaches and disclosing non-financial data in the context of our strategy, management approach, risks, and metrics. In December 2021, through its information letter No. IN-06-28/96 (dated 16 December 2021), the Bank of Russia issued recommendations to the boards of directors of public joint-stock companies on how to consider ESG factors and sustainable development in their activities. Given the growing influence ESG exerts on the operations of different organisations and the increasing impact such organisations have on the environment, society and economy, the Bank of Russia came up with these proposals in order to redefine the key responsibilities of the board of directors in areas of strategic guidance, risk management, and non-financial disclosure. PhosAgro’s Board of Directors included these recommendations from the regulator in its self-assessment report for 2021. Our directors adhere to the Company’s policy of promoting ongoing research and implementing best market practices throughout all of PhosAgro’s operations. PhosAgro carried out an analysis of its corporate governance framework following the publication 61.1 Sustainalytics upgraded the Company’s corporate governance score from 59.1 to 61.1 (putting the Company in the top 17% globally) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Our directors adhere to the Company’s policy of promoting ongoing research and implementing best market practices throughout all of PhosAgro’s operations. of the new recommendations on reporting compliance with the Corporate Governance Code in December 2021 (the Bank of Russia’s letter No. IN-06-28/102 On Disclosure of the Corporate Governance Code Compliance Report in the Public Joint Stock Company’s Annual Report dated 27 December 2021). The Board of Directors confirmed strong alignment between the Company’s practices and the quality criteria outlined in the regulator’s recommendations. After reviewing PhosAgro’s yearly corporate governance quality report, the Board of Directors discussed and approved improvements to the Company’s corporate governance procedures and additional disclosure initiatives. The directors are happy to see that the Company’s sustainability efforts and significant progress in this area have won well-deserved praise from Russian and international rating agencies, as well as industry consultants. In the second half of 2021, Sustainalytics upgraded the Company’s corporate governance score from 59.1 to 61.1 (putting the Company in the top 17% globally), and MSCI ESG Research upgraded it from 6.9 to 7.1 (top 19% globally). PhosAgro continues to perform brilliantly in comparison to both Russian companies and peers from the global agrochemical industry. The Board of Directors is highly satisfied with the management’s performance and contribution to the Company’s success in 2021. During a Board meeting held on 9 February 2022, the directors expressed their gratitude to PhosAgro’s management team for strong operational and financial results and for achieving all of the previous year’s strategic goals. Equally important was the recognition coming from third parties. In February 2021, Andrey Guryev, PhosAgro’s CEO, won the national Director of the Year award for his Contribution to the Development of ESG Culture, and in March, the World Economic Forum (WEF) recognised Guryev as a 2021 Young Global Leader. The Board of Directors reaffirms the Company’s commitment to the highest standards of corporate governance and will continue to focus closely on health and safety, sustainable development, climate change and the global challenges facing the agricultural industry. PhosAgro’s directors will continue to support the management team in implementing the Strategy to 2025. Xavier Rolet, Chairman of the Board of Directors of PJSC PhosAgro until 10 March 2022 202 203 Corporate Governance Corporate Governance Framework About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Corporate governance principles The Company sees its commitment to the highest corporate governance standards as key to building a transparent, responsible and trustworthy governance framework to ensure further growth and sustainable financial strength. PhosAgro’s corporate governance principles, structure, practices and procedures are set forth in its Charter1 and Corporate Governance Code. The current version of PhosAgro’s Corporate Governance Code2 was developed in accordance with the Russian legislation, the Company’s Charter and other internal documents, taking into account the requirements of securities market operators, as well as recommendations set out in the Corporate Governance Code approved by the Bank of Russia’s Board of Directors (the “Russian CGC”, the “Code”). Provisions of the Company’s Corporate Governance Code do not contradict Russia’s Corporate Governance Code and the UK Corporate Governance Code. Basic principles of the Company’s Corporate Governance Code Accountability Transparency Sustainable development governance GRI 2-9, 2-12, 2-13 Our governance framework for sustainable development (SD) relies on a number of internal and external drivers. Internal drivers External drivers Company’s mission and values supported by our Corporate Strategy Stakeholder expectations and the global community’s requirements for the maturity of the Company’s SD governance framework 1 For the full text of the document, please visit our website. 2 The current version of the Corporate Governance Code of PJSC PhosAgro. Equality Responsibility The six main components of the sustainable development governance system are listed in the Sustainable Development section on the official website 204 205 Corporate Governance Documents and initiatives updated or developed in 2021 Documentation support Business processes and organisation Project management Competencies and people Performance review and reporting > Expanding the composition and functionality of the Sustainable Development Committee of the Board of Directors, established in 2019 > Strengthening the sustainability management function at the corporate headquarters and the enterprises > Comprehensive regulations on interaction in preparing non-financial reporting drafted and implemented > Climate and water-related risks and opportunities identified, assessed and included in the corporate risk register > Certification of compliance with requirements of ISO 9001, ISO 14001, ISO 45001, GMP+ FSA > Investor material topic surveys (in particular, obtaining a five-component SPO from Vigeo Eris to map out KPIs as part of the preparation for issuing green finance instruments) > Approval of the External Auditor Selection and Cooperation Policy > Approval of the Personnel Management Policy as amended > Approval of the Environmental Policy as amended > Approval of the Regulations on the Remuneration and Human Resources Committee of the Board of Directors as amended > Approval of the Regulations on the Environmental, Health and Safety Committee of the Board of Directors as amended > Approval of the Internal Audit Policy (internal audit regulations) as amended > Approval of the Inside Information Regulations as amended > Approval of the Information Security Policy > Approval of a transparency statement under the UK Modern Slavery Act as amended > Approval of the Code of Ethics as amended > List and coverage of sustainability KPIs expanded > Comprehensive system to evaluate suppliers against ESG criteria developed, with its automation and migration to an e-platform in progress > List of initiatives pursuing individual UN SDGs-related targets being updated > Mandatory training in various areas (for example, UN SDGs, climate, etc.) included in the sustainability training framework > Participation in major international and Russian initiatives (RSPP, UN Global Compact, IFA) maintained > FAO Global Soil Partnership, European Sustainable Phosphorus Platform, Association of Economic Cooperation with African States (AECAS). IT technologies > Procedure for preparing integrated > Redesign of the Sustainability page on the Company’s official website annual reports drafted and approved. CEO appointed as chair of the working group in charge of the integrated annual report > Analysis of global and local ESG ratings and rankings and expanding the range of global ESG ranking questionnaires (MSCI ESG Research, Sustainalytics, CDP Climate Change, CDP Water Security, Standard & Poor’s (S&P) CSA, RAEX) > Stakeholder surveys (inside and outside the Company) > Procedure for the Sustainable Development Committee to monitor the Company’s ESG scores and ratings assigned by leading global ESG data providers (Sustainalytics, MSCI, S&P CSA, CDP, FTSE Russell) developed > TCFD, CDP, The Value Reporting Foundation recommendations for reporting implemented About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 206 207 Corporate Governance Corporate Governance Structure Structure of corporate governance and sustainability management General Shareholders’ Meeting Board of Directors Review Committee Board of Directors committees Chief Executive Officer Executive bodies (Management Board) > Audit Committee > Remuneration and Human Resources Committee > Strategy Committee > Environmental, Health and Safety Committee > Risk Management Committee > Sustainable Development Committee Corporate Secretary Internal Audit Department Legal and Corporate Governance Department administrative reporting line functional reporting line functional relationship Sustainable Development Department Functional departments in sustainable development Procurement Develops ESG-rating of suppliers and contractors, including climate criteria, and integrates it into the contractor selection system Includes ESG criteria in the list of indicators assessed in supplier audits Project Management Works on matters pertaining to the establishment of a task group on reduction of GHG emissions and of negative climate change effects on the efficiency of management and production processes Risk Management and Internal Control Arranges for identification, assessment, management and monitoring of strategic risks, including ESG-related, subject to the approval and implementation of the Strategy to 2025 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Functional departments in sustainable development Ecology and environmental management Arranges the development of a climate and water strategy; arranges the implementation of activities approved at meetings of the Sustainability Committee and as part of the low-carbon transition plan Technical Development, Capital Construction and Repairs, Samoilov Scientific Research Institute for Fertilizers and Insectofungicides (NIUIF) Studies and reviews technical and organisational actions adopted at meetings of the Sustainable Development Committee and the Board of Directors, and as part of the low-carbon transition plan to reduce emissions and energy consumption Marketing and Development, Innovations, NIUIF Studies and reviews actions adopted at meetings of the Sustainable Development Committee and the Board of Directors, and as part of the low-carbon transition plan specifically pertaining to the development of technology for releasing and promoting new products Develops and promotes sustainable farming practices that mitigate negative environmental effects or respond to materialised climate risks Economic departments Works out a mechanism for incorporation of the carbon price into the system created to evaluate the efficiency of investment projects Human Resources and Social Policy Works out a plan for the development of personnel competencies related to the ESG agenda Develops and integrates ESG KPIs into the personnel incentive system 208 209 Corporate Governance Corporate governance quality assessment Compliance with CGC principles at PhosAgro and other Russian companies, % When assessing the quality of the Company’s corporate governance, the recommendations of the Russian Corporate Governance Code (the “Russian CGC”) and the UK Corporate Governance Code (UK CGC, FRC, 2018) are adopted as best practices. PhosAgro’s Corporate Governance Code is based on the Russian CGC, and the degree of consistency between these two documents is reflected on PhosAgro’s corporate website. The actual compliance with the CGC is measured on an annual basis and disclosed in a dedicated report (report on compliance with the principles and recommendations of the Corporate Governance Code, hereinafter the CGC Report), which is subject to review and approval by the Board of Directors and is included in the Company’s annual report as an appendix. In December 2021, the updated recommendations of the Bank of Russia on drafting the report on compliance with the principles of the Russian CGC and the relevant report form were published. The self-assessment of compliance with the principles and recommendations of the Code in 2021 was carried out with due regard to the above updates. In April 2021, the Board of Directors reviewed the management report on the quality of the Company’s corporate governance in 2020, taking into account the results of assessments by the rating agencies MSCI, CDP and Sustainalytics, the 2020 CGC Report. Noting a high level of compliance as a result of the review, the Board of Directors also reviewed the governance quality criteria, which for certain reasons were not met fully or partially, and discussed an improvement plan. In March 2022, the Audit Committee of the Board of Directors reviewed the results of the improvement plan implementation in 2021, analysed the developments of the degree of compliance with the CGC principles, as well as the assessment of the disclosure quality to explain non-compliance or partial compliance. The level of compliance with the Bank of Russia recommendations was assessed as high. Following a review of the corporate governance quality assessment, the Board of Directors approved the 2021 report on compliance with the principles and recommendations of the Russian CGC, issued a positive assessment of the implementation of the 2021 Corporate Governance Practice Improvement Plan, and approved the improvement plan for 2022. 1 Principles of Corporate Governance 2 Report on compliance with the principles and recommendations of the CGC of the Russian Federation for 2021 Over the past three years, PhosAgro has demonstrated a high level of compliance with the Bank of Russia’s recommendations. CGC section I. Shareholders’ rights II. Board of directors III. The company’s corporate secretary IV. Remuneration V. Risk governance and internal control VI. Information disclosure VII. Material corporate actions Total for the Group % Full compliance Partial compliance Non-compliance 2019 2020 2021 2019 2020 2021 2019 2020 2021 13 36 2 10 6 7 5 79 11 33 2 4 6 7 3 66 84 11 33 2 5 6 7 3 67 85 11 32 2 8 6 5 5 69 87 2 3 5 2 12 15 2 3 4 2 11 14 1 4 2 2 1 1 9 11 1 1 1 1 1 1 1 Full compliance Full compliance Full compliance Partial compliance Partial compliance Partial compliance Non-compliance Non-compliance Non-compliance 85 84 85 87 85 84 85 87 85 84 85 87 14 15 14 11 14 15 14 11 14 15 14 11 1 1 1 1 1 1 1 1 1 1 1 1 76 78 77 76 78 77 76 78 77 18 16 17 18 16 17 18 16 17 6 6 6 6 6 6 6 6 6 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 ФосАгро другие российские публичные акционерные общества PJSC PhosAgro ФосАгро другие российские публичные акционерные общества ФосАгро другие российские публичные акционерные общества Other Russian public joint-stock companies Degree of disclosure to explain non- compliance (partial non-compliance) with CGC principles at PhosAgro and other Russian companies, % Results of implementing the CG improvement plan developed and approved by the Board of Directors in the analysis of the 2020 CGC report 65.8 60 77 63 69 63 2018 2019 20201 PJSC PhosAgro Other Russian public joint-stock companies For every case of partial compliance or non- compliance, the Company specifies the measures taken to mitigate the associated risks in the CGC Report. In 2021, the quality of the Company’s disclosure to explain the non-compliance (partial non-compliance) with the recommendations of the Code, according to the Central Bank of Russia, slightly worsened to 69%, while the average level in the Russian Federation was 63%. The deterioration is not critical, and its causes are taken into account in the 2021 CGC report. 1 The most recent year assessed by the Bank of Russia. Expanding the scope of the annual reports for 2020 and beyond to include the Board of Directors’ viability statement, the going concern assumptions, consideration given to key stakeholders’ voice in the Board’s discussions and decision-making, information about significant external appointments of the Board members Expanding the disclosure in the annual report for 2020 and subsequent years regarding the remuneration system as a whole, the KPI system and their alignment with the strategy Development of the External Auditor Selection and Cooperation Policy Development of the Company’s tax strategy Update of Regulations on Board Committees and other internal documents to reflect the climate agenda, gender equality and diversity, supply chain approach, and stance on animal testing Approval of the Information Security Policy Update of the Internal Audit Policy Update of the Inside Information Regulations In progress, disclosure is being improved Done, approved by the Board of Directors Done, prepared for review by the Audit Committee of the Board of Directors About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 210 211 Corporate Governance Key actions approved by the Board of Directors upon review of the 2021 CGC report which are aimed at improving the governance quality in 2022: > Review and approval of the tax strategy > Amendments to the information policy detailing the process for providing data on shareholder requests > Amendments to the Regulations on the Remuneration and Human Resources Committee reflecting the conditions (events) for reviewing the compensation policies > Return to the practice of individual assessment of the Board members when assessing the Board performance in general General Shareholders’ Meeting The activities of the Company’s supreme governing body – the General Shareholders’ Meeting – are governed by the Regulations on the General Meeting of Shareholders. In May 2021, the Annual General Shareholders’ Meeting was held in absentia to elect a new Board of Directors and Review Committee, determine the Board of Directors’ remuneration, distribute the 2020 profit, including dividend payouts, and resolve on other matters within the its remit. It was held in absentia due to the COVID-19 outbreak. Despite the pandemic-related restrictions, the Annual General Shareholders’ Meeting was held no later than usual, i. e. in last ten days of May. The reporting year also saw three extraordinary General Shareholders’ Meetings convened to vote on interim dividends. Board of Directors The Board of Directors plays a key role in the Company’s corporate governance system. Its activities are governed by the Regulations on the Board of Directors. Effective and resourceful leadership of the Board of Directors is the central pillar upon which the success of PhosAgro is based. In 2021, as the Board of Directors continued to set the Company’s strategic direction and make key decisions, it is fully accountable to PhosAgro’s shareholders and other stakeholders for the Company’s performance in production, financial, environmental, social and other areas. Full text of the Regulations on the General Meeting of Shareholders of PhosAgro is available on the official website of the Company The Regulations on the Board of Directors Sustainable development and the Climate Strategy GRI 2-14, 2-16 In 2021, with the sustainability agenda gaining greater prominence, the Company adopted or revised a number of internal regulations, such as the regulations on the Committees of the Board of Directors, the Environmental Policy, the Personnel Management Policy and the Code of Ethics. These documents set the stage for furthering the Company’s ESG agenda. The revisions made to the regulations on the Committees expanded their remit to include the matters of climate agenda, gender equality and diversity. The amended Environmental Policy identified climate action and biodiversity protection as overriding priorities. The updated Code of Ethics reinforced the Company’s responsible approach to the supply chain. The Board of Directors’ transparency statement under the UK Modern Slavery Act outlined the Company’s actions to prevent all forms of modern slavery and human trafficking within PhosAgro and its supply chain. Strategy and global challenges The Board has traditionally focused on strategic matters, overseeing the overall implementation of PhosAgro’s Strategy to 2025 and extensively reviewing progress towards strategic objectives in production, distribution, procurement, innovative development and international projects. The Company’s Climate Strategy approved in December 2020 added to the list of the Board’s monitoring responsibilities. The COVID-19 pandemic again made crisis management an important part of the Company’s operations. Information security Internal audit In 2021, the Board placed a particular focus on information technologies. As part of work in this area, it considered the Company’s IT strategy, approved the Information Security Policy and analysed the key aspects of cybersecurity at PhosAgro Group companies. The Internal Audit Policy of PhosAgro (the Internal Audit Regulation) was reviewed following the Bank of Russia’s recommendations for the arrangement of risk management, internal control, internal audit, and activities of the audit committee of the board of directors (supervisory board) in public joint-stock companies. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 212 213 Corporate Governance Ongoing tasks GRI 2-16 Key activities undertaken by the Board of Directors in 2021 included: > assessment and quarterly monitoring of > review of the Company’s budget for 2022, the risk management process; > assessment and quarterly monitoring of subsidiary activities with a focus on workplace health and safety, industrial safety and environmental protection; > assessment of the degree to which the requirements of the Company’s Insider Information Policy were met; > development of project management across PhosAgro Group companies; > appointment and evaluation of the performance of the Company’s CEO and Management Board; > oversight over management relations with shareholders, investors and other stakeholders; > monitoring the progress achieved across the Company’s priority areas in 2021 and setting priority activities for 2022; as well as quarterly follow-up on the 2021 budget utilisation; > determination of sustainable development priorities; > determination of whether PhosAgro’s corporate culture is aligned with its mission, values and strategy, as well as assessing and monitoring the corporate culture; > performance and work plans of the Internal Audit Department; > quarterly review and approval of financial statements; > approval of major transactions and interested-party transactions; > convening General Meetings of Shareholders. Participation in the Board meetings In 2021, the Board of Directors held eight meetings (one of them by absentee voting) and considered a total of 91 agenda items. The number of items considered by the Board of Directors in 2021 grew from the previous years (70 and 79 in 2019 and 2020, respectively). This is the result of the agenda of in-person meetings being expanded to include workplace injuries and progress of the relevant risk management initiatives. 8 meetings of the Bord of Directors in 2021 91matters Reviewed by the Board of Directors for 2021 Irina Bokova Andrey A. Guryev Andrey G. Guryev Sven Ombudstvedt Natalia Pashkevich James Rogers Marcus Rhodes Mikhail Rybnikov Xavier R. Rolet Andrey Sharonov Board of Directors 8/8 8/8 8/8 Audit Committee Strategy Committee 2/2 2/2 Remuneration and Human Resources Committee 4/4 Risk Management Committee Environmental, Health and Safety Committee 4/4 1/2 Sustainable Development Committee 4/4 8/8 6/6 2/2 4/4 8/8 8/8 6/6 4/4 2/2 8/8 8/8 8/8 6/6 2/2 2/2 2/4 4/4 7/8 6/6 4/4 4/4 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 214 215 S172 statement According to Section 172 “Duty to promote the success of the company” of the UK Companies Act 2006, PhosAgro’s Board of Directors acts in good faith to promote the success of the Company for the benefit, taking into account possible long-term consequences of its decisions for the society and the environment, as well as the interests of the Company’s employees and other stakeholders. For the members of PhosAgro’s Board of Directors, these standards mean that the Company’s stakeholders should be interacted with responsibly and that their interests should be respected to the maximum extent possible. This includes developing a special section of PhosAgro’s corporate website and our electronic bidding platform to enhance procurement transparency, encouraging small and medium-sized businesses and local counterparties to become our suppliers or contractors and expanding public engagement with local communities through public hearings. Our employees have a special place among the Company’s stakeholders, which is reflected, in particular, in one of our strategic objectives – increasing the loyalty and satisfaction of our staff. Employee satisfaction and loyalty surveys and programmes based on their results are at the forefront of the Remuneration and Human Resources Committee’s agenda. Analysis of hotline complaints and respective management response is reviewed by our Audit Committee on a quarterly basis. Importantly, the said committees are composed solely of independent directors. Although at the moment we do not apply such practices as appointing directors from among the employees or appointing a non-executive director responsible for interaction with employees for considering their standpoint when managing the Company, we consider it effective and are actively involved in a dialogue on all major management issues with the trade union organisation (Minudobreniya Association), which has historically been an equal partner for PhosAgro Group’s management and an authorised representative of employees in collective bargaining, review and resolution of labour disputes. In addition, heads of each production site of PhosAgro Group regularly (at least twice a year) visit all business units and hold meetings with employees, at which they inform the staff about the Group’s performance, implemented measures, and plans for production and social development. Based on employees’ suggestions and comments, an action plan for improving organisational and technological processes is then developed and implemented. In 2021, PhosAgro Group also expanded its dialogue with stakeholders about our environmental footprint. We worked intensively with local communities, holding public hearings on the development of the Group’s production sites and their environmental impact. Corporate Governance Prospects PhosAgro Group’s development scenarios are reviewed by the Board of Directors when approving its Strategy. The Company’s strategic planning cycle spans five years, which we believe to be optimal given the growing speed of external changes and our investment horizon. Since 2019, in addition to our traditional analysis of sensitivity to FX rate fluctuations and changes in product and feedstock prices, the Board of Directors has been considering a contingency plan to prepare for critical changes in the external operating environment, such as possible restrictions on our supplies to key markets. 2021 was a challenging year for PhosAgro, marked by the completion of the investigation in the US ending with countervailable duties imposed on Russian and Moroccan producers, tighter pricing control and the introduction of quotas and export licences in Russia. An important lesson we learnt from that year is that such risks need to be assessed and managed. When approving the Strategy to 2025, the Board of Directors also weighed the associated strategic risks and regularly (semi-annually) reviews them as part of strategy implementation monitoring. Risk management maps were drawn for each, containing a detailed description along with mitigants and probability, materiality and risk appetite estimates. Board of Directors: place of residence, % Board of Directors: length of service, % For more information on our strategic risks, see the Strategic Report section on page 68. 10% Based on the foregoing, the Board of Directors finds it reasonable to believe that PhosAgro Group will, without any reservations, be able to continue its operations and meet all its obligations as they fall due while the Strategy to 2025 is in force. 50% 50% 50% 40% Russian Federation Europe Southeast Asia <3 years >3 years 4–7 years 50% of foreign nationals on the Board 20% of women on the Board 60 years – average age of directors About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Composition of the Board of Directors PhosAgro’s Board of Directors is compared to other boards based on Stanton Chase’s Overview of Boards of Directors at Russia’s Largest Public Companies1. 70 % Independent Directors Board of Directors: age, % Board of Directors: gender split, % PhosAgro Board of Directors: independence, % PhosAgro 10% 10% 40% Above 60 years 50–60 years 40–50 years Under 40 years 20% 20% 10% 40% 11% 89% 15% 52% 33% 80% 70% Stanton Chase Stanton Chase Men Women Non-executive directors Independent directors Executive directors Generalised board member profile Criterion Gender (female | male) Age Foreign citizenship, % Duration of service since appointment Brief bio on the corporate website Photo on the corporate website Actual total remuneration per year Number of the Board of Directors, people Stanton Сhase data2 Korn Ferry Russia data3 PhosAgro Number of companies disclosing information 112 113 112 111 86 82 26 112 Average 11% | 89% 54 20% 5 years 77% 73% RUB 11 mln 11 Number of companies disclosing information 40 40 40 40 n/a n/a n/a 40 Average 2021 13% | 87% 20% | 80% 55.2 30% 60 years 50% 5.5 5.2 years n/a n/a n/a 10.8 100% 100% RUB 22.1 mln 10 1 Companies were selected from RIA Rating’s TOP-100 Russian companies by market capitalisation ranking. The list includes companies from the 2021 ranking as well as those that were included in the previous ranking but subsequently dropped out. This brings the total number of companies on the list to 115, six of which are “new” compared to the last year’s study. 2 The review was prepared by Korn Ferry Russia together with the School of Finance at the National Research University Higher School of Economics. The list includes 40 Russian companies. 3 According to the Stanton Chase study of 115 largest public companies of Russia conducted in September 2021, the average share of independent directors stands at 33%. 216 217 Corporate Governance Professional development and training of the Board of Directors GRI 2-17 The Company views commitment to continuous professional growth as a cornerstone of good corporate governance. By expanding their knowledge and skills, directors add value to the Board of Directors and PhosAgro on the whole. An annual performance assessment highlights the need for the qualification upgrade and training of the Board members, with a focus on the following areas: > industry trends in Russia and abroad; > current legislative and stock exchange requirements; > technological and agricultural innovations. In 2020-2021, trainings could not be held in a traditional format due to the COVID-19 pandemic. Nonetheless, the development areas identified during the 2021 assessment of the Board of Directors performance, including innovative development, cyberrisks and cybersecurity, were addressed. These topics were added to the meeting agendas, and heads of the relevant functions were invited to the Board meetings, which ensured deep understanding of these matters by the Board members and gave an impetus for PhosAgro’s accelerated development in these areas. In addition, outside experts from the Big Four companies and other leading expert organisations were invited to the meetings. The Board heard the following issues: > The impact of the pandemic on risk appetite and risks on the Board’s agenda: cybersecurity, business continuity, and resilience > Assessment of information security risks > Assessment of sanctions risks Board members took an active part in conferences and round tables arranged by such entities as CGI Russia – World Economic Forum Climate Initiative in Davos, IDA – Association of Professional Directors. Three members of the Board of Directors became sought-after speakers at St Petersburg International Economic Forum 2021. The Board of Directors regularly receives newsletters from the Company, including quarterly newsletters on corporate governance and weekly updates on the developments in the chemical and related industries. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information D&O liability insurance Directors and officers liability for damage caused to third parties by their duties is insured by SOGAZ (contract No. 20 DO 0018 in effect from 1 June 2020 to 31 May 2021, contract No. 21 DO 0022 in effect from 1 June 2021 to 31 May 2022) and is covered up to USD 75 mln (in rouble equivalent) and extended by USD 2 mln for independent directors. Apart from directors’ liability, the above contracts include the liability of the Company’s officers. Contracts with SOGAZ have been concluded annually since 2012. Assessment of the Board of Directors GRI 2-18 In accordance with the Russian CGC recommendations, PhosAgro assesses the performance of its Board of Directors on an annual basis, with external experts engaged for this purpose once in three years. Each new assessment relies on previous assessments allowing to analyse both absolute values and any changes that occur over time. January 2020 saw KPMG conduct an external assessment of the Company’s Board of Directors. The independent consultant recognised the Board’s high efficiency and a strong engagement of its members. The next Board evaluation by a third-party expert organisation is scheduled for 2023. 218 219 Role of independent Directors GRI 2-10 Independent directors make a valuable contribution to the Board’s decision-making as their opinions rely solely on professional skills and expertise, as well as a comprehensive study of the matter. Their position is unbiased, independent and free from the influence of other members of the Board and the Company`s management, and they are primarily focused on improving the Company`s performance. At present, seven of the ten directors are independent, which is well above the average in Russia1 and at par with the best global practices. Independent directors chair five of the six Board committees. Independent directors are world-class experts with unique competencies and a track-record in investment and management of major businesses, financial and research organisations and government agencies. They are equipped with a full set of knowledge and skills needed to propel the Company and its Board of Directors forward and foster dialogue with stakeholders at various levels. The independence of Board members and nominees is assessed biannually by the Remuneration and Human Resources Committee. The assessment meets the criteria established by the Regulations on the Board of Directors and the Moscow Exchanges rules. In 2021, a special resolution of the Board of Directors recognised three of its members, Sven Ombudstvedt, Markus Rhodes, and James Rogers, as independent, despite their formal affiliation with the Company after serving for over seven years on its Board of Directors. Onboarding of newly elected directors Despite the fact that there were no changes in the Board composition in 2020 and 2021, the Remuneration and Human Resources Committee updates the onboarding programme for new Board members which is considered an effective tool to gain an insight into the Company’s operations. As part of the onboarding programme, newly appointed directors visit PhosAgro Group’s production sites and meet with functional managers. 1 According to the Stanton Chase study of 115 largest public companies of Russia conducted in September 2021, the average share of independent directors stands at 33%. Corporate Governance Self-assessment The self-assessment of the Board’s performance was completed in February 2022; its results were discussed in detail at a meeting of the Remuneration and Human Resources Committee of the Board of Directors and, in a more condensed form, at a meeting of the Board of Directors in early March 2022. Separately, it should be noted that the self-assessment of the PhosAgro Board of Directors’ performance for 2021 was carried out for the first time with due consideration of the recommendations of the Bank of Russia on how to consider ESG factors and sustainable development in their activities (Bank of Russia information letter No. IN-06-28/96 dated 16 December 2021). In general, the Board members highly appreciated the degree of integration of ESG factors into the work of the governing body – the integral score was 4.34 on a 5-point scale. 6 5 4.71 4.71 4.30 4.31 4.50 4.83 1 4.58 4.52 4.50 4.35 4.47 4.55 4 4.45 4.35 4.40 3.90 4.10 3.90 2 3 1 Organising the business of the Board of Directors 2 Effectiveness of the Board of Directors 3 Continuous improvement 4 Liaising with committees 5 Corporate Secretary assessment 6 Composition and structure of the Board of Directors 2021 2020 2019 Integral assessment Main conclusions of the self-assessment: Balanced and effective board composition High quality of financial reporting Maintaining the quality of work during the COVID-19 pandemic Focus on employee well-being and safety, sustainability, and management quality Deep immersion in operational issues, including IT and cybersecurity, and project management issues Respect for shareholder interests, including ESG and corporate social responsibility, as well as dividend and investment policies Special focus was placed on the extent to which the Company has implemented the recommendations given following the 2021 performance assessment. Assessment notes 2021 While the Board composition and competencies are generally balanced, it could be supplemented with a director with expertise in agriculture and a director having knowledge of the Asian region. Implementation The Board composition remained unchanged. Changed perception among directors assessing the Board of Directors1 Overall, the score remained high (4.62 for 2021 and 4.43 for 2020). 01 02 Need to expand communication with investors/analysts (one opinion), business unit leaders and key employees (one opinion), members of the Management Board (one opinion). Implementation During 2021, the number of executives speaking at meetings of the Board and its committees continued to grow. The Management Board members are invited to attend the Board meetings on a regular basis. 4.29 4.4 4.5 Changed perception among directors assessing the Board of Directors1 Need to expand communication with investors/analysts (two opinions), business unit leaders and key employees (one opinion), Management Board members (one opinion), minority shareholders (one opinion). 03 There is a continued demand for training on industry trends in Russia and globally (four opinions), cyber threats and risk management (one opinion each), as well as technological and agricultural innovations (one opinion). Implementation External experts from the Big Four companies and other leading expert organisations were invited to the meetings of the Board of Directors and committees to discuss the following issues: > The impact of the pandemic on risk appetite and risks on the Board’s agenda: cybersecurity, business continuity, and resilience > Assessment of information security risks > Assessment of sanctions risks Educational events on agricultural innovation and regenerative agriculture, as well as on climate agenda issues have been planned. Changed perception among directors assessing the Board of Directors1 There is a continued demand for training on industry trends in Russia and abroad (four opinions), statutory requirements (one opinion), technological and agricultural innovations (two opinions). 