The Container Store Group
Annual Report 2020

Plain-text annual report

Doubling the Base ANNUAL REPORT 2020 TCS GROUP HOLDING PLC CONTENTS TCS Group is Russia’s leading provider of online financial and lifestyle services via its Tinkoff Ecosystem. STRATEGIC REVIEW DIRECTORS’ REVIEW About us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Board of directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2020 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Tinkoff group: decision making bodies at a glance . . . . . 46 Our history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Management team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Market сontext and position . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 FINANCIALS What makes us different . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 CEO strategic review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Our recent awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 CFO financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Asset, liability and risk management . . . . . . . . . . . . . . . . . . 30 Corporate social responsibility . . . . . . . . . . . . . . . . . . . . . . . 36 International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor’s Report 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 International Financial Reporting Standards Separate Financial Statements and Independent Auditor’s Report 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-137 Employees and corporate social responsibility . . . . . . . . 39 GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1 INVESTOR INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . G-3 Summary of presentation of financial and other information: All financial information in this report is derived from the consolidated financial statements of TCS Group Holding PLC and has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of Cyprus Companies Law, Cap 113, which have been included in this report. A detailed description of the presentation of financial and other information is set out from page F-1 of this report. Data: Market data used in this report, including statistics in respect of market share, have been extracted from official and industry sources TCS Group Holding PLC believes to be reliable and is sourced where it appears. Such information, data and statistics may be approximations or estimates. Some of the market data in this document has been derived from official data of Russian government agencies, including the CBRF, Rosstat and the FSFM. Data published by Russian federal, regional and local governments are substantially less complete or researched than those of Western countries. Forward looking statements: Certain statements and/or other information included in this document may not be historical facts and may constitute “forward looking statements”. The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plan”, “forecast”, “target”, “project”, “will”, “may”, “should” and similar expressions may identify forward looking statements but are not the exclusive means of identifying such statements. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues, operations or performance, capital expenditures, financing needs, our plans or intentions relating to the expansion or contraction of our business as well as specific acquisitions and dispositions, our competitive strengths and weaknesses, our plans or goals relating to forecasted operations, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industry and the political, economic, social and legal environment in which we operate, together with the assumptions underlying these forward looking statements. We do not make any representation, warranty or prediction that the results anticipated by such forward looking statements will be achieved. Nothing in this document constitutes an invitation to invest in securities of TCS Group. 1 THE LEADING LIFESTYLE AND FINANCIAL SERVICES ECOSYSTEM Daily banking Small business • Debit cards • Business account Savings & Investments • Credit products • Salary projects • Payments • Overdraft • P2P transfers • Business loans • Utilities payments • Accounting • Deposits • Securities • Pensions • Investment strategy Auto • Fines • Insurance • Auto loans 9.3mn monthly active users 3.2mn daily active users 13.3mn Total customers Active customers 9.1mn №1 *Source: Global Finance 2 World’s Best Consumer Digital Bank* Mobile • Own number • Own mobile network code • Own SIM cards Insurance Entertainment • Cars • Travel • Property • Health • Life • E-commerce • Ticketing • Restaurant reservations • Stories • Travel Tinkoff Pro Subscription • Higher deposit rates • More cashback cate- gories • Free SMS notifications • Higher P2P transfer limits ONE CLICK LIFESTYLE BANKING IN YOUR MOBILE PHONE 3 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020PROVEN TRACK RECORD OF DRIVING SUSTAINABLE GROWTH HIGHLIGHTS OUR HISTORY Growth Profitability HIGHLIGHTS OF TCS GROUP’S INNOVATIVE DEVELOPMENT • Expert-RA rating reaffirmed at ruA Stable  Nasdaq (*) -100 Technology Sector Index (NDXT) • Tinkoff maintains dividend policy through 2020, paying four interim dividends (total $0.80 per GDR). • 3.1 million acquired customers, reaching 13.3 million  • Record high net income of RUB 44.2 billion, growing • Loan book growth of 14.4% in 2020, despite the 22% YoY, with industry leading ROAE of 40.6%  pandemic that hit the markets globally  • Tinkoff’s net income CAGR of 41.6% in 2016-20 in line • Highest ever engagement growth on our mobile app: reached DAU of 3.2m and MAU 9.3m at YE20  with ambition declared in 2016 of 20-40% annual growth  • Exponential growth of our retail brokerage platform, opening >2.5m accounts in 2020  Capital Markets • Retail current accounts growth of 62% YoY, amounting to a record 52% of total customer accounts New business lines • Share of non-credit cards in the loan book portfolio at a historic high of 43%, with secured lending accounting for 20% of the total loan book  • Tinkoff Investments assets under custody growth x6 YoY, transaction volume growth x8 YoY • Tinkoff Business balances reached almost RUB 90  billion at YE20 • Insurance contribution to Net Income stays at 19% in 2020  • Super App new feature Tinkoff Pro subscriptions launched • Fitch reaffirmed its rating at BB with Stable Outlook  • Moody’s rating reaffirmed at Ba3 Stable  • ACRA reaffirmed its rating at A(RU) with Stable Outlook  Liquidity and capitalisation • Total assets up by 48.1% to RUB 859.3 bn, with cash and treasury portfolio up to RUB374.8 bn  • Total equity up by 32.2% to RUB 127 bn  • 31 December 2020 CBRF N1 statutory capital ratio of 13.07% and Basel III Total capital adequacy ratio is 17,9%.  • Treasury portfolio of RUB238.5 bn of highly liquid CBRF repoable bonds Customer accounts 626.8 RUBbn Total assets 859.3 RUBbn ROAE 2020 40.6 % Net profit 44.2 RUBbn N1.0 at the end of 2020 New credit customers 13.1 % +0.8 mn NET PROFIT (RUBBN) 44.2 2020 • Many new products launched, such as Tinkoff Pro, version 2.0 of our trailblazing voice assistant Oleg,  ‘Business Savings Box’,  ‘Call Defender’, ‘Who is calling?’ and ‘Tinkoff Checkout’ • Launch of CoronaIndex, to showcase how transactional activity across the Tinkoff customer base responded to the pandemic • Voice assistant ‘Oleg’ integrated into the mobile apps of • Tinkoff becomes the largest player in the CBR’s Faster Tinkoff Investments and Tinkoff Mobile Payments System • Tinkoff non-credit product customers overtakes the num- • Tinkoff GDRs included in the MSCI Russian Main Index ber of credit product customers for the first time • Tinkoff joined Top 50 Most Valuable Russian Brands (as • Tinkoff deploys its cloud home call centre platform to ranked by Brand Finance) • Tinkoff Capital launched Russia’s first ETF tracking the assist the Moscow City Government in fielding calls on pandemic-related problems 2017–2019 82.2 • The Company’s GDRs are listed on MOEX • Launch of the first "Super App" in Russia • Raised $300m in equity financing • Introduction of Oleg, the world's first voice assistant for financial and lifestyle tasks • Full brokerage and depositary services license obtained • Launch of Tinkoff Junior app, a service for children and teenagers • Launched Cyprus-based home call centre • Increased equity stake in CloudPayments from 55% to 95% • Launch of Tinkoff Mobile • Roll-out of own ATM’s across Russia • Acquisition of a 55% stake in CloudPayments • Launch of Stories for mobile app • A partnership with Skolkovo Innovation Center announced • Tinkoff joined the FinTech Association 2014–2016 16.3 • Launched a network of software development hubs countrywide, the first in St Petersburg • Joined the Russian blockchain consortium • • Launched a new management long term incentive plan • One of the first launching Apple Pay and Samsung Pay Introduced a face recognition system for scoring • Became Russia’s second largest credit card provider • Launched a range of new business lines, transitioning to online financial marketplace Tinkoff.ru Issued new co-branded cards • • New brand - Tinkoff Bank • Launch of a number of mono mobile applications in Russia 2010–2013 11.8 • TCS Group IPO on the London Stock Exchange Main Market • Launch of Tinkoff Insurance • Launch of cash loans • Minority stakes sold to Baring Vostok and Horizon • Launch of online POS loan programme • Launch of mobile banking • Launch of the mobile and telesales sub-channels of Tink- off Bank online customer acquisition platform • Launch of online acquisition channel for credit cards • Launch of “smart courier” service 2006–2009 -0.6 • Launch of the retail deposit programme • First debit card issued • Minority stakes sold to Goldman Sachs and Vostok Nafta • Launch of internet bank • First credit card issued • Tinkoff Credit Systems Bank was created by Oleg Tinkov 4 5 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 BUSINESS MODEL OPERATING FLEXIBILITY TCS Group has built an advanced platform that is highly suit- ed for the Russian market and operating environment. The Group’s platform is entirely branchless, with a low fixed cost base and high degree of operating flexibility. Cost efficien- cies are enhanced by its best-in-class centralised IT system, with continued investments and advancements in the field of artificial intelligence and machine learning. The low level of retail financial services penetration in Russia, the rapid growth of online and mobile payments, and high margins and barriers to entry make our business model attractive in terms of sustainable profitability, growth potential and competitive edge. ROBUST DATA AND RISK MANAGEMENT TCS Group employs a highly scientific, data-driven and con- servative risk management approach, which underpins the success of the business model. All aspects of the client life cycle – from acquisition to services and collections – are carefully monitored and evaluated. We make loan approval decisions based on a range of available information, includ- ing credit bureau data, a rigorous application verification process and proprietary scoring models. TCS GROUP’S RAPIDLY EVOLVING FULLY DIGITAL BUSINESS MODEL IS SCALABLE WELL BEYOND FINANCIAL SERVICES. COMBINED WITH A SMART BALANCE SHEET, A BEST IN CLASS BROKER PLATFORM SOLUTION AND AN INTEGRATED ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING ALGORITHMS IT GIVES THE UNIQUE COMPETITIVE ADVANTAGE IN A RAPIDLY DEVELOPING FINTECH MARKET Tinkoff is a fully digital ecosystem offering customers the full range of financial, transactional, and lifestyle services. Through our mobile and internet platforms we offer Tinkoff-branded products – credit products, current accounts, deposits, securities dealing, insurance and mobile solutions, as well as non-Tinkoff products through our lifestyle marketplace. For small businesses, we offer current accounts, transactional services, credit products salary projects and on- line merchant acquiring. We deliver premium services to mass market and mass affluent customers in Russia through a unique online, branchless platform. DIVERSIFIED PROVIDER OF RETAIL FINANCIAL, INSURANCE AND LIFESTYLE SERVICES Originally the first purpose-built credit card focused lender in Russia, Tinkoff has evolved into a fully digital advanced on- line financial and lifestyle ecosystem, providing a wide range of its own retail financial services such as retail lending, transactional, savings products, insurance, SME, internet acquiring, securi- ties dealing, mobile solutions as well as non-Tinkoff products through its marketplace built-in the superapp. Tinkoff continues to operate both in the mass mar- ket and mass affluent segments by way of offering an ever expanding range of financial services and targeted lifestyle recommendations, advice and entertainment features. HIGH LIQUIDITY AND DIVERSIFIED FUNDING BASE Tinkoff has established a robust liquidity risk management framework that ensures it maintains sufficient liquidity, including a significant cushion of liquid assets. TCS Group’s funding strategy provides effective diversification in the sources and tenor of funding. The Group maintains strong relationships with market participants to promote effective diversification of funding sources. POWERFUL DISTRIBUTION Tinkoff offers remote access customer service through its award-winning mobile banking as well as through internet banking and high-volume call centres. Our use of direct marketing channels has revolutionised the way custom- ers are acquired in Russia. Distribution channels, which include online (the Internet, mobile services and telesales) and direct sales agents, allow TCS Group to attract new customers right across the country. Supporting the branch- less platform is a “smart courier” network which allows next day delivery along with unlocking the huge cross-sell potential of that delivery force. PREMIUM-LEVEL SERVICE AND BRAND TCS Group is unusual among Russian retail financial ser- vices providers in offering a premium-level service to mass market and mass affluent customers. Our customers enjoy conven ient 24 hours a day, 7 days a week access to their accounts and financial transaction services through the combination of Tinkoff’s free mobile, Internet, call centre service and chat bots platforms. 6 7 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 MARKET CONTEXT AND POSITION Credit business Market shares measured in total RUB balances (as of YE20) Investment brokerage Transactional business 2020 has been a ground shaking year across the globe in many industries, but in the Russian credit market the dislocations proved less impactful than during the previous crises of 2008-09 or 2013-2015, in part helped by government support and more disciplined lending practices of the biggest banks. In 2020 the CBR relaxed risk weights for the first time in many years. This coupled with re- structuring programs launched by many banks helped the credit card market to still grow by 1.6% in 2020. In 2020 Tinkoff further enhanced its po- sition as the number 2 credit card player in Russia after Sberbank increasing its market share to 14%. In the overall consumer credit market (loans < 3 years) Tinkoff market share also increased to 8.6% as it kept its second place. Secured lending (home equity and car loans) remained key contributor to Group’s lending portfolio growth due to their con- tinued scale up. Overall despite elevated risk costs amid Covid, Tinkoff's credit business remains extremely profitable and should continue to contribute to growth in future years. #2 #2 #6 #12 #6 #8 #9 #19 14.0% 8.6% 5.4% 3.0% 2.7% 2.0% 1.4% Credit Card Retail loans < 3 years (incl. credit cards) Individual entrepreneur accounts Car loans Retail current accounts* Total retail loans 0.4% Retail customer accoun Legal entities (incl. individual entrepeneurs) *6th largest player in RUB balances, 3rd largest in number of customers Growth of customer base and engagement 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 s r e m o t s u c n m l 3.7 1.9 0.4 4.1 2.1 0.5 3.4 1.6 0.3 4.7 2.4 0.5 5.1 2.7 0.7 5.5 2.9 0.7 5.9 3.0 0.8 13.3 9.3 12.1 8.0 10.8 11.2 6.7 7.0 10.2 6.0 1.9 2.0 2.2 3.2 2.6 8.8 8.0 4.5 4.8 1.3 1.4 9.6 5.2 1.6 7.2 4.0 1.1 6.5 3.4 0.9 2020 saw a surge in retail interest in equity market amid heightened volatility and suppressed deposit interest rates. Tinkoff Investments acted as a primary driver of this market as Tinkoff’s Investment's active client base reached 1 mn, quadrupling from a year ago. Tinkoff has solidified its dominant position as it accounts for 60% of active accounts on Moscow Exchange, almost 4x ahead of Sberbank and has been consistently largest by trading volume on Saint Petersburg Exchange. Tinkoff Investments should continue to an important driver of group’s revenues and earnings for the years to come. In 2020, the Tinkoff active client base exceeded 9 million, of which 4.8 million were debit card active clients with total utilized cards reaching 7.5 mln. Tinkoff Black remains the main feeder for Tinkoff ecosystem growth and drives cross- sell potential. This product is key in accessing a younger and more mass affluent customer base: the average user is 34 years old customers and predominantly urban. These customers have shown a higher propensity to utilize more of the Tinkoff product suite and Tinkoff Black remains a key feeder for our Tinkoff Investments, Insurance, Credit and SME business lines. The Tinkoff Black debit card is also the main tool to access Tinkoff's increasingly comprehensive array of lifestyle services - including ticketing, entertain- ment, and e-commerce services that Tinkoff provides itself and often in conjunction with partners. Tinkoff - #1 by number of active customers on MOEX 2 2 2 2 2 1 1 1 1 1 62% 57% 48% 36% 28% 20% 22% 16% 17% 12% 12% 16% 17% 12% 5 20% 22% 26% 26% 22% 17% 16% 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 2Q’18 3Q’18 4Q’18 1Q’19 2Q’19 3Q’19 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 Total customers Group MAU* Group DAU* Tinkoff's share of active customers Share of second largest broker Rank *Group MAU and Group DAU refers to unique monthly and daily active users of all Tinkoff platforms (including Tinkoff Banking App, Tinkoff Investments, Tinkoff Internet Banking, SME, Tinkoff Junior, and other smaller platforms) 8 9 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 CONTINUED MARKET CONTEXT AND POSITION Tinkoff Super-App - a leader in the mobile financial and lifestyle solutions in Russia The share of mobile internet users in Russia is growing year-on-year. Tinkoff being a leader in the mobile space from its very first day continues to pay a close attention to not only interfaces and seamlessness of processes in its mobile application but also hugely invests into customer satisfaction and retention. Tinkoff Super-App launched in 2019 is a revolutionary product with inte- grated Tinkoff platform which not only aggregates all of the Tinkoff Group products under one umbrella, but seamlessly allows customers to satisfy their daily banking, credit, transactional, and lfiestyle needs. The app is complemented by Stories – targeted AI based tips based on customer’s transaction activity, restaurant reservations, shopping experience, cinema, theatre and con- cert tickets, travel and many more. Core Lifestyle Apps Partner Apps Cinema >360k MAU Theatre >130k MAU Concerts >135k MAU Restaurant >250k MAU Travel Monthly Sales of >100k tickets Shopping >145k MAU Sport ? Your app Tinkoff Pro – our ecosystem in one subscription — Higher deposit rates — More cashback categories — Higher P2P transfer limits — 15% cashback on Lifestyle offering — More attractive loyalty program terms — 5-10% cashback on Tinkoff Travel — Free SMS notifications — Lower card servicing fees Additional benefits — 7% cashback on Insurance products — Higher transfer limits for — Special offers on Tinkoff Mobile — individual entrepreneurs 10 11 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGY Doubling the Base 01 Grow We plan to more than double our number of revenue generating products to >28 million We continue to see strong growth opportunities across all our business lines. We see two main runways for our growth – we can deepen markets where penetration is still low, and we can continue to gain market share across all the various markets in which we operate. Ranging from credit cards to investments, Russia remains underpenetrat- ed and we think our serviceable addressable net revenue pie can rise from $40 bn to $50 bn in the next 3 years. In 2020 we only captured about 3% of the latter figure and we aim to achieve this through doubling the base of our cus- tomer engagement in two ways. First, we target to expand our active customer base from 9.1 mn MAU to over 16.5 mn by 2023. Second, we want to en- gage more with each customer and see average products per customer rising from 1.4x at YE20 to over 1.7x by 2023 helped by our cross- sell initiative. This would allow us to more than double our revenue generating products to over 28 mn. In financial terms we target to maintain >30% ROE and grow earnings >20% per year to Rub75 bn in 2023. 02 Comprehensive Focus on customer acquisition, retention and driving customer loyalty The technology and experience acquired by Tinkoff in building its high-tech online customer acquisition and service platform has helped it to expand its transactional and payment products such as current accounts, SME solutions, online acquiring, and mobile mono-applications. We intend to support the growth of these products that constitute an important channel for acquiring new custom- ers and for cross-selling other products, particularly credit cards. These transactional and payment products are also being offered to existing customers of Tinkoff, helping to boost retention rates. The financial and lifestyle ecosystem platform providing customers with proprietary and partner products Retail lending remains Tinkoff’s core business. IIn 2019/20 we significantly broadened the range of our credit prod- ucts, with credit cards accounting for 60% of the loan port- folio, while contribution from non-credit related business lines further improved in 2020. GROW OUR CUSTOMER BASE PROFITABLY BY BUILDING THE MOST COMPREHENSIVE, ENGAGING, AND INNOVATIVE FINANCIAL AND LIFESTYLE ECOSYSTEM IN THE WORLD Tinkoff Investments, the final business line, was success- fully launched in April. Since our non-credit business lines are up and running our focus now is on scaling, monetiza- tion and cross-sell potential within our ecosystem. In 2019 we significantly improved our lifestyle and entertainment offering to the customers - culminating in the launch of our Super App - the aggregator of all Tinkoff Group products and a platform that enables customers to satisfy all their credit, transactional, and lifestyle needs. The Super App enables seamless integration with partners and now allows customers to access Stories (AI*-based rec- ommendations and user tips based on transactional activity) as well as complete restaurant reservations, purchase cine- ma, theatre and concert tickets and com- plete e-commerce transactions. The introduction of Oleg, the world's first financial services voice assistant, makes navigation through the Tinkoff platforms seamless and convenient. 03 Engaging Sell and cross-sell financial, insurance and lifestyle products By developing and cross-selling new products to existing customers, Tinkoff expects to diversify its revenue streams, increase its revenue per customer and increase its custom- er retention and life time value rates. Recently launched Tinkoff Pro subscription tool called for driving customer loyalty and engagement by a wide range of value added services, discounts and lower fees on existing products. Tinkoff Insurance product set consist of personal accident insurance, property, travel and car insurance - KASKO and OSAGO. 