04 Comments regarding the Audit Committee agenda: audit and internal control policies; climate change issues; assessment of corporate governance as part of internal audit to be considered in 2021. Implementation Reviewed. Changed perception among directors assessing the Board of Directors1 No comments on the agenda, the assessment of the Audit Committee performance is traditionally high (4.67 for 2021 and 5.00 for 2020). 1 Assessed on a 5-point scale. The assessment also identified the following areas of improvement for the Board of Directors, such as: > more active engagement with investors, analysts, business unit leaders, key employees, and members of the Management Board; including the resumption of visits of the Board of Directors to PhosAgro Group’s production sites; > providing training on industry trends in Russia and globally, as well as technological and agricultural innovations; > improvements in the organisation and procedures of the Board of Directors meetings, such as reducing the scope of a single meeting agenda, reducing the number of reports, provided that the Board members familiarise themselves with the materials in advance and committee chairpersons present a brief report on issues that have been discussed by the respective committees. The next study is scheduled for early 2023 and will involve external experts. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 220 221 Corporate Governance Members of the Board of Directors Information on members of the Board of Directors GRI 2-11 Xavier Rolet Chairman of the Board of Directors at PhosAgro, independent director from 2018 to 10 March 2022 Year of election: 2018 Equity interest / Stake of ordinary shares: None Date of birth: 12.11.1959 Andrey G. Guryev Deputy Chairman of the Board of Directors at PhosAgro, non-executive director from 2013 to 10 March 2022 Year of election: 2013 Equity interest / Stake of ordinary shares: None Date of birth: 24.03.1960 Professional experience Education Professional experience Education 2021 — Pr. Greater Yellowstone Coalition, Member of the Board of Directors 2018–2019 Verseon, Independent non- executive director KEDGE Business School (France), Master’s degree in Management Science and Finance 2018 — Pr. AgroGard-Finance, Chairman of the Board of Directors St Petersburg Mining University, Degree in Economics and Management of Mining and Exploration Enterprises 2021 — Pr. World Quantum Growth Acquisition Corporation, Chairman of the Board of Directors and CEO 2020 — Pr. Shore Capital Markets, Non- executive chairman 2020 — Pr. TowerBrook Capital Partners L.P., Member of the Advisory Board 2020 — Pr. Golden Falcon Special Acquisition Corporation, Independent non-executive director 2020 — 2021 Seplat Petroleum Development Company Plc., Independent non-executive director 2019 — 2022 PhosAgro, Member of the Risk Management Committee 2019 — Pr. The Public Investment Fund (Saudi Stock Exchange – TADAWUL), Member of the Board of Directors 2019–2020 CQS Management LTD., Chief Executive Officer 2018–2019 PhosAgro, Chairman of the Risk Management Committee 2017 — Pr. Grayling Centennial LLC, Managing Partner 2017–2020 goAfrica, Angel investor Columbia Business School (USA), MBA in International Finance Institute for Higher National Defence Studies (IHEDN) (France), Post-graduate degree 2017–2019 UK Department for International Trade, Member of the Committee of Experts Titles of honour and awards 2017–2018 London Stock Exchange Group (LSEG), Advisor. 2014–2017 The Governor of the Bank of England’s Financial Services Forum, Member 2013–2017 HM Treasury, Advisor 2011–2014 The European Securities and Markets Authority (ESMA), Member of the Securities and Markets Stakeholder Group 2011 — Pr. Columbia Business School, Member of the Board of Overseers 2011 — Pr. Ranchlands, Member of the Board of Advisors In 2016, he was made a Knight of the National Order of the Legion of Honour by François Hollande, President of France. In 2015, he was appointed an Honorary Knight Commander of the Most Excellent Order of the British Empire (KBE) by Her Majesty Queen Elizabeth II. He was also awarded the Order of Friendship of the Russian Federation and was made an Officer of Morocco’s Royal Sharifian Order of Al-Alaoui. 2018 — Pr. Shanghai Institute of Finance for the Real Economy – SIFRE, Expert Advisor 2011 — Pr. PEACCEL, Angel investor 2018–2022 PhosAgro, Chairman of the Board of Directors 2009–2017 London Stock Exchange Group (LSEG), CEO Key competencies > Strategy > Finance and audit > Risk management > Law and corporate governance > Chemistry and mining engineering 2017–2018 AgroGard-Finance, Member of the Board of Directors Central State Institute for Physical Education, Degree in Physical Culture and Sports 2013 — 2022 PhosAgro, Deputy Chairman of the Board of Directors, Member of the Strategy Committee 2006 — Pr. Russian Chemists Union, Vice President Titles of honour and awards He was awarded the Order of Merit to the Fatherland, 4th class, the Order of Honour, the Order of Alexander Nevsky, the Certificate of Merit of the President of the Russian Federation, the Certificate of Merit of the Federation Council of the Russian Federation, the Orders of the Russian Orthodox Church and the Miner’s Glory badges of all three classes. He also received a Letter of Acknowledgement from the Government of the Russian Federation. He is an honorary citizen of the cities of Kirovsk and Cherepovets. Key competencies > Strategy > Chemistry and mining engineering > Human resources About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 222 223 Corporate Governance Sven Ombudstvedt Member of the Board of Directors at PhosAgro, independent director Year of election: 2011 Equity interest / Stake of ordinary shares: 0.00103% Date of birth: 27.07.1966 Professional experience 2019 — Pr. Norske Skog ASA, CEO 2018 – Pr. Norske Skog Norway Holding AS, Member of the Board of Directors 2011–2019 PhosAgro, Chairman of the Board of Directors 2010–2017 Norske Skogindustrier ASA, CEO 2017–2019 Norske Skog AS, Chairman of the Board of Directors Education 2017–2017 Norske Skogindustrier ASA, Special Advisor 2011 – Pr. PhosAgro, Member of the Audit Committee, Chairman of the Strategy Committee, Chairman of the Risk Management Committee Pacific Lutheran University (USA), Bachelor’s degree Thunderbird School of Global Management, Master’s degree in International Management Key competencies > Strategy > Finance and audit > Chemistry and mining engineering > Risk management Marcus Rhodes Member of the Board of Directors at PhosAgro, independent director Year of election: 2011 Equity interest / Stake of ordinary shares: 0.000644% Date of birth: 31.05.1961 Professional experience 2021 — Pr. Segezha Group, Member of the Board of Directors 2021— Pr. T Plus, Member of the Board of Directors, Chairman of the Audit Committee 2018–2019 Rustranscom Plc, Non-executive director, Chairman of the Audit Committee 2014 — Pr. QIWI Group (QIWI plc), Member of the Board of Directors, Chairman of the Audit Committee 2011 — Pr. PhosAgro, Member of the Board of Directors, Chairman of the Audit Committee 2014–2017 Zoltav Resources Inc., Member ofthe Board of Directors, Chairman of the Audit Committee Titles of honour and awards 2017–2019 SIA Enterprises Limited, Honorary Treasurer Education Loughborough University (UK), Bachelor’s degree in Economics and History of Economics The Institute of Chartered Accountants in England and Wales, Qualified as chartered accountant Key competencies > Corporate governance > Finance and audit Irina Bokova Member of the Board of Directors at PhosAgro, independent director from 2018 to 15 March 2022 Year of election: 2018 Equity interest / Stake of ordinary shares: None Date of birth: 12.07.1952 2018 — Pr. Ban Ki-moon Centre for Global Citizens, Member of the Board of Directors Key competencies 2017 — Pr. Royal Commission for AlUla, Member of the Advisory Board > Environment, health and safety > Human resources About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 2012 — Pr. Council of the UN Sustainable Development Solutions Network (SDSN), Member of the Leadership Council 2009–2017 UNESCO, Director-General Education Moscow State Institute of International Relations (Russia), Degree in International Relations John F. Kennedy School of Government at Harvard University (USA), Leadership and Economic Development Titles of honour and awards She received state honours from several countries. Received an honorary doctorate from a number of research and educational organisations, including MGIMO University, the Russian Academy of Sciences and Moscow State University. Professional experience 2021 — Pr. Edelman Global Advisory, Member of the Advisory Board 2021 — Pr. Commission for Global Scientific Missions for Sustainability established by the International Science Council (ICS), Co-chair 2021 — Pr. International Advisory Board of the Geneva-Tsinghua Initiative (GTI), Chair 2021 — Pr. The Board of Governors of the UN University of Peace, Costa Rica, Member of the Board of Directors 2020 — Pr. FIA Foundation, Member of the Board of Directors 2018 — Pr. Federation Internationale de l’Automobile, Member of the Board of Directors 2018 — 2022 PhosAgro, Member of the Board of Directors, Member of the Remuneration and Human Resources Committee, Chair of the Sustainable Development Committee 224 225 Corporate Governance Natalia Pashkevich Member of the Board of Directors at PhosAgro, independent director Year of election: 2017 Equity interest / Stake of ordinary shares: None Date of birth: 05.11.1939 James Rogers Member of the Board of Directors at PhosAgro, independent director Year of election: 2014 Equity interest / Stake of ordinary shares: 0.0064% Date of birth: 19.10.1942 Professional experience Education Professional experience Education 2021 — Pr. Priority 2030 Strategic Academic Leadership Programme, Head of the programme St Petersburg Mining University, Degree in Mining Engineering and Economics, PhD in Economics, professor Key competencies > Chemistry and mining engineering > Human resources 2017 — Pr. PhosAgro, Member of the Board of Directors, Member of the Environmental, Health and Safety Committee Titles of honour and awards > Order of Honour 2009 — Pr. National Research University, Head of the development programme > Honoured Worker of Higher Education of the Russian Federation 1999 — Pr. St Petersburg Mining University, First Vice Rector > Veteran of Labour medal > Labour Glory badge, 2nd and 3rd class > Miner’s Glory badge, 3rd class > Honorary Worker of the Gas Industry > Award of the Government of St Petersburg > Medal of the Ministry of Defence of the Russian Federation > Distinguished Employee of St Petersburg Mining University > Honorary Doctor of the Ch’an-Chun Geological University (China) > Full member of the Russian Academy of Natural Sciences > Full member of the International Academy of Ecology and Security > Full member of the Russian Academy of Mining Sciences. 2019 — Pr. ENPlus Co Ltd, External director 2019 — Pr. Spanish Mountain Gold Limited, Advisor 2014 — Pr. PhosAgro, Member of the Board of Directors, Chairman of the Remuneration and Human Resources Committee, Member of the Audit Committee 2018 — Pr. Ananti Inc, Director 2014 — Pr. Genagro Limited, Advisor Yale University (USA), Bachelor’s degree Balliol College, University of Oxford (UK), Bachelor’s / master’s degree in Philosophy, Politics and Economics 2018–2021 Sirius International Insurance Group, Ltd, Member of the Board of Directors 2018–2019 Ocean Capital Advisors LLC, Director 2014–2019 Sinofortune Financial Holdings Limited, Non-executive director 2013–2018 Laguna Bay Pastoral Company Pty Ltd, Advisor 2012 — Pr. Santiago Gold Fund, Advisor Key competencies > Finance and audit > Human resources > Risk management > Law and corporate governance 2018–2019 Quantum Digital Asset Management Pte Ltd, Member of the Board of Directors 2012 — Pr. Geo Energy Resources Limited, Non-executive director 2017 — Pr. AgroGard-Finance, Member of the Board of Directors 2012–2019 Spanish Mountain Gold Limited, Director 2017–2018 Agritrade Resources Ltd, Advisor 2011 — Pr. Forbes & Manhattan, Advisor 2017–2018 ITF Corporation, Advisor 2007 — Pr. Beeland Holdings Pte Ltd, Director 2017–2018 Global Blockchain Technologies Corp, Advisor 2007 — Pr. Beeland Enterprises, Inc., Director 2016 — Pr. Duff & Phelps Select Energy MLP Fund Inc., Director 1990 — Pr. Beeland Interests, Inc., Director 2016 — Pr. Virtus Global Multi- Sector Income Fund, Trustee 1988–2019 Virtus Global Dividend & Income Fund Inc., Director 2016–2018 Crusader Resources Limited, Non-executive director 1986 — Pr. Virtus Total Return Fund Inc., Director 2015–2017 Latitude Technologies Limited, Senior Advisor About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 226 227 Corporate Governance Andrey Sharonov Member of the Board of Directors at PhosAgro, independent director Year of election: 2017 Equity interest / Stake of ordinary shares: None Date of birth: 11.02.1964 Andrey A. Guryev Member of the Board of Directors, CEO and Chairman of the Management Board at PhosAgro from 2013 to 10 March 2022 Year of election: 2013 Equity interest / Stake of ordinary shares: 0.048% Date of birth: 07.03.1982 Titles of honour and awards Professional experience Education Professional experience 2022 — Pr. ESG Alliance, CEO 2021 — Pr. Sberbank, Vice President 2021 — Pr. Foundation for Development of the Centre for Elaboration and Commercialisation of New Technologies (Skolkovo Foundation), Member of the Board of Directors 2020 — Pr. Foundation for Development of the Centre for Elaboration and Commercialisation of New Technologies (Skolkovo Foundation), Chairman of the Human Resources and Compensation Committee 2019 — Pr. En+ Group, Independent non- executive director, Member of the Audit Committee, Chairman of the Corporate Governance and Nominations Committee 2020 — Pr. Rosseti, Member of the Board of Directors (independent director), Member of the Personnel and Remuneration Committee 2016–2021 Moscow School of Management SKOLKOVO, President 2015–2018 VTB Bank, Member of the Supervisory Council 2015–2017 Rosgeologia, Member of the Board of Directors 2014 — Pr. International Business Leaders Forum, Member of the Board of Trustees 2014 — Pr. MC NefteTransService, Chairman of the Board of Directors 2014 — Pr. Sovcomflot, Independent director, Member of the Strategy Committee 2014–2019 NOVATEK, Independent director, Chairman of the Audit Committee, Member of the Remuneration and Nomination Committee 2009–2020 National Research University Higher School of Economics, Professor (part- time) at the School of Finance of the Faculty of Economic Sciences 2018 — Pr. Medicina, Chairman of the Board of Directors Education He was awarded Aristos Award in the Independent Director category (2009); Special Award for Merit in Managerial Education (2016), Director of the Year National Award in the Independent Director category (2009), and the International Award “Person of the Year” in the Business Reputation category (2012). He received a special award “Contribution to the Development of the Institution of Independent Directors” in 2016 by the Independent Directors Association and the Russian Union of Industrialists and Entrepreneurs. He was awarded the Order of Honour. He received Commendations of the President of the Russian Federation. He is an Honoured Economist of the Russian Federation. Ufa Aviation Institute, Degree in Aviation Instrument Making Russian Academy of Public Administration under the President of the Russian Federation, Degree in Law, PhD in Sociology Moscow School of Management Skolkovo, Executive Coaching for the Development of Executives, Top Management Teams and Organisations Key competencies > Law and corporate governance > Finance and audit > Human resources 2017 — Pr. Sovcomflot, Chairman of the Audit Committee, Member of the Compensation Committee 2017 — Pr. PhosAgro, Member of the Board of Directors, Member of the Audit Committee, Member of the Remuneration and Human Resources Committee, Member of the Sustainable Development Committee 2016 — Pr. SKOLKOVO Endowment Fund, Director 2016 — Pr. Association for the Development of Moscow School of Management SKOLKOVO, Executive Director 2020 — Pr. The Coordinating Council of the Russian Union of Industrialists and Entrepreneurs on Combating COVID-19, Chairman of the Council 2015 — Pr. Russian-Argentine Business Dialogue of the Russian Union of Industrialists and Entrepreneurs (RUIE) and the Argentine Industrial Union (UIA), Co-chair from the Russian side 2019 — Pr. Russian Union of Industrialists and Entrepreneurs, Member of the Management Board Bureau 2019 — Pr. The Russia–Brazil Business Council, Chairman of the Council 2017 — Pr. The Russia–Argentina Council of Entrepreneurs at the Russian Chamber of Commerce, Chairman of the Council 2016 — Pr. Russian Association of Fertilizer Producers, President 2016 — Pr. Miners of Russia non- commercial partnership, Deputy Chairman of the Supreme Mining Council 2016 — Pr. Russian Rhythmic Gymnastics Federation, Chairman of the Board of Trustees, Vice President 2015 — Pr. Russian Union of Industrialists and Entrepreneurs, Member of the Management Board 2015 — Pr. Russian Olympians Foundation, Member of the Council of Trustees 2014 — Pr. International Fertilizer Association (IFA), Member of the Board of Directors 2014 — Pr. Russian Chess Federation, Member of the Board of Trustees 2013 — 2022 PhosAgro, CEO, Chairman of the Management Board, Member of the Strategy Committee, Member of the Environmental, Health and Safety Committee, Member of the Risk Management Committee 2013 — 2022 PhosAgro, Member of the Board of Directors 2012 — Pr. PhosAgro-Region, Member of the Management Board 2012 — Pr. Andrey Guryev Charitable Foundation, Chairman of the Management Board 2011 — Pr. Moscow Rhythmic Gymnastics Federation, President University of Greenwich (UK), Bachelor’s degree in Economics Academy of National Economy under the Government of the Russian Federation St Petersburg Mining University, PhD in Economics Titles of honour and awards In 2021, he was awarded the Order of Merit to the Fatherland, 2nd class, and the Order of Pirogov for considerable contribution to organising efforts to provide medical care and to prevent the spread of COVID-19. In 2022, he was awarded the Order of Rio Branco, 4th class, for his contribution to the development of bilateral relations between Russia and Brazil. Key competencies > Strategy > Finance and audit > Chemistry and mining engineering > Environment, health and safety About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 228 229 Corporate Governance Mikhail Rybnikov Member of the Management Board, Member of the Board of Directors and Deputy CEO at PhosAgro until 10 March 2022, CEO and Chairman of the Management Board at PhosAgro from 11 March 2022 Year of election: 2016 Equity interest / Stake of ordinary shares: 0.0258% Date of birth: 30.11.1975 Corporate Secretary The Corporate Secretary is responsible for day-to-day interactions with the shareholders, coordination of the Company’s efforts to protect shareholder rights and interests, and support provided to the Board of Directors to ensure its efficient performance. The Corporate Secretary is appointed by the Board of Directors. The operating procedures of the Corporate Secretary are governed by the Regulation on the Corporate Secretary approved by the Board of Directors. Regulation on the Corporate Secretary Professional experience 2022 — Pr. PhosAgro, CEO 2016 — Pr. PhosAgro, Member of the Board of Directors Lomonosov Moscow State University, Master’s degree in Economics Education 2021 — 2022 PhosAgro, Deputy CEO 2021 — Pr. PhosAgro, Executive Director 2016 — Pr. PhosAgro-Region, Member of the Management Board 2018 — Pr. Samoilov Scientific Research Institute for Fertilizers and Insectofungicides, Member of the Board of Directors 2015–2017 PhosAgro-Cherepovets, CEO, Chairman of the Management Board 2018 — Pr. Apatit, Advisor to the CEO (part- time) 2018–2020 PhosAgro, First Deputy CEO 2013 — Pr. PhosAgro, Member of the Management Board, Chairman of the Environmental, Health and Safety Committee, Member of the Strategy Committee, Member of the Sustainable Development Committee. 2018–2019 Apatit, Member of the Management Board 2013–2018 PhosAgro, Executive Director (part-time) 2017–2018 Apatit, CEO, Chairman of the Management Board Key competencies > Strategy > Finance and audit > Chemistry and mining engineering > Environment, health and safety Sergey Samosyuk Year of election: 2016 Date of birth: 01.10.1976 Professional experience Education Achievements 2021 — Pr. AgroGard-Finance, Member of the Board of Directors 2021 — Pr. Giproruda, Member of the Board of Directors 2017 — Pr. Apatit, Advisor to the CEO 2016 — Pr. PhosAgro, Corporate Secretary St Petersburg State University of Economics, Degree in Engineering and Economics St Petersburg University, Degree in Law National Research University Higher School of Economics, Executive MBA. 2020 Director of the Year National Award for the best corporate governance directors / corporate secretaries. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 230 231 Corporate Governance The committees of the Board of Directors are advisory and consultative bodies made up of the current Board members with relevant experience and expertise in committees’ specific focus areas. The committees can also engage external experts and consultants in their work. The primary role of the committees is the preliminary consideration of key issues submitted for review by the Company’s Board of Directors. The committees are responsible for making sure that issues brought before the Board have been sufficiently reviewed as a way to enable the directors to cast their votes based on full and accurate information. To achieve this, committee members maintain an ongoing dialogue with the Company’s executive bodies, other senior executives, external auditor and other advisors on the issues falling within their remit. At its first meeting on 28 May 2021 the newly elected Board of Directors established the committees without any changes to their composition given the high assessment of their performance in the 2020–2021 corporate year. Committees of the Board of Directors Committee reports Audit Committee The Audit Committee of PhosAgro’s Board of Directors is a key advisory and consultative body of the Board responsible for such critical tasks as assessing the reliability and transparency of the Company’s IFRS consolidated financial statements, reviewing and overseeing financial reporting processes, interacting with the external auditor, overseeing compliance with relevant laws and regulations and managing and directing the internal audit function. Since 2018, the Committee’s has consisted of independent directors only. The Committee’s activities are governed by the Regulation on the Audit Committee. Regulation on the Audit Committee 6meetings were held in 2021 Committee members: Marcus Rhodes Committee Chairman, independent director Sven Ombudstvedt Committee member, independent director James Rogers Andrey Sharonov Committee member, independent director Committee member, independent director The Committee’s statistics 5 5 26 5 5 27 5 5 26 5 5 27 6 35 6 35 6 6 2021 2020 2019 2021 2020 2019 Meetings Meetings Including in person / (in person) via video Matters Including in person / via video Matters Internal audit and control were another central focus area in the reporting year. The Internal Audit Policy of PhosAgro was reviewed following the Bank of Russia’s recommendations for the arrangement of risk management, internal control, internal audit, and activities of the audit committee of the board of directors (supervisory board) in public joint-stock companies. As a result of the review, no significant changes were made. We also assessed the Company’s internal control and internal audit systems with the assistance of KPMG who concluded that they were well developed, robust and effective. The work plan for the Internal Audit Department was discussed and approved and we carried out a thorough assessment of its performance. We certainly could not ignore the growing interest of investors and other stakeholders in the non-financial aspects of business. In 2021, we completed a detailed analysis of non-financial disclosure trends, including the development of uniform principles for non- financial disclosures and the alignment and integration of various reporting standards. Also during the reporting year, the Committee met twice to discuss the concept of an Audit and Assurance Key highlights in 2021 The quality, reliability and timeliness of financial and non-financial corporate reporting is a top priority for the investment community and other stakeholders. We undertake consistent efforts to ensure that you receive the most complete and trustworthy information on a wide scope of PhosAgro’s operations. In 2021, as part of this work, in addition to our standard responsibilities (please see the Ongoing Tasks below), we drafted a policy on the selection of external auditors and the principles for building relationships with them which was approved by the Board of Directors. This policy sets out the grounds and procedures for selecting the external auditor, maximum duration of services, rules for rotating the audit partner, and the maximum proportion of non-audit service fees paid to the incumbent auditor. policy. After much debate, it was decided that this was not appropriate to introduce at this time and that we would revisit the concept in December 2022. Finally, the Audit Committee initiated the development of PhosAgro’s draft tax strategy. The draft will be discussed at the next audit committee meeting and will be presented to the Board of Directors in the first half of 2022. > review of the quarterly IFRS External auditor condensed consolidated financial statements, along with ensuring the adequacy of disclosures; > review and discussion of the results of the annual audit and quarterly reviews by the external auditor; > review of the external auditor plan for the 2021 audit; > review and discussion of the results of the work of Internal Audit; The Committee’s approach to the assessment of the independence and effectiveness of the external audit process, as well as to the appointment or reappointment of the external auditor is comprehensively described in the External Auditor Selection and Cooperation Policy of PJSC PhosAgro approved by the Company’s Board of Directors in April 2021. Ongoing tasks in 2021 During the reporting period, the Audit Committee held six meetings, where 35 matters were considered, mainly in the following areas: > analysis of the Company’s compliance with Russian and European legislation on the protection and use of insider information; > analysis, review and discussion > analysis of the Company’s of the Company’s annual financial performance based on the IFRS consolidated financial statements, including reasons for changes as compared to the previous periods and obtaining a clear understanding of the disclosures; corporate governance compliance with the Russian CGC and the UK Corporate Governance Code; > discussion with legal and tax department heads about ongoing issues that may have an impact on the IFRS financial statements. Marcus Rhodes Audit Committee Chairman PhosAgro’s External Auditor Selection and Cooperation Policy About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 232 233 Corporate Governance Remuneration and Human Resources Committee According to the Regulations on the Remuneration and Human Resources Committee . Regulations on the Remuneration and Human Resources Committee 4 meetings were held in 2021 Committee members: James Rogers Irina Bokova Committee Chairman, independent director Committee member, independent director Andrey Sharonov Committee member, independent director The Committee’s statistics 4 4 15 5 5 14 4 4 15 4 16 5 5 14 4 16 4 4 2021 2020 2019 2021 2020 2019 Meetings Meetings Including in person / (in person) via video Matters Including in person / via video Matters a prerequisite and the only guarantee of career growth, and we are happy that the Company’s management shares this belief. At the same time, at the Committee’s initiative and as part of the efforts to implement best ESG practices, the Board of Directors approved a new version of the Personnel Management Policy, which was supplemented with a number of recommendations from the International Bill of Human Rights and the UN Guiding Principles on Business and Human Rights, along with regulations on work and rest hours and labour disputes. Ongoing tasks in 2021 We also stayed focused on regular matters: > assessment of professional skills, independence, engagement and important external nominations or appointments to the Board of Directors; > best practice guidance and analysis following the appraisal of the Board of Directors’ performance; > performance assessment of the Company’s executive bodies, other key employees, and the Corporate Secretary; > assessment of social and employee training programmes, including the progress towards a sustainability target approved in the Strategy to 2025 – the number of employee training hours; > review of the outcomes following the annual staff loyalty and satisfaction survey, including progress towards a sustainability target approved in the Strategy to 2025 – integrated employee loyalty index. Key highlights in 2021 In the reporting year, taking into account the results of the Committee’s self-appraisal, its members focused on the following matters: > succession planning for the Board of Directors, executive bodies and other key employees, including implementation of the committee’s earlier recommendations to develop a succession plan for N-1 executives; > review of all internal regulations of the Company related to the incentive system. The existing management incentive system, which relies on key performance indicators (KPIs) correlated with strategic targets, made another step forward in 2021, covering as many as 280 people from N to N-3 levels. A notable part of this growth came from the extended scope of KPIs linked to the Company’s sustainability targets. The Committee confirmed that the existing remuneration framework is efficient and in line with the Company’s requirements For more information on the remuneration of the Company’s key employees, see the Management remuneration section on page 262. In April 2021, the Committee added oversight over securing diversity, gender equality and inclusion to its goals and objectives set forth in the Regulations on the Remuneration and Human Resources Committee. We are confident that our people’s professionalism, consistently strong performance and adherence to corporate values are Two times a year, when initially assessing nominations to the Board of Directors and subsequently when finalising its composition, the Committee decides which reasons should disqualify members from serving on it. While preparing the shareholder information for the annual general meeting, the Committee, among other factors, analysed the effect of the below appointments of independent directors on their ability to duly discharge their responsibilities as the Company’s Board members: Xavier Rolet: Shanghai Institute of Finance for the Real Economy — SIFRE, The Public Investment Fund, Saudi Stock Exchange TADAWUL, Shore Capital Markets, TowerBrook Capital Partners L.P., Golden Falcon Special Acquisition Corporation, World Quantum Growth Acquisition Corporation Sven Ombudstvedt: Norske Skog ASA, Norske Skog Norway Holding AS James Rogers: Virtus Total Return Fund Inc, Beeland Interests Inc., Santiago Gold Fund, Genagro Limited, Duff & Phelps Select Energy MLP Fund Inc., AgroGard-Finance, Spanish Mountain Gold Limited, ENPlus Co Ltd, etc. Andrey Sharonov: Sberbank, Sovcomflot, Rosseti, En+ Group Plc, Medicina, etc. Natalia Pashkevich: St. Petersburg Mining University Irina Bokova: Ban Ki-moon Centre for Global Citizens, Federation Internationale de l’Automobile, FIA Foundation The Committee found that in the reporting year the above external appointments did not prevent the Board members from duly discharging their responsibilities, while also maximising their contribution to the Company’s growth. Environmental, Health and Safety Committee GRI 2-16 The Committee is governed by the Regulations on the Environmental, Health and Safety Committee. Regulations on the Environmental, Health and Safety Committee of the Board of Directors 2 meetings were held in 2021 Committee members: Mikhail Rybnikov Committee Chairman, executive director Andrey A. Guryev Committee member, executive director Natalia Pashkevich Committee member, independent director The Committee’s statistics 3 3 17 2 2 13 3 3 17 2 14 2 2 13 2 14 2 2 2021 2020 2019 2021 2020 2019 Meetings Meetings Including in person / (in person) via video Matters Including in person / via video Matters James Rogers Chairman of the Remuneration and Human Resources Committee About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 234 235 Corporate Governance also designed comprehensive biodiversity protection programmes for its Cherepovets and Volkhov sites. The main goals and tasks in these areas were: Strategy Committee GRI 2-16 he Committee’s activities are governed by the Regulations on the Strategy Committee. > monitoring compliance with HSE laws and progress in reducing negative climate impact from the Group’s production activities; > assessing environmental, social, technological, climate and industrial risks associated with the Group’s production activities; > reviewing investigation records on industrial accidents and incidents, environmental laws violation, and breach of climate impact regulations; > considering proposals on working conditions improvement, safety regulations compliance and injury frequency rate reduction, as well as on the reduction of greenhouse gas emissions and pollutant discharges, waste generation and disposal, and increase in energy efficiency; > analysing the progress on programmes and initiatives to introduce resource and energy efficiency solutions and eco- efficient technologies. The reporting year saw the Regulations on Committee amended to add climate change issues to the Committee functions. As part of its new powers, the Committee oversees progress against the Company’s low-carbon transition plan. In the reporting year, the landmark event was the certification of the quality management system, the certification of the environmental management system at all the four production sites of the Group for compliance with ISO 9001 and ISO 14001, and the certification of the health and safety management system at the Cherepovets site for compliance with ISO 45001. Apatit saw its first certification under GMP+ B4 for affreightment of rail transport in feed supplies (feed grade urea and monocalcium phosphate). We made excellent progress in improving energy efficiency. In 2021, similarly to the last few years, consumption rates for all major energy resources showed a steady decline. The Committee continued monitoring the Energy Efficiency Programme. Approved in 2020, it covers all our projects and initiatives designed to reduce energy consumption. We also remained focused on regulatory compliance, reviewing, among others, draft laws, which are yet to be considered and approved. Ongoing tasks in 2021 In the reporting year, the Committee held two meetings and discussed 14 matters. The Committee oversaw three Company’s workstreams: > health and safety; > environmental protection; > energy efficiency. Mikhail Rybnikov Chairman of the Environmental, Health and fety Committee Key highlights in 2021 The most important results in 2021 include a decrease in the number of severe injuries, a decrease in the number of incidents, no breakdowns, fires and traffic accidents with injuries or major damage. We were deeply saddened by the fatality involving a contractor’s employee which occurred in December 2021 at our Volkhov branch. The investigation is underway. We will thoroughly analyse the circumstances of the fatality and communicate conclusions and recommendations on preventive measures will be communicated to the management and employees of the facility and contractors. This tragedy once again highlights the importance of the efforts taken by the Board of Directors and the management to enhance industrial safety. The most frequent violations were of fire safety requirements along with safety rules for vehicle operation and electrical works. We paid special attention to the safety of contractor activities, at all stages of interaction with the counterparties, from selecting a contractor and work preparations to overseeing their activities and completing work. Among the significant safety projects initiated by the Committee in 2021, we would like to note the three-year Safety Culture Transformation Project seeking to achieve the safety culture level of 3.1 as per the Bradley curve, and the initiative to improve the safety of high-risk operations. In terms of environmental protection, the reporting period saw positive changes in unit pollutant emissions, unit waste water discharges and waste recycling rate. We take consistent efforts to reduce the environmental impact and achieve the desired environmental effect. The Company Regulations on the Strategy Committee Key highlights in 2021 2 meetings were held in 2021 Committee members: Sven Ombudstvedt Committee Chairman, independent director The Strategy Committee focused on monitoring the progress towards the 2025 goals approved in 2019. According to a resolution of the Board of Directors, control over compliance of the current activities with the approved strategy is carried out at least twice a year by reviewing the monitoring results, as well as in the course of the Board of Director’ review of the Company’s annual budgets. At both meetings the Committee checked production volumes, sales in priority markets, and expansion of sales and transport infrastructure against the Strategy. Another innovation for the Committee was the mandatory monitoring of the approved ESG indicators, including the first-ever monitoring of indicators under the climate and water strategies approved in December 2020. Andrey G. Guryev Committee member, non- executive director The 2021 results show that we are well on our way to the 2025 goals. Andrey A. Guryev Committee member, executive director Mikhail Rybnikov Committee member, executive director The Committee’s statistics 2 2 3 2 2 4 2 2 3 2 2 4 2 4 2 4 2 2 2021 2020 2019 2021 2020 2019 Meetings Meetings Including in person / (in person) via video Matters Including in person / via video Matters We expect the production of phosphate rock to exceed the approved target level of 11 mt in 2025. In the reporting year, we completed the majority of construction operations, and in Q1 2022 we commissioned the 1st start-up facilities at level 10 of the Kirovsk mine. In a few years, the amount of ore mined at this facility will be just under 9 mtpa, which is almost a quarter of our total production. The total reserves of the horizon are estimated at 95 mt of ore. In the reporting year, we managed to achieve another essential strategic goal ahead of schedule as we met the 2025 target for internal phosphate rock processing (8.4 mt), with the corresponding increase in mineral fertilizer production, in particular thanks to the ambitious Volkhov site development project, which had been completed, and the upgrade programme currently underway in Balakovo. We expect PhosAgro Group to maintain its target sales share in premium markets, although we allow for minor deviations due to changes in market conditions and adherence to the best netback strategy. In 2021, the Group achieved interim targets in such indicators as the number of distribution and logistics centres, and storage capacity for solid and liquid mineral fertilizers. We believe that the 2025 goals will also be successfully achieved in this important area, reflecting our commitment to be closer to the consumer. Continue >>> About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 236 237 Corporate Governance In addition, the Committee focused on monitoring the progress of the investment projects underlying PhosAgro Group’s organic growth in the current strategic cycle, together with development of new projects that will ensure the further dynamic evolution of the Group. Our strategy cannot be static, we are developing, the external economic environment is changing. In 2021, we began developing an updated strategy to 2025 and further to 2030, and I am sure that in 2022 we will be able to present it to our stakeholders. Ongoing tasks in 2021 In 2021, the Strategy Committee held two meetings, focusing on the following matters alongside those mentioned above: > the implementation status of the Company’s Development Strategy to 2025; > key target indicators and sales development models by market group; > key areas of logistics development; > future projects (assessment of prospects, preliminary calculation of the new products efficiency). Sven Ombudstvedt Chairman of the Strategy Committee Risk Management Committee GRI 2-16 The Committee’s activities are governed by the Regulations on the Risk Management Committee. Sustainable Development Committee GRI 2-16 Regulations on the Risk Management Committee The Committee’s activities are governed by the Regulations on the Sustainable Development Committee. Regulations on the Sustainable Development Committee The Committee’s statistics 4 4 10 3 3 8 4 4 10 3 3 8 4 9 4 9 4 4 Committee members: Sven Ombudstvedt Committee Chairman, independent director Xavier Rolet Committee member, independent director Andrey A. Guryev Committee member, executive director Meetings Meetings Including in person / (in person) via video 2020 Matters Including in person / via video 2020 2021 2019 2019 2021 2020 2019 2021 2020 2019 Matters 2021 Committee members: Irina Bokova Andrey Sharonov Mikhail Rybnikov Committee Chairman, independent director Committee member, independent director Committee member, executive director The Committee’s statistics 2 2 9 3 3 10 2 2 9 3 3 10 4 18 4 18 4 4 Meetings Meetings Including in person / (in person) via video Matters Including in person / via video 2019 2020 2019 2021 2020 2021 2020 2019 2021 2020 2019 Matters 2021 Key highlights in 2021 One of the key updates to PhosAgro risk map was the integration of the climate- related risk. Thus, climate risk management has become an integral part of the Company’s risk management system. Climate risks were considered in the context of physical and transition (regulatory) factors, taking into account rapidly changing conditions and requirements in this domain. In 2022, the Committee will keep a close watch for the use of a risk- oriented approach while implementing PhosAgro’s Climate Strategy. The 2021 independent assessment once again showed that PhosAgro generally complies with the relevant industry’s best practices and is even ahead of its peers in some areas. As in the previous year, the Company continued to monitor the risk of the new coronavirus infection. The waves of COVID-19 had its toll on practically all our operations. Nevertheless, the steps taken by the Group helped prevent the suspension of production operations and avoid disruptions to business processes. In addition, in 2021, the Committee regularly reviewed key cybersecurity metrics as well as the status of measures to develop it. With effective cybersecurity tools in place, PhosAgro Group did not record any material incidents in this area in 2021. The key risks were reviewed in conjunction with the Company strategy to assess their negative impact on the Company’s strategic goals. On top of that, the Committee took part in developing Board of Directors competencies in risk management by organising a training workshop in 2021. Ongoing tasks in 2021 The Committee held four meetings in 2021 focusing on the following matters alongside those mentioned above: > results of a reassessment of the Company’s key risks and updating its risk map for 2021. > evaluation of the Company’s risk management and internal control system. Sven Ombudstvedt Chairman of the Risk Management Committee Decisions are made by the project steering committee, which convenes on a monthly basis. The Committee coordinates and oversees the project. The project covers all risks associated with the climate agenda, both physical and regulatory. However, due to the potentially serious impact on PhosAgro Group’s business, carbon border adjustment mechanism was subject to a separate review in December 2021. The Committee also reviewed the opportunities presented by the climate agenda, including the analysis of peer strategies. 2. In 2020, at the Committee’s recommendation, the Company developed an action plan to improve the Company’s ESG ratings, and the Committee reviews appropriate reports at each meeting. We consider this practice to be effective in terms of developing and prioritising organisational and technical sustainability measures, and intend to maintain this approach going forward. We are pleased that PhosAgro has managed to significantly improve its position in the most reputable international ratings and are looking forward to further steady progress in this area. in which sustainability-related goals are adopted and monitored. In particular, the Committee received relevant reports on innovation management, procurement, and international projects. Ongoing tasks in 2021 At each of its four meetings, the Committee focused on the following matters alongside those mentioned above: > controlling compliance with applicable statutory requirements and internal sustainability objectives; > preparing recommendations to the Board of Directors on determining the Company’s strategic sustainable development objectives; > reviewing sustainable development reports; > supervising PhosAgro’s sustainable development disclosure; > analysing PhosAgro’s practices and bylaws in terms of compliance with sustainable development rating requirements and managing efforts to maintain and improve the Company’s rating positions. 3. An important innovation in the Committee’s work in 2021 was the expansion of the functional areas Irina Bokova Chairman of the Sustainable Development Committee from 2019 to 15 March 2022 Key highlights in 2021 In 2021, the Committee held four meetings and reviewed 18 matters, thereby significantly expanding its remit: 1. As the Board of Directors approved the Climate Strategy in December 2020 and the low-carbon transition plan was put into action, one of the Committee’s key roles in the reporting year was to monitor the activities specified in these documents. All the workstreams related to PhosAgro Group’s climate agenda were united into a dedicated project of Apatit’s Project Execution and Management Department. The project working group includes representatives from all the Group’s key functions, including procurement, production, energy, economics, sales, promising technology development, environment, personnel and social policy, and IT – a total of 25 people. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 238 239 Corporate Governance Executive Bodies As at 31 December 2021, the Management Board was composed of: Andrey A. Guryev CEO Siroj Loikov Deputy CEO Alexander Seleznev Сhief of Staff for the CEO Alexei Sirotenko Deputy CEO for Corporate and Legal Affairs и правовым вопросам Number of Management Board meetings Matters considered 12 12 10 8 8 6 4 4 4 In charge of PhosAgro’s day-to- day operations are two executive bodies accountable to the Board of Directors: the collegial body (Management Board) and the sole executive body (CEO). In 2021, the Management Board held five meetings and reviewed 10 items most of which were related to the budget discipline. In November 2021, the approved number of Management Board members was 7 unchanged from the end of 2020 2019 2020 2021 2019 2020 2021 2019 2020 2021 Revision and approval of PhosAgro’s quarterly and annual budgets Review of operating and financial reports Mikhail Rybnikov Deputy CEO Sergey Pronin First Deputy CEO and Managing Director of PhosAgro Alexander Sharabaiko Deputy CEO for Finance and International Projects At least twice a year (after the end of the previous calendar year and after a new Management Board is elected) the CEO submits a report on the performance of PhosAgro’s executive bodies to the Board of Directors for review and approval. We ensure that the executive management focuses on PhosAgro’s strategy and long-term sustainable business development for the benefit of our shareholders and other stakeholders by linking executive remuneration to the Company’s goals and values, as well as ESG KPIs. For more information, see page 262. Changes in the Management Board composition The following changes to the Management Board took place in 2021. Roman Osipov was not appointed to the new Management Board approved by the Board of Directors on 3 November 2021 due to his retirement from PhosAgro, and Sergey Pronin, First Deputy CEO and Managing Director of PhosAgro, joined the Management Board. Roman Osipov Business Development Director About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 240 241 Corporate Governance Information on members of the Management Board Andrey A. Guryev Member of the Board of Directors, CEO and Chairman of the Management Board at PhosAgro from 2013 to 10 March 2022 Year of election: 2013 Equity interest / Stake of ordinary shares: 0.048% Date of birth: 07.03.1982 Mikhail Rybnikov Member of the Management Board, Member of the Board of Directors and Deputy CEO at PhosAgro until 10 March 2022, CEO and Chairman of the Management Board at PhosAgro from 11 March 2022 Year of election: 2016 Equity interest / Stake of ordinary shares: 0.0258% Date of birth: 30.11.1975 Andrey A. Guryev detailed biography on page 229. Mikhail Rybnikov detailed biography on page 230. Alexander Seleznev Member of the Management Board, Сhief of Staff of PhosAgro Year of election: 2019 Equity interest / Stake of ordinary shares: None Date of birth: 06.07.1984 Professional experience Education 2019 – Pr. PhosAgro, Chief of Staff for the CEO, Member of the Management Board in 2015–2019, Head of IR Bauman Moscow State Technical University, Information Security Key competencies > Finance and audit Siroj Loikov Member of the Management Board, First Deputy CEO of PhosAgro Year of election: 2013 Equity interest / Stake of ordinary shares: None Date of birth: 09.09.1972 2015–2018 PhosAgro, Human Resources and Social Policy Director 2015–2018 Korporativnoe pitanie (Corporate Nutrition), Member of the Board of Directors Key competencies > HR management 2015–2017 PhosAgro-Cherepovets, Human Resources and Social Policy Director, Member of the Management Board 2013 — Pr. PhosAgro, Member of the Management Board 2013–2017 Izumrud, Member of the Board of Directors Professional experience 2020 — Pr. PhosAgro, First Deputy CEO 2020 — Pr. Apatit, Advisor to the CEO (part-time) 2018–2020 PhosAgro, Deputy CEO 2018–2020 Apatit, Deputy CEO (part-time) 2018–2019 PhosAgro-Region, Deputy CEO for Human Resources (part-time) 2017–2018 Tirvas, Member of the Board of Directors Education 2017–2018 Apatit, Human Resources and Social Policy Director 2017–2018 Apatit, Member of the Management Board Tashkent State University of Economics, International Economic Relations Nottingham University Business School (UK), Bachelor’s degree in Business Management About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 242 243 Corporate Governance Roman Osipov Member of the Management Board until October 2021 Year of election: 2017 Equity interest / Stake of ordinary shares: None Date of birth: 04.11.1971 Alexei Sirotenko Member of the Management Board, Deputy CEO of PhosAgro for Corporate and Legal Affairs, Legal Affairs Director at Apatit Year of election: 2013 Equity interest / Stake of ordinary shares: None Date of birth: 03.01.1969 Professional experience 2018–2021 Apatit, Advisor to the CEO (part-time) 2013–2021 PhosAgro, Business Development Director 2013–2021 AgroGard-Finance, Member of the Board of Directors 2018–2019 Apatit, Member of the Management Board Education 2017–2021 PhosAgro, Member of the Management Board 2014–2021 Giproruda, Member of the Board of Directors Baltic State Technical University, Master’s degree from the LETI-Lovanium International School of Management Key competencies > Strategy > Chemistry and mining engineering Professional experience 2017 — Pr. Apatit, Legal Affairs Director 2013 — Pr. PhosAgro, Member of the Management Board 2010 — Pr. PhosAgro, Deputy CEO for Corporate and Legal Affairs (part-time). 2017–2019 Apatit, Member of the Management Board Education 2015–2017 PhosAgro-Cherepovets, Legal Affairs Director, Member of the Management Board Lomonosov Moscow State University, Jurisprudence Key competencies > Law and corporate governance Sergey Pronin Member of the Management Board, First Deputy CEO, Managing Director of PhosAgro Year of election: 2021 Equity interest / Stake of ordinary shares: None Date of birth: 10.05.1964 Alexander Sharabaiko Member of the Management Board, Deputy CEO for Finance and International Projects of PhosAgro Year of election: 2018 Equity interest / Stake of ordinary shares: None Date of birth: 25.02.1977 Professional experience Education 2021 — Pr. PhosAgro, First Deputy CEO and Managing Director Moscow Kuybyshev Construction Engineering University, Industrial and Civil Construction, PhD in Economics 2019 — Pr. PhosAgro-Region, Advisor to the CEO (part-time) Titles of honour and awards 2017 — Pr. Apatit, Deputy CEO for Sales and Logistics 2017–2021 PhosAgro, Deputy CEO for Sales and Logistics 2012 — Pr. PhosAgro-Region, Member of the Management Board 2012–2017 PhosAgro-Region, CEO, Chairman of the Management Board Hе has been awarded the Medal in Commemoration of the 850th Anniversary of Moscow, the Zhukov Medal, gold and silver medal “For Contributions to the Development of the Agro-Industrial Complex of Russia”. Prize- winner of the Peter Stolypin National Prize and prize-winner of the Highest Russian Public Award of the Russian Federation in foodstuff production “For the Abundance and Prosperity of Russia”. Key competencies > Strategy > Chemistry and mining engineering Professional experience 2019 — Pr. PhosAgro, Deputy CEO for Finance and International Projects 2018 — Pr. PhosAgro, Member of the Management Board 2017 — Pr. Apatit, Advisor to the CEO (part-time) 2017–2019 Apatit, Member of the Management Board 2017–2018 PhosAgro, Member of the Board of Directors 2015 — Pr. PhosAgro-Region, Member of the Management Board Education 2015–2017 PhosAgro-Cherepovets, Advisor to the CEO (part-time), Member of the Management Board 2014–2019 PhosAgro, Director for Economic Affairs and Finance 2013–2017 PhosAgro, Member of the Management Board Belarus State Economic University, Finance and Credit University of Nottingham (UK), Bachelor’s degree in Business Management Key competencies > Finance and audit About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 244 245 Corporate Governance Corporate Controls Risk governance and internal control Organisational structure of the risk management and internal control framework GRI 2-12 Review Committee Audit Committee Board of Directors Risk Management Committee The risk management and internal control framework is a set of organisational measures, methods, practices and standards of corporate culture. It also embraces actions taken by the Company to strike the right balance between value growth, profitability and risks, support financial sustainability, and ensure efficient operations, protection of its assets, compliance with the laws and bylaws, along with timely and accurate reporting. The Board of Directors defines the key principles of, and approaches to, risk management and internal controls, oversees the Company’s executive bodies, and performs other key functions. The Board’s Risk Management Committee provides recommendations to the Board of Directors on identifying material risks and developing relevant management tools and measures to enhance the risk management framework. The Board’s Audit Committee focuses on assessing and making proposals to improve the risk management and internal control efficiency. On top of that, its members supervise the preparation of accounting (financial) statements and the measures taken to prevent fraudulent behaviour of the Company’s employees or third parties. The Review Committee elected by the General Shareholders’ Meeting exercises control over the financial and business operations of the Company. The executive bodies establish and maintain an efficient risk management and internal control framework. To this effect, they have set up a Risk Commission that monitors the status and effectiveness of risk management initiatives. The monitoring results serve as a basis for the relevant proposals issued by the Commission to executive bodies and the Board of Directors. Following the audits, the Internal Audit Department provides the Board of Directors and executive bodies with recommendations and reports, including, among other things, the assessment of the current status, reliability and efficiency of the corporate governance, risk management and internal control framework. The Risk Management and Internal Control Department is charged with the general supervision of risk management, including related activities, and consolidated reporting to the Board of Directors and executive bodies. As part of their duties, heads of other organisational units are responsible for building, documenting, implementing, monitoring and developing the risk management and internal control framework in their respective functional areas. The framework requires the Company’s employees to identify and assess relevant risks and efficiently implement the controls and risk management initiatives. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information For more information on key roles and other relevant information, see the Risk Management and Internal Control Policy Chief Executive Officer Executive bodies Risk management Internal Audit Department Risk Management and Internal Control Department Other structural departments administrative reporting line functional reporting line In 2021, PhosAgro’s risk management and internal control framework performed strongly thanks to timely identification and assessment of risks, as well as development and implementation of risk management measures. On a quarterly basis, the Board of Directors reviewed reports on the management of the Company’s key risks. PhosAgro’s executives paid special attention to managing these key risks. The Risk Commission continuously monitored the status of risk management activities and, when necessary, initiated changes to improve those related to key risks. 246 247 Corporate Governance The audits were followed by proposals to update the logistics strategy, streamline the approach to project management and improve cooperation between business units. The management developed and approved corrective action plans, with the progress monitored by the Internal Audit Department. The 2022 audit plan covers audits of the procurement and inventory management business processes, IT audit of the automated process control system, review of the IT strategy alignment and audit of ESG targets. External assessment In 2021, PwC completed an external assessment of the IAD’s compliance with the International Standards for the Professional Practice of Internal Auditing and the Institute of Internal Auditors’ Code of Ethics. The IAD earned high scores in the assessment for being generally compliant with all the applicable standards and requirements. According to PwC, its level of organisational and process maturity is above the average among similar functions in the mineral fertilizer and other industries. We plan to organise external assessments once every three years in the future. Development of the risk management and internal control framework in 2021 The Company is making a consistent effort to develop its risk management and internal control framework. In 2021, the Board of Directors reviewed the results of the framework’s independent external assessment, which showed that it was on par with those adopted by the industry’s leading companies, including: > compliance with applicable regulatory requirements, > adoption of most of the leading risk management practices such as alignment with the Company’s development strategy, risk appetite, key risk indicators, automation and robotisation in risk management, as well as integration into the Company’s incentive system and governance framework. The reporting year saw both the production sites and PhosAgro Group as a whole complete a full-year cycle of risk management and internal control, including: > ongoing risk monitoring; > analysis of key risk indicators; Review Committee The General Shareholders’ Meeting held in May 2021 elected the following members to the Review Committee: > Lusine Agabekyan; > Ekaterina Viktorova; > Olga Lizunova. Internal audit PhosAgro’s Internal Audit Department (IAD) assists the Company’s top executives and the Board of Directors in improving the management of business processes and enhancing the internal control and risk management framework. In doing this, it uses a risk-oriented approach and works closely with the Risk Management, Internal Control and Economic Security Departments, and the Company management. Internal audit goals, objectives and powers are outlined in the Internal Audit Policy as approved by the Board of Directors on 18 May 20211. The Committee endorsed PhosAgro’s financial statements for 2021, with its report dated 21 February 2022 included in the materials for the shareholders to prepare for the Annual General Shareholders’ Meeting. The Company’s internal audit procedure is set out in the Internal Audit Guidelines. In 2021, the Audit Committee and the Board of Directors drafted and reviewed internal audit strategic goals. We are consistently working to improve the maturity of the Company’s internal audit function in line with the plan, as well as to develop and diversify the competencies of our internal audit team. The internal audit quality is assured through regular external independent assessments and self-assessment. > development of corrective actions; Audits External audit A key element of the Audit Committee’s operations is ongoing interaction with external auditors and development of recommendations for the Board of Directors regarding the choice and approval of auditors. When selecting an auditor, we evaluate the following factors in addition to the cost of their services: > composition of the audit team (in terms of experience and qualifications), which should ensure that the statements are audited within acceptable deadlines and with adequate quality; > follow-up control and review. 5 20 6 16 4 16 Internal Audit Policy > the auditor’s independence evaluated In 2021, PhosAgro Group also continued rearranging a number of risks in different focus areas such as climate action, occupational health and safety, and information and cybersecurity. Plans for 2022 PhosAgro Group looks to maintain and further develop the existing elements of its risk management framework based on the best practices, while also taking into account the changing external and internal factors. For information on key risks and risk management, see the Strategic Report section on page 68. Scheduled Unscheduled 2019 2020 2021 Audit of business processes The audit plan for the calendar year is subject to review, discussion and approval by the Audit Committee and the Board of Directors. Audits are performed at the Group level, as well as at specific subsidiaries and their standalone business units. In addition, the Internal Audit Department monitors the effectiveness and efficiency of corrective actions taken by the management following the audit, and reports to the Audit Committee on a quarterly basis and to the Board of Directors annually. In 2021, the Internal Audit Department fully met the annual action plan. The audits covered PhosAgro Group’s business processes related to logistics, including all types of feedstock and finished products transportation, project management, insiders and inside information, as well as IT audit of production facilities. based on a variety of factors, including assessment of the scope of non-audit services provided to us by the candidate company during the relevant periods. Each offer from the current auditor for non-audit services requires confirmation by the audit partner to make sure there is no risk to independence and is submitted to the Company’s Audit Committee for consideration and approval. The Committee consents to the contract only if the scope of the non-audit services does not call into question the ability to perform the audit service independently and impartially. The Committee’s assessment of the auditor’s independence is also significantly influenced by the auditor’s internal procedures for controlling the About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information The Company engaged FBK (44/1 Myasnitskaya St., Bld. 2AB, Moscow, Russia) to audit its 2021 RAS accounting statements. The committee approach to assessing external audit’s independence and efficiency, as well as appointment and re-appointment of the external auditor is set out in the External Auditor Selection and Cooperation Policy of PhosAgro as approved by the Board of Directors on 14 April 20212. For more information on the auditors, their selection procedure and independence, see the Company’s quarterly reports3, as well as the respective section of this report that discusses the Audit Committee’s activities. impartiality and professional ethics of the auditor’s staff, including requirements for periodic rotation of the audit partner, training arranged in this area and the use of specialised software to perform the respective audits; > balance between the benefits of long-term cooperation with the auditor and the need for a fresh look at the Company’s financial statements and preparation procedures; > the auditor’s performance over the previous period. The Committee may form its opinion on the quality of the external auditor’s work during in- person Committee meetings, where the external auditor’s mandatory participants are a manager and the partner, as well as during meetings between the audit team and the Chairman of the Audit Committee held prior to the Committee meetings. PhosAgro’s auditor performs the audit of its financial and business operations in compliance with Russian laws and regulations and the agreement signed with the Company. The auditor is approved by the Company’s General Shareholders’ Meeting. The Company engaged AO PricewaterhouseCoopers Audit (10 Butyrsky Val, Moscow, Russia) to audit its 2021 IFRS financial statements. PhosAgro’s External Auditor Selection and Cooperation Policy For more information on the auditors, their selection procedure and independence, see the Company’s quarterly reports 248 249 Corporate Governance Inside information Information security PJSC PhosAgro has adopted an Inside Information Regulation compliant with the Russian laws and the EU Market Abuse Regulation (MAR). In accordance with its provisions, the Corporate Secretary’s office keeps a list of insiders, persons discharging managerial responsibilities (PDMR) and persons closely associated with them (PCA). The Regulation defines the scope of responsibilities for each insider group, which the Corporate Secretary’s office from time to time communicates to respective persons. First and foremost, these include the limitations on the use of inside information and trading in the Company’s securities. Depending on the group, an insider may be prohibited from such transactions or obliged to notify the Company or obtain its consent for such transactions. Every quarter, the Corporate Secretary’s office checks the list of shareholders to identify transactions that may have been executed in breach of such limitations. In 2021, the Board of Directors approved a revised version of the Inside Information Regulation following the enactment in April 2021 of the updated version of the Bank of Russia Instruction No. 5326-U dated 21 November 2019 On the List of Inside Information of Legal Entities Specified in Clause 1, 3, 4, 11 and 12 of Article 4 of the Federal Law No. 224-FZ On Combating Inside Information Unlawful Use and Market Manipulation, and Amendments to Certain Laws of the Russian Federation dated 27 July 2010. In accordance with the above change in the regulatory requirements, PhosAgro approved by CEO’s order a new list of inside information (List) comprising the list of inside information introduced by the Bank of Russia Instruction and the list of inside information outlined by PhosAgro with regard to the nature of its operations in line with the Federal Law No. 224-FZ dated 27 July 2010. The key changes in the list of inside information mainly covered the disclosure of the Board of Directors’ resolutions and the procedure and timelines for disclosing inside information. The List’s alignment with the applicable laws and regulations led to the following amendments to the Inside Information Regulation: > removal of the List from the Inside Information Regulation due to the need to further amend it in autumn 2021 (in accordance with the regulation registered with the Russian Ministry of Justice and coming into effect on 1 October 2021), > addition of a clause regarding the approval of the procedure and timelines for disclosing inside information identified by PhosAgro with regard to the nature of its operations and not included in the list of inside information specified in the Bank of Russia Instruction. The audit conducted by the IAD in 2021 identified no material violations of the applicable laws and the Inside Information Regulation. The audit results were reviewed by the Audit Committee and the Board of Directors. For the full text of the Regulation on Inside Information, please visit our website. The Information Security Policy is the Company’s fundamental document defining the general provisions and principles for ensuring information security. The Information Security Policy applicable to all PhosAgro Group companies and approved by the Board of Directors was first adopted in 2021. Its adoption ensues from the risks and hazards faced by the Group companies in their operations and the respective need to respond to the hazards and minimise the risks. The Policy states high priority of information security activities and sets up its key principles. They cover the target setting and planning of information security activities, as well as their implementation, quality management and process improvement. The above principles define the contents of the lower- level documents such as the Information Security Framework and other bylaws covering respective issues. This set of documents reflects modern solutions and best practices in information security. Every employee of the Internal Audit Department is responsible for ensuring information security. To this end, the Group regularly holds events to raise employees’ awareness of information security issues and develop practical skills to deal with modern threats. This, together with the use of modern information security tools and well- coordinated work of the department, helped avoid information security incidents in 2021 and in previous periods that could have caused tangible material or reputational damage. In 2021, an independent assessment of PhosAgro Group’s information security function was conducted by one of the world’s leading expert companies. The function’s main strengths, as per the assessment, were methodological and documentation support, annual information security tests, the use of tools to protect against various types of information security threats. The areas for improvement included access control and asset management processes, event monitoring and handling of information security incidents. Creating safe conditions for software development and ensuring information security in third-party interactions (supply chain security) were suggested for development. Based on the results of the above assessment, a description of the target state and a respective roadmap were also prepared by one of the world’s leading expert companies. The proposed measures were included in the 2022–2023 action plans; information security issues are submitted for consideration by the Board of Directors every six months. 1 For the full text of the Regulation on Inside Information, please visit our website 2 List of insider information 3 The Information Security Policy About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 250 251 Corporate Governance Ethical Practices Values, principles, standards, and norms of behaviour GRI 2-23, 2-24, 2-26 PhosAgro Group has a well-deserved reputation of a reliable business partner, attractive employer, responsible taxpayer, and partner to the Russian government and regions where the Company operates. The trust that our investors, employees, customers, contractors and authorities place in us is underpinned by the high ethical standards that we have adhered to since PhosAgro’s inception. We take an integrated approach to business ethics; in other words, we believe that ethical considerations are intrinsic to all aspects of our operations, from procurement and teamwork to safety and trade. We systematically analyse risks in this area and develop and implement measures to manage them. PhosAgro Group is a large company: we operate in 70 regions of Russia, supply our products to more than 100 countries, employ over 17,000 people, and have thousands of contractors and counterparties. This means that we deal with potential ethical issues on a daily basis, and our managers and employees have to be comprehensively trained to make ethically sound decisions that meet the highest standards of integrity. To achieve the above, we need to ensure that our ethical principles and standards are clearly defined and communicated to employees and counterparties. We also need to have relevant legal, organisational and informational mechanisms in place to support and, more importantly, monitor compliance with these principles and standards, which should also be overseen at the highest corporate governance level. By consistently implementing this approach for years, PhosAgro Group was able to become a company operating to the highest global standards in human rights, industrial safety, environmental protection, anti- corruption, etc. We recognise that it is hardly possible to fully eliminate ethical risks in a large and diverse organisation that has an almost global presence. We believe that by adhering to our ethical principles and standards we minimise unnecessary risks, maintain our business reputation and keep ourselves on track to achieve our ambitious production and financial targets for the benefit of PhosAgro’s shareholders and other stakeholders. Ethical standards and norms of behaviour The principles and standards of ethical behaviour when working at and with PhosAgro Group are set out in relevant policies and other internal documents, which are listed below. These are regulatory documents all the Group’s heads, officers and employees must comply with. Employees who have violated them are subject to the respective sanctions, including social condemnation, public censure through publication in the media, full or partial withholding of bonuses, and – if the employee’s action (omission) bears signs of a disciplinary offence – disciplinary measures also apply to such employee pursuant to the applicable labour and employment laws. The following internal policies and procedures governing the compliance of PhosAgro with the key principles and standards of ethical conduct are currently in effect Code of Ethics The Code outlines the key principles and rules of ethical business conduct underlying the corporate culture of PhosAgro Corporate Governance Code The Code defines the main principles of and approaches to corporate governance Code of Conduct for Counterparties The Company may refuse to cooperate with suppliers or business partners discriminating their own or subcontractors’ employees or using forced labour Anti-Corruption Policy The Policy defines the goals and objectives and sets forth the Company’s key principles and employee responsibilities in the sphere of anti-fraud and anti-corruption Regulations on Conflict of Interest The Regulations establish the procedure for identifying and resolving conflicts of interest arising with employees in the course of their employment Procurement Policy of Apatit The Policy defines the goals and responsibilities and sets forth the key principles and employee scope of functions in the sphere of procurement Modern Slavery Act Transparency Statement The Act outlines the Company’s actions to prevent all forms of modern slavery and human trafficking within PhosAgro and its supply chain Regulations on the Commission for Combating Fraud and Corruption and Regulating Conflicts of Interest The Regulations address and govern the issues pertaining to employee anti-corruption compliance Regulations on Internal Checks Regulations on Inspections The Regulations govern a set of actions taken to elicit the facts and identify the circumstances, motives and conditions of misconduct, incidents, and other violations of requirements set out in the Group’s internal documents PhosAgro Hotline Regulations The Terms set out the goals and objectives with regard to the receipt of employee reports on the matters pertaining to combating fraud, corruption and theft and identifying conflicts of interest Regulations on Business Presents and Representation Expenses The Regulations set out the procedure for receiving presents by the Company’s employees, as well as making them on behalf of the Company. The Regulations substantiate and detail the formation, structure, and documentation of representation expenses Government Relations Policy The Policy establishes the principles, areas, purpose and objectives of PhosAgro interaction with public authorities and officials Сharity Policy The Policy sets out the key principles and areas for providing charitable support on behalf of and through the funds of the Company Personnel Management Policy The Policy sets forth the Company’s and its management’s adherence to high ethical standards of transparent and fair business aimed at building the image of an employer attractive for the best professionals Regulations to Ensure Compliance with Anti- Corruption Laws as Part of Legal Support Process The Regulations outline goals and objectives for legal support of the Company’s business processes and transactions involving a high risk of corruption About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Antitrust measures The Company has approved two trade policies: for the sale of phosphate rock (Apatit’s Marketing Policy for Domestic Sales of Phosphate Rock and for the sale of certain fertilizer grades to agricultural producers (Apatit’s Trade Policy for Selling Mineral Fertilizers to Agricultural Producers). Both documents were designed to comply with antitrust laws and to mitigate risks associated with anti-competitive behaviour. Apatit’s Marketing Policy for Domestic Sales of Phosphate Rock and for the sale of certain fertilizer grades to agricultural producers Apatit’s Trade Policy for Selling Mineral Fertilizers to Agricultural Producers 252 253 Corporate Governance Communication and training about anti- corruption policies and procedures Informing, advising, and training employees Organisational and informational mechanisms PhosAgro Group has a well-thought-out set of tools in place to ensure that the Group’s employees and counterparties are kept abreast of and trained in ethical business practices and that cases of potentially unethical and corrupt behaviour are effectively reported to authorised officers and business units. Training methodology 205-2 PhosAgro Group offers ongoing training programmes to educate employees on anti- corruption in order to minimise the risk of their involvement in corrupt practices. To this end, the Group has put in place a robust training system to prevent any and all corrupt practices, mitigate possible harm, and eliminate the consequences thereof. To train and inform employees, PhosAgro Group annually develops anti-corruption courses with final tests, which are posted