04 Innovative Customer service is a cornerstone of Tinkoff ecosystem High quality customer service has been a key driver of Tinkoff Bank’s rapid growth. Tinkoff invests to maintain and improve key components, such as our simple applica- tion processes, convenient and 24/7 access to accounts, the reach of our “smart courier” service, free loan repay- ments and straightforward complaints resolution process. Through the launch of a new financial supermarket portal Tinkoff Bank is now able to serve not only its existing cus- tomers but also non-clients when they are allowed to make transactions without full identification within the legislative- ly approved limit of 15,000 Roubles. This is a strategic step for Tinkoff Bank to increase its exposure throughout the financial market. Support business expansion through advanced IT systems and AI Banking Credit risk is under control Tinkoff Bank operates a low-cost, branchless model and seeks to outsource wherever feasible while retaining core functions in-house. This complementary outsourcing strat- egy allows us to retain focus on and develop core compe- tencies to economise on capital expenditures, to manage workflow and to maintain a flexible cost base with low fixed expenses. The Group’s in-house IT team develops a significant part of the software used by Tinkoff, including software used in its online customer acquisition and service platform. This enables Tinkoff to regularly and quickly roll-out new products and services to customers or new versions with enhancements. Tinkoff Bank continues to expand its technological advan- tages over traditional Russian banks. In 2020 Tinkoff Bank announced the launch of super-computer Kolmoborov to support AI-based processes and expertise. The toolkit ‘speech to text and text to speech’, Tinkoff’s own software created in-house, became available for third parties 05 Profitably Solid liquidity and lowest ever funding cost The Group has established a robust liquidity risk man- agement framework that ensures it maintains sufficient liquidity, including a significant cushion of liquid assets. Tinkoff Group’s funding strategy provides effective diver- sification in the sources and tenor of funding. The Group aims to maintain an on-going presence in a broad range of capital market segments and strong relationships with market participants to promote effective diversification of funding sources. As a data-driven organisation, the Group uses a wide range of databases in its loan approval processes and portfolio management and is constantly in search of new sources of relevant data. We take loan approval decisions based on a range of available information, including credit bureau data and scores, proprietary scoring models, a proprietary appli- cation verification process and sophisticated NPV models. The Group will continue to develop credit risk management capabilities and to use increasingly more sophisticated data analysis and modelling to achieve this goal. Credit risk management remains one of the core strengths of Tinkoff and will remain critical to sustaining its competitive advantage. The Group intends to further increase the cost-efficiency of its operations by placing an even greater emphasis on its Internet banking, mobile banking and Home Call Centre operations and constantly seeking new ways to achieve further reductions in operating and customer acquisition costs. We aim to more than double our business 2.6m Total revenue generating products YE16 12.7m Total revenue generating products YE20 >200m Potential revenue generating products >28.0m (>2x growth) Total revenue generating products YE23 12 13 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020WHAT MAKES US DIFFERENT TINKOFF IS A CLOUD ECOSYSTEM PROVIDING A FULL SCOPE OF HIGH UTILITY, DAY-TO-DAY FINANCIAL, INSURANCE, LIFESTYLE, AND ENTERTAINMENT SERVICES HIGH-TECH VIRTUAL PLATFORM Tinkoff has built an advanced high- tech retail financial services platform that is highly suited for the Russian market and operating environment, particularly in underserved parts of the country. This platform is entirely branchless, with a low fixed cost base and high degree of operating flexibil- ity. This high-tech platform includes the mobile app, internet platform, a real-time voice authentication system which creates voice prints during the traditional Q&A verification process for each new caller and highly effi- cient chat-bots and call-bots. We suc- cessfully implemented robotisation through the use of Machine Learning, Artificial Intelligence and Computer Vision of a number of processes on an operational level that helps to signif- icantly improve operating efficiency and cost control. 27mn call and chat enquiries solved by bots or cloud service agents in 2020 SINGLE POINT OF DESTINATION FOR DAILY BANKING Tinkoff is the second largest credit card and short term retail lender in Russia, offering a variety of retail unsecured loans as well as secured home equity and car loans. In addition to our market-leading credit offering, Tinkoff suc- cessfully manages online retail deposits programme, retail and car and other insurance, financial products in the fast emerging mobile payments and retail brokerage. Lever- aging its innovative approach, existing infrastructure and customer base, Tinkoff has been expanding to bring addi- tional partners’ products and services through its full-cycle brokerage platform and further expanding our lifestyle and entertainment offering with travel, ticketing and shopping experience. 4.1mn applications per month on average during 2020 >18.4mn Credit cards issued 14.0% Credit card market share* over 581RUBbn of customer credit card transactions in 2020 * As of 31 December 2020 based on CBRF data. 14 15 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 WHAT MAKES US DIFFERENT TCS GROUP IS TRANSFORMING THE RUSSIAN FINANCIAL SERVICES MARKET AND DRIVING A DIFFERENTIATED CUSTOMER PROPOSITION. POWERFUL DISTRIBUTION Tinkoff offers remote access customer service through its award-winning Internet banking as well as through mobile banking and high-volume call centres. Our use of direct marketing channels has transformed the way customers are acquired in Russia. Distribution channels, which include online (the Internet, mobile services and telesales), direct mail and direct sales agents, allow Tinkoff to attract new customers anywhere in the country. Supporting the branchless platform is a “smart courier” network covering around 2,100 cities and towns in Russia which allows next day delivery. In addition, Tinkoff ’s online origination process makes extensive use of online data and behavioural profiles, and gives it clear advantages over competitors in terms of under- writing. CREATING VALUE IN CHALLENGING MARKETS Our entrepreneurial approach to products, premium-quality customer service and effective credit risk management, based on sophisticated data analysis and modelling, enable us to achieve a combination of sustainable growth and good returns even in a market downturn. The strong trend to adoption of online and mobile consumer technology in Russia, together with the low penetration and growth po- tential in the country’s retail financial services, represent a tremendous opportunity for Tinkoff to continue its success. 44.3% Net loan portfolio CAGR 2010-2020 95x Equity grew by 95x in 10 years (from 2010 to 2020) ≈41% ROAE №1 World’s Best Consumer Digital Bank* * by Global Finance 35% of all customer requests across the products processed by chat-bots in 2020 16 17 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 CEO STRATEGIC REVIEW Dear Investors In mid March I was delighted to report the results of yet another record-breaking year for Tinkoff Group. For 2020 we delivered net profit of RUB44.2bn, up 22% year on year, with an ROAE of nearly 41%. This was no easy feat given the tricky operating environment, and this once again testifies to the resilience of our business model and the agility of our management team. In this strategic review I would like to share my thoughts on four areas: 1. The very successful year 2020 and details of how and why it was achieved and is continuing; 2. To follow up my comments from last year on corporate governance; 3. To share my choice of business highlights from 2020; 4. What do we see ahead in 2021. First I will move onto some of our operational and financial highlights from FY2020. 1 Operational and Financial Highlights of 2020 • Tinkoff’s Retail Debit Card business, Tinkoff Black, the main locomotive of our growth, is further accelerating. More and more Russians are realising that this is a product they must have.  The main reasons it has gone viral are the ease of onboarding, the highly rewarding customer experience, the rich product and the unparalleled level of service.  It also has a strong pull and cool factor.  Total Tinkoff Black customers grew by 60% from 4.7m customers to 7.5m customers in 2020, with balances growing by a comparable 62% year on year. In Q4 2020, our debit card TPV reached a record RUB783bn, up 55% year on year. With every quarter this product cements its pivotal role as both a major customer acquisition tool and a high-retention loyalty program for our Ecosystem. • Our InvestTech business, Tinkoff Investments, concluded the year on a high, and its brand has become synonymous with retail investment in Russia. In 2020, the Tinkoff Investments customer base grew 4x to over 1.25 million, as- sets under custody grew 6x to over RUB300bn, and quarterly trading volumes grew 8x to RUB4.2tn. 60% of all active customers on the Moscow Exchange are Tinkoff Investments customers, a market share that is 4x higher than that of the second largest player in the market. A key point here is that we are ca- tering to all types of investors – from first-timers, to active traders, all the way to higher net worth individuals who need more of an advisory service. We re- ally can say that we are forming this market as it evolves from an early stage. Our customers typically have a similar profile to those that come through Tinkoff Black – young, urban, more mass affluent. Although this business line only broke even in mid-2019, it has already become a meaningful bottom line driver, with some of the most attractive unit economics in our product portfo- lio. Over time, we expect this business line can become the largest contribu- tor to our bottom line out of all of our non-credit businesses. • Tinkoff Business, our provider of SME Services, delivered out- standing results, adding 60K new customers to reach 385K total customers. Our increasing focus on medium sized enterprises that are more NPV accretive is paying off: we grew balances by 48% year on year to almost RUB 90bn, and this business line’s profit before tax grew by 71% YoY. Our SME custom- ers see us not only as a financial partner, but also as a partner that can help them grow their busi- ness through an impressive array of merchant solutions like cloud accounting, website construction, delivery services, CRM tools, and increasingly SME lending. We believe SME represents a huge addressable market for us. • Our Acquiring and Payments busi- ness, Tinkoff Acquiring, continues to ride the wave of digital payments and ecommerce. In the fourth quarter, our TPV grew by over 50% YoY to RUB220bn, contributing to 33% year on year growth in reve- nues and 79% year on year growth in profit before tax. The secret to the success of this business is that our entire acquiring platform is developed in-house, in our view making onboarding, integration and customer experience for our corporate customers significant- ly better than anywhere else in the market. Our conversion and fraud rates are among the best in the industry. We have tailored solutions for different market segments, enabling us to grow across a well-diversified set of ROAE is 40.6% and total equity climbed to RUB 127bn ≈41% FOR 2020 WE DELIVERED NET PROFIT OF RUB44.2BN, UP 22% YEAR ON YEAR, WITH AN ROAE OF NEARLY 41%.  THIS WAS NO EASY FEAT GIVEN THE TRICKY OPERATING ENVIRONMENT Oliver Hughes Chief Executive Officer 18 19 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED CEO STRATEGIC REVIEW merchants and industries. This is a highly technological and innovative business, as shown by the recent launch of ‘Tinkoff Checkout’– a one-stop payment platform that will combine all existing payment technologies of the Tinkoff Ecosystem as well as new solutions, including services provided by CloudPayments, a leading Russian online payments aggregator in which we hold a 95% stake.  We have big plans for the business line in 2021 as we build more solutions for our partners. • Our Consumer finance business also ended 2020 on a high, after an understandably slower first half of the year. We delivered 14% net loan growth for the full year, despite virtually no growth in the first half of the year. The share of lower risk, but high NPV, collateralised loans grew to a record 19% of the portfolio, contribut- ing to both growth and diversification of the consumer lending business.  Our high frequency asset quality data continues to give us the confidence that we are issuing positive NPV loans as we further ramp up our loan issu- ance volumes into 2021. Fee and commission income (RUBbn) +20.9% 195.8 8.1 11.2 11.5 19.2 21.2 161.9 8.4 9.8 14.7 1.6 15.0 4.2 6.4 46.9 47.4 2.3 2.6 4.9 4.3 2.3 2.4 4.8 4.5 48.3 2.8 3.0 4.7 5.7 53.1 3.5 3.7 3.6 4.8 6.7 122.8 112.1 31.5 31.6 29.5 30.3 7.6 2019 2020 1Q’20 2Q’20 3Q’20 4Q’20 MVNO services InsurTech InvestTech Retail Debit Cards Acquiring and Pay- Consumer Finance ments SME Services All of these products are integrated into one Ecosystem which is accessible to customers through our award win- ning super app. Across all our main apps and interfaces, our group MAU reached 9.3m in Q4 2020, up from 6.0m a year ago. And our DAU reached 3.2m up from 1.9m a year ago. Our ability to cross-sell existing products and consequently lengthen the lifetime value of our customers is constant- ly improving. This underpins the growth in product per customers from 1.3 at the end of 2019 to 1.4 at the end of 2020, in spite of the denominator effect from fast custom- er growth. With only a 2% market share of the total retail lending market, we believe that our credit business can generate high growth and high returns for many years to come. We believe we will be able to further grow this metric thanks to the ‘Tinkoff Pro’ subscription, which although at an early stage, is already showing good traction in our customer base.  With regard to the economic impact of the COVID-19 pandemic, we currently do not see any delayed or unreal- ized negative effects on either our existing portfolio or on new issuance. This is not to downplay the seriousness of the pandemic - the health and safety of our employees is always of paramount importance - and elsewhere in this report, as in last year’s report, you will see a very wide range of initiatives in which Tinkoff has actively participat- ed. We take our role as responsible lender and responsible corporate citizen extremely seriously. 2 Aspects of corporate governance and our corporate governance roadmap Last year in my strategic review, I explained our philoso- phy here. We have always striven to maintain the highest standards of corporate governance at Tinkoff, to go well beyond the legal minimum, always incorporating as much stakeholder feedback as possible. We want workable, robust solutions to these multi-dimensional issues while safeguarding the viability of the business. Corporate governance enhancements come in many forms, some more high profile than others, but when taken togeth- er, are all tangible marks on our roadmap. In our financial and other statements for 2020 we have introduced some changes to our reporting formats, which we believe will work to improve investors’ understanding of the key growth and profitability drivers of the Tinkoff business. Firstly, we formally introduced two new customer number metrics, total customers and active customers. The concept of “Total customers” represents those customers who have utilised a Tinkoff product and have not closed it. At the end of FY2020, we had 13.3m ‘Total customers’, up 3.1m from the end of FY2019. And the concept of “Active customers”, what we also call Financial MAU, represents those customers that have generated revenue for us over the last month. At the end of 2020, we had 9.1m monthly-ac- tive customers. These are real customers who are loyal and have chosen Tinkoff as their main financial services provid- er. Secondly, we have revamped our segmental disclosure in the notes to our financial statements. We now present our P&L across seven different segments: • Consumer Finance, • Retail Debit Cards, • SME Services, • InvestTech, • Acquiring and Payments, • InsureTech, and • MVNO Services. In FY2020 the share of revenues from non-consumer finance businesses (i.e. non-credit revenue) amounted to 37% and the share of non-credit net profit amounted to 36%, up from 31% and 18% respectively in 2019. These new reporting changes give extra visibility on the fundamental changes that have been happening in our business and provide further insight into both the pace of our growth and the diversification of our business.  At the same time, we are pressing ahead with other aspects of our corporate governance enhancement program.  The unprec- edented voluntary declassification by our Founder Oleg Tinkov of his weighted voting shares and conversion into ordinary shares at the beginning of the year, as a by-product removed the cap on the number of directors allowed and so paved the way for more change, such as increasing the size of the TCSGH Board.  We are looking to build on the great work of our existing Board by bringing in new members that can further enhance existing oversight functions, but also bring new skills, new experience, and add a stronger strategic dimension to the Board.  The Board will be responsible for steering Tinkoff Group as it grows its business, makes larger capital allocation decisions and thinks about international moves. We will expand the Board in waves to around nine Directors, most of whom will be independent, non-executive directors.  I too will be joining the Board from Q1 2021. We will soon have four special purpose Board committees: in addition to the existing Audit and Remuneration Committees, we will have a Risk and Emerging Risk (Sustainability) Commit- tee and a Strategy Committee.  These initiatives will be rolled out through 2021, and beyond. Your thoughts and feedback on this and all aspects of our corporate governance and ESG initiatives and disclosures are always welcome, to the Tinkoff IR team or through any channel including to stakeholderengage- ment@tcsgh.com.cy Gross loans 16.0% 383.9 54.7 399.0 64.0 395.0 70.8 445.5 70.9 416.7 70.4 329.2 335.8 324.2 346.3 376.5 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 LLP Net loans 3 Highlights of 2020 Tinkoff has been involved in number of ground-breaking inno- vations over 2020 and I would like to mention a few to show the very wide range of Tinkoff activities: • Tinkoff Mobile unveiled a new version of our trail-blaz- ing voice assistant ‘Oleg’ which enables customers to create their own mobile concierge with customizable features; • Tinkoff Business launched ‘Business Saving Box’ a service that allows our SME customers to automatically save and allocate their income for various purposes such as taxes, rent and salaries and Tinkoff Checkout an online and offline payment service for legal entities which operates as a one-stop shop; • Tinkoff signed a long-term development contract to rent the AFI Square business centre in Moscow currently under construction to become Tinkoff’s new HQ in 2022, an ultra-modern workspace, well equipped for tech pro- fessionals and with a smaller environmental footprint; • Our streamlined response to COVID-19, getting over 95% of our office based employees moved to home working within a few weeks, by the second week of March 2020; • Tinkoff Capital launched Russia’s first ETF tracking the Nasdaq ®-100 Technology Sector Index (NDXT); • Tinkoff joined the Top 50 most valuable Russian brands as ranked by Brand Finance; • Tinkoff Education, the team through which we pro- vide educational material for students and graduates, launched free online IT lectures focused on the building blocks of IT companies (on topics like information secu- rity, systems analysis, design and product analytics). 20 21 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED CEO STRATEGIC REVIEW To close, I am happy to have been able to report another year of record Tinkoff profits; a great many people have contributed to this, worked very hard to deliver this for you, in 2020. It’s not possible to name them all but particular mention should go to my colleagues in the Management team, our employees, our investors, our business partners as well as other stakeholders, but above all our customers. We invite more of you to join us, try our suite of transactional, lending and lifestyle offerings, from right across Russia.Keep safe and thank you. Oliver Hughes Chief Executive Officer These are a few of my personal, non-financial highlights; many more have been highlighted in this Report, including by our CFO Ilya Pisemsky in his Financial Review, and feature in our regular market announcements show- ing what a remarkably creative business Tinkoff is. 4 What’s ahead to look forward to? Despite all, 2020 was yet another good year for Tinkoff. We launched several new innovative products some of which I highlighted above, we grew our customer base significantly, we deepened relationships with our customers, and we delivered strong and diversified earnings growth in the process. This is a result of our custom- er-centric approach, our technological capabilities, our disciplined approach to capital allocation and our organisational mind-set. We are confident we can do this for many more years to come, and we will provide more detail about how we will do this and our medium term targets during our virtual Strategy Day in Q2 2021. 2021 will be another interesting year for Tinkoff. As we move into 2021, we feel we have very strong growth momentum and think this is the right time to move up another gear- additional growth now is the best way of guaranteeing a sus- tainable and profitable business into the future.  