on the corporate intranet portal. The themes of the courses depend on the functions (responsibilities) of business units (employees) and the established system of anti-corruption standards. Target audience Training results > Human Rights and Code of Ethics Completed training programmes 2019 Managers of levels N-1, N-2, N-3, N-4, N-5, as well as managers without assigned levels (as stipulated by the organisational and staff structure of the Group), white-collar workers, including employees of branches and other standalone business units Upon completion of the anti- corruption training, a student should have an understanding of the theory of counteracting corruption in the Group; factors, causes, essence and consequences of corruption; Russian anti-corruption laws and regulations, as well as anti-corruption standards adopted in the Group; responsibility for failure to comply with anti- corruption practices Goals and objectives Provide students with updated information on laws and regulations on detecting and combating corruption in business entities. Help students develop an anti- corruption attitude, learn about methods of combating corruption and conflicts of interests and master relevant skills. Help students acquire knowledge of the causes and preconditions for corruption and practices of identifying and counteracting such cases Benefits of online training Educational materials (presentations, tests) accurately reflect the current issues of corruption at PhosAgro Group companies. The training process does not disrupt core business activities 2020 > Preventing and Resolving Conflict of Interest > Main Goals and Principles of the PhosAgro Group Code of Ethics 2021 > Principles of the PhosAgro Hotline > PhosAgro Group Anti-Corruption Policy > The test results were used to monitor the training process and served as a basis for issuing an order on additional training for students who have demonstrated poor performance To implement anti-corruption measures, the Economic Security Department approves an annual training plan, according to which employees are informed from time to time about existing internal regulations on anti-corruption, anti- corruption standards, responsibility for failure to comply with them, as well as amendments and additions thereto. The Group’s management serves as the key communication channel to emphasise the importance of compliance with the established anti-corruption measures. PhosAgro Group’s employees and counterparties have free and easy access to information about the Group’s anti- corruption practices. PhosAgro Group’s official website features a special section on anti-corruption, which contains CEO’s message about the need to strictly comply with established anti-corruption standards, as well as copies of internal documents aimed at preventing corruption (the Anti-Corruption Policy, Code of Ethics, Regulations on Conflict of Interest and on PhosAgro’s Hotline). Internal documents are supplemented by methodological materials (handouts, presentations), which explain in easy terms the anti-corruption policy, standards of conduct, responsibility, and provide examples of corruption- prone situations that employees may encounter in the course of their employment. above. Employees’ job descriptions stipulate their obligation to comply with anti-corruption standards and PhosAgro Group’s internal regulations, as well as to receive respective training. When employees perform functions involving a high risk of corruption, those responsible for the implementation of the Anti-Corruption Policy additionally explain to them the Russian laws and PhosAgro Group’s internal policies on anti-corruption. Every new employee receives training on the basic requirements of the Anti- Fraud and Anti-Corruption Policy, the Code of Ethics, Regulations on Conflict of Interest and on PhosAgro’s Hotline by watching a respective video and putting their signature in briefing log to confirm the 88.2% Share of employees trained in anti- fraud, anti-corruption, and conflict of interest issues (as part of online learning courses) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Training of PhosAgro employees in anti-fraud, anti-corruption, and conflict of interest issues (as part of online learning courses) 7,891 8,691 6,524 4,388 5,441 5,752 1,053 1,143 1,328 3,335 4,298 4,424 55.61 62.6 88.2 Total number of employees to be trained Total number of employees trained Executives White-collar workers Share of employees trained, % 2021 2020 2019 254 255 Corporate Governance Reports received by PhosAgro’s Hotline by category in 2019 – 2021 Total reports received by PhosAgro’s Hotline Reports related to corruption 126 134 119 0 2 3 PhosAgro’s Hotline GRI 205 To improve the timeliness and effectiveness of measures aimed at preventing ethical violations, including corruption, discrimination, human rights violations, etc., PhosAgro Group created the PhosAgro Hotline portal. Any employee or other stakeholder can use PhosAgro’s Hotline to report any potential violations detrimental to the Company’s interests, while the Company may not disclose the identity of the whistle-blower to other employees and third parties. Reports received by PhosAgro’s Hotline by category in 2019 – 2021 Non-discrimination policy and human rights GRI 2-23 2019 2020 2021 2019 2020 2021 We are committed to keeping our working environment free from restrictions based on nationality, gender, age, faith or other grounds as required by the applicable laws. At PhosAgro Group, any decisions regarding promotion, hiring, remuneration or benefits are based solely on the employee’s qualifications, performance, skills and experience. In 2021, the Board of Directors and the Remuneration and Human Resources Committee paid special attention to human rights focusing on diversity and equality of genders. The discussion led to the key conclusion that every employee who works dutifully and has professional skills and competencies may apply for any position within PhosAgro Group, including in an executive role. PhosAgro’s Internal Audit Department reports on a quarterly basis to the Audit Committee on all reports received by the PhosAgro Hotline, actions taken, the results of audits and measures to address violations of PhosAgro Group’s ethical standards. The Chairman of the Audit Committee provides this information to members of the Company’s Board of Directors. 119 Total reports received by PhosAgro’s Hotline Over the past three years, including the reporting period, there have been no employee reports or complaints about violations of labour practices, human rights, or discrimination. For more information on PhosAgro Group’s non- discrimination policy and human rights, see the People Development section on page 122 and 156. Tools to notify the relevant PhosAgro Group’s executives of any instances of misconduct and corrupt practices GRI 2-25, 2-26 PhosAgro Group’s employees and members of the Company’s Board of Directors who have become aware of any actual or poten- tial violation of law or PhosAgro Group’s internal documents are obliged to give a prompt notice of the same in writing. This shall apply to any inducement to corruption and any viola- tions showing signs of corruption, including those targeted at other employees, counterparties or other parties interacting with the Group The procedures for reporting and consideration of violation re- ports are defined in the Anti-Corruption Policy, the Code of Ethics, the Regulations on Conflict of Interest, and the anti-corruption agreement, as well as in notifications/recommendations sent in accordance with Apatit’s Order No. 16-U On Improving the Pro- cedure for Informing Management of Apatit, its Subsidiaries and Affiliates dated 15 January 2020 A person who has submitted the above notice/report is guaran- teed confidentiality of the information received, as well as such person’s personal data. PhosAgro Group assumes measures to protect the employee who has notified the employer of any actual or potential violation of law and PhosAgro Group’s internal docu- ments that poses a threat to the Group companies’ interests The Code of Ethics states that each Company employee, if they have any questions relating to anti-corruption compliance or any concerns as to the rightness of their actions or the actions of other Company employees, counterparties, or other parties interact- ing with the Company, may seek advice or assistance from their immediate supervisors or, if need be, the relevant business units of the Company The Hotline operates to improve the efficiency of measures taken to prevent fraud, corruption, theft, and conflict of interest, as well as mitigate the compliance and reputational risks resulting from violation of professional and ethical standards by PhosAgro Group’s employees. There are three ways to report to the Hotline: > by phone at +8 8202 59 32 32, > e-mail at help@ phosagro.ru > regular mail to the following address: the Economic Security Department, 75 Severnoye Highway, Cherepovets, Vologda Region, 162622, Russia. To ensure free access to the Company’s Hotline, all existing communication channels are posted on the corporate website 126 134 119 2 4 15 11 30 66 2 2 5 32 20 30 41 3 3 3 16 25 16 53 2019 2020 2021 Other External fraud HSE Violations of law and tender procedures Internal fraud Reputational risk Conflicts of interest Corruption (Code of Ethics) Anti-corruption 205-1 We consider it unacceptable for PhosAgro Group’s executives and employees at all levels to take advantage of their official position in a way that is in conflict with corporate or national interests. To prevent fraud and corruption, PhosAgro has put in place its Anti-Corruption Policy together with a system covering 100% of its activities and a commission on fraud, corruption, and conflicts of interest. The Company seeks to identify and assess corruption risks on a regular basis to keep track of functions and positions exposed to such risks. PhosAgro’s management regularly reviews reports on the progress of anti-corruption initiatives and the performance of the anti-fraud and anti-corruption system. In addition, we make an ongoing effort to build a culture of zero tolerance to corruption underpinned by high ethical standards, as well as maintain an atmosphere of trust, mutual respect and integrity among employees. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 256 257 Corporate Governance PhosAgro Group’s participation in collective efforts to combat corruption 205-2 The Company’s anti-corruption policy is implemented in accordance with applicable anti-corruption laws and international conventions (including the UN Convention against Corruption and Russian anti- corruption laws). To prevent and combat corruption, PhosAgro Group cooperates with business communities and participates in public associations, which is seen as a guarantee of compliance with Article 13.3 of Federal Law No. 273-FZ On Combating Corruption dated 25 December 2008: The Anti-Corruption Charter of the Russian Business adopted by the RSPP. As part of self-assessment of special anti- corruption programmes and practices implemented by the Company and covering not only internal activities, but also relations with business partners and the state, procurement through public auctions, financial control, staff training and development, cooperation with law enforcement agencies, PhosAgro Group regularly completes surveys using the portal of the Chamber of Commerce and Industry of Russia; The Social Charter of the Russian Business adopted by the RSPP. Having joined the Social Charter of the Russian Business, PhosAgro formalised the responsible approach it takes to ESG and its commitment to best practices in corporate social responsibility; The Anti-Fraud Working Group of the Russian Association of Fertilizer Producers (RAFP), which has developed initiatives to combat wrongdoings committed by unidentified persons using brands of major mineral fertilizer producers. To counteract corruption, we cooperate successfully with state and local government authorities and non- governmental organisations based on the principles of partnership, mutual respect, trust and professionalism. We have entered into a number of long-term agreements on preventing and detecting crime, as well as helping to build security infrastructure through the creation of police stations at PhosAgro Group’s production sites. Joint activities are widely covered in the corporate media (Khimik newspaper, No. 47 dated 2 December 2021, No. 48 dated 9 December 2021). Every year, the Company’s Economic Security Department takes part in the International Compliance Day online forum under the auspices of the Anti-Corruption Charter of the Russian Business, as well as in in-person conferences titled Anti- Corruption and Compliance in Russia and the CIS held by Dialog Management Partners. Preventing corruption through interaction with partners and counterparties 205-2 When building an effective anti-corruption policy, it is of utmost importance to understand what corruption offences employees may be inclined to commit depending on their positions, what business processes are most likely to involve the commission of such offences, what ways or schemes are available for committing them and what consequences they may lead to. For this purpose, PhosAgro Group has defined lists of corruption-prone functions and positions. The activities of the officials occupying the positions included in the list are under special control of the Economic Security Department and heads of the relevant business units in terms of their compliance with high ethical standards and requirements of internal documents on anti-corruption, including compliance with related prohibitions and restrictions and measures to prevent and resolve conflicts of interest. PhosAgro Group seeks to identify and assess corruption risks on a regular basis using a three-step procedure to update the list of functions and positions exposed to such risks. Corruption risk identification. Identification of corruption offences that may be committed by PhosAgro Group’s employees and detection of business processes (critical points) in the course of which such misconduct is possible Corruption risk analysis. Identification of ways that can be potentially used to commit a corruption offence, depending on the specifics of PhosAgro Group’s business processes (corruption schemes), persons who may be involved in corruption, and business processes’ vulnerabilities Assessment of materiality of corruption risks. Assessment of the probability of a corruption offence at a specific stage of a business process and the potential damage to PhosAgro Group in case an employee (employees) commits (commit) a corruption offence Acquainting business partners with PhosAgro Group’s anti-corruption standards and procedures PhosAgro Group recognises that corruption risks can arise not only within, but also outside the Company, primarily when interacting with counterparties, including business partners, suppliers, contractors, etc. PhosAgro Group has approved a procedure for incorporating an anti-corruption clause and a clause of good faith in every contract signed by the parties; these clauses contain clear and detailed rules and procedures aimed at preventing corruption, including special management procedures, requirements for counterparties, rules of special anti-corruption control and audit, measures to prevent conflicts of interest and commercial bribery, and compensation for material damage. As part of the Company’s sustainable development strategy, we introduced the Code of Conduct for Counterparties. We are committed to establishing and maintaining business relationships with companies that operate in line with high ethical standards and combat corruption. PhosAgro’s official website now enables visitors to register at the electronic bidding platform. Every potential supplier of goods or services interested in establishing a business relationship with the PhosAgro Group is required to read the relevant internal documents (PhosAgro’s Anti-Corruption Policy, Code of Ethics, Anti-Fraud and Anti- Corruption Policy of Apatit, etc.), and familiarise themselves with information on PhosAgro’s Hotline. Only after becoming aware of these standards may they proceed with the registration at the electronic bidding platform. This helps to ensure that all potential counterparties seeking to do business with PhosAgro Group are familiar with PhosAgro’s Anti- Corruption Policy and standards. Anti-Fraud and Anti-Corruption Policy Total number of business partners registered at the electronic bidding platform Share of business partners in this category, % 3,751 3,523 3,751 100 100 22 Total number of partners acquainted with anti-corruption standards 2,980 3,523 831 2021 2020 2019 Incidents of corruption identified and actions taken PhosAgro Group’s commitment to the anti-corruption standards is evidenced by the fact that it cooperates with law enforcement authorities: 1 PhosAgro Group made a public commitment to report to the relevant law enforcement authorities any cases of corruption (signs of corruption) PhosAgro Group (its employees) become aware of. 2 PhosAgro will not impose any sanctions on employees who reported to law enforcement authorities any actual or potential corruption incidents that they became aware of in the course of their employment. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 258 259 Corporate Governance Internal investigations into reported corrupt behaviour GRI 2-15 Number of internal investigations into various failures to comply with the internal regulations, Including corruption-related 3 2 2 52 52 68 2021 2020 2019 Internal investigations were in progress into suspected failures in connection with corruption In 2021, 52 internal investigations were in progress into suspected failures to comply with the internal regulations, of which four (into corruption and fraud) were completed. The details can be found in the relevant sections of the Report. 52 internal investigations were in progress into suspected failures to comply with the internal regulations in 2021 Cases of corruption identified over three years GRI 205-3 2021 2020 2019 Registered Confirmed Investigation in progress Unconfirmed 1 Article 204, Parts 6 and 8, and Article 159, Part 3, of the Russian Criminal Code. 2 Article 258, Part 1, of the Russian Criminal Code. 3 Article 204 and Article 159, Part 4, of the Russian Criminal Code. 5 2 2 1 2 2 0 0 3 3 0 0 In 2021, two cases of corruption were confirmed, one involving an employee of Apatit’s Volkhov branch and the other one involving a contractor’s management, both of them giving rise to criminal proceedings. 1. On 31 May 2021, we completed an internal investigation into wrongdoings committed by CEO of a business entity acting as a counterparty and the management of Apatit’s Heat, Water and Gas Supply Unit when signing work completion certificates, with a disciplinary action (punitive reprimand) taken against the head of Apatit’s respective business unit. The results of investigation were sent to law enforcement authorities for consideration. The criminal case was opened in accordance with Article 159, Part 4 (“Fraud”) of the Russian Criminal Code on 28 December 2021 in connection with fraudulent acts on the part of the counterparty’s management resulting in a loss of RUB 19 mln by Apatit. 2. On 18 November 2021, we completed an internal investigation in respect of a road traffic safety officer of the Transport Department (Volkhov branch of Apatit) who was reported to have illegally received RUB 100,000 for the benefit of a contractor in exchange for concealing their failures to comply with the internal regulations, following which the Company terminated Criminal cases initiated in connection with corruption and fraud Number of criminal cases initiated, total, Including corruption-related 23 12 31 29 19 28 2020 2021 Criminal cases initiated in connection 2019 with corruption and fraud his employment. A criminal case was opened in accordance with Article 204, Part 7 of the Russian Criminal Code. The criminal case was opened in accordance with Article 204, Part 7, clause (c) (“Commercial Bribery”) of the Russian Criminal Code on 14 July 2021 in connection with an illegal transfer of funds as payment for concealing violations and failure to impose penalties on the offenders as prescribed by the Company’s internal regulations. In 2021, the Company disqualified two business partners who wanted to participate in bidding procedures worth over RUB 400 mln on the grounds that they were considered not trustworthy because of their failure to comply with anti-corruption standards. The management of one of the business entities offered RUB 2 mln to representatives of the Economic Security Service for knowingly performing illegal actions to approve their bid for a mineral fertilizer supply contract. The court found the management of the business entity guilty of an administrative offence under Article 19.28, Part 1 (“Illegal Gratification on behalf of a Legal Entity”) of the Russian Administrative Code and imposed an administrative fine in the amount of RUB 500,000. Conflict of interest GRI 2-15 PhosAgro’s Code of Ethics and Regulations on Conflict of Interest require employees to report any potential or actual conflicts of interest to their line manager or an anti- corruption officer. As part of the work to develop a framework for preventing, identifying and resolving conflicts of interest, three designated collegial advisory bodies were established at PhosAgro Group: 1. the Commission on Conflict of Interest between Employees of PhosAgro chaired by the CEO; 2. the Commission on Fraud, Corruption and Conflicts of Interest at Apatit (to streamline anti-corruption efforts across the Company’s production units); 3. the Commission on Fraud, Corruption and Conflicts of Interest at PhosAgro-Region (to act for the downstream business). PhosAgro places a strong emphasis on timely prevention, identification and resolution of potential conflicts of interest. The Company puts in place verification procedures to be carried out when personnel decisions are made and responsibilities are distributed and requires all candidates to report personal interest, if any, at the time they are offered employment with the Company and regularly from then onwards. > an investigation as of 7 June 2021 into the abuse of powers by Deputy Director of Capital Constitution Department (Volkhov branch of Apatit) who had awarded a contract to a close relative and into the way he oversaw the performance of the contract. Following the investigation, this manager’s employment was terminated; > an investigation as of 12 August 2021 in respect of a leading expert of LLC PromTransPort’s standalone business unit who abused their powers when overseeing the performance of the contract awarded to a close relative. Following the investigation, this expert’s employment was terminated. In 2021, the Company considered ten cases of potential conflict of interest, five of them at a meeting of the Commission on Fraud, Corruption and Conflicts of Interest chaired by Apatit’s CEO. Two internal investigations were carried out (see above). Employment with three employees was terminated for failure to comply with the internal documents and report potential conflicts of interest. Internal investigations into reported corrupt behaviour, including conflicts of interest 2 3 0 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 2021 2020 2019 Internal investigations into reported corrupt behaviour, including conflicts of interest Period 2021 2020 2019 11 12 10 6 5 5 0 1 1 0 0 2 Number of potential conflicts of interest, total Number of conflicts of interest considered at the meeting of the Commission on Fraud, Corruption and Conflicts of Interest Number of notices to heads of business units Number of employees with whom employment was terminated 260 261 Corporate Governance Remuneration Report Board of Directors remuneration GRI 2-19. 2-20 When deciding on a Board of Directors composition, the General Meeting of Shareholders approves the amount and the rules for determining and paying remuneration and compensation to the Board members. According to the Company’s Corporate Governance Code, the Board remuneration shall be in line with current market conditions and shall be sufficient to enable the Company to attract, motivate and retain highly skilled professionals to help drive the future growth and performance. At the same time, the Company avoids higher-than-necessary remuneration. Fixed (quarterly) remuneration is paid only to independent Board members. RUB132.8mln the total remuneration paid to PhosAgro’s Board of Director in 2021 Additional (quarterly) remuneration is paid to the chairmen of Board committees who are independent directors and the non- employee directors of the Board of Directors. If such independent or non-employee director chairs two or more committees, the additional (quarterly) remuneration is increased to USD 45,000 for a full quarter. The Company compensates directors for actual expenses incurred by them while performing their respective functions. The Chairman of the Board of Directors who is an independent director receives fixed (quarterly) remuneration equivalent to USD 90,000 for a full quarter. Other independent directors are paid an equivalent of USD 45,000 for a full quarter. Additional (quarterly) remuneration is payable to the chairmen of Board committees who are either independent or non-employee directors in an amount equivalent to USD 30,000 for a full quarter. Board of Directors’ remuneration, RUB Full name of the member of the Board of Directors Sven Ombudstvedt James Beeland Rogers Jr. Marcus Rhodes Andrey Sharonov Xavier Rolet Irina Bokova Total 2019 2020 2021 22,871,844.00 27,111,960.00 26,561,520.00 19,059,870.00 22,593,300.00 22,134,600.00 19,059,870.00 22,593,300.00 22,134,600.00 11,435,922.00 13,555,980.00 13,280,760.00 21,339,381.35 27,111,960.00 26,561,520.00 15994944.69 22,593,300.00 22,134,600.00 109,761,832.04 135,559,800.00 132,807,600.00 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Remuneraton of the management Remuneration principles The Company’s remuneration policy for executive bodies’ members and other key employees is determined by the Board of Directors based on the recommendations of the Remuneration and Human Resources Committee. The Remuneration and Human Resources Committee conducts a detailed bi-annual review of the incentive system, evaluating its effectiveness and, if necessary, making recommendations for its improvement. KPIs for each senior manager are set annually and take into account metrics related to operational efficiency and individual contribution to the corporate growth and strategic performance. To assess the performance of the Company’s CEO, a number of indicators are used that characterise the Company’s performance benchmarked against peers in the industry and reflect the efficiency of investments made: The remuneration due to the Company’s senior executives consists of a monthly base salary plus additional compensation payable twice a year. Additional remuneration is linked to achieving the Company’s key performance indicators (KPIs) and completeness and quality of accomplishment of additional tasks, as determined by the Board of Directors and the CEO for the reporting period, as well as the Company’s achievement of the EBITDA target. All KPIs are aligned with the Company’s strategic goals defined in its Strategy to 2025 and oriented towards their achievement. The amount of additional remuneration ranges from 30% to 150% of the annual base salary and depends on the level of the position held and the functional area of the manager. The Remuneration and Human Resources Committee of the Board of Directors, during its annual evaluation of the incentive system, ensures an effective proportion of fixed and variable components of remuneration. 1. Excess of PhosAgro’s average shareholder return over the average total shareholder return of phosphate fertilizer manufacturers. The indicator is based on benchmarking the level of return received by PhosAgro shareholders against the average return received by shareholders of other public companies in the industry. We use both the dividend yield received by shareholders during the reporting period and the income generated by changes in the value of shares (depositary receipts) as the indicator. The goal is to exceed the shareholder return of peer companies. 2. Change in spread between average EV/EBITDA of public phosphate fertilizer manufacturers and PhosAgro’s EV/EBITDA. EV/EBITDA reflects investors’ estimate of a company’s fair market value and its investment case. The goal is to increase the spread. 3. Excess of PhosAgro’s ROIC – WACC spread over the average ROIC – WACC spread of public peers. The indicator reflects how much higher a company’s return on investment is than the cost of capital (equity and debt), and how efficient the company’s investments are compared to other companies in the industry. The goal is to outperform. 4. Achievement of the target NPV for investment proje. This indicator reflects the success of the strategic investment decisions made and the quality of delivering the company’s strategic plans. The goal is to achieve the target. Values of the specified KPIs in the range of base case / target / challenge, as well as their actual values at the end of the reporting period are approved by the Chairman of the Board. Taken together, these indicators contribute to the achievement of the Company’s strategic goals and serve the interests of shareholders both in terms of the Company’s development and in terms of minimising the risks arising from incentivising excessively risky management decisions. KPIs of the CEO and N-1 level managers, including sustainable development indicators, are cascaded down and decomposed into KPI scorecards of lower-level management. The indicators themselves and their weights are modified depending on the nature of a particular manager’s focus area with due regard to their strategic fit. Specific KPI wordings and their weights are established by the Company’s KPI Committee, taking into account the opinion of the KPI holder and their immediate supervisor. In 2021, 280 PhosAgro Group’s officers were benchmarked against 1,527 KPIs. Item no. Wording Impact on the variable component of the CEO's annual remuneration, % KPI performance in 2021, % 1 2 3 4 Excess of PhosAgro's average shareholder return over the average total shareholder return of phosphate fertilizer manufacturers Change in spread between average EV/EBITDA of public phosphate fertilizer manufacturers and PhosAgro's EV/EBITDA Excess of PhosAgro's ROIC – WACC spread over the average ROIC – WACC spread of public peers Achievement of the target NPV for investment projects 20 20 20 20 100 125 125 115 262 263 Corporate Governance 280 PhosAgro Group’s officers were benchmarked against 1,527 KPIs in 2021 Number of officers holding KPIs by year: 2021 2020 2019 280 277 106 Top-3 KPI-driven areas 1 2 3 Commitment to sustainability — 50% of KPIs Expansion of production capacities through improved operational efficiency — 36% of KPIs Development in high-potential areas — 9% of KPIs Management remuneration The amount of remuneration and additional compensation due to PhosAgro’s CEO is regulated by a contract between them and the Company, which is signed by the Chairman of the Board of Directors. The total remuneration reflects the CEO’s qualifications and their personal contribution to the Company’s financial results. Loans extended to members of the Board of Directors and executive bodies – RUB 15 mln (as at 31 December 2021). Terms of borrowing – based on 2/3 of the refinancing rate effective as at the date of the loan. Remuneration paid to the CEO and six other Management Board members who represent the senior management team for their services to the Company, RUB ‘000 Pay type 2019 2020 2021 Total, including 451,207.7 1,098,922.60 1,422,662.4 salary bonus other types of remuneration fee 170,490.6 421,033.0 399,548.2 280,408.6 677,807.1 1,023,035.3 302.5 0 82.5 0 78.9 0 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information As can be seen from the above statistics, PhosAgro Group is focused on sustainable development, and the KPI framework includes the following indicators: > Share of waste recycling, neutralisation and processing In 2021, KPIs were added for the following areas: > projects to implement the most environmentally friendly methods of farming (promotion of sales of urea with urease inhibitor) > Compliance with maximum permissible > promotion of the Green Label project discharge/emission rates > Implementation of key social projects Innovations project > promotion of the University of > % of completion of the programme to improve social and working conditions > quality of non-financial reporting > Zero industrial accidents > Zero occupational injuries > external perception of environmentally responsible development activities External auditor’s remuneration The Company engaged AO PricewaterhouseCoopers Audit to audit its 2021 IFRS consolidated financial statements. The actual remuneration paid to the auditor for this service stood at RUB 36.0 mln, net of VAT and overhead costs; a similar amount for 2020 was RUB 36.5 mln. In addition, in 2021, Pricewaterhouse- Coopers Audit rendered audit-related services to the Company for a total of RUB 13.7 mln, including preparations for the Eurobond issue worth RUB 8.4 mln, net of VAT. Also, during 2021, other contracts were concluded for the provision of non-audit services to the Company in the amount of RUB 10.4 mln, net of VAT. All additional services, related and unrelated to audit, were duly approved by the audit partner, as well as by the Chairman of the Audit Committee of the Company’s Board of Directors, with due regard to appropriate independence considerations. The actual remuneration of FBK to audit the Company’s RAS accounting statements for 2021 was RUB 620,000 net of VAT, up 5% year-over-year. When determining the amount of additional annual remuneration for the top management, we look at the achievement of the EBITDA target as an integral indicator of the Company’s performance. The managers’ performance is adjusted by the percentage of delivering on the EBITDA target as follows: % of EBITDA target met Adjustment based on the Company's EBITDA, % Less than 60 Greater than or equal to 60 and less than or equal to 125 Above 125 0 Actual EBITDA / Target EBITDA 125 The Company does not provide for any compensation payable to managers in case of their dismissal or voluntary resignation or the Company’s takeover or the change of its owner (golden parachutes). Neither does it use options, pre-determined unconditional bonuses or a clawback mechanism. 264 265 Corporate Governance Transparency and consistency The Company maintains an ongoing dialogue with the investor community through a variety of communication channels and with involvement of the Company’s senior management and independent directors. Responsible growth Since the IPO, we have more than doubled our output of mineral fertilizers and feed phosphates. From 2011 up to now, we have invested close to USD 6 bln in the Company’s development. Over these ten years, we have achieved a nearly four-fold increase in labour productivity at our production sites, while also reducing workplace injury rates by more than two thirds. >250 online meetings and conference calls with investors and analysts L A T I P A C E R A H S 268 Ownership Structure 269 Share Performance 270 Debt Management 271 Analyst Coverage 271 Dividend Policy 273 Relationship with shareholders and investors 266 267 267 267 Об отчете О компании Стратегический отчет Обзор результатов Корпоративное управление Акционерный капитал Финансовая отчетность Дополнительная информацияАкционерный капитал Share Capital Ownership structure The authorised capital of PhosAgro as at 31 December 2021 amounted to RUB 323,750,000 consisting of 129,500,000 ordinary shares with a par value of RUB 2.5 per share. The register of holders of PhosAgro’s securities is maintained by JSC Reestr whose details are set out in the Contacts section https://www.phosagro.com/ contacts/. As at 31 December 2021, there were no shareholders in the Company with a stake of more than 5% beyond those already disclosed by the Company in this report. The Company is unaware of any shareholders that may gain or have gained control disproportionate to their share in the Company’s authorised capital, including by virtue of shareholder agreements. Shareholding structure as at 31 December 2019 Shareholder Adorabella Limited Chlodwig Enterprises Limited Evgenia Guryeva Vladimir Litvinenko Other shareholders Total Number of shares % of issued and outstanding shares 32,176,662 24,359,900 6,235,960 27,174,815 39,552,663 129,500,000 24.85 18.81 4.82 20.98 30.541 100.00 Share performance PhosAgro’s shares are traded on the A1 quotation list of the Moscow Exchange under the ticker symbol PHOR (ISIN: RU000A0JRKT8). Global depositary receipts (three GDRs represent one share) are traded in the Main Market of the London Stock Exchange under the symbol PHOR. Shares of PhosAgro are included in the following indices of the Moscow Exchange: > MSCI Russia; > MSCI Emerging Markets; > MOEX Russia; > RTS. Citigroup Global Markets Deutschland AG acts as the depositary for the Company’s GDR Programme. Tickers Stock exchange Bloomberg Reuters ISIN Moscow Exchange London Stock Exchange PHOR RU PHOR LI PHOR.MM RU000A0JRKT8 PHORq.L US71922G2093 Codes for Global Depositary Receipts Under Regulation S Under Rule 144A CUSIP ISIN Common code SEDOL RIC 71922G209 71922G100 US71922G2093 US71922G1004 065008939 0B62QPJ1 PHOSq.L 065008939 0B5N6Z48 GBB5N6Z48.L About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Shareholding structure as at 31 December 2020 Share/GDR performance in 2021 Shareholder Adorabella Limited Chlodwig Enterprises Limited Evgenia Guryeva Vladimir Litvinenko Other shareholders Total Shareholding structure as at 31 December 2021 The current ownership structure is available on the Company’s website Contacts section Shareholder Adorabella Limited Chlodwig Enterprises Limited Evgenia Guryeva Vladimir Litvinenko Other shareholders Total 1 Free-float ratio (% of shares in free float). Number of shares % of issued and outstanding shares 30,234,162 26,302,400 6,235,960 27,174,815 39,552,663 129,500,000 23.35 20.31 4.82 20.98 30.541 100.00 Number of shares % of issued and outstanding shares 30,234,162 26,302,400 6,235,960 27,174,815 39,552,663 129,500,000 23.35 20.31 4.82 20.98 30.541 100.00 6,000 5,000 4,000 3,000 2,000 30 25 20 15 5 January February March April May June July August September October November December Share price (MOEX) GDR price (LSE) The key factors affecting the Company’s share performance in 2021: surge in demand for phosphate- and nitrogen-based fertilizers over the year; high prices for major crops in global markets; more expensive primary feedstock (gas, sulphur, potassium); strong operational and financial performance of the Company; successful completion of construction of an 800 ktpa phosphate-based fertilizer plant in Volkhov; low fertilizer stocks in the Company’s key sales markets; improvements across the Company’s key ESG ratings in 2021. 268 269 Share Capital PhosAgro is covered by analysts from leading Russian and international brokers. Company ATON BCS Investment Bank VTB Capital Goldman Sachs BMO Sberbank CIB Bank of America Alfa Bank Renaissance Capital Raiffeisen Bank Analyst Andrey Lobazov Kirill Chuyko Elena Sakhnova Artem Vodyannikov Nina Dergunova Ilya Dmitriev Joel Jackson Sergey Donskoy Maria Martynova Sashank Lanka Boris Krasnojenov Yulia Tolstykh Boris Sinitsyn Sergey Garamita Tel. +7 (495) 213-03-37 +7 (495) 213-15-26 +7 (495) 213-15-03 +7 (495) 287-68-77 +7 (495) 645-42-30 +1 (416) 359-42-50 +44 207 071-08-24 +7 (495) 665-56-00 +971 4 425 8231 +7 (495) 795-36-12 +7 (499) 956-45-40 +7 (495) 221-98-42 Sinara Financial Corporation Anastasia Egazaryan +7 (917) 514-85-51 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Share performance Item Share price on the Moscow Exchange, RUB GDR price on the London Stock Exchange, USD Market capitalisation, USD mln List of major institutional investors in shares and GDRs as at 31 December 2021, % As at 31 December 2020 As at 31 December 2021 Name BlackRock, Inc. FIL Limited 3,133.00 5,833.00 Vanguard Group, Inc./The Norges Bank Van Eck Associates Corporation 13.64 21.58 Nordea Bank Abp 5,299.14 8,383.83 Swedbank AB Grantham, Mayo, Van Otterloo & Co. LLC FMR LLC Government Pension Investment Fund Source: Bloomberg % of the free float 1.72 1.55 0.86 0.64 0.39 0.37 0.37 0.26 0.24 0.22 For more information on our historical share performance, please visit website Debt management The Company uses a conservative approach to leverage and believes that a comfortable net debt/EBITDA ratio should be below 2х or even within a range of 1–1.5х in the long run. As at 31 December 2021, the Company’s leverage was much lower than that, at 0.8x. When determining its borrowing requirements, the Company assesses the cost of borrowing from banks and public debt markets, the amount and maturity available while striving to ensure that this fits into the Group’s long-term debt reduction strategy. The choice of the currency of borrowings is based on the structure of the Company’s revenue, 70% of which is in foreign currency and the rest is strongly correlated with US Dollar exchange rate. Bonds Borrower Issuer PJSC PhosAgro PJSC PhosAgro PJSC PhosAgro PhosAgro Bond Funding Limited PhosAgro Bond Funding Limited PhosAgro Bond Funding Limited Settlement date Principal outstanding, USD mln USA Guarantor(s) 24 January 2018 23 January 2020 16 September 2021 500 JSC Apatit 500 JSC Apatit 500 JSC Apatit Analyst coverage Recommendations from analysts of investment banks and financial institutions regarding the Company’s shares as at 31 December 2021, % 27 9 18 46 Buy Hold Sell Recommendation under review Dividend policy PhosAgro is committed to striking an effective and reasonable balance between the payment of dividends and reinvestment of profit in further development. Higher transparency and predictability of dividend payments are a priority for the Company as it seeks to ramp up its growth and strengthen its investment case. All resolutions on the payment of dividends and the timing and amount of such payment are subject to approval of the General Shareholders’ Meeting, based on recommendations provided by the PhosAgro Board of Directors. When preparing recommendations for the General Shareholders’ Meeting on any dividend payout (declaration), in addition to the current financial standing assessment, the Board of Directors takes into account the relevant provisions of the Company’s dividend policy that state that the amount of distributed dividends may range from 50% to over 75% (subject to the Company’s leverage ratio) of the Company’s consolidated free cash flow for the respective year under IFRS. At the same time, the amount of declared dividends should not be lower than 50% of net profit for the year under IFRS. (AGM) approve dividends of RUB 390 per share (RUB 130 per global depositary receipt), or RUB 50,505 in total. If approved by the Annual General Shareholders’ Meeting on 30 June 2022, declared dividends for 2021 will amount to RUB 114,608, or 147% of the free cash flow calculated on the basis of the Company’s 2021 IFRS consolidated financial statements. The full text of our dividend policy is available on the Company’s website On 9 February 2022, PhosAgro’s Board of Directors recommended that the Annual General Shareholders’ Meeting 270 271 Share Capital Report on dividends declared and paid Dividend per share, RUB Dividend per GDR, RUB Total amount of declared dividends, RUB Governance body deciding on the payment of dividends Date of the General Shareholders’ Meeting where the relevant resolution on the payment of dividends was adopted and No. of the minutes Dividend payment timeframes1 72 54 48 18 78 33 123 63 105 156 234 390 24 18 16 6 26 11 41 21 35 52 78 130 9,324 6,993 6,216 2,331 10,101 4,273.5 15,928.5 8,158 13,597.5 20,202 30,303 50,505 24.06.2019 04.10.2019 24.01.2020 22.05.2020 19.06.2020 30.09.2020 14.12.2020 25.05.2021 22.06.2021 13.09.2021 08.12.2021 No later than 11 July 2019 – 15 August 2019 No later than 16 October 2019 – 20 November 2019 No later than 5 February 2020 – 12 March 2020 No later than 3 June 2020 – 8 July 2020 No later than 7 July 2020 – 10 August 2020 No later than 16 October 2020 – 20 November 2020 No later than 28 December 2020 – 18 January 2021 No later than 8 June 2021 – 13 July 2021 No later than 6 July 2021 – 9 August 2021 No later than 08 October 2021 – 29 October 2021 No later than 21 December 2021 – 1 February 2022 30.06.2022 No later than 25 July 2022 – 15 August 2022 Item 2019 Retained earnings as at 31 March 2019 .... as at 31.12.2018 .... as at 31.12.2018 .... as at 31.12.2019 (based on 2019 results) 2020 .... as at 31.03.2020 .... as at 30.06.2020 .... as at 30.09.2020 .... as at 31.12.2020 (based on 2020 results) 2021 .... as at 31.03.2021 .... as at 30.06.2021 .... as at 30.09.2021 .... as at 31.12.2021 (based on 2021 results)2 Extraordinary General Shareholders’ Meeting Annual General Shareholders’ Meeting For more information on the Company’s dividend payment history, please visit website 1 To nominee holders and trustees who are securities market professionals and are on PhosAgro’s register of shareholders / other persons on PhosAgro’s register of shareholders. 2 On condition the approval of the payments recommended by the Board of Directors based on the results of 2021 at the Annual General Shareholders’ Meeting on June 30, 2022. Relationship with shareholders and investors At PhosAgro, we are committed to transparency and consistency, and maintain an ongoing dialogue with the investor community through a variety of communication channels and with involvement of the Company’s senior management and independent directors. Continuous engagement programme allows the Company: > To raise investor awareness of the Company’s potential value and long- term sustainability; > To update investors on PhosAgro’s strategic priorities and progress we have made; > To attract a wider pool of investors to improve liquidity, share price and borrowing costs; > To increase our access to a variety of capital market instruments; > To provide transparency on how our corporate governance systems work; > To generate new ideas through a dialogue with investors; > To clarify the Company’s contribution to the UN Sustainable Development Goals. We keep the market abreast of the Company’s performance by publishing quarterly operational and financial results that are made available to investors via press releases, presentations, conference calls and webcasts. On top of that, we take every opportunity to answer investors’ questions and gather feedback from market players by participating in industry and regional investment conferences. Regular NDRs allow us to expand our investor base through meetings arranged outside of key financial market centres. In 2022, the Company is conducting another ESG investor survey, with plans to make it biennial. The first survey took place in 2020. A well developed Eurobond programme helps reinforce the Company’s position in the public debt market while ensuring the lowest cost of funding. In 2021, the Company expanded communication with retail investors by holding five conference calls with the assistance of major Russian brokers. The calls were broadcast on Telegram, YouTube, Clubhouse and other channels and helped the Company reach a wider audience. In 2021, PhosAgro received DFI certification of its USD 500 mln Eurobond issue. Also, the Company engaged Vigeo Eris to provide a five- component Second Party Opinion (SPO). The purpose was to map out KPIs as part of the preparation for issuing green finance instruments. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Why we interact There are four main purposes for which PhosAgro interacts with the investment community – each building on each other and facilitating an ongoing exchange of information and higher business transparency: > Communicate investor feedback to the management to form the internal position and tweak/work out a development strategy that would mitigate major risks and unlock the Company’s potential; > Provide investment community with reliable and relevant information on the key aspects of the Company’s operations, its development plans and long-term goals; > Identify risks and opportunities for the Company as seen from the perspective of members of the investment community after they have analysed the provided information; > Monitor the progress against the Company’s development strategy and present its results to the public. 272 273 Share Capital Information disclosure PhosAgro strictly follows the requirements imposed by Russian securities regulations, as well as rules for the companies traded on the LSE. The Company publicly discloses all required information to shareholders and investors in a timely manner through authorised newswires, the corporate website, PhosAgro’s official disclosure page on the Interfax portal, and at the LSE webpage. Financial calendar for 2022 Financial results disclosure Q4 and FY 2021 Q1 2022 Q2 and 6M 2022 Q3 and 9M 2022 10 February 2022 19 May 2022 (TBC) 11 August 2022 (TBC) 10 November 2022 (TBC) PhosAgro’s official disclosure page on the Interfax portal The Company’s page on the LSE website Disclosure on the Company’s official website About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information How we interact The Company interacts with the investment community in a variety of ways: community to raise their awareness of the Company’s operations; > Non-deal roadshows (including those held virtually) > Interaction with credit and ESG rating agencies; covering general topics for broader investor audiences and deal roadshows relating to Eurobond offerings and ESG disclosures etc.; > Regulatory press releases; > Annual General Shareholders’ Meetings and formal > One-on-one meetings and calls with investors; reporting; > Investor conferences, both offline and online; > Corporate website; > Conference calls on the Company’s financial and > A dedicated in-house investor relations team; operational performance; > Surveys of the Company’s perception by different investor categories, including ESG-oriented groups; > Selective communication with members of the analyst > Appointment of seven independent directors of the Board of Directors to represent shareholder interests Key topics and activities in 2021 > In 2021, the Company held meetings with more than 250 investors and analysts. These include 12 investor conferences and numerous calls as part of virtual NDRs. > 120 publications were made in line with Russian disclosure regulations via the Interfax Corporate Disclosure Centre. > Following an intensive DCM marketing campaign the Company raised USD 500 mln via a Eurobond issue, which was priced at a coupon of 2.6% per annum, the lowest ever rate among Russian corporate issuers. > Four conference calls and webcasts for analysts and investors were organised in order to discuss the Company’s financial results. > More than 50 press releases were distributed via the UK regulatory news service. For more information on our initiatives and their accompanying presentations, please visit the Calendar section of the Company’s official website 274 275 Share Capital N O I T A M R O F N I L A N O I T I D D A 278 Financial statements 326 Changes in the status of conformity with the Corporate Governance Code (CGC) principles in 2021 328 Independent limited assurance report 334 GRI content index 343 SASB content index 345 TCFD recommendations 346 Glossary 347 Contacts 276 277 Financial statements Independent Auditors’ Report To the Shareholders and Board of Directors of PJSC “PhosAgro”: Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of PJSC “PhosAgro” (the “Company”) and its subsidiaries (together – the “Group”) as at 31 December 2021, and the Group’s consolidated financial performance and consolidated cash flows for the year then ended in accordance with International F inancial Reporting Standards (IFRS). What we have audited The Group’s consolidated financial statements comprise: the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2021; the consolidated statement of financial position as at 31 December 2021; the consolidated statement of cash flows for the year then ended; the consolidated statement of changes in equity for the year then ended; and the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the ethical requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047 T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru Key audit matter How our audit addressed the key audit matter Initial audit procedures as a result of changing the auditor Refer to Note 4 to the consolidated financial statements of the Group In December 2020, the Company appointed us as auditors of the consolidated financial statements of the Group for the year ended 31 December 2021. The consolidated financial statements of the Group for the year ended 31 December 2020 were audited by another auditor who expressed an unmodified opinion on those statements on 18 February 2021. For the first-year audit, our objective with respect to the opening balances was to obtain sufficient appropriate audit evidence about whether: (a) The opening balances contain misstatements that materially affect the current period’s financial statements; and (b) Appropriate accounting policies reflected in the opening balances have been consistently applied in the current period’s financial statements, or changes thereto are appropriately accounted for and adequately presented and disclosed in accordance with IFRS. We focus on this matter as the first-year audit inherently requires greater attention to the consistency of the application of accounting principles, critical estimates and significant management judgements. As the newly appointed auditor we performed the following audit procedures to obtain sufficient appropriate audit evidence regarding the opening balances: We contacted the predecessor auditor and assessed the predecessor auditor’s working papers to obtain evidence regarding the opening balances. We reviewed the accounting policies of the Group and ensured that the accounting policies have been consistently applied in the current period’s financial statements. We assessed changes in the accounting policies implemented by the Group since 2020 to make sure they were appropriately applied and presented in the consolidated financial statements in accordance with IFRS. We identified complex accounting matters and transactions and assessed management’s judgement, the accounting treatment and the disclosures made in the consolidated financial statements. We obtained an understanding of management’s process in respect of the identification and measurement of the accounting estimates and related controls. We assessed critical estimates and judgements applied by management that had the most significant effect on the amounts recognised in the consolidated financial statements of the Group and ensured that these estimates and judgements are adequate and conform with IFRS requirements. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 278 279 Additional Information Independent Auditors’ Report Key audit matter How our audit addressed the key audit matter Recoverability of deferred tax assets Refer to Note 17 to the consolidated financial statements of the Group We performed the following audit procedures to address the key audit matter: As at 31 December 2021, the Group’s consolidated statement of financial position includes RUB 9,499 million of deferred tax assets, the main part of which relates to deferred tax assets recognised by the Company in respect of tax losses carried forward. In terms of IFRS, a deferred tax asset shall be recognised for unused tax losses only to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Management of the Group performed the assessment of and concluded on the recoverability of the deferred tax assets. This analysis was based on the long-term plans of the Group and the financial projections of the future taxable profits of the Company. We focus on this area because it involves significant management’s judgement and is affected by the uncertainty over the amount of future taxable profit. We obtained an understanding of the Company’s process in relation to the assessment of the recoverability of the deferred tax assets and long-term budget preparation. We obtained the long-term budget prepared by the Company’s management and challenged the expected future profits and assumptions regarding future earnings as reflected therein, by comparing them to industry and market trends. We assessed the accuracy of the Company’s calculations used in the model, including deferred tax calculations. We assessed the adequacy of the management’s assumptions used in assessing the recoverability of the deferred tax assets arising from tax losses carried forward in the consolidated financial statements. We involved our tax specialists to assist in evaluating the management’s plans and to consider any potential limitations to the amount and timing of the utilisation of the unused tax loss as established by Russian tax legislation. We have read the consolidated financial statements and assessed adequacy of the related note disclosures. Other matter – Materiality and Group audit scope Overview Materiality Overall Group materiality: Russian Roubles (“RUB”) 8,003 million, which represents 5% of profit before tax Group scoping We conducted audit work at six reporting units located in three countries Our audit scope addressed 88% of the Group’s revenues and 78% of the Group’s absolute value of underlying profit before tax Materiality As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of signifi cant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the consolidated financial statements as a whole. Overall Group materiality RUB 8,003 million How we determined it 5% of profit before tax Rationale for the materiality benchmark applied We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark. We chose 5% which is consistent with quantitative materiality thresholds used for profit-oriented companies in this sector How we tailored our Group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Our group audit was focused on the significant components in the Russian Federation and abroad. For components which are individually financially significant we performed an audit of their complete set of financial information. For components that are not individually financially significant, but that are important to achieve sufficient coverage on individual items, we performed an audit of a complete set of financial information or an audit of one or more account balances. As a group auditor, we determined the nature and extent of the audit procedures to be performed for the components of the Group to ensure that we have performed enough work to be able to give an opinion on the Group’s consolidated financial statements as a whole. For the component auditors involved from another PwC network firm, we issued specific instructions which included our risk analysis, materiality and audit approach for the key audit areas. The Group engagement team regularly communicated with the component auditor. By performing the above procedures at the components, combined with additional procedures at the Group level, we have obtained sufficient and appropriate audit evidence regarding the consolidated financial statements of the Group as a whole that provides a basis for our opinion. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 280 281 Additional Information Independent Auditors’ Report Other information Management is responsible for the other information. The other information comprises the Group’s Annual report for 2021 and the Company’s Securities issuer’s report for the 12 months ended 31 December 2021 (but does not include the consolidated financial statements and our auditor’s report thereon), which are expected to be made available to us after the date of this auditor’s report. Our opinion on the consolidated financial statements does not cover the other info rmation and we will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our respons ibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the the Group’s Annual report for 2021 and the Company’s Securities issuer’s report for the 12 months ended 31 December 2021, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financ ial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high lev el of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always det ect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The certified auditor responsible for the audit resulting in this independent auditor’s report is A.Y. 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ceccecececececececeeceeceecececececececececeeeeeeeeeceeeceeceeeeeeeeeeececececeeceeeeeeeeceeeececeecececccccccccecceceeeececeeceeeececcccccccccccccececeeeececececcccceeeeececcccccccccceeeccccccececeeeeeeeeeceeeeeecececeecececeeeceeeeeececececececccecceeceeeeeeecececeeceececcceeeeeceeececccccceeeeceeeccccccccccccceeeeeeeeeccccceeeeeccceeecccccccccccc rtrtttrtrtrtrtrtrtrttrtttrttttrttrtttrttrtrtrtrrtrttrtttrttrtrtrttrtrtttttttrrtrtttrtttrrrttttttttrrrrrrrrtttrtrrrrrrttttrrrrrrrrrrrrttrrrrrrrrttrrrrrrrrrrrtrrrrrrrrrrrrrrrrrrrrrrrrr iififfiffiffffifffffffffffffiffffifififffifffffffffffifffifffffffififffffffffffiiifffififfffiifffiiiiiffffffiiiififfffffifiifiiiii iiiiieiiiiiiii d au 282 283 Additional Information Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 Consolidated Statement of Financial Position as at 31 December 2021 RUB million Revenues Cost of Group products sold Cost of products for resale Gross profit Administrative and selling overhead expenses Taxes, other than income tax, net Other expenses, net Foreign exchange (loss)/gain from operating activities, net Operating profit Gain from revaluation of financial assets measured at fair value Finance income Finance costs Foreign exchange loss from financing activities, net COVID-19 related expenses Profit before tax Income tax expense Profit for the year Attributable to: Non-controlling interests* Shareholders of the Parent Basic and diluted earnings per share (in RUB) Other comprehensive loss Items that will never be reclassified to profit or loss Actuarial losses Items that may be reclassified subsequently to profit or loss Foreign currency translation difference Other comprehensive (loss)/income for the year Total comprehensive income for the year Attributable to: Non-controlling interests* Shareholders of the Parent *Non-controlling interests are the minority shareholders of the subsidiaries of PJSC “PhosAgro” The consolidated financial statements were approved on 9 February 2022: Note 7 8 9 10 11 18 12 12 29(b) 13 24 27 2021 420,488 (206,082) (12,725) 201,681 (27,845) (5,946) (3,449) (307) 164,134 1,193 778 (5,044) (531) (475) 160,055 (30,381) 129,674 (23) 129,697 1,002 2020 253,879 (157,370) (9,333) 87,176 (24,048) (2,962) (2,512) 1,379 59,033 - 975 (5,455) (26,449) (1,434) 26,670 (9,749) 16,921 (11) 16,932 131 (36) (28) (350) (386) 129,288 (23) 129,311 2,345 2,317 19,238 (11) 19,249 A.A. Guryev Chief executive officer A.F. Sharabaiko Deputy CEO for Finance and International Projects RUB million Assets Property, plant and equipment Advances issued for property, plant and equipment Deferred tax assets Right-of-use assets Non-current spare parts Other non-current assets Catalysts Intangible assets Investments in associates Non-current assets Trade and other receivables Inventories Cash and cash equivalents VAT and other taxes receivable Income tax receivable Other financial assets Current assets Total assets Equity Share capital Share premium Retained earnings Actuarial losses Foreign currency translation reserve Equity attributable to shareholders of the Parent Equity attributable to non-controlling interests Total equity Liabilities Loans and borrowings Deferred tax liabilities Lease liabilities Defined benefit obligations Non-current liabilities Trade and other payables Loans and borrowings VAT and other taxes payable Income tax payable Lease liabilities Current liabilities Total equity and liabilities Note 31 December 2021 31 December 2020 14 17 15 18 16 21 20 22 19 23 25 17 26 27 28 25 26 237,444 13,237 9,499 6,955 4,698 2,058 2,049 1,756 569 220,031 7,835 7,462 7,335 4,308 948 2,292 1,621 556 278,265 252,388 48,526 41,177 21,710 15,013 540 216 127,182 405,447 372 7,494 148,193 (753) 9,231 164,537 106 164,643 157,081 12,937 3,459 952 174,429 41,756 12,710 6,397 3,334 2,178 66,375 405,447 17,515 30,580 8,460 10,285 479 311 67,630 320,018 372 7,494 90,757 (717) 9,581 107,487 129 107,616 103,824 11,578 4,268 945 120,615 29,869 55,316 3,675 1,000 1,927 91,787 320,018 The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements. The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 284 285 Additional Information Consolidated Statement of Cash Flows for the year ended 31 December 2021 Consolidated Statement of Changes in Equity for the year ended 31 December 2021 RUB million Cash flows from operating activities Operating profit Adjustments for: Depreciation and amortisation Loss on disposal of property, plant and equipment and intangible assets Operating profit before changes in working capital and provisions Increase in inventories, catalysts and non-current spare parts Increase in trade and other receivables Increase in trade and other payables Cash flows from operations before income taxes and interest paid Income tax paid Finance costs paid Cash flows from operating activities Cash flows from investing activities Acquisition of property, plant and equipment and intangible assets Borrowing cost capitalised paid Other Cash flows used in investing activities Cash flows from financing activities Proceeds from borrowings, net of transaction costs Repayment of borrowings Early eurobond partial redemption fees Dividends paid to shareholders of the Parent Dividends paid to non-controlling interests Lease payments Other payments Cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rates fluctuations Cash and cash equivalents at 31 December About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Note 2021 2020 Attributable to shareholders of the Parent 164,134 59,033 RUB million Share capital Share premium Retained earnings Actuarial losses Foreign currency translation reserve Attributable to non- controlling interests Total Total equity Balance at 1 January 2020 372 7,494 111,054 (689) 7,236 125,467 170 125,637 Total comprehensive income Profit/(loss) for the year Actuarial losses, note 27 Foreign currency translation difference Transactions with owners recognised directly in equity Dividends to shareholders, note 23 Other - - - - - - - - - - 16,932 - - (38,850) (249) - (28) - - - - - 16,932 (28) 2,345 2,345 (11) 16,921 - - (28) 2,345 - - (38,850) (249) (30) (38,880) - (249) Balance at 31 December 2020 372 7,494 88,887 (717) 9,581 105,617 129 105,746 Effect of change in accounting policy, note 4 - - 1,870 - - 1,870 - 1,870 Balance at 1 January 2021 372 7,494 90,757 (717) 9,581 107,487 129 107,616 Total comprehensive income Profit/(loss) for the year Actuarial losses, note 27 Foreign currency translation difference Transactions with owners recognised directly in equity Dividends to shareholders, note 23 - - - - - - - - 129,697 - - (72,261) - (36) - - - - (350) 129,697 (23) 129,674 (36) (350) - - (36) (350) - (72,261) - (72,261) Balance at 31 December 2021 372 7,494 148,193 (753) 9,231 164,537 106 164,643 8, 9 11 25 25 12 23 26 22 27,676 198 192,008 (10,855) (38,667) 17,490 159,976 (28,806) (4,945) 126,225 (47,951) (1,141) 724 (48,368) 61,622 (50,081) - (72,260) - (1,950) - (62,669) 15,188 8,460 (1,938) 21,710 26,626 209 85,868 (1,843) (2,316) 12,612 94,321 (6,462) (4,121) 83,738 (40,878) (1,220) 879 (41,219) 63,520 (66,182) (292) (38,852) (30) (1,951) (249) (44,036) (1,517) 8,236 1,741 8,460 The consolidated statement of сash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements. 286 The consolidated statement of сhanges in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements. 287 Additional Information Notes to the consolidated financial statements for 2020 (d) Presentation currency 1. BACKGROUND (a) Organisation and operations PJSC “PhosAgro” (the “Company” or the “Parent”) is a public joint stock company registered in accordance with the Civil Code of the Russian Federation. PJSC “PhosAgro” and its subsidiaries (together referred to as the “Group”) comprise Russian legal entities and foreign trading subsidiaries. The Company was registered in October 2001. The Company’s location is Leninsky prospekt 55/1 building 1, Moscow, Russian Federation, 119333. The Group’s principal activity is production of apatite concentrate and mineral fertilisers at plants located in the cities of Kirovsk (Murmansk region), Chere- povets (Vologda region), Balakovo (Saratov region) and Volkhov (Leningrad region), and their distribution across the Russian Federation and abroad. As at 31 December 2021, the Company’s key shareholders are two entities (Adorabella AG, Chlodwig Enterprises AG) registered in Switzerland that together hold approximately 44% of the Company’s ordinary shares in total and Mr. Vladimir S. Litvinenko holding approximately 21% of the Company’s ordinary shares. The above mentioned companies’ shares are ultimately owned by trusts, where the economic beneficiary is Mr. Andrey G. Guryev and his family members. (b) Russian business environment The Group’s operations are primarily located in the Russian Federation. Consequently, the Group is exposed to the economic and financial conditions of the Russian Federation, which display certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue development, and are subject to varying interpretations and frequent changes (note 31). The Russian economy contin- ues to be negatively impacted by ongoing political tension in the region and international sanctions against certain Russian companies and individuals. In March 2020, the World Health Organisation declared the outbreak of COVID-19 a global pandemic. In response to the pandemic, the Russian author- ities implemented numerous measures attempting to contain the spreading and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders and limitations on business activity, including closures. Some of the above measures were subsequently relieved, however, as of 31 December 2021, the global infection levels remain high, vaccination rate is relatively low, and there is a risk that additional restrictions may be imposed in subsequent periods, including due to emerging new variants of the virus. In 2021 the Russian economy demonstrated positive dynamics in recovery from the pandemic. This trend was also supported by the global economic recovery and higher prices on global commodity markets. However, higher prices on certain markets in Russia and globally also contribute to the inflation in Russia. These consolidated financial statements are presented in RUB. All financial information presented in RUB has been rounded to the nearest million, except per share amounts. The translation from USD and EUR into RUB, where applicable, was performed as follows: Assets and liabilities in USD and EUR as at 31 December 2021 and 31 December 2020 were translated at the following closing exchange rates: Closing exchange rate 31 December 2021 31 December 2020 RUB to USD 1 RUB to EUR 1 74.2926 73.8757 84.0695 90.6824 Profit and loss items for the year ended 31 December 2021 and 31 December 2020 were translated at the average exchange rate for the appropriate month: Average exchange rate for the month RUB to USD 1 RUB to EUR 1 RUB to USD 1 RUB to EUR 1 2021 2020 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information January February March April May June July August September October November December 74.2291 74.3842 74.4151 76.0977 74.0438 72.5106 73.9194 73.5942 72.8914 71.4981 72.6024 73.7172 90.5062 89.9403 88.6904 90.8178 89.8856 87.4537 87.3794 86.6334 85.9412 82.9586 82.9339 83.3260 61.7823 63.8836 73.3183 75.2321 72.6187 69.2239 71.2853 73.7998 75.6621 77.5924 77.0462 74.0563 68.7249 69.7001 81.0512 81.9481 79.0550 77.9624 81.3800 87.3414 89.2870 91.2900 91.0875 90.0734 Management of the Group has considered events and conditions that could give rise to material uncertainties and concluded that the range of possible out- comes does not cast significant doubt over the Group’s ability to continue as a going concern. > Equity items arising during the year are recognised at the exchange rate ruling at the date of transaction. The resulting foreign exchange The future effects of the current economic situation and the above measures are difficult to predict, and management’s current expectations and estimates could differ from actual results. difference is recognised in other comprehensive income. (e) Use of estimates and judgments 2. BASIS OF PREPARATION (a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the Inter- national Accounting Standards Board. The Group additionally prepares IFRS consolidated financial statements in the Russian language in accordance with the Federal Law No. 208-FZ On consoli- dated financial reporting. (b) Basis of measurement The consolidated financial statements are prepared on the historical cost basis except for the financial assets measured at fair value. (c) Functional currency The national currency of the Russian Federation is the Russian Rouble (“RUB”), which is the functional currency of the Parent and its subsidiaries, except for foreign trading subsidiaries, where the functional currency is USD, EUR and other currencies. The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical assumptions and estimation uncertainties that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: > Note 3 (c) (iii) – estimated useful lives of property, plant and equipment; > Note 17 – recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax losses can be used; > Note 3 (f) – derecognition of trade receivables under the securitisation arrangement. 288 289 Additional Information (f) Adoption of new and revised standards and interpretations (ii) Loss of control The following amended standards became effective from 1 January 2021, but did not have any material impact on the Group: > COVID-19-Related Rent Concessions Amendment to IFRS 16 (issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020). > Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the oth- er components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Sub- sequently it is accounted for as an equity-accounted investee or as measured at FVOCI financial asset depending on the level of influence retained. annual periods beginning on or after 1 January 2021). (g) New standards and interpretations not yet adopted A number of new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2022 or later, and which the Group has not early adopted, but is in process of assessing the impact on the Group’s consolidated financial statements. > Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). > IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023). > Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023). > Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). (iii) Acquisitions and disposals of non-controlling interests Any difference between the consideration paid to acquire a non-controlling interest, and the carrying amount of that non-controlling interest, is recognised in equity. Any difference between the consideration received from disposal of a portion of a Group’s interest in the subsidiary and the carrying amount of that portion, including attributable goodwill, is recognised in equity. (iv) Associates Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity ac- counted basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases. Dividends received from associates reduce the carrying value of the investment in associates. When the Group’s share of losses exceeds the Group’s interest in the associate, that interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate. > Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023). (v) Transactions eliminated on consolidation > Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022). > Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). > Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). > Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual periods beginning on or after 1 April 2021). > Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the con- solidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled enterprises are eliminated to the extent of the Group’s interest in the enterprise. Unrealised gains resulting from transactions with associates are eliminat- ed against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment. (b) Foreign currencies Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate ruling at that date. Non-monetary assets and liabilities denominated in foreign curren- cies that are stated at historical cost are translated to the functional currency at the exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the exchange rate rul- ing at the dates the fair values were determined. Foreign exchange differences arising on translation are recognised in the profit or loss. (c) Property, plant and equipment (i) Owned assets Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. The cost of property, plant and equipment at the date of transition to IFRS was determined by reference to its fair value at that date (“deemed cost”) as determined by an independent appraiser. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for their intended use and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as sep- arate items of property, plant and equipment. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 290 291 Additional Information (ii) Subsequent expenditure Expenses in connection with ordinary maintenance and repairs are recognised in the consolidated statement of profit or loss and other comprehensive in- come as they are incurred. ucts and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of over- heads. Other development expenditure is recognised in the profit or loss as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Expenses in connection with periodic maintenance on property, plant and equipment are recognised as assets and depreciated on a straight-line basis over the period until the next periodic maintenance, provided the criteria for capitalizing such items have been met. (ii) Other intangible assets Expenses incurred in connection with major replacements and renewals of property, plant and equipment are capitalised and depreciated on a systematic basis. (iii) Depreciation Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the month of acquisition or, in respect of internally constructed assets, from the month when an asset is completed and ready for use. Land is not depreciat- ed. The estimated useful lives as determined when adopting IFRS (1 January 2005) for the assets reflected on the statement of financial position at that date are as follows: Buildings Plant and equipment Fixtures and fittings Tangible fixed assets acquired after the date of adoption of IFRS, are depreciated over the following useful lives: Buildings Plant and equipmen Fixtures and fittings 12 to 17 years; 4 to 15 years; 3 to 6 years. 10 to 60 years; 5 to 35 years; 2 to 25 years. Management assesses the remaining useful lives in accordance with the current technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the Group. (iv) Capitalisation of borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalized as part of the costs of those assets. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale. The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditure on qualifying assets. Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average interest cost is applied), except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs are capitalised. Borrowing costs capitalized are presented as part of cash flows from investing activities in the consolidated statement of cash flows. Other intangible assets acquired by the Group are represented by Oracle software, which has finite useful life and is stated at cost less ac- cumulated amortisation and impairment losses. (iii) Amortisation Intangible assets, other than goodwill, are amortised on a straight-line basis over their estimated useful lives from the date the asset is available for use. The estimated useful lives are 3 – 10 years. (e) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equiv- alents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. The Group financial assets are classified in the following measurement categories based on the Group’s business model for managing the financial assets and the contractual terms of the cash flows: financial assets at amortised cost; financial assets at fair value (either through other comprehensive income or profit or loss). Financial assets at amortised cost. Financial asset is measured at amortised cost if it meets both of the following conditions: • the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any gains or losses arising from derecognition are recognised directly in profit or loss. Financial assets at fair value through other comprehensive income (“FVOCI”). Financial assets are classified and measured at fair value through other comprehensive income if they meet both of the following conditions: > they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and > their contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information (v) Advances issued for property, plant and equipment amount outstanding. A prepayment is classified as non-current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. These financial assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign ex- change gains and losses and impairment are recognised in profit or loss. (d) Intangible assets (i) Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the profit or loss as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved prod- Financial assets at fair value through profit or loss (“FVPL”). Financial asset that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. (f) Securitisation arrangements The Group enters into non-recourse securitisation arrangements under which insured trade receivables can be sold to a bank for cash proceeds. 292 293 Additional Information Trade receivables are derecognised from the statement of financial position as the Group does not retain substantially all risks and rewards of ownership, except for the amount of security deposit which represents insurance deductible amount for the receivables transferred to a bank. A deposit is recognised in trade receivables in the consolidated statement of financial position of the Group. The Group continues to collect and service the receivables and then transfers to the bank the collected amounts of the trade receivables sold. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impair- ment losses are recognised in the profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, if any, and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The portfolio of trade receivables that can be sold to a bank meets the criteria for “held to collect and sell” business model and such trade receivables are classified and measured at fair value through other comprehensive income. Cash collected from the customers and not yet transferred to the bank at the reporting date is presented within other payables in the consolidated state- ment of financial position of the Group. Securitisation fees are recognised as finance costs. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. Bank deposits held for longer than three months that are repayable on demand within several working days without penalties or that can be redeemed/ withdrawn, subject to the interest income forfeited, are classified as cash equivalents if the deposits are held to meet short-term cash needs and there is no significant risk of a change in value as a result of an early withdrawal. (h) Inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventory (finished goods and goods for resale) for distribution companies is determined on the first-in, first-out (FIFO) basis. The cost of inventories for production companies is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (j) Leases As a lessee Applying IFRS 16 for all leases (except as noted below), the Group: > Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of future lease payments; > Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss and other comprehensive income; and > Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated statement of cash flows. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and making cer- tain adjustments to reflect the terms of the lease and type of the asset leased. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Spare parts to be used for construction and in repairs capitalised are classified as non-current spare parts. Lease payments included in the measurement of the lease liability comprise the following: Catalysts to be used in production during the period of more than 1 year are classified as part of non-current assets and written-off to the production cost based on the volume of goods produced. Catalysts to be used in production within 1 year are classified as part of inventories > fixed payments; (i) Impairment Financial assets The Group recognises loss allowances for expected credit loss (ECLs) on financial asset measured at amortised cost and debt investments measured at fair value through other comprehensive income (“FVOCI”). The loss allowances are measured on either of the following bases: 12-month ECLs that result from default events that are possible within the 12 months after the reporting date; and lifetime ECLs that result from all possible default events over the expect- ed life of a financial instrument. For trade receivables the Group estimated the expected credit losses for the entire period, applying a simplified approach to measuring expected credit loss- es, which uses lifetime expected loss allowance. In the terms of calculating the expected credit loss, the Group considers the credit rating for each counter- party, adjusted with forward-looking factors specific to the debtors, historical credit loss experience and economic environment in which they operate. If, in a subsequent period, the fair value of an impaired financial assets increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. Non-financial assets > variable lease payments that depend on the rate; > amounts expected to be payable under a residual value guarantee. Lease liability is measured at amortised cost using the effective interest method. It is revalued when there is a change in future lease pay- ments arising from adjusted interest rate, extension or termination option and other events. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. For short-term leases (lease term of 12 months or less) and leases of low-value assets the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within cost of sales, administrative expenses and selling expenses in the consolidated statement of profit or loss and other comprehensive income. (k) Share capital (i) Repurchase of share capital When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is de- ducted from equity. The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. (ii) Dividends The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). Dividends are recognised as a liability in the period in which they are declared. 294 295 Additional Information (l) Financial liabilities (p) Revenues The Group’s financial liabilities comprise trade and other payables, borrowings and bonds which are measured at amortised cost. The Group derecognises a financial liability when its obligation specified in the contract is discharged or cancelled or expires. (m) Employee benefits (i) Pension plans The Group’s net obligation in respect of defined benefit post-employment plans, including pension plans, is calculated separately for each plan by estimat- ing the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to deter- mine its present value, and the fair value of any plan assets, if any, is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised immediately as an expense in the profit or loss. To the extent the benefits vest immediately, the expense is recognised immediately in the profit or loss. All actuarial gains and losses are recognised in full as they arise in other comprehensive income. (ii) Long-term service benefits other than pensions The Group’s net obligation in respect of long-term service benefits, other than pension plans, is the amount of future benefits that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations. All actuarial gains and losses are recognised in full as they arise in other comprehensive income. (iii) State pension fund The Group makes contributions for the benefit of employees to Russia’s State pension fund. The contributions are expensed as incurred. (n) Provisions Revenue from contracts with customers is recognised when control of the goods or services is transferred to a customer. The amount of revenue recognised reflects the consideration the Group expects to be entitled in exchange for goods or services, taking into account any trade, volume and other discounts. Advances received before the control passes to a customer are recognised as the contract liabilities. The amount of consideration does not contain a significant financial component as payment terms for the majority of contracts are less than one year. No information is provided about remaining performance obligations as at the reporting date that have an original expected duration of one year or less, as allowed by IFRS 15. Contracts with customers for the supply of goods use a variety of delivery terms. The Group determined that under the terms of the major- ity contracts for the supply of mineral fertilizers the Group undertakes to provide delivery and the related delivery services after the transfer of control over the goods to the buyer at the loading port. Under IFRS 15, these services are a separate performance obligation, which revenue must be recognised during the period of delivery as revenue from logistics activities. The Group recognises revenue from these logistics services at the time of delivery, due to the fact that the potential difference is calculated and recognised as insignificant. In the revenue disclosure the sales of certain product groups include the proceeds from logistics services. Costs related to rendering of logistics services are mainly represented by transportation costs and included in cost of group products sold. (q) Finance income and finance costs Finance income comprises interest income, dividend income, gain arising from operations with foreign currency, unwinding of discount on financial assets and share of profit of associates and foreign exchange gains on financing activities. Interest income is recognised as it ac- crues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established. Finance costs comprise interest expense on borrowings, interest expense on lease liabilities, bank fees, securitisation fees, loss arising from operations with foreign currency, share of l oss of associates, increase in provision for bad debts for financial investments, interest expense on defined benefit obligations and foreign exchange losses on financing activities. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses, gains and losses arising from operations with foreign currency, securitisation fees, share of profit and losses of associates are reported on a net basis. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (r) Overburden removal expenditure (o) Income tax In open pit apatite rock mining operations, it is necessary to remove the overburden and other waste in order to access the economically recoverable resources. Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recog- nised in other comprehensive income, in which case it is recognised in other comprehensive income. Stripping costs incurred during the pre-production phase of the open pit mine are capitalised as the cost of the development of the mining property and amortised over the life of the mine. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differenc- es relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. According to the Group’s approach to stripping, the ore, which becomes accessible after the overburden removal, is extracted within no more than four months. Therefore, the stripping ratio (volume of overburden removed over the volume of resources extracted) is expected to stay relatively constant over the future periods and stripping costs incurred during the production phase of the open pit mine are recog- nised in the profit or loss as incurred. (s) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the peri- od, adjusted for own shares held. If the number of ordinary shares outstanding increases/ (decreases) as a result of a share split/ (reverse share split), the calculation of the EPS for all periods presented is adjusted retrospectively. 296 297 Additional Information (t) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including reve- nues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s top management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Group’s top management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 4. CHANGE IN ACCOUNTING POLICY AND RECLASSIFICATIONS Starting from 1 January 2021, the Group: (a) Changed its accounting policy on the recognition of logistics expenses to the point of sale. The Group started to capitalise such logistics expenses in the cost of finished goods, while previously these expenses were recognised as part of selling expenses as they occurred. The Group also classified these expenses as part of the cost of products sold, while previously these expenses were recognised as part of selling expenses. The comparative figures were changed respectively to align them with the current year presentation. Balances at 1 January 2020 were not restated as having no material effect on the financial statements. (b) Changed the presentation of administrative and fixed selling expenses. The Group started to present these expenses together as administrative and selling overhead expenses, while previously these expenses were presented separately as selling and as administrative expenses. The comparative figures were changed respectively to align them with the current year presentation. (c) Netted-off trade accounts receivable against other payables under the arrangement with the bank for the sale of accounts receivable described in note 29 (c). (d) Separately presented spare parts to be used as part of non-current assets and made other reclassifications. Management believes that the new accounting policy and change in classification and presentation of certain expenses will provide more relevant and transparent information about the results of Group’s operations. The tables below reconcile the carrying amounts of assets, liabilities, equity, expenses and cash flows as presented in accordance with the previous account- ing policy and the new amounts after the changes were adopted. Extract from the Consolidated Statement of Financial Position: RUB million Assets Non-current spare parts (d) Non-current assets Trade and other receivables (c), (d) VAT and other taxes receivable (d) Income tax receivable (d) Inventories (a), (d) Current assets Total assets 31 December 2020 (as previously reported) Adjustment/ reclassification 31 December 2020 (as presented) - 248,080 32,887 - - 32,636 74,294 322,374 4,308 4,308 (15,372) 10,285 479 (2,056) (6,664) (2,356) 4,308 252,388 17,515 10,285 479 30,580 67,630 320,018 RUB million Equity Retained earnings (a) Equity attributable to shareholders of the Parent (a) Total equity Liabilities Deferred tax liabilities (a) Non-current liabilities Trade and other payables (c), (d) Income tax payable (d) VAT and other taxes payable (d) Current liabilities Total equity and liabilities 31 December 2020 (as previously reported) Adjustment/ reclassification 31 December 2020 (as presented) 88,887 105,617 105,746 11,196 120,233 39,152 - - 96,395 322,374 1,870 1,870 1,870 382 382 (9,283) 1,000 3,675 (4,608) (2,356) 90,757 107,487 107,616 11,578 120,615 29,869 1,000 3,675 91,787 320,018 Extract from the Consolidated Statement of Profit or Loss and Other Comprehensive Income: RUB million Cost of sales (d) Cost of Group products sold (a), (d) Cost of products for resale (a), (d) Gross profit Selling expenses (b) Administrative expenses (b) Administrative and selling overhead expenses (b) Foreign exchange gain from operating activities, net (d) Operating profit Foreign exchange loss (d) Foreign exchange loss from financing activities, net (d) Extract from the Consolidated Statement of Changes in Equity: RUB million Retained earnings (a) Total Extract from the Consolidated Statement of Cash Flows: RUB million Cash flows from operating activities Operating profit (d) Operating profit before changes in working capital and provisions Decrease in trade and other receivables (d) Increase in trade and other payables (d) 2020 (as previously reported) (133,335) - - 120,544 (39,588) (17,828) - - 57,654 (25,070) - Reclassification 2020 (as presented) 133,335 (157,370) (9,333) (33,368) 39,588 17,828 (24,048) 1,379 1,379 25,070 (26,449) - (157,370) (9,333) 87,176 - - (24,048) 1,379 59,033 - (26,449) 31 December 2020 (as previously reported) 88,887 105,746 Adjustment 31 December 2020 (as presented) 1,870 1,870 90,757 107,616 2020 (as previously reported) Reclassification 2020 (as presented) 57,654 84,489 (345) 12,020 1,379 1,379 (1,971) 592 59,033 85,868 (2,316) 12,612 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 298 299 Additional Information 5. DETERMINATION OF FAIR VALUES Segment information for the year ended 31 December 2021 is as follows: When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: > Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. > Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). > Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Fair values have been determined for measurement and / or disclosure purposes based on the methods described below. When applicable, further informa- tion about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Financial assets and liabilities measured at amortised cost The fair values of financial assets and liabilities presented by loans issued, trade and other receivables, cash and cash equivalents, trade and other payables approximate their carrying amounts as at the reporting date. The fair values of eurobonds are determined for disclosure purposes based on quoted market prices and included in level 1 of the fair value hierarchy. The fair values of loans and borrowings are categorised as Level 3 of the fair value hierarchy. The fair values are calculated based on the present value of fu- ture principal and interest cash flows, discounted at the market rate of interest at the reporting date. (b) Financial instruments measured at fair value The fair value of financial assets measured at fair value through profit or loss is determined using valuation techniques and categorised as Level 3 of the fair value hierarchy. 6. SEGMENT INFORMATION Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly re- viewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM has been identified as the Group’s top management. The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products, and they require different technology and marketing strategies. The following summary describes the operations in each of the Group’s reportable segments: > Phosphate-based products segment includes mainly production and distribution of ammophos, diammonium phosphate, sodium tripolyphosphate and other phosphate-based and complex (NPK) fertilisers on the factories located in Cherepovets, Balakovo and Volkhov, and production and distribution of apatite concentrate extracted from the apatite-nepheline ore, which is mined and processed in Kirovsk; > Nitrogen-based products segment includes mainly production and distribution of ammonia, ammonium nitrate and urea on the factory located in Cherepovets. Certain revenue and expenses are not allocated to any particular segment and are, therefore, included in the “other operations” column. None of these op- erations meet any of the quantitative thresholds for determining reportable segments. The CODM assesses the performance of the reportable segments based on, among other factors, a measure of EBITDA (operating profit adjusted by depre- ciation and amortization). Since the EBITDA term is not a standard IFRS measure, its definition may differ from that of other companies. Information regarding the results of each reportable segment is included below. RUB million Segment revenue and profitability Segment external revenues, thereof: Export Domestic Cost of Group products sold Cost of products for resale Gross segment profit Administrative and selling overhead expenses Taxes, other than income tax, net Other expenses, net Foreign exchange loss from operating activities, net Operating profit Certain items of profit and loss Depreciation and amortisation EBITDA Gain from revaluation of financial assets measured at fair value Finance income Finance costs Foreign exchange loss from financing activities, net COVID-19 related expenses Profit before tax Phosphate- based products Nitrogen-based products Other operations Total 332,999 238,033 94,966 71,851 64,722 7,129 (175,036) (29,481) - 157,963 (23,001) (5,702) (2,881) (200) - 42,370 (4,378) (236) (550) (97) 126,179 37,109 (22,188) 148,367 978 603 (4,178) (276) (412) (4,966) 42,075 205 127 (854) (245) (59) 122,894 36,283 15,638 7,276 8,362 (1,565) (12,725) 1,348 (466) (8) (18) (10) 846 (522) 1,368 10 48 (12) (10) (4) 878 420,488 310,031 110,457 (206,082) (12,725) 201,681 (27,845) (5,946) (3,449) (307) 164,134 (27,676) 191,810 1,193 778 (5,044) (531) (475) 160,055 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 300 301 Additional Information Segment information for the year ended 31 December 2020 is as follows: 8. COST OF GROUP PRODUCTS SOLD RUB million Segment revenue and profitability Segment external revenues, thereof: Export Domestic Cost of Group products sold Cost of products for resale Gross segment profit Administrative and selling overhead expenses Taxes, other than income tax, net Other expenses, net Foreign exchange gain from operating activities, net Operating profit Certain items of profit and loss Amortisation and depreciation EBITDA Finance income Finance costs Foreign exchange loss from financing activities, net COVID-19 related expenses Profit before tax The analysis of export revenue by regions is as follows: RUB million Europe South America North America India Africa CIS Asia 7. REVENUES RUB million Phosphate-based products Sales of chemical fertilisers Sales of apatite concentrate Sales of nepheline concentrate Sales of other phosphate-based products and services Nitrogen-based products Other Phosphate-based products Nitrogen-based products Other operations Total RUB million Production expense for Group goods sold 2021 (163,034) 2020 (124,197) 203,561 38,701 11,617 253,879 135,506 68,055 (131,937) - 71,624 (20,128) (2,773) (2,239) 1,168 47,652 (20,830) 68,482 798 (4,544) (22,806) (1,299) 19,801 31,530 7,171 (23,654) - 15,047 (3,413) (179) (273) 211 11,393 (5,392) 16,785 149 (897) (3,642) (131) 6,872 1,771 9,846 (1,779) (9,333) 505 (507) (10) - - (12) (404) 392 28 (14) (1) (4) (3) 2021 116,771 103,893 31,780 19,765 17,916 12,171 7,735 168,807 85,072 (157,370) (9,333) 87,176 (24,048) (2,962) (2,512) 1,379 59,033 (26,626) 85,659 975 (5,455) (26,449) (1,434) 26,670 2020 66,516 41,915 12,287 21,623 12,336 10,512 3,618 310,031 168,807 2021 332,999 297,009 24,397 1,382 10,211 71,851 15,638 2020 203,561 167,718 25,877 1,090 8,876 38,701 11,617 420,488 253,879 Depreciation Materials and services Sulphur and sulphuric acid Potash Salaries and social contributions Ammonia Natural gas Repair and maintenance expenses Transportation of phosphate rock Electricity Fuel Drilling and blasting operations expenses Ammonium sulphate Logistics expenses for Group goods sold Freight, port and stevedoring expenses Russian Railways infrastructure tariff and operators’ fees Customs duties Other services and materials 9. ADMINISTRATIVE AND SELLING OVERHEAD EXPENSES RUB million Administrative overhead expenses: Salaries and social contributions Professional services Depreciation and amortisation Security and fire safety services Other Selling overhead expenses: Salaries and social contributions Depreciation and amortisation Materials and services (24,812) (23,120) (17,707) (16,574) (15,286) (14,277) (12,635) (11,373) (9,105) (6,740) (5,578) (3,486) (2,341) (43,048) (28,587) (10,728) (2,483) (1,250) (23,743) (19,501) (4,360) (12,253) (13,807) (4,802) (12,342) (10,134) (8,134) (6,311) (3,885) (3,168) (1,757) (33,173) (19,128) (11,452) (1,482) (1,111) (206,082) (157,370) 2021 (21,083) (13,493) (1,971) (1,384) (1,053) (3,182) (6,762) (4,002) (1,480) (1,280) 2020 (17,828) (11,249) (1,929) (1,368) (886) (2,396) (6,220) (3,484) (1,515) (1,221) (27,845) (24,048) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 302 303 Additional Information 10. TAXES, OTHER THAN INCOME TAX, NET 13. INCOME TAX EXPENSE The Company’s applicable corporate income tax rate is 20% (2020: 20%). RUB million Current tax expense Deferred income tax - origination and reversal of temporary differences, including change in unrecognised assets Income tax expense Reconciliation of effective tax rate: Profit before tax Income tax at applicable tax rate Deferred tax assets decrease Over/(under) provided in respect of prior years Tax effect of items which are not deductible or assessable for taxation purposes Effect of tax rates in foreign jurisdictions Effect of reduction in tax rate Change in tax incentive 2021 RUB million 160,055 (32,011) - 78 (1,017) 431 2,163 (25) % 100 (20) - - (1) 1 1 - 2021 (31,073) 692 (30,381) 2020 RUB million 26,670 (5,334) (4,800) (9) (864) 317 716 225 (30,381) (19) (9,749) 2020 (8,045) (1,704) (9,749) % 100 (20) (18) - (3) 1 2 1 (37) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information RUB million Mineral extraction tax Property tax Land tax Environment pollution payment VAT included in expenses Using water objects payment Other taxes 11. OTHER EXPENSES, NET RUB million Social expenditures Increase in provision for inventory obsolescence Loss on disposal of property, plant and equipment and intangible assets Increase in provision for bad debt and expected credit losses allowance Gain/(loss) on disposal of inventories Reversal/(accrual) of contingent liabilities Other income, net 12. FINANCE INCOME AND FINANCE COSTS RUB million Interest income Unwinding of discount on financial assets Share of profit of associates Dividend income Other finance income Finance income Interest expense on borrowings Interest expense on lease liabilities Bank fees (incl. early eurobond partial redemption fees) Securitisation fees Increase in provision for bad debts for financial investments Interest expense on defined benefit obligations Other finance costs Finance costs 2021 (3,605) (1,694) (222) (211) (113) (53) (48) 2020 (919) (1,397) (258) (174) (129) (44) (41) (5,946) (2,962) 2021 (3,378) (370) (198) (125) 387 2 233 2020 (2,570) (18) (209) (114) (73) (119) 591 (3,449) (2,512) 2021 643 64 13 - 58 778 (3,910) (395) (221) (146) (81) (48) (243) 2020 338 60 37 242 298 975 (3,647) (485) (517) (141) (503) (53) (109) (5,044) (5,455) 304 305 Additional Information 14. PROPERTY, PLANT AND EQUIPMENT 15. RIGHT-OF-USE ASSETS The Group has the following types of right-of-use assets: railway wagons, production equipment, offices. The leases typically run for a peri- od of 5 years, with an option to renew the lease after that date. Buildings Plant and equipment RUB Million Cost At 1 January 2020 Additions Transfers from right-of-use assets (note 15) Transfers Disposals Other movements At 1 January 2021 Additions Transfers to right-of-use assets (note 15) Transfers Disposals Other movements At 31 December 2021 Accumulated depreciation At 1 January 2020 Transfers from right-of-use assets (note 15) Depreciation charge Disposals Other movements At 1 January 2021 Transfers to right-of-use assets (note 15) Depreciation charge Disposals Other movements At 31 December 2021 Net book value at 1 January 2020 Net book value at 1 January 2021 Net book value at 31 December 2021 Land and buildings Plant and equipment Fixtures and fittings Construction in progress 94,482 1,757 - 10,653 (2,425) 138 104,605 1,529 - 11,760 (1,450) (44) 164,929 4,013 16 25,253 (6,425) 175 187,961 4,406 (15) 18,110 (6,655) (7) 116,400 203,800 (21,774) (81,164) - (5,945) 2,289 (25) (8) (17,552) 6,343 97 15,649 2,477 - - (242) 16 17,900 3,031 - - (192) (2) 20,737 (9,658) - (1,862) 234 (10) (25,455) (92,284) (11,296) - (6,425) 1,263 8 7 (17,703) 6,560 10 - (1,852) 179 1 (30,609) (103,410) (12,968) 36,995 37,590 - (35,906) (79) - 38,600 34,866 - (29,870) (102) - 43,494 - - - - - - - - - - - 72,708 79,150 85,791 83,765 95,677 100,390 5,991 6,604 7,769 36,995 38,600 43,494 Total 312,055 45,837 16 - (9,171) 329 349,066 43,832 (15) - (8,399) (53) 384,431 (112,596) (8) (25,359) 8,866 62 (129,035) 7 (25,980) 8,002 19 (146,987) 199,459 220,031 237,444 During the year ended 31 December 2021, the Group capitalised borrowing costs in the amount of RUB 1,141 million (2020: RUB 1,220 million) in the value of property, plant and equipment using the weighted average interest rate of 2.86% per year (2020: 3.20% per year). As at 31 December 2021, the most significant balances of the construction in progress related to the following investment projects: 16. INVESTMENTS IN ASSOCIATES > Kirovsk mine extension and modernization. As at 31 December 2021, the Group has capitalised expenses of RUB 14,045 million (as at 31 December 2020: Carrying values of the Group’s investments in associates are as follows: RUB 10,758 million); > MAP facilities construction in Volkhov. As at 31 December 2021, the Group has capitalised expenses of RUB 13,362 million (as at 31 December 2020: RUB 7,939 million); RUB million JSC Khibinskaya Teplovaya Kompaniya (Russia) > Granulated ammonium sulphate facilities construction in Balakovo. As at 31 December 2021, the Group has capitalised expenses of RUB 1,862 million JSC Giproruda (Russia) (as at 31 December 2020: RUB 715 million); > Aluminium fluoride production facilities development in Cherepovets. As at 31 December 2021, the Group has capitalised expenses of RUB 1,090 million (as at 31 December 2020: RUB 2,180 million). JSC Soligalichskiy izvestkovyi kombinat (Russia) Total RUB million Net book value at 1 January 2020 New lease contracts and modification on existing lease contracts Transfers to property, plant and equipment (note 14) Depreciation Disposals Effect of foreign currency translation reserve Net book value at 31 December 2020 Net book value at 1 January 2021 New lease contracts and modification on existing lease contracts Transfers from property, plant and equipment (note 14) Depreciation Disposals Effect of foreign currency translation reserve Net book value at 31 December 2021 RUB million Depreciation expense on right-of-use assets Interest expense on lease liabilities Expenses relating to short-term leases Expenses relating to leases with variable payments Amounts recognised in the consolidated statement of cash flows: RUB million Principal lease payments (note 26) Interest lease payments (note 26) Expenses relating to short-term leases Expenses relating to leases with variable payments Total payments Amounts recognised in the consolidated statement of profit or loss and other comprehensive income: 109 146 - (79) (6) 15 185 185 395 - (100) (20) (8) 452 6,782 1,934 (8) (1,545) (15) 2 7,150 7,150 1,087 8 (1,673) (68) (1) 6,503 2021 1,773 395 481 524 2021 (1,949) (395) (481) (524) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Total 6,891 2,080 (8) (1,624) (21) 17 7,335 7,335 1,482 8 (1,773) (88) (9) 6,955 2020 1,624 485 618 476 2020 (1,951) (485) (618) (476) (3,349) (3,530) 31 December 2021 31 December 2020 Carrying value Share of ownership Carrying value Share of ownership 484 59 26 569 50% 25% 26% 463 62 31 556 50% 25% 26% 306 307 Additional Information 17. DEFERRED TAX ASSETS AND LIABILITIES (a) Deferred tax assets and liabilities by type of temporary difference RUB million 31 December 2020 Recognised in profit or loss Recognised in other comprehensive income Reclassification 1 January 2020 Deferred tax assets and liabilities are attributable to the following items: RUB Million Property, plant and equipment and intangible assets Other long-term assets Current assets Liabilities Tax loss carry-forwards Unrecognised deferred tax assets Tax assets/(liabilities) Set off of tax Net tax assets/(liabilities) Assets 2021 375 71 2,449 1,825 6,881 (55) 11,546 (2,047) 9,499 Liabilities 2021 Net 2021 (13,714) (13,339) (256) (809) (205) - - (14,984) 2,047 (185) 1,640 1,620 6,881 (55) (3,438) - (12,937) (3,438) Assets 2020 383 115 1,322 1,921 5,962 (55) 9,648 (2,186) 7,462 Liabilities 2020 (12,390) (51) (1,012) (311) - - (13,764) 2,186 (11,578) Net 2020 (12,007) 64 310 1,610 5,962 (55) (4,116) - (4,116) The deferred tax assets on tax loss carry-forwards relate to the Russian entities. Due to amendments to the Russian tax legislation, starting from 1 Janu- ary 2017, tax losses for Russian tax purposes carried forward existing as at 31 December 2021 do not expire. Management has developed a tax strategy to utilise the tax losses above. In assessing the recoverability of the tax losses, management considers a forecast of future taxable profits of the Group and the Group’s tax position. The forecast is reviewed at each reporting date to ensure that the related tax benefit will be realised. As at 31 December 2021, no deferred tax liability for taxable temporary differences of RUB 714 million associated with investments in subsidiaries has been recognised (31 December 2020: RUB 19,984 million), either because the Parent can control the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future, or because the applicable tax rate is expected to be 0%. (b) Movement in temporary differences during the year Property, plant and equipment, right- of-use assets and intangible assets Other long-term assets Current assets Liabilities Tax loss carry-forwards Unrecognised deferred tax assets (12,007) 64 692 1,610 5,962 (55) (78) 63 (9) (215) (1,465) - Net tax (liabilities)/assets (3,734) (1,704) (2) 9 24 3 - - 34 - - - - - - - (11,927) (8) 677 1,822 7,427 (55) (2,064) 18. OTHER NON-CURRENT ASSETS RUB million Loans issued to third parties, at amortised cost Provision for loans issued to third parties Loans issued to third parties, at amortised cost, net Long-term accounts receivable Provision for long-term accounts receivable Long-term accounts receivable, net Financial assets, at fair value through profit or loss Loans issued to employees, at amortised cost Total other non-current assets 31 December 2021 31 December 2020 637 (561) 76 677 (589) 88 1,790 104 2,058 716 (605) 111 732 (635) 97 592 148 948 RUB million Property, plant and equipment, right-of-use assets and intangible assets Other long-term assets Current assets Liabilities Tax loss carry-forwards Unrecognised deferred tax assets 31 December 2021 Recognised in profit or loss Recognised in other comprehensive income Reclas- sification 1 January 2021 (as presented) Effect of change in accounting policy 31 December 2020 (as previously reported) (13,339) (1,331) (185) 1,640 1,620 6,881 (55) (243) 1,337 10 919 - 692 1 (6) (7) (2) - - (14) (2) (12,007) (12,007) 64 310 1,610 5,962 (55) - - (382) - - - 64 692 1,610 5,962 (55) (4,116) (382) (3,734) - - 2 - - - Net tax (liabilities)/assets (3,438) About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 308 309 Additional Information 2021 2020 Raw materials and spare parts 20. INVENTORIES RUB million 18 OTHER NON-CURRENT ASSETS (CONTINUED) The movements in provision for loans issued and long-term accounts receivable are as follows: RUB million Loans issued to third parties Balance at 1 January Provision for loans issued accrued Use of provision Reversal of provision Effect of foreign currency translation reserve Balance at 31 December Long-term accounts receivable Balance at 1 January Provision for Long-term accounts receivable accrued Use of provision Reversal of provision Effect of foreign currency translation reserve Balance at 31 December (605) (510) (1) - - 45 (561) (635) (1) - - 47 (589) - 2 59 (156) (605) - (584) - - (51) (635) As at 31 December 2021 and 31 December 2020, financial assets measured at fair value through profit or loss include 9.27% share in a related party JSC “AgroGuard-Finance”. The company is not publicly traded and the fair value of the investment was estimated using valuation techniques. As at 31 De- cember 2021, a fair value of operating subsidiaries of JSC “AgroGuard-Finance” was estimated by reference to the projected cash flows discounted at the post-tax RUB-nominated rate of 13.7% based on the weighted average cost of capital, a fair value of other subsidiaries was estimated using adjusted net assets method. During the year ended 31 December 2021, the Group recognized fair value gain of RUB 1,193 million in profit or loss (no fair value gain or loss has been rec- ognized during the year ended 31 December 2020). Finished goods: Chemical fertilisers Apatite concentrate Other products Work-in-progress: Chemical fertilisers and other products Chemical fertilisers and other products for resale, purchased from third parties Other goods Provision for obsolescence Total inventories 21. TRADE AND OTHER RECEIVABLES RUB million Financial assets Trade accounts receivable Other receivables Provision for doubtful accounts and expected credit losses allowance Non-financial assets Advances issued Deferred expenses Receivables from employees Provision for doubtful accounts and expected credit losses allowance About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 31 December 2021 31 December 2020 10,535 8,086 22,110 607 291 6,375 1,662 197 (600) 14,254 717 378 4,902 2,292 172 (221) 41,177 30,580 31 December 2021 31 December 2020 33,013 822 (339) 14,819 199 28 (16) 11,212 996 (349) 5,537 117 22 (20) 19. OTHER FINANCIAL ASSETS RUB million Interest receivable Loans issued to employees, at amortised cost Loans issued to third parties, at amortised cost Loans issued to related parties, at amortised cost Dividend receivable Provision for doubtful accounts Total other financial assets 31 December 2021 31 December 2020 140 104 60 25 - (113) 216 134 125 48 - 41 (37) 311 Total trade and other receivables 48,526 17,515 As at 31 December 2021, amount of trade accounts receivable includes RUB 3,166 million of trade receivables measured at fair value through other comprehensive income (31 December 2020: RUB 1,874 million) and RUB 4,885 million measured at fair value through profit or loss (31 December 2020: RUB 93 million). The fair values of these receivables approximate their carrying amounts. The movements in bad debt and expected credit losses allowance are as follows: RUB million Balance at 1 January Use of allowance Reversal of allowance Reclassification from non-сurrent assets Effect of foreign currency translation reserve Increase in provision for doubtful accounts and expected credit losses allowance Balance at 31 December See note 29 (c) for the analysis of overdue trade accounts receivable. 