We also see both organic and potentially inorganic growth opportuni- ties through acquisitions of businesses complementary to Tinkoff. OUR RECENT AWARDS Global Finance • Best Website Design 2020 • Best Mobile Banking App 2020 • Best Open Banking APIs 2020 • Best Online Treasury Services 2020 • 50 Best Employers Ranking by Forbes (3rd Place) • Best European Retail Bank of the Year • Best Mobile Banking App at the Core of a Financial Ecosystem • Best Mobile Banking for Daily Operations for iOS and Android • Best Daily Banking and Digital Office (Internet Banking Rank 2020) • Joins the Brand Finance global Top 500 • Best daily banking in the premium segment most valuable banking brands • Top 50 most expensive Russian brands • Best bank for entrepreneurs • Named among the Largest Merchant Acquirers in Europe 2019 • Investment Company of the Year 2020 • Maximum score in the rating of banks' satisfaction according • Deposit of the Year 2020 • Bank card of the Year 2020 to the NPS methodology 22 23 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020FINANCIAL REVIEW Dear Investors Last year I wrote that FY2019 was the latest in a string of record break- ing years for Tinkoff and it might prove hard to beat-this was at a time of great uncertainty as the impact of the pandemic broadened out. I as- sured readers that every effort would be made to beat FY2019’s results, that I was confident we would deliver in 2020. And this is just how things turned out, another year of record high profits for both Q4 and FY2020. Tinkoff remains the second largest player in the Russian credit card market with a market share of 14% at 31 December 2020, and is the third largest retail bank in Russia in terms of active client base. Naturally I will take you through the financial results in my review but as in the past I would like to share with you some particular business highlights of 2020. These showcase the great range of activities the Group carries on as Russia’s leading fintech brand. Throughout 2020 we continued to innovate, launching new products, improving existing ones, trialling others, building a sustainable future for the business. My highlights of the many for 2020 would include these: • • In 2020 Tinkoff became the largest player in the CBR’s Faster Pay- ments System; In 2020 for the first time the number of our non-credit product cus- tomers exceeded the number of credit product customers; • Tinkoff paid four interim dividends in 2020 (total $0.80 per GDR); • Tinkoff proactively supported borrowers impacted by the pandemic by offering both government and proprietary restructuring pro- grammes; and deployed our cloud based home call centre platform to assist the Moscow City Government and the People’s Social Front (a consumer protection organisation) in fielding calls from people experiencing pandemic- related problems; • Tinkoff launched Tinkoff Call Defender, a platform designed to pre- vent fraud and social engineering in the telecom sector developed as part of the comprehensive Tinkoff Security system to protect Ecosystem customers. It was developed in partnership with major Russian mobile operators; • Tinkoff launched a free service called “Who is Calling?” which identi- fies incoming caller IDs and helps to protect against scammers and spam calls; • Tinkoff adopted a cutting-edge approach to credit-scoring based on securely-merged data on oneFactor platform. It includes AI-powered predictive analytics tools, based on combined data from multiple sources, including telecom operators, Russia’s largest credit bureau and Tinkoff itself; • Tinkoff was recognized as among Russia’s Top 3 Employers for 2020 (Forbes). I would now like to describe some of the main trends that we observed in our business through FY2020. Assets growth RUBmn +48.1% 18.2% 859.3 136.4 238.5 726.9 56.9 238.1 670.1 57.7 217.1 580.0 66.5 135.2 607.8 59.9 148.0 329.2 335.8 324.2 376.5 346.3 60.1 4Q’19 64.1 1Q’20 71.2 2Q’20 85.5 107.9 3Q’20 4Q’20 Cash and cash equivalents Investments in debt securities Net loans Other ANOTHER YEAR OF RECORD HIGH PROFITS. TINKOFF REMAINS THE SECOND LARGEST PLAYER IN THE RUSSIAN CREDIT CARD MARKET WITH A MARKET SHARE OF 14% AT 31 DECEMBER 2020, AND IS THE THIRD LARGEST RETAIL BANK IN RUSSIA IN TERMS OF ACTIVE CLIENT BASE. Ilya Pisemsky Chief Financial Officer 24 25 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020accounts and funds from SME customers which grew by 62%, 500% and 49% respectively during FY2020. At the same time, the term deposits balance remained flat for the year, as deposit rates went down significantly more recent- ly and new possibilities to earn decent returns on the funds through our brokerage platform became widely available to the public. This is positive news for our profitability, as we are spending less on interest expense and earning more in fees, while keeping our customers happy. Ample liquidity on the asset side and generally short duration of our loan book allows to us keep our ALM proportions intact and liquidity ratios at high levels. Another funding source that did not grow much (apart from currency revaluation) during 2020 was wholesale funding. Nevertheless we are keeping an eye on the wholesale market, especially on the perpetual market, as our unused capacity for AT1 capital will be growing in absolute terms in 2021-2022. Shareholders’ equity increased by 9% in Q4 to RUB127 bn thanks to strong quarterly profits. Our Basel ratios went down a bit due to the yearly re-measuring of operational risk under IFRS. We also recorded a reduction in RWA density as the share of loan portfolio in our assets declined compared to cash and investments. Statutory ratios also came down slightly - the N1.0 and N1.1 to 13.07% and to 10.2% respectively. CONTINUED FINANCIAL REVIEW The Group’s Balance Sheet Following convention I will start with the composition of the Balance Sheet. Total Assets of the Group grew for the full year by 48.1%, with over 18% in Q4. The substantial growth in cash balances during Q4 was a result of strong inflows from SME and retail current accounts, pushing the share of cash on the balance sheet to 16% at the year end. At the same time, in anticipation of the interest rate increase, we decided not to grow the bond investment portfolio during the winter. It remained flat during the quarter at slightly below RUB240 bn and fell proportionally to 28% of the total assets of the Group. Throughout the year we built a significant positive revaluation on this portfolio which was realized during 2020, contributing nicely to our net income. Our net loan portfolio showed solid 8.7% sequential growth in Q4, commencing the return to the pre-pandemic levels of lending. This allowed us to show double digit growth for 2020 despite the portfolio decrease in H12020. This growth was driven by several components of the credit book, which I will discuss later in detail. Observing the full year dynamic in the total net assets composition, proportionally the net loan book declined to 44% of the total assets due to the faster growth of cash and investment portfolio. There was an increase in other assets which rose over RUB100bn and reached 13% of our total portfolio. Among usual other assets such as security deposits with Payment Systems, settlements and Fixed Assets there are RUB24 bn of short-term receivables from Tinkoff Investments’ cus- tomers who made margin trades before the year end. We expect this balance should grow further in 2021. Our funding base is growing strongly, mirroring asset growth. The total funding balance of the Group grew by 48.3% year-on-year and by a stellar 18% in Q4, allowing us to build a significant liquidity buffer on the assets side. Growth is most visible in retail current accounts, brokerage By the end of 2020 Tinkoff Bank had issued over 18.4mn credit cards 18,4mn Cost of Borrowing 5.7% 4.0% 5.6% 4.8% 4.5% 3.9% 3.3% 2019 2020 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 The Group’s Profit and Loss Statement Now I will turn to the Income Statement and the breakdown of our profit and loss statements by the major business verticals. These are set out in greater detail in “Segment analysis” of our financial statements where both revenue breakdown and net profit breakdown by business line are shown, one of our governance enhancement measures. We hope this new level of granularity will give a better insight into the key drivers of profitability and growth of our business. Next a few words on revenue dynam- ics. Compared to 2019 our revenue grew by 21% to almost RUB196 bn, and most of this growth came in Q4 FY2020 when we emerged from the pandemic slowdown. The share of revenue from non-credit business lines rose from 31% in 2019 to 37% in 2020 (and to 43% in Q4 2020), despite the strong growth of the credit busi- ness. We expect this trajectory would continue in 2021. On cost management, there was a return to growth in Q3 in acquisition costs after two quarters of cost preservation, and that continued into Q4. Now we see momentum, and op- portunity, to acquire more customers across all business verticals. So our acquisition costs more than doubled in Q4 2020 compared to Q4 2019 or to last year’s pandemic period and com- prised almost half of total administra- tive costs. The growth in acquisition costs corresponds to the doubled figures in our operating statistics. It also shows how our business model allows us to manage costs very rap- idly depending on market conditions, and we believed this was an appropri- ate moment to spend more. Looking forward into 2021 we intend to keep our marketing effort on this level in absolute terms, with cost to income normalizing around 40%. As for the dynamic of our net income and the contribution that credit and non-credit businesses give to that growth, Q4 net income is in line with that of Q3, despite the fact that we have stepped up customer acquisi- tion costs. You can also see that the magnitude of acquisition costs effect is higher for non-credit businesses compared to credit. Despite this, the share of net income coming from non-credit businesses rose from 18% in 2019 to 37% in 2020. I will turn now the results of each business segment one-by one starting with our bread-and-butter credit business. Our loan portfolio showed a healthy 8.7% growth during Q4 on a gross ba- sis and 14.4% growth for the year on a net basis. Looking forward into 2021 we see a growth opportunity. Growth in 2020 was driven by several com- ponents of the credit book, including unsecured and collateralized loans. SME lending remains in test mode, but even there positive results are starting to come through. In terms of the composition of the book, the share of credit cards is slowly but gradually falling towards half of the loan book, now representing 57% of the total. Credit cards remain a key product and we see huge potential still in this market. In Q4 we added 800K new activated credit cards, 2.3m cards in FY2020. The disbursements in other credit segments were also strong but from a lower base, which is the reason for the declining share of the credit card part of the portfolio. Turning to the economics of our credit business, in 2020 interest income grew 15% to RUB128 bn. Our head- line gross interest yield on the credit portfolio decreased from 32.4% to 28.1% year-on-year, mostly due to the growing share of the non-credit card loan portfolio. This gives roughly a 1% per-quarter reduction in yield, which rarely happens smoothly. Q42020 is a good example as the reduction in yield was less than half-a-percent, after a sharper descent in Q3. It is reasonable to assume that during 2021 gross yield should continue to gradually move down as a result of the changing portfolio mix. Our blended cost of borrowing de- clined from 5.7% to 4% year-on-year and was as low as 3.3% in Q4 2020, thanks to large inflows of cheaper SME, retail and brokerage accounts funds. Despite the recent increase in interest rates worldwide, we have hopes of our cost of funding remain- ing at these lower levels. 26 27 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED FINANCIAL REVIEW Net interest margin declined year-on-year by 4% because of the reduction of the gross yield and in Q4 due to exception- al inflows of retail funding. Cost of risk improved marginally in Q4 but more importantly it has improved significantly in the second half of 2020, proving the V-shaped nature of the pandemic crisis in Russia. As a reminder, we also still have RUB 5.6bn of macro-factor adjustment that we incurred throughout 2020. The improvement in cost of risk allowed our risk-adjusted net interest margin to remain over 13%. The annual 4% decrease in our risk-adjusted net interest margin from 15.4% to 11.3% is a result both of the reduction in gross margin and elevated credit risks in H1 2020. I can share some more granular information about the unsecured and secured parts of the loan book, including gross yield and cost of risk. For the more mature unsecured loan book, we found a mild improvement in asset quality but still very attractive risk-adjusted margins. For the younger secured part of the portfolio, the risk parameters and NPLs are not yet fully shaped on fast-growing portfoli- os, but are heading in the right direction. This portfolio has a lower cost of risk than our unsecured portfolio – this was the case both during the pandemic crisis and now. Now some comments on our non-credit businesses, starting with our debit card business. With 7.5 million total customers and with almost RUB323bn of balances, our current account business contributed RUB21.2bn in reve- nues in 2020, net of the cashback returned to customers. We continue to develop this product as the cornerstone of subsequent cross-sell opportunities. We still intend to keep our bottom-line result for this business close to break-even – and note that in the first half of the year the profit before tax from this segment were in positive territory because of Net interest income RUBbn +19.1% 104.7 the realized gains on our treasury portfolio. We see more value in growing the customer base and in the potential synergetic effect with other business lines rather than as a source of pure net income. Our SME business is returning to growth after a rebalanc- ing phase, focusing more on per-client profitability rather than the absolute growth in number of customers. At the end of 2020 we had 385K total customers with almost RUB90bn in balances on SME current accounts. We earned revenue of RUB11.5 bn in fees, treasury income and some interest on SME loans. Our focus on per-client profitability is coming through, as profit before tax grew 71% year on year to RUB5.6bn, while revenue grew 17% year on year. 2020 was a year of exponential growth for our investment business. Over 1.5m customers utilized brokerage ac- counts on our Tinkoff Investments platform, with quarterly transaction volumes well over 4 trillion Rubles compared to half a billion just a year ago. Our assets under custody grew 6x year-on-year to almost RUB315bn. This business line’s revenues grew over 8x year-on-year. Tinkoff Investment's contribution to group net results is already visible despite the fact that we still spend proportionally high amounts on product development and customer acquisition. This was particularly visible in Q4, when we ran certain TV cam- paigns. We will continue to develop our platform, product proposition and grow our customer base in 2021, as ever, trying to find the ideal balance between profitability and growth. We are already a market leader by number of cus- tomers but the retail brokerage market itself is only starting to develop, so we feel there is could be lot of room to grow. +12.5% 26.8 26.9 25.5 25.4 87.9 24.0 2019 2020 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20 Acquiring is a business line which is benefitting from the accelerated transition to ecommerce. Our internet acquiring business is the second largest in Russia, providing best in class conversion metrics for our merchants. Including our offline acquiring business, we processed more than RUB210bn of TPV in Q4, which represents 52% growth year-on-year. Combined with a stable commission of 1.7%, this led to revenues of RUB 11.2bn during 2020, up by 33% year-on-year. Its profit before tax rose 79% year on year to RUB 2.3bn. This business works both with large aggregators and individual merchants, in roughly a 50-50 split. It is also an important part of the value proposition to many of our SME customers. Last but by no means least, profits. You have already seen our quarterly profit number; to reiterate, it is in line with the previous quarter in spite of acquisition activity stepping up a gear. The Group annual profit of RUB44.2bn is 22% higher than a year ago, despite the pandemic. Return on equity is normalizing around 40%, while remaining industry-leading. Return on assets went down to 6.4% due to additional provisions charged during the pandemic and to the extra liquidity obtained before the year-end by successful current account and investment businesses. Tinkoff Bank issued over 10.4mn debit cards at YE2020 >10.4mn How to wind up my review of FY2020? A busy year certainly, the year when the pandemic made its effects felt. But a year too in which the resilience of the Tinkoff business model shone through again, in another crisis. Our robust performance is made possible by our deep bench of first rate talents, attracted to Tinkoff’s unique corporate culture and hard work. Looking ahead, FY2021 looks promising and I hope to be writing to you next year with equally good news. Ilya Pisemsky Chief Financial Officer 28 29 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020ASSET, LIABILITY AND RISK MANAGEMENT Tinkoff Bank Board of Directors The Board of Directors is responsible for the creation and supervision of the op- erations of the internal control system of the Group and approves the Group’s credit policy (“Credit Policy”) and approves certain decisions that fall outside the scope of the Credit Committee’s authority. Tinkoff Bank Management Board The Bank’s Management Board, which, in addition to its Chairman, also includes the Group’s Risk Director, Chief Financial Officer, Chief Accountant, Chief Legal Counsel, Chief Operational Officer and Head of Payment Systems, has overall responsibility for the Bank’s asset, liability and risk management operations, policies and procedures. The Management Board delegates indi- vidual risk management functions to each of the various decision making and execution bodies within the Group’s risk management structure. Finance Committee The purpose of the Finance Committee is to ensure the long-term economic ef- fectiveness and stability of the Group’s operations. The Finance Committee es- tablishes the Group’s policy with respect to capital adequacy and market risks, including market limits, manages the Group’s assets and liabilities, establishes the Group’s medium term and long term liquidity risk management policy and sets interest rate policy and charges with respect to individual loan products. The Finance Committee meets on a weekly basis. Credit Committee The Credit Committee supervises and manages the Group’s credit risks. With respect to credit cards, the Credit Committee approves the consumer lend- ing policy, the underwriting methodologies and the scoring models used for assessment of the probability of default, the initial credit limit assignment and subsequent account management strategies, provisioning rates and decisions to write off non-performing loans. The purpose of the Group’s asset, liability and risk management (“risk management”) strategy is to evaluate, monitor and manage the risks arising from the Group’s activities. The main types of risk inherent in the Group’s business are credit risk, market risk, which includes foreign currency exchange risk, interest rate risk and li- quidity risk. The Group designs its risk management policy to manage these risks by establishing procedures and setting limits that are monitored by the relevant departments. Risk Management Organisational Structure The Group’s risk management organisation is divided between policy making bodies that are responsible for establishing risk management policies and proce- dures (including the establishment of limits) and policy implemen- tation bodies whose function is to implement those policies and procedures, including monitoring and controlling risks and limits. Policy Making Bodies The policy making level of the Group’s risk management organ- isation consists of the Board of Directors, and at the Tinkoff Bank level its Board of Directors and the Management Board, the Finance Committee, the Credit Committee and the Business Development Committee. These bodies perform the following functions: THE GOAL OF THE GROUP’S RISK MANAGEMENT FUNCTION IS TO IDENTIFY POTENTIAL PROBLEMS BEFORE THEY MATERIALIZE AND HAVE A PLAN FOR ADDRESSING THEM IF AND WHEN, AND IN THE FORM, THEY DO. COVERING BOTH INTERNAL AND EXTERNAL RISKS WHICH MIGHT HAVE AN ADVERSE IMPACT ON THE GROUP, THE GROUP’S APPROACH CAN BE STRIPPED DOWN TO FOUR ESSENTIALS: DEFINING A RISK MANAGEMENT STRATEGY, IDENTIFYING AND ANALYZING AND RE-ANALYZING RISKS, PRO-ACTIVELY MANAGING RISKS THROUGH IMPLEMENTING THAT STRATEGY AND DRAWING UP A CONTINGENCY PLAN AND/OR PREVENTATIVE MEASURES. Policy Implementation Bodies The policy implementation level of the Group’s risk management organisation consists of the Finance De- partment, the Risk Management Department, the Col- lections Department and the Internal Control Service. Finance Department The Finance Department is responsible for man- aging correspondent accounts, daily currency liquidity, money transfer control and daily money transfer modelling to support the required curren- cy liquidity level for correspondent accounts and compliance with the CBR’s liquidity ratios. The Finance Department is also responsible for closing international and local transactions in accordance with the Group’s limits as approved by the Finance Committee and in compliance with the CBR’s regulations, as well as for short term placements, currency hedging and interest rate hedging. Risk Management Department The Risk Management Department is responsible for the development and implementation of the Group’s consumer lending policy after the final approval of such policy by the Credit Committee. The Risk Man- agement Department is also responsible for credit risk assessment of all proposed new products and related marketing communications, for approval of credit card applications and other loan products applications and for subsequent account management programmes. Collections Department The Collections Department is responsible for collec- tion of amounts due but unpaid by delinquent Group customers. The Management Board approves the Group’s collections policy, which is then implemented by the Collections Department. Internal Control Service The Internal Control Service assesses the adequacy of internal procedures and professional standards, as well as their compliance with CBR regulations. The Internal Control Service is controlled by, and reports to, the Bank’s Board of Directors. Business Development Committee Management Reporting Systems The Business Development Committee is responsible for the development, design and marketing of the Group’s financial products and provides recom- mendations to the Group’s risk management bodies with respect to changes to the Group’s lending policies and procedures and the pricing of the Group’s loan products. The Group has implemented an online analytical processing management reporting system based on a common SAS data warehouse; it is updated on a daily basis. The set of daily reports includes sales reports, application processing reports, re- ports on the risk characteristics of the credit card portfolio, vintage reports, transition matrix (roll rates) reports, reports on pre, early and late collections activities, reports on compliance with the CBR’s requirements, capital adequacy and liquidity reports, operational liquidity forecast reports and information on intraday cash flows. Some reports are submitted for the review of the Tinkoff Bank Board of Directors on a monthly basis. These include select- ed financial information based on IFRS and adjusted to meet the requirements of internal reporting, analytical reports on credit risk and lending, reports on the status of the Group’s credit card business accompanied by management commen- tary and analysis and reports on the Group’s performance versus budget and operational risk reports. 30 31 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED ASSET, LIABILITY AND RISK MANAGEMENT Overview of principal risks 1 Credit Risk The Group is subject to a number of principal risks which might adversely impact its performance. Substantially all of the Group’s assets and customers are lo- cated in or have businesses related to Russia. Consequent- ly the Group is affected by the state of the Russian economy which is itself to a significant degree dependent on exports of key commodities such as oil, gas, iron ore and other raw materials, on imports of material amounts of consumer and other goods and on access to international sources of financing. During recent years the Russian economy has been significantly and negatively impacted by a combina- tion of macroeconomic and geopolitical factors such as a significant decline in the price of oil, ongoing political tension in the region, economic sanctions imposed against Russian individuals and companies, economic restrictions imposed by Russia on other countries, capital outflows as well as depreciation of the Rouble and a decrease in Rus- sia’s international reserves. In addition emerging markets such as Russia are subject to greater risks than more ma- ture markets, including significant political, economic and legal risks. This over-arching risk environment could impact one or more of the principal risks. The principal activity of the Group is banking operations and so it is within this area that the Principal Risks occur. Management considers that those principal risks, are: The Group is exposed to credit risk, which is the risk that a customer will be unable to pay amounts in full when due. Credit risk arises mainly in the context of the Group’s con- sumer lending activities. The general principles of the Group’s credit policy are outlined in the Credit Policy approved by the Board of Directors. This document also outlines credit risk controls and monitoring procedures and the Group’s credit risk management systems. Credit limits with respect to credit card applications are established by the Credit Committee and by officers of the Risk Management Department. The Group structures the levels of its credit risk expo- sure by placing limits on the amount of risk accepted in relation to different online (Internet, mobile and telesales) and offline (sales through retailers) customer acquisition channels and sub-channels. Such risks are monitored on an ongoing basis and are subject to frequent review with the approval of the Management Board. The Group uses automated systems to evaluate an appli- cant’s creditworthiness (“scoring”). The system is regularly modified to incorporate past experience and new data acquired on an iterative basis. The Group performs close credit risk monitoring throughout the life of a loan. T N E M E G A N A M K S I R Credit risk Market risk Foreign currency exchange risk Interest rate risk Liquidity risk Operational risk These are discussed on the following pages. Loan Approval Criteria and Procedures In almost all cases, the decision to issue a credit card or other loan product to a potential customer is made automatically, based on the credit bureaus information, verification of the customer’s identity and credit score of the applicant calculated using one of the acquisition chan- nel-specific scoring models. Loan Collection The Group employs a multi stage collection process that seeks to achieve greater efficiency in the recovery of overdue credit card loans. Collections on loans that are overdue by 0 to 90 days are performed by the Group’s inter- nal Collections Department. After 90 days of delinquency, when it is clear that the early collection efforts are unlikely to be effective, a customer’s debt may be restructured into instalment loans (which is the option preferred by the Group), transferred to collections through courts or sold to the Group’s its internal collection agency or external collection agencies. The Group’s collections methodology is based on customer behaviour and corresponding collection scores. Under this approach, at initial stage of collections (pre collections and early collections), delinquent customers are allocat- ed to one of three groups depending on their risk profile (high risk of default, medium risk of default and low risk of default). This enables the Group to apply a variety of collec- tions tools and collections treatments to different groups of delinquent customers. All of the stages described may be accelerated in cases where the Group has grounds to believe that the delinquent customer will not repay the debt voluntarily or that fraud has taken place. In such circumstances, the time periods between each collections stage are shortened or omitted (the respective loans are accelerated into collections used for non-performing loans) to increase the chances of recovery. The Group’s management uses monthly second payment default rate (percentage of accounts on which payment has not been received within 30 days of the first due date) as an important measure of asset quality that provides early indi- cation of how non-performing loans levels and provisions might change in the future. Non-Performing Loans Management. When loans are overdue by more than 90 days, the Group collection efforts consists of (i) the restructuring of credit card debt to personal instalment loans, which is the pre- ferred option of the Group to handle such delinquency, or, if customers do not agree to such restructuring, then either (ii) collections through courts with the enforcement of judg- ments with the help of the Federal Service of Court Bailiffs of the Russian Federation or (iii) sales of non-performing loans to its internal collection agency (Feniks) or external collection agencies. ager, which allows to request a customer’s identification data and passwords without providing access to such data to the customer support service. In addition, a real-time voice authentication system is used to verify the identity of a caller. The system is based on the NICE Real-Time Voice Authentication System. The system is synchronised with the universal authentication manager processing custom- er calls to the centre. This technology enables customer voice identification during a regular phone call, reducing verification times. This dramatically improved customer experience by saving customer time and helped to reduce traffic costs and enhance security, given the prevalent risk of personal data in the age of social engineering. Payment operations are generally secured via one-time SMS codes. Any operations with cash and movements on customer accounts are only carried out upon confirmation using a code sent via SMS and push notifications. IMSI system is used to check to authenticate a sim card. Unauthorised operations are prevented by our fraud mon- itoring system, which is based on the IBM Safer Payments solution. The system allows us to effectively prevent fraud at various stages of a payment process using a cross-chan- nel monitoring. The monitoring system may, inter alia, automatically reject or suspend a payment, block an account or send an alert report of a suspicious operation. Provisioning Policy Provisioning policy falls under the responsibility of Tinkoff Bank’s Management Board that approves internal docu- ments regulating the determination of delinquency groups and creation of allowances for potential losses in connec- tion with the Group’s loan portfolio. Fraud Prevention The Group maintains a fraud prevention strategy which is based on identification and fraud monitoring. Access to customers’ accounts is secured via smart identification system, which takes into account various customer profile parameters and sets an identification level. Depending on such identification level, the customer needs to acknowledge the entry into the account by way of a login and password, four-digit access code, fingerprint, security question or a password sent to the customer’s contact number. In securing access to customers’ accounts a two-factor identification is used. Customer support centres use a unified identification man- Write Off Policy The Management Board makes decisions on loans to be written off based on information provided by the Risk Man- agement Department. Generally, loans recommended to be written off are those in respect of which further steps to enforce collection are regarded as not economically viable. Loans sold to external collection agencies are also written off from the Group’s balance sheet. 32 33 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 CONTINUED ASSET, LIABILITY AND RISK MANAGEMENT 2 Market Risk 5 Liquidity Risk The Group’s exposure to market risk arises from open inter- est rate and foreign currency positions, which are exposed to general and specific market movements. The Group is generally not engaged in trading operations. It has mismatches in its foreign currency positions that arise generally due to relatively short term lending in Roubles and relatively long term borrowings in U.S. dollars. The Group manages the positions through hedging, matching or controlled mismatching. The CBR sets limits on the open currency position that may be accepted by the Group on a stand-alone level, which is monitored on a daily basis. These limits prevent the Group from having an open currency position in any currency exceeding five per cent. of the Group’s equity. 3 Foreign Currency Exchange Risk The Group suffered from the Rouble devaluation in Novem- ber 2008 to February 2009 and has since implemented a “low foreign exchange risk tolerance” policy aiming to minimise exposure to foreign currency exchange risks. The policy imposes neutral hedging that matches assets and liabilities by currency, foreign exchange hedging of funding received in foreign currency and prohibits foreign exchange trading for speculative purposes. Non-monetary assets are not considered to give rise to any material currency risk. 4 Interest Rate Risk The Group’s exposure to interest rate risks arises due to the impact of fluctuations in the prevailing levels of market in- terest rates on its financial position and cash flows. Interest margins may increase as a result of such changes, but may also decrease or create losses in the event that unexpect- ed movements arise. The Group’s management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken. Liquidity risk is the risk that an entity will encounter difficul- ty in meeting obligations associated with financial liabilities. The Group is exposed to daily calls on its available cash re- sources from unused limits on issued credit cards, retail de- posits from customers, current accounts and due to banks. The Group does not maintain cash resources to meet all of these needs as experience shows that only a certain level of calls will take place and it can be predicted with a high level of certainty. Liquidity risk is managed by the Finance Committee of the Bank. The Group seeks to maintain a stable funding base primarily consisting of amounts due to institutional investors, corpo- rate and retail customer deposits and debt securities. The Group keeps all available cash in diversified portfolios of liq- uid instruments, such as a correspondent account with the CBR and overnight placements in high rated commercial banks, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements. The Group believes that the available cash at all times is sufficient to cover (i) debt repayments due within a month and accrued interest for one month ahead and (ii) a deposit liquidity cushion. The Group believes that it has a proven ability to control loan portfolio cash flows to maintain levels of liquidity reflecting changing market realities. The Group also believes that its loan portfolio is responsive to change in inputs (such as stopping the issuance of any new credit cards or other loans and any increases in credit card limits) and that the Group can go from being cash-negative to being cash posi- tive in a short period of time. All daily reports also include week-to-day and month-to-day comparisons. On the basis of all these reports, the CFO then ensures the availability of an adequate portfolio of short term liquid as- sets, made up of an amount in the correspondent account with the CBR and overnight deposits with banks, to ensure that sufficient liquidity is maintained within the Group as a whole. Regular liquidity stress testing under a variety of scenarios covering both normal and more severe market conditions and credit card portfolio behaviour is reviewed by the CFO. The Group has no significant risk associated with variable interest rates on loans and advances provided to custom- ers or loans received. The Group monitors interest rates for its financial instru- ments. All the investment securities available for sale are classified within demand and less than one month as they are easy repoable in the CBR or on the open market securities and can provide immediate liquidity to the Group. All current accounts of individuals are classified within demand and less than one month. The matching and/or controlled mismatching of the matur- ities and interest rates of assets and liabilities is fundamen- tal to the management of the Group. It is unusual for banks ever to be com- pletely matched since business trans- acted is often of an uncertain term and of different types. An unmatched position potentially enhances profita- bility, but can also increase the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing li- abilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest and exchange rates. 6 Operational Risk The Group is exposed to operational risk which is the risk of losses result- ing from inadequate management and control procedures, fraud, poor business decisions, system errors relating to employee mistakes and abuse by employees of their positions, technical failures, settlement errors, natural disasters and misuse of the Group’s property. The Group has established internal control systems intended to comply with Basel guidelines and the CBR’s requirements regarding operational risk. The Board of Directors adopts general risk management policy, as- sesses the efficiency of risk manage- ment, approves the Group’s manage- ment structure, adopts measures designed to ensure continuous busi- ness activities of the Group including measures designed for extraordinary and emergency situations and super- vises other executive bodies in re- spect of operational risk management. The Management Board generally oversees the implementation of risk management processes at the Group including relevant internal policies, adopts internal regulations on the Group’s risk management, determines limits for monitoring operational risks and allocates duties among various bodies responsible for operational risk management. Regular monitoring of activities is intended to detect in a timely manner and correct deficiencies in policies and procedures designed to manage operational risk, which can reduce the potential frequency and/or severity of a loss event. Dedicated personnel track all problems the Group encoun- ters in its operations and record all operation errors/issues and remedial measures taken on a special help- desk system. Reports on such errors or issues are sent to key managers and all such errors are issues are recorded in incident log. In order to minimise operational risk, the Group strives to regularly improve its busi- ness processes and its organisational structure as well as incentivise its staff. The Group insures against operation- al risks through several insurance policies that cover, among other things, property risks in respect of the Group’s offices, IT infrastructure and certain third-party liabilities. The Group has not experienced any material operational failures in recent years. In order to minimise potential losses from such failures, ensure busi- ness continuity in case of disruption to IT systems and provide reliable and continuous access to business data and services, the Group’s IT systems are located in two dedicated data cen- tres each connected to separate and independent power supply sources. Both data centres provide 24 hours a day, seven day a week, year round power, cooling, connectivity and security capabilities to protect mis- sion-critical operations and preserve business continuity for IT systems. Moreover, the Group keeps additional hardware on its premises for back-up purposes and has stand-by servers for each key system, including active standby for critical systems such as processing and transaction authori- sation. Data connections to the data centres are 100 per cent. reserved via separate physical lines. Anti-Money Laundering and Terrorist Financing Procedures As a member country of the FATF, Russia adopted the Anti-Money Laun- dering Law. Subsequent to the adop- tion of the Anti-Money Laundering Law, the CBR promulgated a number of anti-money laundering regulations specifically for the banking sector. The Group has adopted internal regulations on anti-money launder- ing that are based on, and are in full compliance with, the requirements of the Russian anti-money laundering regulations, related instructions of the CBR and international standards. The supervision of the Russian anti-money laundering regime is shared by the CBR and the FSFMT. The Group has created a specialised unit and appointed an authorised officer who coordinates activities aimed at preventing money laun- dering and terrorism financing. The Group conducts identification and review of its customers, customer’s representatives, beneficiaries and beneficiary owners, money laundering and terrorism financing risk manage- ment, personnel training as well as daily analysis of banking operations, verifies information on operations that are subject to monitoring and sends all required information to the relevant state authorities. Employees of the Group have to take mandatory training on the Group’s policies and proce- dures for preventing money launder- ing and terrorism financing both as part of the initial training after being hired and as part of the subsequent training activities. Mandatory internal control checks are conducted by the Group’s Internal Control Service. External control is provided by the CBR and, within an annual audit, by a statutory auditor. The Group cooperates with the FSFMT by timely addressing their requests re- garding certain entities or operations. 34 35 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CORPORATE SOCIAL RESPONSIBILITY In 2020 the Group continued to contribute to the achievement of the 17 Sustainable Development Goals adopted by the United Nations. To this end, we launched a new service in our super app, which systematically supports the non-profit sector and local communities. The Group con- siders the following values and goals are firmly embedded in our corporate DNA: HEALTH AND WELL-BEING QUALITY EDUCATION HEALTHY WORK ENVI- RONMENT INDUSTRY, INNOVATION AND INFRASTRUCTURE GLOBAL PARTNERSHIP FOR SUSTAINABLE DE- VELOPMENT. Health and well-being In 2020 the entire world found itself facing new conditions, specifically a pandemic and its consequences, including self-isolation. The Group reacted very swiftly to this by enabling employees to work remotely and providing comprehensive support to employees. Assistance was also provided to affected communities, low-income families, medical services and the Moscow government. Our existing T-life program, which cov- ers the five key elements of well-being (physical health, emotional comfort, professional development, finance and social life), was quickly adapted to the meet the needs of employees now working online. The COVID-19 pandemic The Group was quick to react to the pandemic with a variety of measures tailored to help our wide range of stakeholders. In March Tinkoff Mobile launched a feature that allowed customers to open accounts using virtual SIM cards, and cancelled certain roaming charges for customers who found themselves stranded abroad, unable return to Russia. Tinkoff's home call center was de- ployed to help the Moscow Govern- ment and the Popular Social Front (a consumer protection organization) handle calls from people affected by Covid-19. Tinkoff took a key part in discussions with the Russian govern- ment, the Central Bank of Russia and other lenders to the retail and SME sectors regarding debt restructuring programs and what form govern- ment-supported debt relief should take. Tinkoff introduced a cash-back offer called “Surviving quarantine” allowing customers to benefit from signifi- cant discounts on online services, products and subscriptions that were particularly in demand during isolation (for example online movie streaming, home fitness gadgets, books, lan- guage courses, among many). Tinkoff launched its own flexible loan restructuring packages for retail clients and small and medium-sized businesses in parallel with those pro- moted by the Russian government. Some specific examples include the following; 500 Tinkoff Mobile SIM cards with free service packages were gifted to volunteers of the WE TOGETHER project. This project brings together volunteers to provide support for doctors and non-profit initiatives by helping isolated elderly people. Tinkoff donated RUB10M to buy protective equipment for medical staff working with Covid-19 patients (at the Bakulevsky Center and the Davy- dovskaya Hospital) as well as RUB2M for the purchase of food kits for low-income families facing hardship (fund Rus). Support for sports initiatives The pandemic led to the cancellation of or restricted participation and attendance at almost all scheduled events, and that seriously impacted our plans to support sporting events. As a result, we were able to host just one of our planned events in 2020 many of which we have supported over many years. Tinkoff Rosafest Ski Festival 2020 - Key results: - more than 12,500 attendees; - more than 2,800 took part in the quest "Game"; - more than 30,000 prizes; - more than 3,000,000 online views of the night freestyle show. In February 2020 Tinkoff became the title sponsor of the Russian Premier League in football. To maintain the Company’s path to well-being, Tinkoff continues to organ- ise and maintain various initiatives: Employees in all offices continue to collect plastic covers and batteries for recycling. In 2020, Tinkoff quickly moved social initiatives online, and employees con- tinued to participate in charity fairs as well as fundraising initiatives ded- icated to Valentine's Day, Children's Day, the beginning of the school year and the lead-up to New Year holidays. Thanks to these initiatives, more than RUB800K were donated to charitable foundations supporting primarily orphans and the elderly. Tinkoff Russian Premier League Tinkoff team race Quality education In 2020 Tinkoff celebrated its fifth year successfully implementating its Tink- off educational programs for school pupils and students. The main goal of these educational programmes is to teach best industry practices to the most talented and motivated school pupils, university students and graduates from all across the Russian Federation. All programmes are free to participants. Tinkoff Education has had a government license for educational activities since July 2019. The main difference in 2020 is that we ensured these courses were accessi- ble online for everyone in Russia. 1) Tinkoff Fintech – blended learning IT and analytics courses for stu- dents. In 2020, we organised 15 on- line courses for Russian students and graduates that were attended by 400 participants. 244 students successfully completed these courses, and 63 were ultimately hired by Tinkoff. 2) We improved programmes for existing courses such  as Fron- tend development, iOS & Android, Python, Kotlin, Scala, Java to Scala, QA Automation, and added new courses such as Business Analysis and System Analysis. Tinkoff Fintech Middle is the new stream for mid-level Engineers. We organised si online courses (SRE, Java to Scala, Java to Kotlin, iOS) for 187 specialists. 72 individuals ended up completing the courses and seven of these now work in the Tinkoff team.  3) Tinkoff Generation – blended learn- ing informatics and mathematics classes for school pupils. We have four streams : Mathematics for Olympiads, Algorithms and data structures, Machine learning, and Deep learning. These streams are available in Moscow and Saint Petersburg offline, and in over 20 cities across Russia as an online project. In total, 1,189 school pupils participated, 118 of whom pro- gressed to become participants in the All-Russian Student Olympiad in mathematics, informatics and physics and astronomy - the most prominent and renowned competi- tion for school pupils in Russia. Tinkoff Generation now represents the biggest community of gifted and motivated school pupils under the patronage of a private business company. 4) Partnership with Educational Centre Sirius. Sirius is the premier government-backed project for the support of talended children. Tink- off was involved in a partnership event with INTS Sirius, Yandex and Russian Railways.  5) Tinkoff Academy – educational programs for Universities. We have a master’s degree programme in partnership with the Moscow Institute of Physics and Technolo- gy, in which we offer three majors: Machine Learning, Analytics and Scala Development. We also opened a research laboratory as an additional facility there 20 students recently working on 7 projects.  We continued our partnership with the Department of Mechanics and Mathematics at Moscow State Uni- versity and formed new partner- ships with St Petersburg University and Ural Federal University. More than 1,000 students were regis- tered in these university courses in 2020.  6) We also support summer IT school and other summer and winter schools for school pupils in different regions of Russia. We share both financial aid and organ- isational support and expertise with different local Olympiads in informatics and mathematics. 7) We started a Mathematics Com- petition, which registered 1,863 participants from 131 cities (across Russia and internationally). A new project we are offering is an online course called "Fintech Trends". It is available on YouTube and has over 3,000 views on each video. 36 37 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 CONTINUED CORPORATE SOCIAL RESPONSIBILITY Healthy work environment We provide employment for thousands of our employees throughout Russia. More details on this can be found in the next section. Tinkoff once again ordered New Year's gifts from its social partner Buy Social amounting to over RUB2.8M. This supported people with mental disabilities in Orenburg and elderly people in the Sverdlovsk region who work in social enterprises. It is also how we generated a significant dona- tion to the the Zhivoi foundation for the treatment of adults struggling with illness. Industry, innovation and infrastructure 1) Tinkoff payment systems continues to develop its "Char- ity" section for the Group’s customers to make dona- tions. We launched a partnership with the "Need Help" charitable platform and brought in experts to evaluate various charitable organizations. In 2020, the number of charitable non-profit organizations receiving donations increased from 294 to 358, more than double that of 2019. Customers can donate through Tinkoff.ru or our mobile application, both in the form of regular payments throughout the year and in the form of one-time fixed contributions, as well as donation of cashback. In 2020, Tinkoff customers increased the number of transfers they made to charitable foundations by almost 3 times to over two hundred thousand. Tinkoff does not charge for such transactions. 2) During 2020, Tinkoff donated 260 working computers to underprivileged families, the elderly, and a foundation's office for helping children with brain cancer. 3) The partnership between Tinkoff and the World Wildlife Fund (WWF) in 2020 was particularly significant. Since the creation of the Tinkoff-WWF eco-credit card in 2018, the amount of donated cashback has grown from RUB2.7M to 5.7M. Tinkoff trainers also conducted a training course for the staff of the WWF call center and for the first time became the General Partner of Earth Hour. This latter initiative led Tinkoff to join thousands of other buildings around the world in turning off their lights simultaneously. On the day of the campaign, a lecture by one of the leading Russian climatologists was held for Tinkoff employees. 