2021 (369) 140 10 - (3) (133) (355) 2020 (258) 78 5 (37) (29) (128) (369) 310 311 Additional Information 22. CASH AND CASH EQUIVALENTS (c) Dividends RUB million Cash in bank Call deposits Petty cash Total cash and cash equivalents 31 December 2021 31 December 2020 13,298 8,405 7 21,710 4,023 4,432 5 8,460 The most significant balances of cash and cash equivalents were held in banks with credit rating from an AA to BBB. 23. EQUITY (a) Share capital As at 31 December 2021 and 31 December 2020, the Company’s share capital consists of 129,500,000 ordinary shares with par value of RUB 2.5 per share. All issued ordinary shares are fully paid. Each ordinary share carries one vote. As at 31 December 2021 and 31 December 2020, the number of ordinary shares authorised for additional issue is 994,977,080, with a par value of RUB 2.5 per share. (b) Dividend policy The Group’s dividend policy is based on the following principles: > striking an effective and reasonable balance between the payment of dividends and reinvestment of profit in further development; > ensuring transparency and predictability of dividend payments as a way to boost the Company’s investment case. Amount of such payment is subject to approval of the General Shareholders’ Meeting, based on recommendations provided by the PhosAgro Board of Di- rectors. The Board of Directors’ recommendations depend on such factors as the Company’s earnings for the reporting period and its financial position. To calculate the amount of dividend payments, the Board of Directors considers the Company’s consolidated free cash flow for the reporting period (quarter, six months, first nine months or year) under IFRS. Free cash flow is defined as cash flows from operating activities less cash flows from investing activities based on the consolidated statement of cash flows. A decision on the payment of an interim dividend is made at the General Shareholders’ Meeting within three months of the end of the relevant reporting period. The payment period for dividends payable to a nominal holder or a trustee, which is a professional par- ticipant of the securities market, who are registered in the share register, shall be not more than 10 business days. The payment period for dividends payable to other parties registered in the shareholders register shall not exceed 25 business days after the date on which the parties entitled to receive dividends are determined. Holders of PhosAgro GDRs are also entitled to receive dividends in respect of the underlying shares, subject to the terms of their Depositary Agreements. In accordance with the dividend policy, the Board of Directors shall seek to make sure that the amount of distributed dividends ranges from 50% to over 75% (subject to the Company’s leverage ratio) of the Company’s consolidated free cash flow for the respective period under IFRS. At the same time, the amount of declared dividends shall not be lower than 50% of net profit for the relevant period under IFRS adjusted by the amount of unrealized exchange rate difference. In accordance with Russian legislation the Company’s distributable reserves are limited to the balance of accumulated retained earnings as recorded in the Company’s statutory financial statements prepared in accordance with Russian Accounting Standards. As at 31 December 2021, the Company had cumulative retained earnings of RUB 59,337 million (31 December 2020: RUB 18,057 million). Proposed by the Board of Directors in Total dividends approved during the reporting period April 2021 May 2021 August 2021 November 2021 Total dividends approved subsequent to the reporting date February 2022 Total dividends 24. EARNINGS PER SHARE Approved Amount per share Amount of dividends by shareholders in RUB RUB million May 2021 June 2021 September 2021 December 2021 April 2022 63 105 156 234 390 8,158.5 13,597.5 20,202.0 30,303.0 50,505.0 122,766.0 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Basic earnings per share are calculated based on the weighted average number of ordinary shares outstanding during the year. Basic and diluted earnings per share are the same, as there is no effect of dilution. RUB million Weighted average number of ordinary shares in issue Profit for the year attributable to shareholders of the Parent, RUB million Basic and diluted earnings per share, RUB 25. LOANS AND BORROWINGS 2021 2020 129,500,000 129,500,000 129,697 1,002 16,932 131 This note provides information about the contractual terms of the Group’s loans and borrowings. For more information about the leases, see note 26. For more information about the Group’s exposure to foreign currency risk, interest rate risk and liquidity risk, see note 29. RUB million Current loans and borrowings Unsecured bank loans Eurobonds Interest payable Bank commission (short-term) Total current loans and borrowings Non-current loans and borrowings Eurobonds Unsecured bank loans Bank commission (long-term) Total non-current loans and borrowings Total loans and borrowings 31 December 2021 31 December 2020 11,492 - 1,220 (2) 12,710 111,439 45,957 (315) 157,081 169,791 28,326 25,857 1,137 (4) 55,316 73,876 30,159 (211) 103,824 159,140 In May 2017, the Company’s SPV issued a USD 500 million 4.5-year Eurobond with a coupon rate of 3.95%, which was listed on the Irish Stock Exchange. In 2020, the Company’s SPV redeemed USD 150 million of the Eurobond ahead of schedule. The fair value of the Eu- robond at 31 December 2020 was RUB 26,514 million. In November 2021, the Company’s SPV redeemed USD 350 million. The redemption was financed through the proceeds from Eurobonds issued in September 2021. 312 313 Additional Information In January 2018 the Company’s SPV issued a USD 500 million 5,25-year Eurobond with a coupon rate of 3.949%, which is listed on the Irish Stock Exchange, with the fair value at the reporting date of RUB 37,940 million (31 December 2020: RUB 38,763 million). 26. LEASES In January 2020 the Company’s SPV issued a USD 500 million 5-year Eurobond with a coupon rate of 3.05%, which is listed on the Irish Stock Exchange, with the fair value at the reporting date of RUB 37,726 million (31 December 2020: RUB 38,534 million). In September 2021, the Company’s SPV issued a USD 500 million 7-year Eurobond with a coupon rate of 2.6%, which is listed on the Irish Stock Exchange, with the fair value at the reporting date of RUB 36,140 million. Management believes that the fair value of the Group’s other loans and borrowings approximates their carrying amounts. The breakdown of the loans and borrowings denominated in different currencies is as follows: RUB million USD-denominated EUR-denominated RUB-denominated Total The maturity of the loans and borrowings is as follows: RUB million Less than 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Bank commission Total Reconciliation of loans and borrowings balances: RUB million Balance as at 1 January Cash inflows Cash outflows Interest accrued Interest paid Amortisation of bank commission Foreign exchange (gain)/loss Other turnovers Balance as at 31 December 31 December 2021 31 December 2020 154,288 12,407 3,096 169,791 129,593 20,018 9,529 159,140 31 December 2021 31 December 2020 12,712 48,760 16,879 41,037 11,320 39,400 (317) 55,320 12,182 40,859 3,921 40,859 6,214 (215) 169,791 159,140 2021 159,140 61,622 (50,081) 3,910 (3,861) 83 (812) (210) 2020 133,576 63,520 (66,182) 3,647 (3,352) 83 27,848 - 169,791 159,140 RUB million Balance as at 1 January 2020 New lease contracts and modification of existing lease contracts Interest expense on lease liabilities Principal lease payments Interest lease payments Effect of foreign currency translation reserve Balance as at 1 January 2021 New lease contracts and modification of existing lease contracts Interest expense on lease liabilities Principal lease payments Interest lease payments Effect of foreign currency translation reserve Balance as at 31 December 2021 27. DEFINED BENEFIT OBLIGATIONS RUB million Pension obligations, long-term Post-retirement obligations other than pensions Total defined benefit obligations Lease liability without subsequent asset buyout Lease liability with subsequent asset buyout 4,757 94 295 (1,242) (296) 14 3,622 882 223 (1,345) (223) (11) 3,148 1,487 1,793 190 (709) (189) 1 2,573 521 172 (604) (172) (1) 2,489 Total 6,244 1,887 485 (1,951) (485) 15 6,195 1,403 395 (1,949) (395) (12) 5,637 About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 31 December 2021 31 December 2020 307 645 952 323 622 945 The Group has defined benefit plans at JSC “Apatit”, including all the branches, and PhosAgro Trading SA which stipulate payment of a lump sum allowance to employees who have a specified period of service in these companies upon their retirement. All the defined ben- efit plans are unfunded. The movement in the present value of the defined benefit obligations is as follows: RUB million Defined benefit obligations at 1 January Benefits paid Current service costs and interest Past service costs Actuarial loss in other comprehensive income Effect of foreign currency translation reserve and foreign exchange differences Defined benefit obligations at 31 December The key actuarial assumptions used in measurement of the defined benefit obligations are as follows: 2021 945 (132) 123 (15) 36 (5) 952 2020 857 (74) 98 (1) 28 37 945 Discount rate Future pension increases 31 December 2021 31 December 2020 7.5% 4.1% 6.4% 3.5% 314 315 Additional Information 28. TRADE AND OTHER PAYABLES RUB million Trade accounts payable including accounts payable for property, plant and equipment and intangible assets Advances received (contract liabilities) Payables to employees Accruals and provisions Dividends payable Other payables Total trade and other payables 31 December 2021 31 December 2020 16,643 5,676 16,379 5,094 209 2 3,429 41,756 12,230 4,777 12,406 4,029 210 - 994 29,869 Contract liabilities balance at the beginning of the year was fully recognised in revenue during the reporting period. 29. FINANCIAL RISK MANAGEMENT (a) Overview In the normal course of its operations, the Group has exposure to market, credit and liquidity risks. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and man- aging risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk manage- ment policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adher- ence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. (b) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the val- ue of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Foreign currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional curren- cies of Group entities. The currencies giving rise to this risk are primarily USD and EUR. In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buy- ing or selling foreign currencies at spot rates when necessary to address short-term imbalances. The Group implemented a natural hedge approach (policy) aiming at reducing its exposure to foreign currency risk by means of borrowing in the same cur- rencies in which sales agreements are denominated. The Group has the following net monetary position on financial assets and liabilities denominated in foreign currencies: RUB million Group companies in Russia: Current assets Trade and other receivables Cash and cash equivalents Other financial assets Non-current liabilities Non-current loans and borrowings Non-current finance lease liabilities Сurrent liabilities Current loans and borrowings Trade and other payables Current finance lease liability 31 December 2021 31 December 2020 USD denominated EUR denominated USD denominated EUR denominated 1,643 654 989 - (143,073) (142,510) (563) (13,563) (12,070) (1,422) (71) 70 3 67 - (11,786) (11,786) - (1,712) (620) (1,092) - 439 366 73 - (97,319) (97,319) - (33,457) (32,475) (982) - 28 5 23 - (6,716) (6,716) - (14,094) (13,302) (792) - About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information Net position of the Group companies in Russia (154,993) (13,428) (130,337) (20,782) Foreign Group companies: Current assets Trade and other receivables Cash and cash equivalents Other financial assets Non-current liabilities Non-current finance lease liability Сurrent liabilities Trade and other payables Current loans and borrowings Current finance lease liability Net position of foreign Group companies RUB million Total: Current assets Trade and other receivables Cash and cash equivalents Other financial assets Non-current liabilities Non-current loans and borrowings Non-current finance lease liabilities Сurrent liabilities Current loans and borrowings Trade and other payables Current finance lease liabilities Total net position 2,831 1,572 1,182 77 - - (137) (121) (16) - 2,694 2,977 1,390 1,587 - (2) (2) (199) (197) - (2) 2,776 1,596 970 543 83 - - (2) (2) - - 1,594 916 560 356 - - - (171) (171) - - 745 31 December 2021 31 December 2020 USD denominated EUR denominated USD denominated EUR denominated 4,474 2,226 2,171 77 (143,073) (142,510) (563) (13,700) (12,086) (1,543) (71) 3,047 1,393 1,654 - (11,788) (11,786) (2) (1,911) (620) (1,289) (2) 2,035 1,336 616 83 (97,319) (97,319) - (33,459) (32,475) (984) - 944 565 379 - (6,716) (6,716) - (14,265) (13,302) (963) - (152,299) (10,652) (128,743) (20,037) 316 317 Additional Information Management estimates that a 10% strengthening/(weakening) of RUB against USD and EUR, based on the Group’s total net position in USD and EUR as at the reporting date would have increased/(decreased) the Group’s profit for the year by RUB 16,295 million, before any tax effect (2020: would have in- creased/(decreased) the Group’s profit for the year by RUB 14,878 million). This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2020. The foreign exchange loss recognized in profit or loss of RUB 838 million (RUB 25,070 million for the comparative period) resulted from the depreciation of the Russian Rouble against major currencies during the reporting and comparative periods. Foreign currency translation differences In addition, the net assets of the Group’s foreign subsidiaries denominated in USD, EUR and other currencies amount to RUB 19,842 million as at the report- ing date (31 December 2020: RUB 16,760 million). Interest rate risk Interest rate risk is the risk that changes in interest rates will adversely impact the financial results of the Group. Management does not have a formal policy of determining how much of the Group’s exposure should be to fixed or variable rates. However, at the time of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable rate would be more favourable to the Group over the expected period until maturity. The interest rate profile of the Group’s interest-bearing financial instruments at their carrying values is as follows: Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual specific characteristics of each customer. The general charac- teristics of the Group’s customer base, including the default risk of the industry and country, in which customers operate, has less of an influence on credit risk. Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum amount of outstand- ing receivables; these limits are reviewed quarterly. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis. In response to the COVID-19 pandemic, the risk management committee has also been performing more frequent reviews of sales limits for customers in regions and industries that are severely impacted. The Group is monitoring the economic environment in response to the COVID-19 pandemic and is taking actions to limit its exposure to customers that are severely impacted. The majority of the Group’s customers have been transacting with the Group for several years, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics. Trade and other receivables relate mainly to the Group’s wholesale customers. The Group does not require collateral in respect of trade and other receivables, except for new customers who are required to work on a prepayment basis or present an acceptable bank guarantee or set up letter of credit with an acceptable bank. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 31 December 2021 31 December 2020 In addition, a major part of trade receivables in the Group’s foreign subsidiaries is insured. RUB million Fixed rate instruments Other non-current assets Call deposits and other financial assets Long-term borrowings Short-term borrowings Lease liabilities Total fixed rate instruments Variable rate instruments Long-term borrowings Short-term borrowings Total variable rate instruments 181 8,594 (154,309) (6,523) (5,637) 259 4,605 (94,498) (53,027) (6,195) (157,694) (148,856) (3,087) (6,189) (9,276) (9,537) (2,293) (11,830) At 31 December 2021, a 1 percentage point increase/(decrease) in LIBOR/EURIBOR, with all other variables held constant, would have decreased/(increased) the Group’s profit for the year and equity by RUB 93 million (31 December 2020: RUB 118 million). (c) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises from the Group’s receivables from customers, loans issued to related parties, current and non-current financial assets and cash and cash equivalents. As at 31 December 2021, the Group’s maximum exposure to credit risk is represented by the carrying amount of its financial assets and amounted to RUB 57,489 million (31 December 2020: RUB 21,580 million). There are no significant concentrations of credit risk, whether through exposure to individual customers and/or regions. As at 31 December 2021, the Group’s financial assets measured at amortised cost amounted to RUB 47,648 million (31 December 2020: RUB 19,021 mil- lion). As at 31 December 2021, the Group’s financial assets measured at fair value through profit or loss amounted to RUB 6,675 million (31 December 2020: RUB 685 million). As at 31 December 2021, the Group’s financial assets measured at fair value through other comprehensive income amounted to RUB 3,166 million (31 De- cember 2020: RUB 1,874 million). The Group establishes an allowance for impairment that represents its estimate of the expected credit losses in respect of trade and other receivables and other financial assets. The Group estimated the expected credit losses for the entire period, applying a simplified approach to measuring expected credit losses, which uses lifetime expected loss allowance. In the terms of calculating the expected credit loss, the Group considers the credit rating for each counterparty, adjusted with forward-looking factors specific to the debtors, historical credit loss experience and economic environment in which they operate. The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited to external ratings, audited financial statements, management accounts and cash flow projections and available press informa- tion about customers) and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default and are aligned to external credit rating definitions from agencies. Exposures within each credit risk grade are segmented by geographic region and industry classification and an ECL rate is calculated for each segment based on delinquency status and actual credit loss experience over the past years. These rates are multiplied by scalar fac- tors to reflect differences between economic conditions during the period over which the historical data has been collected, current condi- tions and the Group’s view of economic conditions over the expected lives of the receivables. The Group uses an allowance matrix presented in the table below to measure the ECLs of trade receivables from individual customers, which comprise a very large number of small balances. Loss rates are calculated using a ‘roll rate’ method based on the probability of a re- ceivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different segments based on the following common credit risk characteristics – geographic region, age of customer relationship. The analysis of overdue trade and other receivables at the reporting date is as follows: RUB Million Not past due Past due 0-90 days Past due 91-180 days Loss Rate 0%-15% 1%-35% 5%-60% Past due 181-365 days 15%-90% More than one year 50%-100% 31 December 2021 31 December 2020 Gross carrying amount 30,652 2,265 32 68 812 33,829 Lifetime ECL Net carrying value Loss Rate Gross carrying amount Lifetime ECL (3) (46) (6) (51) (232) (338) 30,649 0%-15% 10,252 2,219 1%-35% 26 17 5%-60% 15%-90% 580 50%-100% 951 391 32 582 33,491 12,208 (4) (4) - (8) (333) (349) Net carrying value 10,248 947 391 24 249 11,859 318 319 Additional Information The following information shows the movements in the Group’s assets and liabilities under the securitisation arrangement for the reporting period: RUB million Trade receivables transferred to the bank Associated cash inflow Associated cash outflow Net-off with other payables Other non-cash operations 2021 23,992 8,684 (3,566) 15,308 253 2020 14,899 2,350 (3,881) 12,549 63 RUB Million Carrying value Contractual cash flows Loans and borrowings 159,355 171,988 0-1 year 59,276 2,336 18,042 6,195 18,042 7,122 18,042 340 360 283 Lease liabilities Trade and other payables Financial guarantees issued for associates and related parties 31 December 2020 1-2 yrs 15,637 2,109 - 77 2-3 yrs 43,337 1,477 - - 3-4 yrs 4-5 yrs Over 5 yrs 5,529 1,021 41,759 161 - - - - 6,450 18 - - Payables to the bank as at 31 December 2021 amounted to RUB 3,229 million (31 December 2020: RUB 852 million) are presented within other payables. Receivables from the bank as at 31 December 2021 amounted to RUB 854 million (31 December 2020: RUB 537 million) are presented within trade receivables. Current and non-current financial assets The Group lends money to related parties and to third parties, who have good credit standing. Based on the prior experience, management believes that there is no significant credit risk in respect of related party and third party loans. Cash and cash equivalents are primarily held with banks with high credit rating. Guarantees Total 183,932 197,512 79,937 17,823 44,814 6,550 41,920 6,468 (e) Capital management The Group’s policy is to safeguard the Group’s ability to continue as a going concern, to maintain a strong capital base in order to provide investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital invested and the level of dividends paid to shareholders. There were no changes in the Board’s approach to capital management during the year. The Company and its subsidiaries are subject to externally imposed capital requirements including the statutory requirements of the coun- try of their domicile and the bank covenants. For financial guarantees issued the maximum exposure to credit risk is the amount of the commitment (note 32). The Group’s policy is to provide financial guarantees only to the subsidiaries or related parties. 30. COMMITMENTS (d) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to en- sure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incur- ring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Group maintains several lines of credit in various Russian and international banks. As at 31 December 2021, the Group had contractual commitments for the purchase of property, plant and equipment for RUB 29,458 mil- lion (31 December 2020: RUB 31,197 million), including VAT where applicable. 31. CONTINGENCIES (a) Litigation The Group has a number of small claims and litigations relating to regular business activities and small fiscal claims. Management believes that none of these claims, individually or in aggregate, will have a material adverse impact on the Group. The table below illustrates the contractual maturities of financial liabilities, including interest payments, which are converted at the closing exchange rates, where applicable. The amounts disclosed in the maturity table are the contractual undiscounted cash flows: (b) Taxation contingencies RUB Million Loans and borrowings Lease liabilities Trade and other payables Financial guarantees issued for associates and related parties 31 December 2021 Carrying value Contractual cash flows 170,108 185,811 5,637 20,283 6,246 20,283 0-1 year 16,492 2,487 20,283 75 75 75 1-2 yrs 52,628 1,856 - - 2-3 yrs 19,720 1,261 - - 3-4 yrs 43,070 318 - - 4-5 yrs Over 5 yrs 12,526 41,375 202 122 - - - - Total 196,103 212,415 39,337 54,484 20,981 43,388 12,728 41,497 Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal doc- umentation supporting the tax positions may be challenged tax authorities. Russian tax administration is gradually strengthening, includ- ing the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year when decisions about the review was made. Under certain circumstances reviews may cover longer periods. Russian transfer pricing (TP) legislation is generally aligned with the international TP principles developed by the Organisation for Econom- ic Cooperation and Development (OECD), although it has specific features. The TP legislation provides for the possibility of additional tax assessment for controlled transactions (transactions between related parties and certain transactions between unrelated parties) if such transactions are not on an arm’s-length basis. The management has implemented internal controls to comply with current TP legislation. Tax liabilities arising from controlled transactions are determined based on their actual transaction prices. It is possible, with the evolution of the interpretation of TP rules, that such prices could be challenged. The impact of any such challenge cannot be reliably estimated; how- ever, it may be significant to the financial position and/or the Group’s operations. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 320 321 Additional Information The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. This interpretation of relevant legislation may be chal- lenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group. The Controlled Foreign Company (CFC) legislation introduced Russian taxation of profits of foreign companies and non-corporate structures (including trusts) controlled by Russian tax residents (controlling parties). The CFC income is subject to a 20% tax rate. Management doesn’t ex- pect any significant payments in respect of its foreign subsidiaries profits due to new CFC legislation. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the tax au- thorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group. (c) Environmental contingencies b) Balances with related parties RUB million Trade and other receivables Trade and other payables Trade and other receivables Trade and other payables Short-term loans issued, at amortised cost c) Financial guarantees Nature of relationship 31 December 2021 31 December 2020 Associates Associates Other related parties Other related parties Other related parties 20 (17) 8 (349) 25 16 (12) 14 (237) - The environmental legislation, currently effective in the Russian Federation, is relatively new and characterised by frequent changes, official pronounce- ments and court decisions, which are often unclear, contradictory and subject to varying interpretation by different authorities. The Group issued financial guarantees to the bank to secure associates’ bank loans amounting to RUB 75 million (31 December 2020: RUB 340 million). The Group is involved in chemical production, which is inherently exposed to significant environmental risks. The Group companies record environmen- tal obligations as they become probable and reliably measurable. The Group companies are parties to different litigations with the Russian environmental authorities. The management believes that based on its interpretations of applicable Russian legislation, official pronouncements and court decisions no provision is required for environmental obligations. However, the interpretations of the relevant authorities could differ from management’s position and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant. d) Key management personnel remuneration Remuneration of key management personnel consists of monthly compensation, annual performance bonus contingent on operating results and contributions to the Russian state pension and social funds. The remuneration of the Board of Directors and key management personnel recognised as part of administrative and selling overhead expenses amounted to RUB 4,147 million (2020: RUB 3,351 million). (d) Compliance with covenants The Group is subject to certain covenants related primarily to its loans and borrowings. Non-compliance with such covenants may result in negative conse- quences for the Group including growth in the cost of borrowings and declaration of default. The Group was in compliance with covenants during the years ended 31 December 2021 and 31 December 2020. 32. RELATED PARTY TRANSACTIONS Parties are generally considered to be related if the parties are under common control or if one party has the ability to control the other party or can exercise significant influence or joint control over the other party in making financial and operational decisions. In considering each possible related party relation- ship, attention is directed to the substance of the relationship, not merely the legal form. Other related parties include entities controlled by the Company’s key shareholders. The balances and transactions with related parties are usually unsecured and denominated in RUB. a) Transactions with related parties RUB million Sales of goods and services Other income, net Purchases of goods and services Sales of goods and services Dividend income Other expenses, net Purchases of goods and services Nature of relationship Associates Associates Associates Other related parties Other related parties Other related parties Other related parties 2021 26 - (585) 968 - (60) (224) 2020 26 1 (561) 686 203 (53) (115) In 2021, the Company declared dividends in total amount of RUB 46,824 million (2020: RUB 25,113 million) to its shareholders which have significant influ- ence over the Group. About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 322 323 Additional Information 33. SIGNIFICANT SUBSIDIARIES Subsidiary Country of incorporation 31 December 2021 31 December 2020 Effective ownership (rounded) Apatit, JSC (including Balakovo, Volkhov and Kirovsk branches) Mekhanik, LLC NIUIF, JSC PhosAgro-Region, LLC PhosAgro-Belgorod, LLC PhosAgro-Don, LLC PhosAgro-Kuban, LLC PhosAgro-Kursk, LLC PhosAgro-Lipetsk, LLC PhosAgro-Oryol, LLC PhosAgro-Stavropol, LLC PhosAgro-Volga, LLC PhosAgro-SeveroZapad, LLC PhosAgro-Tambov, LLC PhosAgro-Sibir, LLC PhosAgro Trading SA Phosint Limited PhosAgro Logistics SA PhosAgro Polska Sp.z o.o. PhosAgro Deutschland GmbH PhosAgro France SAS PhosAgro Balkans DOO UAB PhosAgro Baltic PhosAgro Balkans SRL PhosAgro South Africa Proprietary Limited Logifert Oy Bulk Terminal Kotka Oy 34. SEASONALITY Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Russia Switzerland Cyprus Switzerland Poland Germany France Serbia Lithuania Romania South Africa Finland Finland 100% 100% 94% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 94% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Management responsibility statement The Company’ management hereby confirms that, to the best of its knowledge, the financial statements prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole. The management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. The Company was guided by GRI standards, as well as the principles of the ISO 26000 and AA 1000 standards during the preparation of the integrated report. A draft of this integrated report was reviewed and pre-approved at PhosAgro’s Board of Directors meeting on3 March 2022. On 30 June 2022, it will be submitted for approval to the Annual General Meeting of Shareholders. The consolidated financial statements for the year ended 31 December 2021 were approved by the Board of Directors on 10 February 2022. The Group is subject to certain seasonal fluctuations in fertiliser demand due to the timing of fertiliser application and, as a result, fertiliser purchases by farmers. However, the effect of seasonality on the Group’s revenue is partially offset by the fact that the Group sells its fertilisers globally and fertiliser appli- cation and purchases vary by region. The Group’s costs are generally stable throughout the year, however several maintenance activities undertaken at the Group’s production facilities may not be evenly spreaded. Andrey A. Guryev ГChief Executive Officer and Chairman of the Management Board of PJSC PhosAgro About this Report Company Profile Strategic Report Performance Review Corporate Governance Share Capital Additional Information 324 325 Additional Information Changes in the status of conformity with the Corporate Governance Code principles in 2021 № Number and brief description of the principle Old status New status Change in criteria Comments 1 2 3 4 1.1.5. Ability for shareholders to freely exercise their rights to vote 1.1.6. Equal opportunity to all persons present at the General Shareholders’ Meeting to express their opinions and ask questions that might be of interest to them 1.2.1. A transparent and clear mechanism for determining the amount of dividends and payment thereof 1.2.4. Ruling out any ways through which shareholders can obtain any profit or gain at the Company’s expense other than dividends and the payment of the liquidation value thereof A new criterion, fundamentally different from the previous one, was introduced at the end of the reporting year and, therefore, it was not complied with (PhosAgro Charter does not provide for online ballot completion on the website). The vast majority of the Company’s shareholders hold their shares through nominee shareholders (with the exception of only 25 out of 139,000 shareholders, or less than 0.02%) and can take advantage of remote voting by instructing their nominees accordingly (proxy voting) and thus exercise their voting rights by completing online ballots. In the reporting year, all general shareholders’ meetings of the Company were held by absentee voting and for that reason compliance with the criteria of this clause was not required (was impossible). Going forward (starting from this year), the Company will make certain to comply with these criteria when holding in-person meetings. Criteria 1 and 2 were fully complied with. Criterion 3, introduced for the first time, was not met with respect to failing to provide explanations and business justification for allocating a portion of the net profit for own needs as part of the materials for the general shareholders’ meetings in 2021. At the same time, information on the procedure for determining the amount of dividends and its conformity with the Company’s dividend policy was included in the shareholders materials for the GSM meetings. Starting from 2022, the Company will include explanations and business justification for allocating a portion of its net profit for own needs in annual GSM materials. In the reporting year, no ways through which persons controlling the Company could obtain profit or gain at the Company’s expense, other than dividends, were registered. № Number and brief description of the principle Old status New status Change in criteria Comments 2.1.1. Responsibility of the Board of Directors for decisions to appoint and oversee the activities of executive bodies 2.1.4. Determination of the Company’s remuneration policy by the Board of Directors 2.8.2 Performance of the remuneration committee 2.8.5. Composition of the Board of Directors committees 2.9.1. Evaluation of the quality of the work of the Board of Directors 5 6 7 8 9 4.1.1 The level of remuneration paid by the Company to its Board members and key managers 4.1.2 Remuneration Policy 4.1.3 Remuneration Policy 4.3.1 Remuneration key managers 10 11 12 13 14 4.3.2 Long-term incentive programme To improve the explanation, an indication of no time limits for non-compliance with the criterion has been added. To improve the explanation, an indication of no time limits for non-compliance with the criterion has been added. Criteria 1 and 2 were fully complied with. Criterion 3, first used in this version, was not met with respect to failure to define in the Company’s internal documents the conditions (events) upon the occurrence of which the Remuneration and Human Resources Committee of the Board of Directors considers the revision of the Company’s policy on remuneration of the Board members, members of executive bodies, and other key executives. The Company proceeded from the fact that the responsibility to regularly revise the policy, which is specified in the Regulations on the Remuneration and Human Resources Committee of the Board of Directors, implies ensuring that it is updated and meets the current needs of the Company. However, in 2022, a new version of the Regulations setting out the conditions (events) for the revision of the Remuneration Policy will be presented to the Board of Directors. According to the new version of the criteria, the recommendation that the Board committees should be headed by independent directors is limited to the Audit Committee and the Remuneration and Human Resources Committee. Criteria 1 and 3 were fully complied with. Criterion 2, first formulated in this version, was not met with respect to the failure to conduct individual assessment of each member of the Board of Directors in 2021 (for 2020) and 2022 (for 2021). In 2022, the Company will resume the practice of assessing each Board member individually, as part of the evaluation of the quality of the work of the Board of Directors. In the new version of the criteria, the only compliance requirement is a comparative analysis of remuneration in peer companies. To improve the explanation, an indication of no time limits for non-compliance with the criterion has been added. To improve the explanation, an indication of no time limits for non-compliance with the criterion has been added. The principle is complied with given the exclusion from the criteria of the procedure for refunding to the Company unlawfully obtained bonuses. The principle is complied with given the exclusion from the criteria of the requirement to have a long-term incentive programme. complied did not comply partially complied criteria changed criteria not changed complied did not comply partially complied criteria changed criteria not changed 326 327 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information № Number and brief description of the principle Old status New status Change in criteria Comments Independent limited assurance report 15 6.3.1 Providing shareholders with access to information at their requests 16 6.3.2. Providing shareholders with access to information at their requests 17 18 7.1.3. Material corporate actions taken by the Company 7.2.2. Material corporate actions taken by the Company Criteria 1 was complied with. Criterion 2, introduced for the first time, was not met as regards to absence in the Company’s internal documents of provisions specifying access to information on legal entities controlled by the Company upon the request of a shareholder. The principle of completeness set out in the current information policy means that the Company provides shareholders with information it is required to provide under the applicable law, as well as other information necessary for making informed decisions, which, we believe, also includes information on controlled entities. However, in 2022, a new version of the information policy setting out provisions on controlled entities will be presented to the Board of Directors. Criteria 1 was complied with. Criterion 2, introduced for the first time, was not met as regards to absence in the Company’s internal documents of provisions providing for shareholders’ warning of the confidential nature of information and the need for commitment to keep it confidential. The principle of balance specified in the current information policy means that the Company maintains a reasonable balance between being transparent and observing the interests of the Company and existing shareholders with respect to protecting business and confidential information, which, we believe, implies complying with requirements for maintaining information confidentiality. However, in 2022, a new version of the information policy setting out the conditions upon the occurrence of which shareholders are warned of the confidential nature of information and the need for commitment to keep it confidential, will be presented to the Board of Directors. Independent Limited Assurance Report To the Management of Public Joint Stock Company “PhosAgro”: Introduction We have been engaged by the Management of Public Joint Stock Company “PhosAgro” (hereinafter – the “Company”) to provide limited assurance on the selected information described below and included in the Integrated annual report of the Company for the year ended 31 December 2021 (hereinafter – the “Integrated annual report”). The Integrated annual report represents information related to the Company and its subsidiaries (hereinafter together – the “Group”). Selected information We assessed the qualitative and quantitative information specified in Appendix 1 to this report, that is disclosed in the Integrated annual report and referred to or disclosed in the GRI Content Index of the Integrated annual report (hereinafter – the “Selected Information”). The scope of our limited assurance procedures was limited to the Selected Information for the year ended 31 December 2021 only. We have not performed any procedures with respect to earlier periods or any other items included in the Integrated annual report and, therefore, do not express any conclusion thereon. In 2021, all material corporate actions were approved prior to being taken. Reporting criteria The status was changed following additional review of internal documents related to engaging an appraiser for taking material corporate actions. It revealed that PhosAgro’s Order No. 77 dated 31 January 2018 in conjunction with PhosAgro Regulations on the Procurement of Commodities, Works and Services fully comply with the criteria for this corporate governance principle. Appendices (presented in a separate document) We assessed the Selected Information using relevant criteria, including reporting requirements, in the respective GRI Sustainability Reporting Standards 2, 3, 202, 203, 205, 207, 302, 303, 304, 305, 306, 401, 403, 404 and 413 (hereinafter together – the “GRI Standards”) published by the Global Reporting Initiative (GRI) and in the Group’s management methodology as set forth in the criteria defined in the notes to the Group’s specific disclosures in the Environmental review section of the Integrated annual report (hereinafter – the “PhosAgro Methodology”, and together with the GRI Standards – the “Reporting Criteria”). We believe that the Reporting Criteria are appropriate given the purpose of our limited assurance engagement. Responsibilities of the management of the Group The management of the Group is responsible for: (cid:31) (cid:31) (cid:31) (cid:31) designing, implementing and maintaining internal control relevant to the preparation of the Selected Information that is free from material misstatement, whether due to fraud or error; establishing internal methodology and guidelines (including the PhosAgro Methodology) for preparing and reporting the Selected Information in accordance with the Reporting Criteria; preparing, measuring and reporting of the Selected Information in accordance with the Reporting Criteria; and the accuracy, completeness and presentation of the Selected Information. Our responsibilities We are responsible for: (cid:31) (cid:31) (cid:31) planning and performing the engagement to obtain limited assurance about whether the Selected Information is free from material misstatement, whether due to fraud or error; forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and reporting our conclusion to the management of the Group. AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru complied did not comply partially complied criteria changed criteria not changed 328 329 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information This report, including our conclusion, has been prepared solely for the management of the Group in accordance with the agreement between us, to assist management in reporting on the Group’s sustainability performance and activities. We permit this report to be disclosed in the Integrated annual report, which will be published on the Company’s website1, to assist management in responding to their governance responsibilities by obtaining an independent limited assurance report in connection with the Selected Information. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the management of the Group for our work or this report except where the respective terms are expressly agreed in writing and our prior consent in writing is obtained. Professional standards applied and level of assurance We performed a limited assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Information”, issued by the International Auditing and Assurance Standards Board . A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. Our independence and quality control We have complied with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, and the ethical requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our limited assurance engagement in respect of the Selected Information in the Russian Federation. We have fulfilled our other ethical responsibilities in accordance with these requirements. Our firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Work done We are required to plan and perform our work in order to consider the risk of material misstatement of the Selected Information. In doing so, we: (cid:31) (cid:31) (cid:31) made enquiries of the Group’s management, including the Sustainability Reporting team and those with responsibility for Sustainability Reporting management and group reporting; conducted interviews of the Group’s personnel responsible for the preparation of the Integrated annual report and collection of underlying data; performed analysis of the relevant internal methodology and guidelines (including the PhosAgro Methodology), gaining an understanding and evaluating of the design of the key structures, systems, processes and controls for managing, recording, preparing and reporting the Selected Information; and ________________________ 1 The maintenance and integrity of the Company’s website is the responsibility of management; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the reported Selected Information or Reporting Criteria when presented on the Company’s website. 2 (cid:31) performed limited substantive testing on a selective basis of the Selected Information to chec k that data had been appropriately measured, recorded, collated and reported. Reporting and measurement methodologies Under the GRI Standards there is a range of different, but acceptable, measurement and reporting techniques. The techniques, together with the PhosAgro Methodology, can result in materially different reporting outcomes that may affect comparability with other organisations. The Selected Information should therefore be read in conjunction with the methodology used by management in preparing the Integrated annual report, described therein, and for which the Group is solely responsible. Conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the Selected Information for the year ended 31 December 2021 has not been prepared, in all material respects, in accordance with the Reporting Criteria. 15 April 2022 022 Russsssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssssiaiaiaiaiaiaiaaaiaaaaaaiaaaiaiaaaiaaaaiaaiaaiaiiaiiaiiiiiiiaiaaaaaiaiaiiiiaaiiiaaaaaaiiiaaaiiiaaaaaiaaaiaaiaaaaaaaaaaaaiaaaaaaaaaaaaaaaaaaiaaaaaaaaaaaaaaaiaaaaaaaiaaaaaaaaaiiaaaaaaiiiiaaaaaaaaaaaaaaaiaaaaaaaaiiaaaaaaiiaaaaaaaaaaannnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn FFFFeFFFFeFeFeFeFeFeeFeFeFeFeFeFFeFFFeeeeFeFFFFeFeFeeeFeFeFeFFFFeFeFeeeFeFeeeFeeFeeFeeeeFeFeFeeeFeFFFFFFeeeeeFeFeeeeeeFeFeFFFFFFFeeeFeeFeeFeFeFeeeFeFFFFFFFeFeeeeeeeFeFeFFFeFeeeeeFeeFeFeFFFFFeeeeeeeeFeFFFFFFFFeeFeeeeFeeeeeeFFFFFFeFFFeeFeFeFeeeeeeFeeeFFFFFFFFFeeeeeeeeeFeeFeFFFFFFeFFFeeeeeeeFeeFFFFFFFFFFFFFeeeeeeeeFFFFFeFFFFFeeeeeeeeFFeFFFFeeeFeeFFFFFFFeeFFFFFFFFFeeFFFFeeFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF dedededededdedededddeddeddddedededeededdededededededddddddddddedddededeedeedededddddddddedddededdedeededdddddddddddeededddddddddeeeededdddddddddededdddddddddededdddddeddeddddddddeeeeeeedeeeeddddddddeeeeeeeeeeeeeeddddddddeeeeedeeeddddddddddeddddddddddddddddddddddddddddddddddddddededdeeeeeeeddddddeeeeeeeeedddddddeeeeeeeeeeddddddddeeeeeeerrararararrararararaaaaararararararraararararaararaarararrrrrarrraaaarararaaaaaaaarrrrraaararaaaaaarararrrrrraaraaaaaaraaraaaaaarararraaaaaaaaaaaaaaaaaaaaaraaaaraaaaaraaaaaaaaraaaaaaaaaraaaaaaaaaaaaaaaaaaaraaaarrrrrrrrrrrrrrrrrraarrrrarrrarrrrraaarrrrraaatititititttittitititittttittititittittttttttittttttttttititttttttttttttititttttttittttttttttttttttititttttititittititiiiittttttiitiitittttitttiiiititittiitiitttiiittiiitttttttittttttiiiitttttttiiiiiiiiiiiiiiiiiiiiiiiiononononononononononoooonooooononoooononnonooonnnooonnonnnoooonnnnnnnnoooooonnnnnononnoooooonnnonnnnonononoonooonnnonnonnonoonononnnnonnoooooonnnnnnnonoooooononnnonoooooonnnnnonoooooooonnnnnononnooooooooonnnnoooooooonnnnoooooooooooooooonnnnnooooooooooooooooonnnoooooooonoononooooooooooooonooooooooooonooooooonnnnn Moscow, Russian Federation A. 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tttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttto sign ttii N b i l R i tt 3 330 331 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Appendix 1 to the Independent Limited Assurance Report dated 15 April 2022 The Selected Information subject to limited assurance procedures and prepared in accordance with the GRI Disclosures and the PhosAgro Methodology, as applicable, is set out below: GRI Disclosure 2-7 2-27 3-2 202-1 202-2 203-1 205-3 207-1 207-2 207-3 302-1 302-3 303-3 303-4 303-5 304-3 305-1 305-2 305-4 305-5 305-7 306-3 306-4 306-5 401-1 401-2 403-1 403-2 403-3 403-4 403-5 403-6 403-7 403-8 403-9 403-10 404-1 404-2 404-3 413-1 Narrative Employees Compliance with laws and regulations List of material topics Ratios of standard entry level wage by gender compared to local minimum wage Proportion of senior management hired from the local community Infrastructure investments and services supported Confirmed incidents of corruption and actions taken Approach to tax Tax governance, control, and risk management Stakeholder engagement and management of concerns related to tax Energy consumption within the organization Energy intensity Water withdrawal Water discharge Water consumption Habitats protected or restored Direct (Scope 1) GHG emissions Energy indirect (Scope 2) GHG emissions GHG emissions intensity Reduction of GHG emissions Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air emissions Waste generated Waste diverted from disposal Waste directed to disposal New employee hires and employee turnover Benefits provided to full-time employees that are not provided to temporary or part-time employees Occupational health and safety management system Hazard identification, risk assessment, and incident investigation Occupational health services Worker participation, consultation, and communication on occupational health and safety Worker training on occupational health and safety Promotion of worker health Prevention and mitigation of occupational health and safety impacts directly linked by business relationships Workers covered by an occupational health and safety management system Work-related injuries Work-related ill health Average hours of training per year per employee Programs for upgrading employee skills and transition assistance programs Percentage of employees receiving regular performance and career development reviews Operations with local community engagement, impact assessments, and development programs 4 Related description PhosAgro Methodology (the Group’s specific disclosure) Pollutant emissions Waste water discharge Waste water discharge, m3 per tonne of finished and semi-finished products Specific water withdrawal Specific water withdrawal Recycled and decontaminated waste Specific water withdrawal from surface sources, excluding mining and drainage waters, and waste water from other waste water discharge systems, m3 per tonne Share of recycled and decontaminated waste of 1–4 hazard classes, % Specific water withdrawal, including mining and drainage waters, m3 per tonne Pollutant emissions, kg per tonne of finished and semi-finished products 5 332 333 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information GRI Content Index The data disclosed in this Report includes information on: Boundary 1: PhosAgro and companies that are part of the group to which PhosAgro belongs (corresponds to the scope of disclosure in IFRS consolidated financial statements). Boundary 2: PhosAgro and Apatit, including its branches and standalone business units. Boundary 3: Apatit, including its branches and standalone business units. Code GRI Indicator Comments Boundary Page number 2 2-1 2-2 2-3 General disclosures (2021) Organisational profile Entities included in the organisation's sustainability reporting Reporting period, frequency, and point of contact 2-4 Restatements of information 2-5 2-6 External assurance Activities, value chain and other business relationships 2-7 2-8 2-9 2-10 2-11 Employees Workers who are not employees Governance structure and composition Appointment and selection of the supreme governance body Chair of the supreme governance body The following historical data have been revised in the 2021 report: - methodology for GHG (Scope 2) emissions calculation was amended – for more information, see GRI 305-2; - HR metrics regarding personnel breakdown by education – for more information, see GRI 2-7. The new sulphuric acid plant at the Volkhov branch of Apatit allowed us to purchase less acid from external parties and reduce logistics costs for transporting our own sulphuric acid between production facilities. An upgraded loading unit at the Cherepovets production site enabled us to sell higher-quality sulphuric acid. To meet the increased demand for ammonia at the Cherepovets and Volkhov branches, which grew by roughly 60% year-on-year, we entered into long-term contracts with major suppliers and made a decision to build a new ammonia plant. To source natural gas for this promising project, a connection agreement was signed with a gas distribution organisation. As part of the rolling stock renewal programme, we successfully tested a new Russian-made dump car with an increased capacity of 115 tonnes and signed a supply agreement to increase the volume and efficiency of ore transportation. In 2021, PhosAgro launched SAP Process Mining by Celonis, a platform that takes a fundamentally new approach to managing business processes and complements our existing toolkit, to further automate procurement activities. Not disclosed owing to the confidential nature of this information. 4, 26, 347 4 4 4, 328 3 26,-27, 115 2 1 1 1 127-128 204 218 222 Code GRI Indicator Comments Boundary Page number 2-12 2-13 2-14 2-15 2-16 2-17 2-18 2-19 2-20 2-21 2-22 2-23 2-24 2-25 2-26 2-27 Role of the supreme governance body in overseeing the impacts Delegation of responsibility for impact management Role of the supreme governance body in sustainability reporting Conflicts of interest Communication of critical concerns Collective knowledge of the supreme governance body Supreme governance body performance assessment Remuneration policies Process to determine remuneration Annual total compensation ratio Statement on sustainable development strategy Policy commitments Embedding policy commitments Processes to remediate negative impacts Mechanisms for seeking advice and raising concerns Compliance with laws and regulations 2-28 2-29 Membership associations Approach to stakeholder engagement 2-30 Collective bargaining agreements 3 3-1 3-2 3-3 Material topics (2021) Processes to determine material topics List of material topics Management of material topics Not disclosed owing to the confidential nature of this infor- mation. For purpose of this disclosure, the Group uses the following materiality criteria: - with regard to fines, the Group determined the amount exceeding RUB 1 mln to be material fines for the Group considering the scale of its operations; - with regard to other non-monetary sanctions, the Group assesses their influence on its reputation and ability to continue as a going concern, taking into account the amount of expenses likely to be incurred as a result of such penalties. There were no significant instances of non-compliance with laws and regulations during 2021 for which material fines or non-monetary sanctions were incurred by the Group. During 2021, the Group incurred expenses of RUB 2,274 thousand for the reproduction of aquatic biological resources as a compensation for the harm caused by an emergency situation in 2019. For information on cases of non-compliance with environmen- tal laws and regulations, see page 161. 1 1 1 1 204, 247 204 212 260 1 212, 214, 234 1 1 1 1 1 1 1 1 218 219 262 262 36 252, 256 252 124, 256 1 134, 252, 256 1 161 98, 112-113 9 122 7 8 124, 158 2 1 1 1 334 335 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Code GRI Indicator Comments Boundary Page number Code GRI Indicator Comments Boundary Page number 201 Economic performance (2016) 201-1 Direct economic value generated and distributed 201-2 Financial implications and other risks and opportunities due to climate change 201-3 Defined benefit plan obligations and other retirement plans 201-4 Financial assistance received from government Not disclosed owing to the confidential nature of this infor- mation. 202 Market presence (2016) 202-1 Ratios of standard entry level wage by gender compared to local minimum wage 202-2 Proportion of senior management hired from the local community 203 Indirect economic impacts (2016) 203-1 Infrastructure investments and services supported 203-2 Significant indirect economic impacts 204 Procurement practices (2016) 204-1 Proportion of spending on local suppliers at significant locations of operation 205 Anti-corruption (2016) 205-1 Operations assessed for risks related to corruption 205-2 Communication of and training in anti-corruption policies and procedures 205-3 Confirmed incidents of corruption and actions taken 207 Tax (2019) 207-1 Approach to tax 207-2 207-3 Tax governance, control, and risk management Stakeholder engagement and management of tax-related concerns 207-4 Country-by-country reporting 302 Energy (2016) 302-1 302-2 Energy consumption within the organisation Energy consumption outside of the organization not applicable 302-3 Energy intensity 302-4 Reduction in electricity consumption 302-5 Reductions in energy requirements of products and services Information will be disclosed in the next annual report 2022. 1 3 2 2 2 1 3 1 1 1 1 1 1 1 3 3 3 84 76, 162 340 135 129 193 191 114, 119 256 254, 258 260 85 86 85 87 174, 175 175 172 303 Water and effluents (2018) 303-1 Responsible water consumption 303-2 Management of water discharge and related impacts on water resources 303-3 Water withdrawal 303-4 Water discharge 303-5 Water consumption 304 Biodiversity (2016) Effluents are treated until standard permissible discharge and temporarily permitted discharge rates are reached as required by permits to discharge pollutants into the environment (water bodies) issued by a relevant authority for each discharge 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas The Group’s operations are not located in protected areas or areas of high biodiversity value outside protected areas. The Group’s operations are not located in protected areas or areas of high biodiversity value outside protected areas 304-2 Significant impacts of activities, products, and services on biodiversity 304-3 Habitats protected or restored 304-4 IUCN Red List species and national conservation list species with habitats in areas affected by operations 305 Emissions (2016) 305-1 Direct (Scope 1) GHG emissions 305-2 Energy indirect (Scope 2) GHG emissions 305-3 Other indirect (Scope 3) GHG emissions 305-4 GHG emissions intensity 305-5 Reduction of GHG emissions The Group’s operations are not located in protected areas or areas of high biodiversity value. The Group’s operations do not pose a threat to endangered animal and plant species listed in the International Union for Conservation of Nature (IUCN) Red List and the Russian Red Data Book Other indirect (Scope 3) GHG emissions will be calculated and disclosed in 2022 as part of the CDP 305-6 Emissions of ozone-depleting substances The Сompany does not use ozone-depleting substances on an industrial scale Information will be disclosed in the next annual report 2022 305-7 Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions 306 Waste (2020) 306-1 Waste generation and significant waste-related impacts 306-2 Management of significant waste- related impacts 306-3 Waste generated 306-4 Waste diverted from disposal 306-5 Waste directed to disposal 308 Supplier environmental assessment (2016) 308-1 New suppliers that were screened using environmental criteria 308-2 Negative environmental impacts in the supply chain and actions taken 3 3 3 3 1 1 3 3 3 3 3 3 3 3 3 3 3 183 184 185, 186 186 189 189 170 171 170 171 180 176 177 177 177 118-119 118-119 336 337 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Code GRI Indicator Comments Boundary Page number Code GRI Indicator Comments Boundary Page number 401 Employment (2016) 401-1 New employee hires and employee turnover 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees Benefits established by collective bargaining agreements apply to all employees of Apatit, its branches, standalone business units and do not depend on conditions of employment 401-3 Parental leave 403 Occupational health and safety (2018) 403-1 Occupational health and safety management system 403-2 Hazard identification, risk assessment, and incident investigation 403-3 Occupational health services 403-4 Worker participation, consultation, and communication on occupational health and safety 403-5 Worker training on occupational health and safety 403-6 Promotion of worker health 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships 403-8 Workers covered by an occupational health and safety management system 403-9 Work-related injuries 403-10 Occupational diseases 404 Training and education (2016) 404-1 404-2 Average hours of training per year per employee Programmes for upgrading employee skills and transition assistance programmes In 2021, our occupational health and safety management system covered 100% of the Group’s employees. All our employees (executives together with blue- and white- collar staff) take OHS training as required by the national laws, as well as additional training (for more information, see page 140). The minimum required training is provided to each and everyone, including all visitors and representatives of contractors as part of the introductory briefing. Occupational diseases are divided into three groups: group 1: HAVS, stage 1 and 2, Polyneuropathy of the upper and lower limbs, Cervical/lumbosacral radiculopathy, Bilateral humeral epicondylitis with joint function disorder, stage 1, Myofibrosis of the forearms, Bilateral humeroscapular periarthrosis, Osteoarthritis deformans of the shoulder and elbow joints, Osteoarthritis deformans of the shoulder and elbow joints, Osteoarthritis deformans of the shoulder and elbow joints, Reflex myotonic syndrome of the cervical/ lumbosacral area; group 2: Chronic bilateral sensorineural hearing loss, 1st and 2nd degree; group 3: Respiratory diseases associated with exposure to complex chemical aerosols. 2 3 2 3 3 3 3 3 3 3 2 3 3 3 3 128, 342 341 139 144 141 151 151 153 153 147 149 130 132 404-3 Percentage of employees receiving regular performance and career development reviews 405 Diversity and equal opportunity (2016) 405-1 Organisation’s governance bodies and main employee categories by gender, age group, minority groups and other indicators of diversity 405-2 Ratio of basic salary and remuneration of women to men 408 Child labour (2016) 408-1 Operations and suppliers at significant risk for incidents of child labour 413 Local communities (2016) 413-1 Operations with local community engagement, impact assessments, and development programmes 413-2 Operations with significant actual and potential negative impacts on local communities 417 Marketing and labelling (2016) 417-1 417-2 417-3 Requirements for product and service information and labelling Incidents of non-compliance concerning product and service information and labelling Incidents of non-compliance concerning marketing communications PhosAgro is committed to ensuring that no child labour is used by its business units and subsidiaries. As part of regular risk assessments, each of our subsidiaries identifies risks related to the use of child and forced labour in their own and their counterparties’ operations. PhosAgro Group only cooperates with those counterparties that show no tolerance for child labour (work done by children under the minimum age for admission to employment as provided by the laws) and may refuse to cooperate with the suppliers that do not adhere to the respective zero-tolerance policy. The ESG assessment of suppliers in 2021 revealed that 51% of our counterparties had adopted a zero-tolerance policy on child labour, which prevents such incidents. Needless to say, this number should show a trend towards growth. Therefore, our important objective in 2022 is to step up efforts in communicating the importance of principles enshrined in the Code of Conduct for Counterparties and invite suppliers to discuss sustainable development matters. Programmes for engagement with local communities, assessment of our operations' impact on local communities, and local community development programmes were implemented across all branches of Apatit and PhosAgro. The Group has no operations with significant actual and potential negative impacts on local communities. Significant impacts of the Group on local communities has been assessed as part of evaluation of UN Sustainable Development Goals impacts. No such cases registered, not applicable. No such cases registered, not applicable. 3 134 124 128 2 192 98 338 339 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information GRI Content Index: additional information Defined benefit plan and other retirement-related obligations GRI 201–3 Region Employee benefit obligations Actual performance of the employee benefit obligations, RUB mln i n o g e r a d g o o V l i n o g e r d a r g n n e L i i n o g e r k s n a m r u M i n o g e r v o t a r a S l a t o T Current value of employee benefit obligations (private benefit coverage for newly retiring employees) Retirement-related obligations (other than employee benefit obligations) Payment of retirement benefits Merit benefit plans Financial aid to retired former employees Total: Current value of employee benefit obligations (private benefit coverage for newly retiring employees) Retirement-related obligations (other than employee benefit obligations) Payment of retirement benefits Merit benefit plans Financial aid to retired former employees Total: Current value of employee benefit obligations (private benefit coverage for newly retiring employees) Retirement-related obligations (other than employee benefit obligations) Payment of retirement benefits Merit benefit plans Financial aid to retired former employees Total: Current value of employee benefit obligations (private benefit coverage for newly retiring employees) Retirement-related obligations (other than employee benefit obligations) Payment of retirement benefits Merit benefit plans Financial aid to retired former employees Total: Current value of employee benefit obligations (private benefit coverage for newly retiring employees) Retirement-related obligations (other than employee benefit obligations) Total: Payment of retirement benefits Merit benefit plans Financial aid to retired former employees 2021 Estimate 7,918 19,148 73,191 100,256 Estimate 0,385 0,000 19,746 20,131 Estimate 35,126 0,000 88,877 124,003 Estimate 0,902 0,000 7,637 8,539 Estimate 44,331 19,148 189,451 252,929 Parental leave GRI 401-3 Region Vologda Region Vologda Region Vologda Region, total Saratov Region Saratov Region Saratov Region, total Leningrad Region Leningrad Region Leningrad Region, total Murmansk Region Murmansk Region Murmansk Region, total Moscow Region Moscow Region Moscow Region, total Grand total Employees on leave Employees on leave Employees who returned after leave Gender as at 31 December 2021 1 January 2021 to 31 December 2021 1 January 2021 to 31 December 2021 F M F M F M F M F М 288 2 290 51 1 52 42 42 194 4 198 11 11 593 379 3 382 68 1 69 56 1 57 285 8 293 18 18 819 Returning ratio is the ratio between those who returned and those who had been supposed to return. Retention ratio is the ratio between those who returned in the previous period and continued working as at 31 December and all of those who returned to work in the previous period. Total number of new employee hires in 2021, people GRI 401-1 Region Gender Under 25 years 25–34 years 35–44 years 45–55 years Above 55 years Vologda Region Vologda Region Vologda Region, total Leningrad Region Leningrad Region Leningrad Region, total Moscow region Moscow region Moscow Region, total Murmansk Region Murmansk Region Murmansk Region, total Saratov Region Saratov Region Saratov Region, total Other Other, total Total M F M F M F M F M F M F 173 102 275 60 32 92 1 1 2 196 82 278 26 26 52 0 0 0 215 183 398 127 42 169 11 12 23 424 127 551 90 41 131 0 3 3 167 160 327 118 43 161 11 20 31 463 101 564 69 44 113 1 5 6 70 78 148 52 30 82 8 7 15 196 46 242 17 22 39 0 1 1 11 26 37 7 15 22 3 0 3 22 10 32 1 7 8 0 1 1 699 1,275 1,202 527 103 3,806 65 65 13 13 15 1 16 76 2 78 3 3 175 Total 636 549 1,185 364 162 526 34 40 74 1,301 366 1,667 203 140 343 1 10 11 340 341 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Personnel turnover by gender, age and region GRI 401-1 Turnover in 2020, % Region Gender Under 25 years 25–34 years 35–44 years 45–55 years Above 55 years M F M F M F M F M F M F 0.14 0.11 0.25 0.04 - 0.04 - 0.01 0.01 0.29 0.09 0.38 - 0.03 0.03 0.47 0.24 0.70 0.54 0.33 0.87 0.16 0.08 0.24 0.05 0.02 0.07 1.24 0.25 1.50 0.06 0.05 0.11 2.05 0.73 2.78 0.40 0.31 0.71 0.14 0.14 0.28 0.03 0.01 0.04 1.43 0.24 1.67 0.11 0.05 0.15 2.11 0.74 2.85 0.21 0.18 0.39 0.06 0.04 0.10 0.01 0.01 0.02 0.62 0.11 0.74 0.05 0.05 0.09 0.95 0.39 1.34 0.08 0.06 0.14 0.01 - 0.01 - 0.01 0.01 0.10 0.05 0.15 0.04 0.04 0.08 0.22 0.16 0.38 Vologda Region Vologda Region Vologda Region, total Leningrad Region Leningrad Region Leningrad Region, total Moscow region Moscow region Moscow Region, total Murmansk Region Murmansk Region Murmansk Region, total Saratov Region Saratov Region Saratov Region, total Men, total Women, total Total Turnover in 2021, % Region Gender Under 25 years 25–34 years 35–44 years 45–55 years Above 55 years Vologda Region Vologda Region Vologda Region, total Leningrad Region Leningrad Region Leningrad Region, total Moscow region Moscow region Moscow Region, total Murmansk Region Murmansk Region Murmansk Region, total Saratov Region Saratov Region Saratov Region, total Men, total Women, total Total M F M F M F M F M F M F 0.19 0.15 0.34 0.13 0.04 0.17 0.01 - 0.01 0.33 0.11 0.44 0.06 0.03 0.09 0.71 0.34 1.05 0.87 0.60 1.47 0.38 0.10 0.48 0.03 0.01 0.04 1.47 0.36 1.83 0.26 0.11 0.38 3.02 1.18 4.21 0.74 0.66 1.40 0.33 0.10 0.43 0.02 0.03 0.05 1.48 0.36 1.84 0.14 0.17 0.31 2.71 1.31 4.02 0.27 0.24 0.51 0.09 0.06 0.14 0.03 0.01 0.04 0.53 0.18 0.71 0.08 0.08 0.16 0.99 0.57 1.56 0.05 0.09 0.14 0.02 0.02 0.05 - - - 0.10 0.05 0.14 0.02 0.03 0.05 0.20 0.18 0.38 Total 1.35 0.99 2.34 0.41 0.25 0.67 0.09 0.06 0.15 3.69 0.74 4.43 0.25 0.21 0.47 5.80 2.25 8.05 Total 2.13 1.73 3.86 0.95 0.32 1.27 0.09 0.05 0.14 3.90 1.06 4.96 0.57 0.43 0.99 7.64 3.59 11.22 SASB content index Code Activity metric EM-MM-000.B Total number of employees, percentage contractors Environmental RT-CH-110a.1 EM-MM-110a.1 RT-CH-110a.2 EM-MM-110a.2 RT-CH-120a.1 EM-MM-120a.1 RT-CH-130a.1 EM-MM-130a.1 RT-CH-140a.1 EM-MM-140a.1 RT-CH-140a.2 EM-MM-140a.2 RT-CH-140a.3 Gross global Scope 1 emissions, percentage covered under emissions-limiting regulations Discussion of a long-term or short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets Air emissions of the following pollutants: (1) CO, (2) NOx (excluding N2O), (3) SOx, (4) particulate matter (PM10), (5) mercury (Hg), (6) lead (Pb), (7) volatile organic compounds (VOCs), and (8) hazardous air pollutants (HAPs) 1 (1) Total energy consumed, (2) percentage grid electricity, (3) percentage renewable, (4) total self-generated energy (1) Total water withdrawn, (2) total water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress Number of incidents of non-compliance associated with water quality permits, standards, and regulations Description of water management risks and discussion of strategies and practices to mitigate them RT-CH-150a.1 Amount of hazardous waste generated, percentage recycled EM-MM-150a.1 Total weight of tailings waste, percentage recycled EM-MM-150a.2 Total weight of mineral processing waste, percentage recycled EM-MM-160a.1 Description of environmental management policies and practices for active sites EM-MM-160a.3 Percentage of (1) proved and (2) probable reserves in or near sites with protected conservation status or endangered species habitat RT-CH-410b.1 (1) Percentage of products that contain Globally Harmonized System of Classification and Labeling of Chemicals (GHS) Category 1 and 2 Health and Environmental Hazardous Substances, (2) percentage of such products that have undergone a hazard assessment RT-CH-410b.2 Discussion of strategy to (1) manage chemicals of concern and (2) develop alternatives with reduced human and/or environmental impact Page number/ Comment 127 170 164 180 174 183 183 183 176 177 177 158 188 177 158 342 343 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Code Social Activity metric EM-MM-210a.3 Discussion of engagement processes and due diligence practices with respect to human rights, indigenous rights, and operation in areas of conflict RT-CH-210a.1 Discussion of engagement processes to manage risks and opportunities associated with community interests EM-MM-210b.1 Discussion of process to manage risks and opportunities associated with community rights and interests EM-MM-210b.2 Number and duration of non-technical delays EM-MM-310a.2 Number and duration of strikes and lockouts RT-CH-320a.1 RT-CH-320a.2 (1) Total recordable incident rate (TRIR) and (2) fatality rate for (a) direct employees and (b) contract employees Description of efforts to assess, monitor, and reduce exposure of employees and contract workers to long-term (chronic) health risks RT-CH-540a.1 Process Safety Incidents Count (PSIC), Process Safety Total Incident Rate (PSTIR), and Process Safety Incident Severity Rate (PSISR) RT-CH-540a.2 Number of transport incidents Governance EM-MM-510a.1 Description of the management system for prevention of corruption and bribery throughout the value chain EM-MM-510a.2 Production in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index RT-CH-530a.1 Discussion of corporate positions related to government regulations and/or policy proposals that address environmental and social factors affecting the industry Page number/ Comment 124 190 190 42 No cases 147 144 147 146 256 The Company does not carry out production in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index 161, 252 TCFD Recommendations Indicator Corporate governance The Board of Director’s role in monitoring climate-related risks and opportunities. The management’s role in assessing and managing climate-related risks and opportunities Strategy Description of the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. Description of the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning. Assessment of the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 4°C and 2°C scenario. Climate risk management Description of the organisation’s processes for identifying and assessing climate-related risks. Description of the organisation’s processes for managing climate-related risks. Description of integration of processes for identifying, assessing and managing climate-related risks into the general risk management framework Metrics and targets Description of the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management processes. Disclosure of Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks. Description of the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. Reported 208 208 164 164 165 165 165 76 166 170 163 TCFD Report For more information on GHG emissions and climate risks, see the TCFD report 2020 344 345 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information Glossary AN – ammonium nitrate HR – human resources ANBP – apatite-nepheline beneficiation plant HSE – health, safety and environment ANSES – French Agency for Food, Environmental and Occupational Health & Safety IFA – International Fertilizer Association BAT – best available technique IFRS – International Financial Reporting Standards bln – billion IMF – International Monetary Fund Capex – capital expenditure CDP – Carbon Disclosure Project CIS – Commonwealth of Independent States CJSC – closed joint-stock company CO2 – carbon dioxide IPCC – in-pit crushing and conveying at the Vostochny mine IRR – internal rate of return IT – information technology IUPAC – International Union of Pure and Applied Chemistry COVID-19 – сoronavirus disease 2019, the pandemic caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) JSC – joint-stock company kg – kilogram DAP – diammonium phosphate KPI – key performance indicator DROZD – Educated and Healthy Children of Russia programme kWh – kilowatt-hour EBITDA – earnings before interest, taxes, depreciation and amortisation LSE – London Stock Exchange LTIFR – lost time injury frequency rate EMERCOM – Ministry for Civil Defence, Emergencies and Elimination of Consequences of Natural Disasters MAP – monoammonium phosphate MCP – feed monocalcium phosphate ESG – environmental, social, and governance mg – milligram ESPP – European Sustainable Phosphorus Platform mln – million PhosAgro Group – PJSC PhosAgro and its subsidiaries and affiliates PJSC – public joint-stock company PwC – PricewaterhouseCoopers R&D – research and development RAFP – Russian Association of Fertilizer Producers RAS – Russian Accounting Standards REACH – Registration, Evaluation, Authorisation and Restriction of Chemicals Rospotrebnadzor – Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing Rostekhnadzor – Federal Service for the Supervision of Environment, Technology and Nuclear Management RSPP – Russian Union of Industrialists and Entrepreneurs RUB – Russian rouble SDG – UN Sustainable Development Goal SMEs – small and medium-sized enterprises SO2 – sulphur dioxide STPP – sodium tripolyphosphate Strategy to 2025 – PhosAgro’s Development Strategy to 2025 EU – European Union FAO – Food and Agriculture Organisation GDP – gross domestic product MOP – muriate of potash t – metric tonne MW – megawatt ths – thousand NIUIF – Samoilov Scientific Research Institute for Fertilizers and Insectofungicides UN – United Nations GDR – global depositary receipt NO2 – nitrogen dioxide UNESCO – United Nations Educational, Scientific and Cultural Organisation GLOSOLAN — Global Soil Laboratories Networks; supporting the GLOSOLAN by developing research capacities and strengthening the Regional Soil Laboratories Networks (RESOLAN) NPK – nitrogen-phosphorus-potassium fertilizer USA – United States of America OPEC – Organisation of the Petroleum Exporting Countries USD – United States dollar VAT – value-added tax GRI – Global Reporting Initiative P2O5 – phosphoric pentoxide VOC – volatile organic compound Contacts GRI 2-1 Investor Relations Andrey Serov Head of Investor Relations Corporate Secretary Sergey Samosyuk Address PJSC PhosAgro Depositary Auditor Citigroup Global Markets Deutschland AG AO PricewaterhouseCoopers Audit LLC FBK Registrar JSC Reestr Contacts for employees and potential employees Contacts for media Dmitry Borodich HR and Social Policy Director Andrey Podkopalov Director of Information Policy Tel.: +7 (495) 231 31 15 Email: ir@phosagro.ru Tel.: +7 (495) 232 96 89, ext. 27 12 Email: ks@phosagro.ru 55/1 Leninsky Prospekt, bldg. 1, Moscow 119333, Russia Tel.: +7 (495) 232 96 89 Fax: +7 (495) 956 19 02 Frankfurter Welle Reuterweg 16 60323 Frankfurt, Germany White Square Business Centre 10 Butyrsky Val, Moscow, 125047, Russia Tel.: +7 (495) 967 60 00 Fax: +7 (495) 967 60 01 Website: www.pwc.ru 44/1 Myasnitskaya St., Moscow 101990, Russia Tel.: +7 (495) 737 53 53 Fax: +7 (495) 737 53 47 Website: www.fbk.ru 20 B. Balkansky Lane, bldg. 1, Moscow 129090, Russia Tel.: +7 (495) 617 01 01 Fax: +7 (495) 680 80 01 Email: reestr@aoreestr.ru Website: www.aoreestr.ru Tel.: +7 (495) 231 31 15 Email: info@phosagro.ru Tel.: +7 (495) 232 96 89, ext. 26 51 Sustainability contacts Sergey Kudryashov Head of Sustainable Development Department Tel.: +7 (495) 231 27 47 Email: info@phosagro.ru Timur Belov Head of Information Policy Division, Press Secretary Tel.: +7 (495) 232 96 89, ext. 26 52 Email: pr@phosagro.ru 346 347 Additional InformationAbout this ReportCompany ProfileStrategic ReportPerformance ReviewCorporate GovernanceShare CapitalAdditional Information
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