4) In 2020, Tinkoff continued to provide structured support for four non-profit organizations. The total budget of donat- ed funds was RUB7.2M. Tinkoff funds helped to support various socially vulnerable groups and their supporting organizations, for example: – – – – Soedinenie (The Connection) Charitable Foundation which helps deaf and visually impaired adults; Tzentr Lechebnoy Pedagogiki (The Center for Clinical Peda- gogy) which is involved in the training and rehabilitation of children with mental illnesses (Down syndrome, autism.); The Charity Foundation Starost v radost (Old Age in Joy) which supports lonely elderly people and people with disa- bilities living in public institutions; Zhuravlik Charitable Foundation, which is engaged in inclusive education for children and anti-bullying programs in Russian schools. Screen of the "Cashback for Good" social service in the Tinkoff app Global partnership for sustainable development In August 2020, Tinkoff launched its first philanthropic service "Cashback for Good". Now Tinkoff customers can donate their cashback quickly and conveniently without leaving the super app. The project includes more than 350 charitable founda- tions whose credentials have been verified by experts. Foun- dations and their public foundation ambassadors supported the project by filming a support video which showed donors new way to donate to their charitable foundation of choice. Over the 5 months of the service's operation, about 10,000 customers have connected to it and over RUB3.5M has been donated. Donations and connections to the service continue to grow on average by 20% month on month. EMPLOYEES AND CORPORATE SOCIAL RESPONSIBILITY COVID-19 pandemic situation and employees In June, employees were given the opportunity to become online volunteers, and the Group entered the ProCharity volunteering program. In February 2020, additional health and safety measures were launched across all the Group’s offices, including regular disinfection of public areas. In March Tinkoff began the mass migration of employees to the cloud and provided online help to over 140 employees obtaining compulsory health insurance policies. Tinkoff also adopted enhanced security measures for its smart couriers and more broadly in its offices. The Tinkoff hotline and Slack channel were also created, used by over 1,500 employees. The HR department switched to electronic document man- agement in two weeks, automating the human resource and processes alongside other key tasks. The internal com- munications team in 2020 issued 173 communications with supportive and important information for employees. The communication portal SPACE was successfully launched. We also launched the T-mood bot, which collects informa- tion about the mood of employees in Slack, and a welcome bot was successfully launched. A system to rapidly test employees for COVID-19 was launched in our offices, and medical support was launched within the framework of the insurance program. By the end of March, Tinkoff had successfully migrated 95% of office workers to the cloud, leaving only about 200 mis- sion-critical employees left to work physically in the offices. Tinkoff Team Tinkoff refocused its Tinkoff Life program to support the physical and emotional well-being of employees online during the pandemic. At the Tinkoff Life Club, more than 50 volunteer interest clubs were organized. Individual support sessions with a psychologist and webinars on burnout prevention were organized for employees. The Tinkoff Training Center adapted its training courses for employees into online formats in just a few weeks. All social initiatives for employees - charity fairs, fundraising and eco-webinars - were quickly transferred to online formats. Throughout 2020, we continued to hire the best professionals on the market to support our new and existing business lines. By the end of 2020, the Group’s headcount exceeded 29,500, 14,400 of whom are permanent office-based employees and 15,100 of whom work remotely. Mathematicians and IT spe- cialists account for 80% of the total headcount at Tinkoff head- quarters. The average employment term in the Group is over 2.4 years, with 12% of employees working at the Company for longer than five years. The share of vacancies filled internally is 12%, and the average period of reviewing new candidate applications ranges from three to five days. Our team is still among the youngest on the market: the average age of em- ployees Group-wide stands at 28. Morning online show "Morning with taste" for employees, a comic demonstration of the importance of masks and antiseptics 38 39 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 CONTINUED EMPLOYEES AND CORPORATE SOCIAL RESPONSIBILITY The Group’s human resources policy focuses on: bringing together smart people with analytical skills; a transparent structure with zero tolerance of bureau- cracy or excessive  hierarchy; a smart working environment; an effective learning environment; encouraging initiative and taking on responsibility; ensuring creativity and open dialogue between employees; In line with our Test and Learn approach, we test many concepts and implement only the most successful. Our employees are not afraid of making mistakes: in our quest for the most successful models we support experiments and promote open communication between colleagues. We welcome innovative ideas that seek to solve challenges in different ways, and believe in the importance of creating an environment that grants talented people far-reaching au- thority. We consider granting our team’s greater freedoms and opportunities to be a crucial element of our success. To achieve outstanding collaboration within our matrix orgstructure and deliver on the Group’s objectives, we use various channels to facilitate communication between employees, including Intranet, internal messenger, project trackers and other digital means of communication uniting people from different locations and time zones. Any employee can address anyone in the Company regardless of their position and we are proud of our liberal values and open-door policy which help us to enhance our spirit of creativity and success. promoting team spirit and an entrepreneurial culture; Recruitment broadening employee capabilities and delegating responsibilities; ensuring an environment where employees can ex- periment, make mistakes and learn lessons. Tinkoff charity flower fair We continue to strive to attract the best talent in the market using a variety of tools to motivate and retain people. the Group is recruiting new team members through advertis- ing and job sites, student forums, social media and other online channels. We are actively looking for top students at leading national and global universities, including Olympiad winners in mathematics, physics and programming. We offer career and training opportunities for professionals of all levels. In 2020, we hired 1,581 people, which is 29% more than in 2019. Of these, 867 work in IT. The net increase in 2020 was + 1087, and the increase in the number of IT employees was 628. Every sixth new employee came to Tinkoff on the recom- mendation of a friend. Morning online show "Morning with taste" for employees HR Training Center Tinkoff Training Center recorded the following results in 2020: 1) We organised and held 3,486 edu- cational events, of which 674 were offline and 2,812 online; 2) 8 598 people were trained, in- clud-ing 1,327 managers and 7,274 specialists; 3) The average rating of events by participants was 4.7 out of 5; 4) We carried out 180 electronic courses on soft and hard skills; 5) Career coaching for high-potential employees covered 63 people, with 10 meetings organised for each, while our NPS was 9.56 out of 10; 6) Life coaching sessions were at- tended by 209 team members. NPS was 9 out of 10; 7) 190 employees attended external training. Compensation and incentives The Group offers its employees a unique working environment and a transparent system of career growth. We provide fixed-rate salaries and bonuses, regularly assess employees’ performance against KPIs, determine the amount of com- pensation and give feedback for future career development. The Group has a market-based salary structure, with KPI-related pay rises and bonuses. In April 2020 we launched a new long-term incentive program – KERP (Key-Employee Retention Programme). It’s cash-settled, equity-linked, and currently covers around 250 employ- ee participants. These are top-and mid-level managers who work in all operational divisions of the Group. We expect to significantly expand KERP in the coming years. Income from this program is linked to the performance of individual participants. The equity-based MLTIP was also redesigned with a number of the top managers receiving new awards in 2020/21. Employees also include individuals with disabilities, who we allow to choose the work hours and locations that best suit their circumstances. These employees are trained online, having access to all the necessary corporate tools and materials by way of a special cloud platform.  Tinkoff took 4th place in the Forbes Woman ranking of the 25 Best Compa- nies in Russia for Female Professionals, published in February 2020. Among IT companies and banks, Tinkoff has the highest ranking. The metrics consid- ered included gender composition, remuneration, career opportunities and corporate programmes. Diversity and inclusion Photo zone for employees on St Valentine’s Day 2020 Tinkoff ’s flexible business model, based on a high-tech contactless platform, allows individuals with dis- abilities more easily to join our team. This helps us to expand and diver- sify the Group’s recruiting pool and recruit people based on professional skills and merits alone. In 2020, we continued developing our home call centre where people can work for the Company at any hours and locations convenient for them. This working format is suitable for those residing in remote areas with limited access to transportation as well as those who can only work remotely (for example, women on maternity leave). By the end of 2020, 15,100 people across Russia were working in our home call centre. 40 41 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED EMPLOYEES AND CORPORATE SOCIAL RESPONSIBILITY The growing attractiveness of the Tinkoff employer brand, in the Forbes Russia 2020 ranking of the 50 Best Employers in Russia, Tinkoff Bank took 3rd place, rising from 28th place in 2019, overtaking such IT industry leaders as Sber and Mail.ru. Forbes' assessment methodology is very detailed and scientific: criteria such as salary, training programs, social benefits, working conditions, charity, investment in infrastructure and much more are taken into account, including assessments by experts from the Forbes board of directors and heads of reputable universities. Another boost for the Tinkoff HR brand was that for the second year in a row we were a winner of the IT HR AWARDS. The Tinkoff Life program won first place in the Employee Devel- opment and Training nomination. Thanks to Tinkoff Life, employees' work-life balance has improved signif- icantly over the year, and employees continue to feel like a team despite working remotely. New Year 2020 employees’ party at the Tinkoff HQ cafe in Moscow.  Employees were gifted branded winter hats and pins. 3. Professional development: training, career coaching programs, library, employee participation in external conferences, professional development workshops. 4. Financial support: loyalty programs, legal advice and tax consultants, promotions and discounts from part- ners, financial assistance in difficult situations. 5. Social life: charity, volunteering, social projects, envi- ronmental initiatives, volunteer interest clubs, develop- mental lectures. Health and safety The Tinkoff Life program focused on wellbeing, created in 2019, has become a real ecosystem of services and events for our employees in 2020. The Group sees 5 key elements of well-being and the way the Group aims to improve them are these: 1. Physical health: health insurance, vaccinations, of- fice-based doctor, COVID-19 testing, corporate sports initiatives, support for football, volleyball, basketball, running teams, healthy eating days in the canteen, sports programs from Adidas. 2. Emotional comfort: psychological support, yoga, Pilates, personal life coaching and mental health pro- grams, gifts to employees' children twice a year. Physical health Financial support Professional development Social life Emotional comfort 42 43 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020BOARD OF DIRECTORS Constantinos Economides (45) Chairman of the Board of Directors Constantinos Economides has been a director of TCS Group Holding PLC since November 2008 and Chairman since June 2015. Mr. Economides is also the Managing Director of Royal Pine & Associates Ltd since January 2016. He was previ- ously the Managing Director of Orangefield Cyprus from October 2006 to December 2015. Prior to 2006, he worked with Deloitte Ltd in Cyprus from 2003 to 2006 and Ernst & Young in the United Kingdom from 1999 to 2002. Mr. Economides is a Fellow Member of the Institute of Chartered Accountants in England & Wales (ICAEW) and holds an MSc in Management Sciences from Warwick Busi- ness School, United Kingdom. In addition, he is a Licensed Insolvency Practitioner of the Institute of Certified Public Accountants of Cyprus (ICPAC) since October 2015. Martin Cocker (61) Member of the Board of Directors Independent Non-Executive Director Chairman of the Audit Committee Member of the Remuneration Committee Martin Cocker has been a non-executive director since October 2013. Mr Cocker also serves on the boards of Etalon Group plc, Beverley Building Society, Nostrum Oil and Gas PLC and Head- hunter Group plc. Mr. Cocker previously held positions at Ernst & Young, Amerada Hess, Deloitte & Touche and KPMG in the United Kingdom, Russia and Kazakhstan. Mr. Cocker is a member of the ICAEW and holds a bachelor of science (joint honours) degree in mathematics and economics from the University of Keele, United Kingdom. Alexios Ioannides (44) Jacques Der Megreditchian (61) Member of the Board of Directors Alexios Ioannides has been a director of TCS Group Hold- ing PLC since November 2008. Mr. Ioannides previously worked for Deloitte from 2001 to 2008 where he trained and qualified as a Chartered Accountant in 2004. Mr. Ioannides is also a member of the Board of Directors of The Copperlink Partners Limited (since 2015). Mr. Ioannides is a fellow member of the Institute of Char- tered Accountants in England & Wales (ICAEW) and a member of the Institute of Certified Public Accountants of Cyprus (ICPAC) and holds a BSc. in Business Administra- tion from the University of Alabama, USA. Member of the Board of Directors Independent Non-Executive Director Chairman of the Remuneration Committee Member of the Audit Committee Jacques Der Megreditchian has been a non-executive director since October 2013. Mr. Der Megreditchian previously served as Chairman of the Exchange Council of the Moscow Exchange. Mr. Der Megreditchian has over 30 years of experience in finance from CCF, Societe Generale and Troika Dialog where he held the position of Chief Business Officer. Mr. Der Megreditchian holds a degree in business admin- istration from the European Business Institute, France and in financial analysis from the French Center for Financial Analysis, France. Directors of the Company. Left to right: Alexios Ioannides (Director), Mary Trimithiotou (Director), Constantinos Economides (Chairman of the Board), Jacques Der Megreditchian (Director) and Martin Cocker (Director). Maria Trimithiotou (43) Member of the Board of Directors Maria (Mary) Trimithiotou has been a director since May 2012. Mrs. Trimithiotou previously worked for Deloitte Ltd holding the position of audit manager from October 2001 to Febru- ary 2009 and subsequently, moved to Orangefield Fidelico Ltd where she held the position of Director from 2012 until 2015. Currently, Mrs. Trimithiotou is a member of the Board of Directors of Royal Pine & Associates Ltd (since 2016). Mrs. Trimithiotou is a Fellow Chartered Certified Accountant and a Member of the Association of Chartered Certified Accountants as well as Member of the Institute of Certified Public Accountants of Cyprus (ICPAC). Mrs. Trimithiotou is also a licensed Insolvency Practitioner (from October 2015). She is also registered with CySEC as a holder of the Finan- cial Services Regulatory Framework Advanced Certificate, and a holder of the CySEC AML certificate. 44 45 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 TINKOFF GROUP: DECISION MAKING BODIES AT A GLANCE Decision making body TCS Group Holding PLC (Cyprus)  Board of Directors Tinkoff Bank Board of Directors Tinkoff Bank Management Board Members (31/12/2020) Relationship to other key governing bodies Key powers Number of meetings in 2020 Constantinos Economides (Chairman) Appoints members of the Tinkoff Bank Board of Directors. -Provides leadership and oversight to the Group within a framework of prudent and effective controls which enable risk to be assessed and managed; 30 Mary Trimithiotou Alexios Ioannides Martin Cocker (INED) Jacques Der Megreditchian (INED) The Company is sole shareholder of Tinkoff Bank  and determines all the matters reserved to shareholders. -Sets the Group’s strategic objectives and ensures the necessary financial and human re- sources are in place for the Group to meet its objectives; -Appoints the Group’s external auditors; -Sets the Group’s values and standards and ensures its obligations to shareholders/investors and other stakeholders are understood and met; -Reviews management performance; -Decides the Group’s remuneration policy; -Approves the Group’s credit policies: -Makes the Group’s dividend policy and decides the level of dividends. A more detailed description can be found on pages 48-51. Stanislav Bliznyuk (Chairman) Appoints and oversees the Tinkoff Bank Manage- ment Board -Determines the strategic priorities of the Bank; 20 Oliver Hughes Sergey Pirogov Vadim Stasovsky Svetlana Ustilovskaya (Independent) Oliver Hughes (Chairman) Reports to the Tinkoff Bank Board of Directors Valeriya Pavlyukova Anatoliy Makeshin Evgeniy Ivashkevich Ilya Pisemsky Natalia Izyumova Viacheslav Tsyganov -Approves capital markets operations of the Bank, major and related party transactions, risk and capital management strategy, procedures for managing conflicts of interest, HR policies, employee and management compensation and bonus policies; -convenes annual and extraordinary meetings of shareholders, decides on the agenda and the record date for meetings; -Recommends dividends; -Determines the Bank’s asset, liability and risk management operations, policies and proce- dures; 44 -The Chairman appoints the members of the Finance, Credit, Technology and Business Development Committees. The decisions of these Committees frame most of the day to day operations of Tinkoff Bank. A more detailed description can be found on page 30-31. 46 47 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020      CORPORATE GOVERNANCE THE ROLE OF THE BOARD IS TO PROVIDE LEADERSHIP TO THE GROUP WITHIN A FRAMEWORK OF PRUDENT AND EFFECTIVE CONTROLS WHICH ENABLES RISK TO BE ASSESSED AND MANAGED. Overview The Board of directors Global Depositary Receipts (GDRs) of TCS Group Holding PLC (a Cyprus incorporated company), with each GDR is- sued under a deposit agreement dated on or about 24th Oc- tober 2013 with JPMorganChase Bank N.A. as depositary representing one Ordinary (formerly Class A) share, are listed on London Stock Exchange. The Company’s GDRs are also listed on the Moscow Exchange. No shares of TCS Group Holding PLC are listed on any exchange. The Company is required to comply with the UK corpo- rate governance regime to the extent it applies to foreign issuers of GDRs listed on London Stock Exchange. The Company has not adopted corporate governance measures of the same standard in all respects as those adopted by UK incorporated companies or companies with a premium listing on the London Stock Exchange. As the shares themselves are not listed on the Cyprus Stock Exchange (or elsewhere), the Cypriot corporate gov- ernance regime, which only relates to companies that are listed on the Cyprus Stock Exchange, does not apply to the Company and accordingly the Company does not monitor its compliance with that regime. From IPO in 2013 until 7th January 2021, the Company maintained a capital structure with two classes of shares, Class A and Class B. On 7th January 2021, all Class B shares were converted to Class A and simultaneously all shares were reclassified and redesignated as Ordinary shares all ranking pari passu for all purposes and in all respects with the other existing shares, with the provisions in the Articles of Association of the Company relating to B Class shares deemed deleted. The Company’s Home State is Cyprus. A description of the terms and conditions of the GDRs can be found at ‘Terms and Conditions of the Global Depositary Receipts’, ‘Summary of the Provisions relating to the GDRs whilst still in Master Form’ and ‘Description of Arrange- ments to Safeguard the Rights of the Holders of the GDRs’ in the Prospectus issued by the Company dated 22 October 2013 and on the website at www.tinkoff.ru/eng. Copies of the Articles of Association of the Company adopt- ed on 21 October 2013 as amended, the terms of reference of the Committees, and other corporate governance related as well as investor relations related materials can also be found on the websites www.tinkoff.ru/eng, at the Company’s main website www.tcsgh.com.cy, on the Company’s page on the London Stock Exchange website (www.londonstockex- change.com/exchange/prices-and-markets/stocks/summa- ry) and at the official site of the Department of Registrar of Companies, Cyprus (http://www.mcit.gov.cy/). The role of the Board is to provide entrepreneurial lead- ership to the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. The Board sets the Group’s strategic objectives, ensures that the necessary financial and human resourc- es are in place for the Group to meet its objectives and reviews management’s performance. The Board also sets the Group’s values and standards and ensures that its ob- ligations towards the shareholders and other stakeholders are understood and met. The Board operates under a formal schedule of matters reserved to the Board for its decision, approved by share- holders in 2013. The authorities of the members of the Board are specified by the Articles of Association of the Company and by law.  The current five strong Board of directors is com- prised of three executive directors including the chair- man, and two non-executive directors both of whom are independent. There was no change in the composition of the Board or status of the directors in 2020. The Board of directors contains no Director B. The longest serving director Mr. Constantinos Economides took over the role of Chairman of the Board of directors in June 2015.  The names of the people who served on the Board during 2020 are listed at F–5. The Group has established two Committees of the Board. Specific responsibilities have been delegated to those committees as described below. The Board is required to undertake a formal and rigorous review annually of its own performance, that of its commit- tees and of its individual directors. That review was recently carried out, in-house, in relation to 2020, looking at overall performance. All directors completed detailed question- naires on the Board’s, the committees’ and individual direc- tor’s performance. The role of appraising the Chairman of the Board for 2020 was performed by the Chairman of the Audit Committee. Analysis of the resultant feedback, which was discussed at a meeting of the Board of Directors in March 2021 did not show up any deficiencies in the perfor- mance of the Board, its committees or individual directors of a nature that required changes to be made. The Board has not appointed a senior independent director. There are now only two independent directors of whom at least one will retire by rotation each year. 48 Number of directors Director's powers Unless and until otherwise determined by the Company in general meeting, the number of directors shall be no less than four, of whom two must be non-executive, and until 7 January 2021 was not permitted to exceed seven, when Class B shares were in issue. From 7 January 2021, there is no maximum number of directors. The Articles of Association of the Company provide for the retirement by rotation of certain directors at each Annual General Meeting.  At the AGM 2020 on 24th August the director who retired by rotation was Mr. Jacques Der Me- greditchian who was duly reappointed that day by vote of all the shareholders. The business of the Company is managed by the directors, who are empowered to exercise all such powers of the Company as are not, by the Cyprus Companies Law or by the Articles of Association, required to be exercised by the shareholders in general meeting, subject nevertheless to any provisions of the Articles of Association, of the Cyprus Companies Law and of any directions given by the general meeting by ordinary resolution; but no alteration of the Articles of Association and no direction made by the Com- pany in general meeting shall invalidate any prior act of the directors which would have been valid had that alteration or direction not been made or given. Proceedings of the Board of Directors The quorum necessary for the transaction of the business of the directors shall be at least four directors. Questions arising at any meeting of the Board of directors shall be decided by a majority of votes. In the case of equality of votes, the chairman shall have a second or casting vote. A director may, and the secretary on the requisition of a director shall, at any time, summon a meeting of the directors. A resolution in writing signed or approved by letter, telex, facsimile or telegram by all directors or in relation to a committee by all its directors, shall be as valid and effectual as if it had been passed at a meeting of the Board of directors or (as the case may be) at a committee meeting duly convened and held. Any such resolution in writing signed may consist of several documents each signed by one or more of the persons described. Any notice shall include an agenda identifying in reasonable detail the matters to be discussed at the meeting together with copies of any relevant documents. The directors may delegate any of their powers to a committee or committees consisting of one or more members of their body as they think fit; any committee so formed shall, in the exercise of the powers so delegated to it, comply with the rules which may have been imposed on it by the directors, in respect of its powers, composition, proceedings, quorum or any other matter. ATTENDANCE TABLE FOR BOARD OF DIRECTORS AND COMMITTEE MEETINGS 2020 Dear stakeholders Last year I wrote that 2020 was shaping up to be a more turbulent, volatile and chal- lenging year. Even though all that turned out to be a fair assessment of last year and the pandemic is still ongoing, I always felt our deep and ever-deepening pool of manage- ment talent would be capable of handling whatever was thrown at them. Tinkoff has survived a number of crises in its life-even though these crises have all been ‘different’, the Tinkoff business model has always been and remains highly flexible, very resilient and led by a skillful management team which has proved true this time around too. But Tinkoff has done more than survive, far more. It is emerging even stronger; crises amplify Tinkoff’s strengths. Another set of super financial results for FY2020 evidence this and I recommend reading our CFO Ilya’s Financial Review. As COVID-19 has spread throughout the world, all of us I believe have been forced to change our behaviours, in so many aspects of our lives. But as and when we come through the worst of it and reach a new state of normal, I feel it will not be a return to 2019, but there will be long lasting effects on societies, on our economies, our be- haviours. COVID-19 hit the fast forward button on a number of existing trends from e-commerce to workplace culture and much else. So whether its avoiding queues and busy places, spending more of one’s life at a screen, working from home or at least more flexible work patterns, the move away from cash to online spending, the gener- al disruption of consumer spending patterns among many, these trends are Tinkoff’s opportunities, where Tinkoff can help its customers in more and better ways. Tinkoff has consistently shown itself very quick to anticipate trends in this as in many other spheres -on employee and customer health and safety, to offering products tailored for customers’ changed and changing needs under lockdown, to assisting those whose financial health and mental wellness were impacted by the pandemic, to help- ing governmental authorities in meeting their responsibilities, to mention a few. We set these out in some detail in last year’s annual report. On the governance side the Board was able to continue its supervisory and over- sight work much as usual; all of us are now experts in call technologies whose names have entered everyday conversation during the pandemic. The one exception was the Board’s visits to Moscow to meet the wider management team face to face in the Bank’s HQ which we had to put back; the next such visit is though already in the planning stage. We expect to continue our rollout of corporate governance enhance- ments-some major some less so but all part of a concerted trend to greater transpar- ency- this year and into the future, following the unprecedented voluntary renuncia- tion of weighted votes by our Founder in January. Some like the recent Board changes and the business segment financial disclosures in FY2020 FS are public already. Oth- ers will follow in the coming months. I would like to close by thanking all of those who have put their faith in Tinkoff. We will not disappoint in 2021, I am confident. Director Constantinos Economides (Chairman) Maria Trimithiotou Alexios Ioannides Martin Cocker Jacques Der Megreditchian Board Attendance 2020 AC Attendance 2020 RC attendance 2020 Keep safe in these difficult times. Yours sincerely 30/30 30/30 30/30 30/30 30/30 n/a n/a n/a 4/4 4/4 n/a n/a n/a 7/7 7/7 49 Constantinos Economides Chairman of the Board of Directors STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 STRATEGIC REVIEW DIRECTORS’ REVIEW FINANCIALS CONTINUED CORPORATE GOVERNANCE Committees of the Board of directors The Company has established two Committees of the Board of directors: the Audit Committee and the Remu- neration Committee. Their terms of reference are summarized below. Both Committees were formed in October 2013. The Board reserves the right to amend their terms of refer- ence and arranges a periodic review of each Committee’s role and activ- ities and considers the appropriate- ness of additional committees. Committees-current composition The Audit Committee is chaired by an independent non-executive director Mr. Martin Cocker. From 16 August 2019 the Audit Committee is comprised of its chairman Mr. Martin Cocker and one independent non-ex- ecutive director. The Remuneration Committee is also chaired by an independent non-ex- ecutive director Mr. Jacques Der Megreditchian. From 16 August 2019 the Remuneration Committee is com- prised of its chairman Mr. Jacques Der Megreditchian and one independent non-executive director. The current terms of reference of both Committees are available to the public and can be found on the Group’s websites. A short summary of both is set out below. Role of the Audit Committee The Audit Committee’s primary purpose and responsibility is to assist the Board in its oversight responsibilities. In executing this role the Audit Committee mon- itors the integrity of the financial statements of the Group prepared under IFRS as adopted by the EU and any formal announcements relating to the Group’s and the Company’s financial performance, reviewing significant financial reporting judgments contained in them,  oversees the financial reporting controls and procedures implemented by the Group and monitors and assesses the effec- tiveness of the Company’s internal financial controls, risk management systems, internal audit function, the independence and qualifications of the independent auditor and the effectiveness of the external audit process. The Audit Committee is required to meet at appropriate times in the reporting and audit cycle but in practice meets more often, as required. In 2020 the Audit Committee convened 4 times. Under its terms of reference the Audit Committee is required at least once a year to review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it con- siders necessary for Board approval. The Audit Committee met this obligation through members participating in the main Board review described above. After consideration of the review, no changes were proposed to the committee’s terms of reference. The Audit Committee operates a structured framework around the extensive work it does on non-financial statements related matters holding at least two additional meetings annually, which would typically be held at the Bank’s head office in Moscow, to consider specific, non-financial statements related areas within its terms of reference. No such meeting was held in 2020 due to COVID-19 travel restrictions but at least two are planned for 2021. The Audit Committee has developed a risk matrix which constantly evolves to reflect new risks, the perceived impact of, and the Group’s appetite for, any given risk and the measures taken to mitigate those risks. This matrix is run in conjunc- tion with the internal audit function. The Group has further broadened its top management team with a number of senior external hires. Role of the Remuneration Committee The Remuneration Committee is responsible for determining and reviewing among other things the framework of remuneration of the executive directors, senior management and its overall cost and the Group’s remuneration policies. The objective is to ensure that the executive management of the Group are pro- vided with appropriate incentives to encourage enhanced performance and are in a fair and responsible manner rewarded for their individual contributions to the success of the Group. The Remuneration Committee’s terms of reference in- clude reviewing the design and determining targets for any performance related pay schemes and reviewing the design of all share incentive plans for approval by the Board. The Remuneration Committee is required to meet at least twice a year but in practice meets far more often. Martin Cocker Independent Non-Executive Director, Chairman of the Audit Committee, Member of the Remuneration Committee. Jacques Der Megreditchian Independent Non-Executive Director, Chairman of the Remuneration Committee, Member of the Audit Committee. The Remuneration Committee continued with its work into 2020 on an ongoing review of the operation of the Group’s equity based incentive and retention plan for key, senior and middle management (MLTIP) which launched in 2016 and in considering additional awards to both existing and new participants for this and subsequent years. The Committee has also been working on plans for an incentive and compensation arrangements within MLTIP for when, in the period 2022 to 2024, existing awards made to MLTIP joiners in 2016-2017 start to go into run off. The Remuneration Committee recommended in 2020 members of key management should be offered new Awards under MLTIP, all on a five year vesting schedule from August 2021. The Group also introduced in April 2020 15 a new equity linked long term compensation plan for around 250 senior and mid- dle employees with a planned further expansion of around 200 additional employees in 2021. In 2020, Changes were made to the remuneration calendar to enhance its retentive effects. Under its terms of reference the Remuneration Committee is required at least once a year to review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it considers necessary for Board approval. The Remuneration Committee met this obligation through members participating in the main Board review (described above) under which detailed questionnaires were completed by all directors assessing the operation of the Board and both committees as well as individual directors. Although earlier reviews had resulted in certain minor changes to the Remuneration Committee’s terms of reference, no further changes were felt required based on the most recent review. The Committee continues to meet as required. In 2020 it convened 7 times. Appointment, retirement, rotation and removal of directors The office of director shall be vacated if the director: • becomes bankrupt or makes any arrangement or com- position with his creditors generally; or • becomes prohibited from being a director by reason of any court order made under Section 180 (disqualifica- tion from holding the position of director on the basis of fraudulent or other conduct) of the Cyprus Companies Law; or • becomes, or may be, of unsound mind; or • resigns his office by notice in writing to the Company left at the registered office; or • is absent from meetings of the board for six consecutive months without permission of the Board of directors and his alternative director (if any) does not attend in his place and the Board of directors resolves that his office be vacated. The directors of the Company are appointed by the general meeting of shareholders with the sanction of an ordinary res- olution. Such an appointment may be made to fill a vacancy or as an additional director. But no director may be appointed unless nominated by the Board of directors or a committee duly authorized by the Board of directors or by a shareholder or shareholders together holding or representing shares which in aggregate constitute or represent at least 5% in number of votes carried or conferred by the shares giving a right to vote at a general meeting. The Board of directors may at any time appoint any person to the office of director either to fill a vacancy or as an addition- al director and every such director shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation. One third of the directors (or if their number is not a multiple of three, the number nearest to three but not exceeding one- third) shall retire by rotation at every annual general meeting. Directors holding an executive office are excluded from retirement by rotation. . Directors may be removed from office by the shareholders at a general meeting with the sanction of an ordinary resolution, subject to giving 28 days’ notice to that director in accord- ance with the Articles of Association. 50 TCS GROUP HOLDING PLC ANNUAL REPORT 2019 51 CONTINUED CORPORATE GOVERNANCE Share capital; redesignation and reclassification of Class B shares As at 31 December 2020, the Company's issued share capital was US$7,972,219.68 divided in to 199,305,492 shares, each of nominal value of US$0.04 per share and fully paid. Of these 129,391,449 were Class A shares and 69, 914,043 Class B shares, each with a nominal value of US$0.04 per share and fully paid. As of 31 Decem- ber 2020, the Company’s authorized share capital was USD8,401,385.92 (with 10,729,156 undesignated shares of nominal value US$0.04 each). With effect from 7th January 2021 the Company’s issued share capital comprised 199,305,492 Ordinary shares. Certain rights of pre-emption are conferred, by the Cyprus Companies Law and the Articles of Association of the Company, on existing share- holders for issue of new shares to the Company in cash. Please refer to the section below on pre-emption rights for further information. Neither the Company nor any of its subsidiaries has any outstanding convertible securities, exchangeable securities or securities with warrants or any relevant acqui- sition rights or obligations over the Company's or any of the subsidiaries' authorised but unissued capital or undertakings to increase its issued share capital. Articles of Association Rights of shareholders In this section Cyprus Companies Law means the Companies Law, Cap. 113 of Cyprus and any successor statute or as the same may from time to time be amended. The Company's current Articles of Association were adopted on 21 October 2013 and, except as to share capital and conversion of the B Class with deemed deletion of the Class B special rights on 7 January 2021, have not changed since. The following is a brief summary of cer- tain material provisions of the Articles of Association, in force as at 7 January 2021. Holders of GDRs are not direct share- holders in the Company but instead de- rive their rights through holding a GDR. A description of the terms and conditions of the GDRs can be found at ‘Terms and Conditions of the Global Depositary Receipts’, ‘Summary of the Provisions relating to the GDRs whilst still in Master Form’ and ‘Description of Arrangements to Safeguard the Rights of the Holders of the GDRs’ in the Prospectus issued by the Company dated 22 October 2013 and on the website at www.tinkoff.ru/ eng. With effect from 7 January 2021 none of the shareholders of the Company has any rights different from any other holder of shares of the Company. A summary of the rights attached to the shares of the Company is set out below. Meeting of shareholders The Company is required to hold an annual general meeting each year on such date and at such place as the directors may determine provided that not more than 15 months should elapse between annual general meetings. The board of directors or any director may convene general meetings. The board of directors will also convene extraordinary general meetings of the Company on the requisition of a shareholder or shareholders together, holding or representing in aggregate, shares which constitute or represent at least five per cent. of the total number of votes carried or conferred by the shares. An annual general meeting and a meeting called at which a special resolution will be proposed shall be called by at least twenty-one days' prior written notice. All other general meetings may be convened by the board by issuing at least 14 days’ prior written notice. General meetings of the Company may be called by shorter notice and shall be deemed to have been duly called if it is so agreed: • • in the case of a meeting called as the annual general meeting, by all the shareholders entitled to attend and vote; and in the case of any other meeting, by a majority in number of the share- holders having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving the right to attend and vote at the meeting. Shareholders’ rights at meetings All shareholders are entitled to attend the general meeting or be represented by a proxy authorised in writing. The quorum for a general meeting will consist of such number of shareholders holding in aggregate more than 50 per cent. of the issued capital. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day in the following week, at the same time and place or to such other day and at such other time and place as the chairman of the general meeting may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders pres- ent shall be a quorum. A resolution in writing which has been signed by or on behalf of shareholders conferring in aggregate at least 75 per cent. of the votes exercisable on such resolution at general meeting of the Company is valid and effectual as if the resolution were sanctioned by the general meeting, pro- vided that a notice of the intention to propose the resolution together with a copy of the resolution, are given to all the shareholders conferring the right to vote on the resolution, at least 30 days prior to the date of the resolution. Such a resolution in writing may consist of several documents in the like form each signed by, or on behalf of, one or more shareholders. Pre-emption rights Under the Cyprus Companies Law, each existing share- holder has a right of pre-emption to subscribe for any new shares to be issued by the Company in cash, in proportion to the aggregate number of such shares of the sharehold- er. There are no pre-emption rights with respect to shares issued for non-cash consideration. Specifically, all new shares and/or other securities giving rights to purchase shares in the Company, or which are convertible into shares in the Company that are to be is- sued for cash, shall be offered to the existing shareholders on a pro-rata basis to the participation of each shareholder in the capital of the Company, on a specific date fixed by the directors. Any such offer shall be made upon written notice to all the shareholders specifying the number of the shares and/ or other securities giving rights to purchase shares in the Company, or which are convertible into shares in the Company, which the shareholder is entitled to acquire and the time periods (which shall not be less than 14 days from the date of notification of the offer (or)/from the date of the dispatch of the written notice), within which the offer, if not accepted, shall be deemed to have been rejected. If, until the expiry of the said time period, no notification is received from the person to whom the offer is addressed or to whom the rights have been assigned that such person accepts all or part of the offered shares or other securities giving rights to purchase shares in the Company, or which are converti- ble into shares of the Company, the directors may dispose of them in any manner that they deem fit. These pre-emption rights may be disapplied by a resolu- tion of the general meeting which is passed by a specified majority, being a majority in favour of over one half of all the votes cast if the attendance represents not less than half the issued share capital and a majority in favour of not less than two-thirds of the votes cast in all other cases ("Special Majority Resolution"). In connection with such a waiver, the directors have an obligation to present to the relevant gen- eral meeting a written report which explains the reasons for the proposed disapplication of pre-emption rights and justifies the proposed issue price of the shares. Voting rights at general meetings Every holder of shares who is present (if a natural person) in person or by proxy or (if a corporation) is present by a representative, shall have one vote for each Ordinary share of which he is a holder. The Ordinary shares carry the right to one vote per Ordinary share and confer on the Ordinary shareholders the right: • on a Hands Vote, to one vote per Ordinary shareholder; and • on a Poll Vote, to one vote per Ordinary share held by each shareholder, No shareholder shall be entitled to vote (either in person or by proxy) at any general meeting unless all calls or other sums presently owed by him in respect of those shares have been paid or the Board of directors otherwise deter- mine. Dividend and distribution rights The Ordinary shares have the right to an equal share in any dividend or other distribution paid by the Company, and any dividend or other distribution may only be declared and paid by the Company to the holders of all shares together. 52 53 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020MANAGEMENT TEAM Oliver Hughes (50) CEO, Chairman of the Management Board of Tinkoff Bank Oliver oversees the strategic direction of Tinkoff Bank. He joined Tinkoff as CEO in 2007 and has been at the helm every step of the way, helping Tinkoff grow into the world’s largest independent digital bank by customer base. Before joining Tinkoff, Oliver worked for Visa International for a decade, including as Head of Visa in Russia from 2005 until 2007. Prior to Visa, he held various positions including at Reebok, Shell UK and the British Library. Oliver holds a Master of Arts degree in International Politics from Leeds University and a Master’s degree in Information Management and Technology from City University in London. He also has a Bachelor’s (First Class) degree in Russian and French from the University of Sussex. Ilya Pisemsky (45) Chief Financial Officer, Deputy Chairman of the Management Board of Tinkoff Bank Ilya is responsible for financial management, corporate strategy and planning. He has been Chief Financial Officer at Tinkoff since July 2008 and Deputy Chairman of the Management Board since April 2010. Prior to joining Tinkoff, he was Deputy Chief Financial Officer at Bank Soyuz and held a managerial position at Ernst & Young CIS. Ilya graduated from the Finance Academy under the Government of the Russian Federation in Moscow and holds an MBA from the F.W. Olin Graduate School of Business at Babson College in Wellesley, Massachusetts. Sergei Pirogov (50) Head of Corporate Finance, Member of the Board of Directors of Tinkoff Bank Sergey has been responsible for capital raising and debt portfolio management at Tinkoff as Head of Corporate Finance since January 2010. Since July 2016, he has served on Tinkoff Bank’s Board of Directors. Previously Sergey worked at Citigroup, where he was Director of Corporate Finance for Russia and the CIS from 2002 to 2008. Prior to that, he was Programme Coordinator and Head of Investment Projects at IBS Intertraining. Sergey graduated from the Moscow State Institute for International Relations. He also holds an MBA from the Darden Graduate School of Business at the University of Virginia, USA. George Chesakov (48) Head of Tinkoff Mobile George Chesakov is responsible for Tinkoff’s mobile virtual network operator (MVNO Tinkoff Mobile) and has been in this role since January 2017. He also served as Chief Operating Officer and Chairman of the Management Board from 2006 until 2011. Prior to his returning to Tinkoff in February 2016, George was President of OTP Bank and co-founder of Revo Technology. Prior to Tinkoff, George worked at McKinsey & Company, Russian Standard Bank and launched a consumer finance business at Investsberbank (now OTP Bank). George holds a Master’s degree in Computer Science from Princeton University and a Master’s degree with honors in Mathematics from Moscow State University. Stanislav Bliznyuk (40) Chief Operating Officer, Deputy Chairman of the Management Board of Tinkoff Bank Stanislav oversees operations at Tinkoff. Before being appointed Chief Operating Officer in June 2012, he was Head of Technologies at the Bank from 2006. Prior to this, Stanislav worked in the banking sector, including as Process & Project Director at Raiffeisen Bank Russia. Stanislav graduated from Moscow State University with a Master’s degree in Mathematics and Economics. Valeria Pavlyukova (38) Chief Legal Officer, Deputy Chairman of the Management Board of Tinkoff Bank Valeria has overseen all legal matters at Tinkoff as Chief Legal Officer and Deputy Chairman of the Board since January 2017. Before joining the Bank, she was Head of Legal for Sberbank’s international division and a Legal Director for InBev for/in Russia. Valeria graduated from the International University in Moscow and studied finance at Hult International Business School. Management Team positions shown as of 31 December 2020 54 55 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED MANAGEMENT TEAM Fedor Bukharov (39) Head of Tinkoff Business Fedor joined the Company in 2015 and is responsible for developing Tinkoff’s SME offering and is head of Tinkoff Business. He started his career in banking in 2002 and previously worked on developing the SME business portfolios of UniCredit Bank and other Russia banks. Fedor graduated from Novosibirsk State Technical University in 2003 and holds a Finance and Credit degree from the Finance Academy under the Government of the Russian Federation. Nadezhda Serova (45) Human Resources Director As Head of Tinkoff’s HR department, Nadezhda oversees employee engagement, talent management, development of motivational programs and the overall well- being of employees and all processes related to it. Nadezhda has been working in HR for more than 15 years, including more than 10 years in senior positions. Before joining the Tinkoff team, she was Head of HR for Yandex Market. Nadezhda graduated from Novgorod State University. She also holds a bachelor's degree in business administration from the Russian-Norwegian School. Anatoly Makeshin (48) Head of Payment Systems, Deputy Chairman of the Management Board of Tinkoff Bank Anatoly has been responsible for Tinkoff’s payments systems since 2006. He has also been a member of Tinkoff’s Management Board since September 2012. Anatoly graduated from Moscow Power Engineering Institute and holds a PhD in Technical Science from the Russian Academy of State Service. Natalia Izyumova (58) Chief Accountant, Member of the Management Board of Tinkoff Bank Natalia oversees Tinkoff’s accounting. She stepped into her current role and became a member of Tinkoff Bank’s Management Board when she joined the Bank in February 2011. Natalia has also been a member of the Financial Committee of Tinkoff Bank since November 2011. Prior to joining Tinkoff, Natalia held a number of senior-level positions, including that of CFO and Deputy Chairwoman of Dvizheniye Bank’s Management Committee. Natalia graduated from Moscow State University with a degree in Economics and holds a PhD in Economics from the Research Institute of Economy. Evgeny Ivashkevich (49) Viacheslav Tsyganov (45) Risk Director, Deputy Chairman of the Management Board of Tinkoff Bank Chief Information Officer, Member of the Management Board of Tinkoff Bank Evgeny is in charge of risk management at Tinkoff. He has been in his current role since 2007, having also joined Tinkoff Bank’s Management Board as Deputy Chair- man in 2011. Before joining Tinkoff, he was a portfolio manager at Renaissance Capital Bank and Head of Product Development at Russian Standard Bank. Evgeny graduated from the Moscow Institute of Physics and Technology and ob- tained a PhD in Theoretical Physics from the Joint Institute for Nuclear Research. Viacheslav has been with Tinkoff Bank from the beginning of its story. He is in charge of information technology and computer systems at Tinkoff. Viacheslav has been Chief Information Officer since 2009 after transitioning from his role as Head of IT Architecture and Development at the Bank. Viacheslav holds a Master’s degree in Computer Science from Southwest State University. 56 57 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED MANAGEMENT TEAM Dmitry Panchenko (39) Investment Business Director Dmirty joined the Company in 2019. Prior to joining Tinkoff, Dmitry held a variety of managerial positions in several leading  brokerage firms, including head of brokerage business at BCS Broker and Deputy CEO at Freedom Finance. Before that he worked for National Standard Bank, Rosenergobank and the Moscow Capital investment fund. Dmitry graduated from the Higher School of Economics in 2004 and earned his Master’s degree from Moscow State University in 2012. Аnna Mikhina (33) Head of Lifestyle Banking As Head of Lifestyle Banking for Tinkoff, Anna oversees strategic development of partner and non-financial services for the Tinkoff group of companies. Prior to joining the Tinkoff team in November 2012, Anna worked as a mobile product manager for Yandex, Rambler and Mail.ru. Anna graduated from the Humanities Institute of Television and Radio Broadcasting in Moscow with a degree in journalism. Neri Tollardo (29) Larisa Chernysheva (45) Head of International Investor Relations and Partnerships Head of Investor Relations and transaction execution Neri Tollardo joined Tinkoff in 2019 and is responsible for building and developing relationships with international investors and partners. Prior to joining Tinkoff, he was a top-ranked sell-side research analyst at Morgan Stanley for seven years, during which he covered a number of different emerging markets and sectors. Neri holds a MSc in Finance and Private Equity from the London School of Economics and a BSc in International Economics and Management from Bocconi University Milan. Artem Lebedev (43) PR Director Artem has been in charge of Tinkoff Group's strategic communications and public relations since early 2019. Previously Artem held managerial positions in PR, GR and marketing with MegaFon, Vnesheconombank, Russian Standard, Avtobank among others. He has more than 10 years of experience in journalism, having contributed to Kommersant Publishing House, Russian Telegraph and Moskovskiye Novosti. He was also the founder of Russian Policy, an insurance magazine. Artem graduated from Moscow State University with a degree in PR and advertising and holds a financial degree from the Finance Academy under the Government of the Russian Federation. Larisa oversees two functions in Tinkoff: she leads the IR strategy which covers all aspects of investor communication and interaction as well as being is responsible for supervising fixed income and equity related transactions. Before joining the Tinkoff team in August 2012, Larisa worked as a relationship manager for financial institutions for Citigroup Corporate Bank Moscow. Prior to Citigroup Larisa worked as a legal assistant for Freshfields Bruckhaus Deringer Moscow office. Larisa holds masters degree in management and media communications from the Moscow State University of Culture and is certified by the College of Ministry of Foreign Affairs of the Russian Federation in Business Administration. Konstantin Markelov (36) Business Technologies Director Konstantin Markelov is responsible for implementing new technologies at Tinkoff, as well as for business analytics, partnerships with technical universities, talent acquisition and educational programmes. He has been with the Company since 2007, starting out as an analyst and taking an active part in its development. He launched several important projects and led the Company to employ business analysts (technologists). In 2007, he graduated with honours from the Faculty of Mechanics and Mathematics of Moscow State University. 58 59 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020Board of Directors and other officers Board of Directors Constantinos Economides, Chairman Alexios Ioannides Mary Trimithiotou Jacques Der Megreditchian Martin Robert Cocker The above all served throughout 2020 and through to the date of these consolidated financial statements. The Company’s Articles of Association include regulations for the retirement by rotation of Directors at each annual general meeting. These regulations will operate in 2021 on the basis of the composition of the Board at the relevant date. Company Secretary Caelion Secretarial Limited 25 Spyrou Araouzou Berengaria 25, 5th floor, 3036, Limassol, Cyprus Registered office 25 Spyrou Araouzou Berengaria 25, 5th floor, 3036, Limassol, Cyprus 31 DECEMBER 2020 TCS Group Holding PLC International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor’s Report Contents Board of Directors and other officers . . . . . . . . . . . . . . . . . F-2 Consolidated Management Report . . . . . . . . . . . . . . . . . . .F-3 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . F-11 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Financial Position . . . . . . . . F-21 Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-22 Consolidated Statement of Changes in Equity . . . . . . . .F-23 Consolidated Statement of Cash Flows . . . . . . . . . . . . . .F-24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15 Debt Securities in Issue . . . . . . . . . . . . . . . . . . . . . . . . . F-68 16 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69 17 Insurance Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69 18 Other Financial and Non-financial Liabilities . . . . . .F-70 19 Share Capital, Share Premium and Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-73 20 Net Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-75 21 Fee and Commission Income and Expense . . . . . . .F-76 22 Customer Acquisition Expense . . . . . . . . . . . . . . . . . . . F-77 23 Insurance Premiums Earned and Claims Incurred . F-77 24 Administrative and Other Operating Expenses . . . .F-78 25 Other Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .F-79 26 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-79 27 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-81 28 Reconciliation of Liabilities Arising from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-82 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-25 29 Financial and Insurance Risk Management . . . . . . F-83 2 Operating Environment of the Group . . . . . . . . . . . . . .F-27 30 Management of Capital . . . . . . . . . . . . . . . . . . . . . . . . F-100 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . . . . . .F-29 4 Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31 31 Contingencies and Commitments . . . . . . . . . . . . . . . F-101 32 Offsetting Financial Assets and Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . F-105 5 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . F-35 33 Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . F-106 6 Due from Other Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . .F-37 34 Non-Controlling Interest . . . . . . . . . . . . . . . . . . . . . . . F-106 7 Loans and Advances to Customers . . . . . . . . . . . . . . .F-37 35 Financial Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-107 8 Investments in Securities and Repurchase Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-57 36 Fair Value of Financial Instruments . . . . . . . . . . . . . .F-107 37 Presentation of Financial Instruments by 9 Guarantee Deposits with Payment Systems . . . . . . F-64 Measurement Category . . . . . . . . . . . . . . . . . . . . . . . . .F-113 10 Brokerage Receivables and Brokerage Payables . F-64 38 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . .F-115 11 Tangible Fixed Assets, Intangible Assets 39 Events after the End of the Reporting Period . . . . . F-117 and Right-of-use Assets . . . . . . . . . . . . . . . . . . . . . . . . . F-65 12 Other Financial and Non-financial Assets . . . . . . . . F-66 40 Significant Accounting Policies . . . . . . . . . . . . . . . . . . F-117 41 Adoption of New or Revised Standards 13 Due to Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-67 and Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-134 14 Customer Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-67 42 New Accounting Pronouncements . . . . . . . . . . . . . F-134 F-1 F-2 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 31 DECEMBER 2020 Consolidated Management Report The Board of directors presents its report together with the audited consolidated financial statements of TCS Group Holding PLC (the “Company”) and its subsidiaries (collec- tively the “Group”) for the year ended 31 December 2020. Principal activities and nature of operations of the Group 1. The Group’s principal activities are mainly undertaken within the Russian Federation and consist of on-line retail banking operations, through its subsidiary JSC “Tinkoff Bank” (the “Bank”), and other operations through its subsidiaries, such us insurance operations through JSC “Tinkoff Insurance” (the “Insurance Com- pany”), mobile services through LLC “Tinkoff Mobile” and asset management through LLC “Tinkoff Capital” (Note 1). 2. The Bank specialises in retail banking for individuals, individual entrepreneurs (“IE”), small and medium enterprises (“SME”) and brokerage services. The Bank which is fully licensed by the Central Bank of Russia, launched its operations in the Summer of 2007 and is a member of the Russian Deposit Insurance System. The Insurance Company specialises in providing non-life insurance coverage such as accident, property, travel, credit protection and auto insurance. The founder of the Company is Oleg Tinkov who was also the con- trolling shareholder throughout 2020. Changes in group structure 3. During 2020 the Group founded an infrastructure com- pany LLC “Tinkoff Invest Lab” to support and optimize the Group’s investment services. 4. In August 2020 the Group acquired a 22.15% share- holding in Incantus Holding Limited by transferring its 100% shareholding in LLC “Fintech DC” to Incantus Holding Limited and by providing a convertible loan (Notes 7 and 38). Incantus Holding Limited is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding CIS) through the mobile banking platform Vivid Money. In October 2020 a new venture capital fund has invested into the share capital of Incantus Holding Limited. As a result the Company’s shareholding in Incantus Holding Limited has decreased to 16.32%. 5. As at 31 December 2020 the Group holds 16.32% of the shares of Incantus Holding Limited. Review of developments, position and performance of the Group’s business 6. The Group operates a flexible business model. Its virtual network enables it to quickly and easily increase business or slow down customer acquisition de- pending upon the availability of funding and market conditions. The Bank’s primary customer acquisition channels are Internet and Mobile, but it also uses Direct Sales Agents and partnerships (co-brands) to acquire new customers. These customer acquisition models, combined with the Bank’s virtual network, af- ford it a geographic reach across all of Russia’s regions resulting in a highly diversified portfolio. 7. In 2020 the Group signed a long-term rental contract for space in a business centre in Moscow, which is currently under construction, and which will become the Group’s new headquarters. Construction will be completed according to plan in 2022. 8. In 2020 LLC “Tinkoff Capital” launched Russia’s first ex- change-traded fund (ETF) tracking the Nasdaq Technolo- gy Sector Index (NDXT). 9. During 2020 the Company actively continued the de- velopment of its call-center and software development services in Cyprus, providing training so that these employees might provide a wider range of services to the Bank and, indirectly, its customers. 10. The key offerings of JSC “Tinkoff Insurance” are personal accident insurance, collective insurance against acci- dents and illnesses, travel insurance, motor vehicle in- surance and property insurance, compulsory third party liability insurance (CTP) and voluntary third party liability insurance (VTP) (Note 23). The Insurance Company focuses on online sales. 11. In terms of financial performance the profit of the Group for the year ended 31 December 2020 was RR 44,213 million (2019: RR 36,123 million). This result is driven by two major continuing trends: the ongoing growth of the Group’s consumer finance business and a growing contribution from the non-credit fees-and-commission business lines. Net margin increased by 19.1% to RR 104,702 million (2019: increased by 46.6% to RR 87,926 million) on the back of credit and investment portfolio growth. The growth of the credit portfolio was driven not only by credit card loans but also by other types of loans, such as secured, cash and POS loans. The Group aims to diversify its credit portfolio by the extension of collater- alised credit products which represents a business line with lower credit risks. The 90 days plus overdue loans ratio (“NPL”) increased to 10.4% as at 31 December 2020 (2019: 9.1%). The NPL coverage ratio reduced to 153% as at 31 December 2020 (2019: reduced to 156%). The In- vestment in securities portfolio increased by 76.4% and amounted to RR 238,454 million as at 31 December 2020 (31 December 2019: increased by 35% to RR 135,178 million). This growth has been fuelled by the continued development of the debit card and SME business lines. The Group continues to maintain a good quality and diversified securities portfolio. During the year the Bank developed the Tinkoff Investments product by increasing the customer base and providing of new trading instru- ments to its clients. The Group’s Insurance business continues to develop at a good pace. This year insurance premiums earned increased by 31.6% to RR 18,567 million (2019: increase by 111.4% to RR 14,110 million). The growth was as a result of a continuous development of auto (including CTP and VTP) and travel insurance, as well as the growth of personal accident insurance along with the credit portfolio and providing a wider coverage of insured risks. In order to reflect appropriately the uncertainty associated with the COVID-19 pandemic, the Group has made changes to its ECL model, which resulted in approximately RR 5.6 billion of additional credit loss allowance charge in the first half of 2020 and was the main driver of increased cost of risk. Refer to Notes 2 and 3. Environmental matters 12. As the Group is an online-only financial institution, the management of the Group believes that none of the Group’s business relationships, products or services are likely to have any significant actual or potential significant environmental impacts and do not believe its operations are exposed to any material environmental risks. Management, in reaching this view, have taken into account the risk of adverse impacts that may stem from the Company’s own activities as well as its busi- ness relationships including its supply and subcontract- ing chains. This belief is based on continuous scrutiny of the business. The Group is continuously reviewing its processes to identify opportunities to reduce their environmental impact. Human resources 13. Empowerment is an important ingredient in the success of our organization. To achieve this, decision-making is delegated to levels deep below the management team, discussion, idea generation and exchange and transpar- ency are actively promoted and encouraged and an open leadership style ensures that information can move freely. The Group utilizes all types of forums to promote continual dialogue – such as email, online chat rooms, flash meetings, as well as formalized meeting structures. The Group offers clear far-reaching career path for its employees, a unique work environment and fair and transparent compensation. 14. Clear performance evaluation processes and fair compen- sation are essential. Compensation is a combination of fixed rate salary and supplemental bonuses and is based on employee performance. Employees are evaluated on a regular basis in order to monitor their achievement against their Key Performance Indicators as well as to provide feedback which can be used for their career development and to determine incentive compensation. 15. Prior to its IPO in 2013, the Group set up share-based man- agement long term incentive plans as retention and motiva- tional tools for key and senior managers. In March 2016, the Group announced a consolidated long-term management incentive and retention plan, covering around 50 key, senior and middle managers (MLTIP). Since then the Group has announced the expansion of MLTIP. The total size of the MLTIP pool was 8.13% of the Group’s share capital as at 31 December 2020. The plan is designed to align more closely managers’ interests with those of shareholders to grow the Group's value. Current MLTIP is awarded over four years with each annual award vesting over the subsequent three years. The Group believes that participation in its share capital is an effective motivation and retention tool. The management incentive and retention plan embraces more managers, for two main reasons: firstly, internal promotions as some employees were promoted to key managerial positions; and, secondly, as part of its expansion and transformation into a financial marketplace, the Group has hired a significant number of new managers to develop and manage new business lines and to strengthen internal controls, including cyber security. 16. In April 2020 the Group launched a key employees retention plan (KERP), which is a new long term incentive program for more than 250 senior and middle management level employees. The purpose of the program is to retain and motivate key employees with high potential. This is a performance-based cash-settled program linked to the market price of the Group’s GDRs. Non-Financial Information and Diversity Statement 17. The Group’s policies and other information that provide an understanding of the development, performance, position and impact of the Group’s activities in the areas of environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters can be found in the Group’s most recently published Non-Financial Information and Diversity Statement (Sustainability Report). The Group will pub- lish its Sustainability Report for the year ended 2020, on the Company’s website, www.tcsgh.com.cy (and www. tinkoff.ru/eng) no later than 30 June 2021. F-3 F-4 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Consolidated Management Report (Continued) Principal risks and uncertainties Results 18. The Group’s business and financial results are impact- ed by uncertainties and volatilities in the Russian eco- nomic environment which can be impacted by global factors and/or by national factors. 19. The Group is subject to a number of principal risks which might adversely impact its performance. The principal ac- tivities of the Group are banking and insurance operations and so it is within this area that the principal risks occur. Management considers that those principal risks are fi- nancial risks, operational risks and legal risks. Financial risk comprises market risks (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. 20. The Board has put in place arrangements to identify, evaluate and manage the principal risks and uncertainties faced by the Group. The Group has an established risk management program that focuses on the unpredictabili- ty of financial markets and seeks to minimize potential ad- verse effects on the Group's financial performance. This is overseen by a dedicated Risk Management function, which works with senior management of the operating companies in Russia as well as the Board of directors in this area. The primary objectives of the financial risk management function are to establish acceptable risk limits, and then ensure that the exposures remain within these limits. The operational and legal risk management functions are intended to ensure the proper functioning of internal policies and procedures that minimize operation- al and legal risks. The risk management strategy is estab- lished so as to identify, assess, monitor and manage the risks arising from Group's activities. These risks as well as other risks and uncertainties, which affect the Group and how these are managed, are presented in Notes 29 and 31 of the consolidated financial statements. 21. Analysis of impact of COVID-19 pandemic on the Group is disclosed in the Note 2 of the сonsolidated financial statements. 24. The Group’s results for the year are set out on page 2 of the consolidated financial statements. Information on distribution of profits is presented in Note 27. Any important events for the Group that have occurred after the end of the financial year 25. Important events for the Group that have occurred after the end of the financial year are presented in Note 39. Share capital, redesignation and conversion of class B and class A shares 26. As at 31 December 2020 the issued share capital of the Company was 199,305,492 shares (2019: same). Of these 129,391,449 were class A shares (2019: 119,291,268) and 69,914,043 class B shares (2019: 80,014,224) with a par value of USD 0.04 per share. In December 2020 10,100,181 class B shares in the Com- pany held by the Rigi Trust were converted to class A shares. As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 87.03% to 84.38%. 27. On 7 January 2021 all 69,914,043 issued class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares, and on the same date all issued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of being exercised is equal to the total number of issued shares (currently 199,305,492 shares following the class B share conver- sion). As a result of the conversion, Mr. Oleg Tinkov's vot- ing rights in the Group decreased from 84.38% to 35.08%. As a result his control over the Group was ceased. Contingencies Treasury shares 22. The Group’s contingencies are disclosed in Note 31 to 28. At 31 December 2020 the Group held 3,013,379 (2019: the consolidated financial statements. Future developments 23. The Group’s strategic objective is to be a full service, online financial and lifestyle ecosystem with a broad range of financial, insurance and quasi-financial prod- ucts, serving customers through a high-tech online and mobile platform that offers premium quality service and convenience, while maintaining high growth rates, profitability and effective data-driven risk management. 4,185,166 ) of its own GDRs, equivalent to approximately RR 3,238 million (2019: RR 3,164 million) and which represent 1.5% (2019: 2.1%) of the issued shares. 29. Treasury shares are GDRs of TCS Group Holding PLC that are held by a special purpose trust which has been specifically created for the long-term incentive programme for the MLTIP (see Note 38 for further information). 30. During 2020 the Group repurchased 650,000 GDRs at market price for RR 661 million (2019: no GDRs were repurchased). 31. During 2020 the Group transferred 1,809,681 GDRs (2019: 2,419,187 GDRs), representing 0.91% (2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a transfer of RR 587 million (2019: RR 506 million) out of treasury shares to retained earnings. Research and development activities 32. During the years ended 31 December 2020 and 2019 the Group has undertaken research and development activities related to software including greater use of biometrics, voice assistant, social networking, machine learning and intelligence. Board of Directors 33. The members of the Board of directors as of 31 Decem- ber 2020 and at the date of this report are presented above. All served throughout the year ended 31 Decem- ber 2020 and through to the date of these consolidated financial statements. 34. There were no significant changes in the assignment of responsibilities or remuneration of the Board of directors. Branches 35. The Group did not operate through any branches during the year. Independent auditor 36. The Independent Auditor, PricewaterhouseCoopers Limited, has expressed its willingness to continue in office. A resolution giving authority to the Board of directors to fix its remuneration will be proposed at the Annual General Meeting (AGM). Going concern 37. The Directors have access to all information neces- Corporate Governance Statement GDRs of TCS Group Holding PLC (a Cyprus incorporated company), with each GDR issued under a deposit agree- ment dated on or about 24 October 2013 with JPMorgan- Chase Bank N.A. as depositary representing one ordinary (formerly class A) share, are listed on London Stock Exchange. The Company’s GDRs are also listed on the Moscow Exchange. No shares of TCS Group Holding PLC are listed on any exchange. The Company is required to comply with the UK corpo- rate governance regime to the extent it applies to foreign issuers of GDRs listed on the London Stock Exchange. The Company has not adopted corporate governance measures of the same standard in all respects as those adopted by UK incorporated companies or companies with a premium listing on the London Stock Exchange. As the shares themselves are not listed on the Cyprus Stock Exchange (or elsewhere), the Cypriot corporate gov- ernance regime, which only relates to companies that are listed on the Cyprus Stock Exchange, does not apply to the Company and accordingly the Company does not monitor its compliance with that regime. From IPO in 2013 until 7 January 2021, the Company maintained a capital structure with two classes of shares, class A and class B. On 7 January 2021, all class B shares were converted to class A and simultaneously all shares were reclassified and redesignated as ordinary shares all ranking pari passu for all purposes and in all respects with the other existing shares, with the provisions in the Articles of Association of the Company relating to class B shares deemed deleted. The Company’s Home State is Cyprus. A description of the terms and conditions of the GDRs can be found at “Terms and Conditions of the Global Depositary Receipts”, “Summary of the Provisions relating to the GDRs whilst still in Master Form” and “Description of Arrange- ments to Safeguard the Rights of the Holders of the GDRs” in the Prospectus issued by the Company dated 22 October 2013 and on the website at www.tinkoff.ru/eng. sary to exercise their duties. The Directors continue to adopt the going concern basis in preparing the consolidated financial statements based on the fact that, after making enquiries and following a review of the Group’s budget for 2021, including cash flows and funding facilities, the Directors consider that the Group has adequate resources to continue in operation for the foreseeable future. This assessment was made with the available information to the Group as at the date of approving the financial statements. Copies of the Articles of Association of the Company adopted on 21 October 2013, the terms of reference of the Committees, and other corporate governance related as well as investor relations related materials can also be found on the website www.tinkoff.ru/eng, at the Company’s main website www.tcsgh.com.cy, on the Company’s page on the London Stock Exchange website (www.londonstock- exchange.com/exchange/prices-and-markets/stocks/sum- mary) and at the official site of the Department of Registrar of Companies, Cyprus (http://www.mcit.gov.cy/). F-5 F-6 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Consolidated Management Report (Continued) The Board of directors Number of directors Role of the Audit Committee Role of the Remuneration Committee The role of the Board is to provide entrepreneurial lead- ership to the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. The Board sets the Group’s strategic objectives, ensures that the necessary financial and human resourc- es are in place for the Group to meet its objectives and reviews management’s performance. The Board also sets the Group’s values and standards and ensures that its ob- ligations towards the shareholders and other stakeholders are understood and met. The Board operates under a formal schedule of matters reserved to the Board for its decision, approved by share- holders in 2013. The authorities of the members of the Board are specified by the Articles of Association of the Company and by law. The current five strong Board of directors is comprised of three executive directors including the chairman, and two non-executive directors both of whom are independ- ent. There was no change in the composition of the Board or status of the directors in 2020. The Board of directors contains no Director B. The longest serving director Mr. Constantinos Economides took over the role of Chairman of the Board of directors in June 2015. The names of the people who served on the Board during 2020 are listed at the Board of directors and other officers. The Group has established two Committees of the Board. Specific responsibilities have been delegated to those committees as described below. The Board is required to undertake a formal and rigorous review annually of its own performance, that of its commit- tees and of its individual directors. That review was recently carried out, in-house, in relation to 2020, looking at overall performance. All directors completed detailed question- naires on the Board’s, the committees’ and individual direc- tor’s performance. The role of appraising the Chairman of the Board for 2020 was performed by the Chairman of the Audit Committee. Analysis of the resultant feedback will be discussed at a meeting of the Board of directors on 10 March 2021 and no changes are expected to be made in the performance of the Board, its committees or individual directors. The Board has not appointed a senior independent director. There are only two independent directors of whom at least one will retire each year. Unless and until otherwise determined by the Company in general meeting, the number of directors shall be no less than four, of whom two must be non-executive, and until 7 January 2021 was not permitted to exceed seven, when class B shares were in issue. From 7 January 2021, there is no maximum number of directors. The Articles of Association of the Company provide for the retirement by rotation of certain directors at each Annual General Meeting (AGM). At the AGM on 24th August 2020 the director who retired by rotation was Mr. Jacques Der Megreditchian who was duly reappointed that day by vote of all the shareholders. Committees of the Board of directors The Company has established two Committees of the Board of directors: the Audit Committee and the Remuner- ation Committee. Their terms of reference are summarized below. Both Committees were formed in October 2013. The Board reserves the right to amend their terms of reference and arranges a periodic review of each Committee’s role and activities and considers the appropriateness of addi- tional committees. Committees-current composition The Audit Committee is chaired by an independent non-ex- ecutive director Mr. Martin Cocker, and had, until 16 August 2019, two other members both non-executive directors, one of whom was independent. From 16 August 2019 the Audit Committee has comprised its chairman Mr. Martin Cocker and one independent non-executive director. The Remuneration Committee is also chaired by an inde- pendent non-executive director, Mr. Jacques Der Megred- itchian, and had until 16 August 2019 two other members both non-executive directors, one of whom was independ- ent. From 16 August 2019 the Remuneration Committee has comprised its chairman Mr. Jacques Der Megreditchian and one independent non-executive director. The current terms of reference of both Committees are available to the public and can be found on the Group’s websites. A short summary of both is set out below. The Audit Committee’s primary purpose and responsibility is to assist the Board in its oversight responsibilities. In executing this role the Audit Committee monitors the integrity of the financial statements of the Group prepared under International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and any formal announcements relating to the Group’s and the Compa- ny’s financial performance, reviewing significant financial reporting judgments contained in them, oversees the finan- cial reporting controls and procedures implemented by the Group and monitors and assesses the effectiveness of the Company’s internal financial controls, risk management systems, internal audit function, the independence and qualifications of the independent auditor and the effective- ness of the external audit process. The Audit Committee is required to meet at appropriate times in the reporting and audit cycle but in practice meets more often as required. Under its terms of reference, the Audit Committee is required, at least once each year, to review its own perfor- mance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it considers necessary for Board approval. The Audit Committee met this obligation through members participating in the main Board review described above. Af- ter consideration of the review, no changes were proposed to the committee’s terms of reference. The Audit Commit- tee operates a structured framework around the extensive work it does on non-financial statements related matters holding at least two additional meetings annually, which would typically be held at the Bank’s head office in Moscow, to consider specific, non-financial statements related areas within its terms of reference. No such meeting was held in 2020 due to COVID-19 travel restrictions but at least two are planned for 2021. The Audit Committee has developed a risk matrix which constantly evolves to reflect new risks, the perceived im- pact of, and the Group’s appetite for, any given risk and the measures taken to mitigate those risks. This matrix is run in conjunction with the internal audit function. Changes in the top management team A new post of chief information security officer was created in late 2017 and filled, with additional personnel expert in cyber-security recruited, in a very competitive market, through 2019 and 2020 to support the Group’s ever-increas- ing efforts to stay ahead of trends and threats in this sphere. The Group has further broadened its top management team with a new chief investment officer appointed in 2019 and a new chief operating officer appointed in early 2020. The Remuneration Committee is responsible for determin- ing and reviewing among other things the framework of remuneration of the executive directors, senior manage- ment and its overall cost and the Group’s remuneration policies. The objective is to ensure that the executive management of the Group are provided with appropriate incentives to encourage enhanced performance and are in a fair and responsible manner rewarded for their individual contributions to the success of the Group. The Remuner- ation Committee’s terms of reference include reviewing the design and determining targets for any performance related pay schemes and reviewing the design of all share incentive plans for approval by the Board. The Remunera- tion Committee is required to meet at least twice a year but in practice meets far more often. The Remuneration Committee continued with its work into 2020 on an ongoing review of the operation of the Group’s MLTIP which launched in 2016 and in considering addition- al awards to both existing and new participants for this and subsequent years. In the end of Q2 2020 the Committee approved the propos- als of launching a new incentive and retention plan for more than 250 senior and middle managers (KERP). The Committee has also been working on plans for an incentive and compensation arrangement within MLTIP for when, in the period 2022 to 2024, existing awards made to MLTIP joiners in 2016-2017 start to go into run off. The Remuneration Committee recommended in June 2020 and December 2020 7 and 8 members of key management re- spectively be granted new awards under MLTIP in Q3 2021. Under its terms of reference the Remuneration Committee is required at least once each year to review its own per- formance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it considers necessary for Board approval. The Remuneration Committee met this obligation through members participating in the main Board review (described above) under which detailed questionnaires were complet- ed by all directors assessing the operation of the Board and both committees as well as individual directors. Although earlier reviews had resulted in certain minor changes to the Remuneration Committee’s terms of reference, no further changes were felt required based on the most recent re- view. The Committee continues to meet as required. F-7 F-8 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Consolidated Management Report (Continued) Appointment, retirement, rotation and removal of directors Internal control and risk management systems in relation to the financial reporting process The directors of the Company are appointed by the general meeting of shareholders with the sanction of an ordinary resolution. Such an appointment may be made to fill a vacancy or as an additional director. But no director may be appointed unless nominated by the Board of directors or a committee duly authorized by the Board of directors or by a shareholder or shareholders together holding or repre- senting shares which in aggregate constitute or represent at least 5% in number of votes carried or conferred by the shares giving a right to vote at a general meeting. The Board of directors may at any time appoint any person to the office of director either to fill a vacancy or as an addi- tional director and every such director shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation. One third of the directors (or if their number is not a multi- ple of three, the number nearest to three but not exceeding one-third) shall retire by rotation at every annual general meeting. Directors holding an executive office are excluded from retirement by rotation. Directors may be removed from office by the sharehold- ers at a general meeting with the sanction of an ordinary resolution, subject to giving 28 days’ notice to that director in accordance with the Articles of Association. The office of director shall be vacated if the director: • becomes bankrupt or makes any arrangement or com- position with his creditors generally; or • becomes prohibited from being a director by reason of any court order made under Section 180 (disqualification from holding the position of director on the basis of fraud- ulent or other conduct) of the Cyprus Companies Law; or • becomes, or may be, of unsound mind; or • resigns his office by notice in writing to the Company left at the registered office; or • is absent from meetings of the board for six consecutive months without permission of the Board of directors and his alternative director (if any) does not attend in his place and the Board of directors resolves that his office be vacated. Significant direct/indirect holdings For the significant direct and indirect shareholdings held in the share capital of the Company, please refer to Note 1 of the consolidated financial statements. Policies, procedures and controls exist around financial reporting. Management is responsible for executing and assessing the effectiveness of these controls. Financial reporting process The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the require- ments of the Cyprus Companies Law, Cap.113, and for such internal control as the Board of directors determines is necessary to enable the preparation of consolidated finan- cial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of directors 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 the Board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The Board has delegated to the Audit Committee the respon- sibility for reviewing the consolidated financial statements to ensure that they are in compliance with the applicable framework and legislation and for recommending these to the Board for approval. The Audit Committee is responsible for overseeing the Group’s financial reporting process. Internal Controls and Risk Management Management is responsible for setting the principles in relation to risk management. The risk management organi- sation is divided between Policy Making Bodies and Policy Implementation Bodies. Policy Making Bodies are responsi- ble for establishing risk management policies and proce- dures, including the establishment of limits. The main Policy Making Bodies are the Board of directors, the Management Board, the Finance Committee, the Credit Committee and the Business Development Committee. The policy implementation level of the Group’s risk manage- ment organisation consists of the Finance Department, the Risk Management Department, the Collections Department and the Internal Control Service. In addition the Group has implemented an online analytical processing management system based on a common SAS data warehouse that is updated on a daily basis. The set of daily reports includes but is not limited to sales reports, application processing reports, reports on the risk charac- teristics of the card portfolios, vintage reports, transition matrix (roll rates) reports, reports on the pre-, early and late collections activities, reports on compliance with CBR requirements, capital adequacy and liquidity reports, operational liquid- ity forecast reports and information on intra-day cash flows. Diversity policy The Group is committed to offering equal opportunity to all current and prospective employees, such that no applicant or employee is discriminated in favour of or against on the grounds of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation in recruitment, training, promotion or any other aspect of employment. Recruitment, training and promotion are exclusively based on merit. All the Group employees involved in the recruitment and management of staff are responsible for ensuring the policy is fairly applied within their areas of responsibility. The Group applies this approach throughout, at all levels. This includes its administrative, management and supervisory bodies, including the Board of directors of the Company. The composition and diversity information of the Board of directors of the Group for the year ended and as at 31 December 2020 is set out below: Name Age Male/Female Educational/professional background Constantinos Economides 45 Male Alexios Ioannides Mary Trimithiotou Martin Robert Cocker 44 43 61 Male Female Male Jacques Der Megreditchian 61 Male ICAEW, MSc in Management Sciences, experience in ‘Big Four’ professional services firms ICAEW, ICPAC, BSc in Business Administration, experience in ‘Big Four’ professional services firms ICPAC, FCCA, Licensed insolvency practitioner, experience in ‘Big Four’ professional services firms ICAEW, BSc in Mathematics and Economics, experience in ‘Big Four’ professional services firms BSc in Business Administration and in Financial Analysis, banking and finance experience Further details of the corporate governance regime of the Company can be found on the website: https://www.tinkoff.ru/eng/investor-relations/corporate-governance/. By Order of the Board Constantinos Economides Chairman of the Board Limassol 10 March 2021 F-9 F-10 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020 F-11 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Consolidated Statement of Financial Position Consolidated Statement of Profit or Loss and Other Comprehensive Income Note 31 December 2020 31 December 2019 In millions of RR Note 2020 2019 In millions of RR ASSETS Cash and cash equivalents Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Investments in securities Repurchase receivables Guarantee deposits with payment systems Brokerage receivables Current income tax assets Deferred income tax assets Tangible fixed assets and right-of-use assets Intangible assets Other financial assets Other non-financial assets TOTAL ASSETS LIABILITIES Due to banks Customer accounts Debt securities in issue Financial derivatives Brokerage payables Deferred income tax liabilities Subordinated debt Insurance provisions Other financial liabilities Other non-financial liabilities TOTAL LIABILITIES EQUITY Share capital Share premium Treasury shares Share-based payment reserve Retained earnings Revaluation reserve for investments in debt securities Equity attributable to shareholders of the Company Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 5 6 7 35 8 8 9 10 26 11 11 12 12 13 14 15 35 10 26 16 17 18 18 19 19 19 38 34 136,351 5,379 1,887 376,521 5,035 238,454 29 15,475 24,064 3,133 947 10,481 7,082 31,070 3,386 55,564 3,448 2,084 329,175 390 135,178 - 8,877 2,799 815 1,517 10,560 5,435 21,673 2,510 859,294 580,025 4,819 626,837 23,910 109 9,206 333 20,755 6,067 34,337 5,905 23 411,614 26,078 590 1,207 142 18,487 6,280 14,648 4,874 732,278 483,943 230 26,998 (3,238) 1,548 99,540 1,849 126,927 89 127,016 859,294 230 26,998 (3,164) 1,039 66,880 3,996 95,979 103 96,082 580,025 Approved for issue and signed on behalf of the Board of directors on 10 March 2021. Constantinos Economides Director Mary Trimithiotou Director 20 20 20 20 20 20 7,18 8 21 21 22 23 23 24 25 26 Interest income calculated using the effective interest rate method Other similar income Interest expense calculated using the effective interest rate method Other similar expense Expenses on deposit insurance Net margin Credit loss allowance for loans and advances to customers and credit related commitments Credit loss allowance (charge)/reversal for debt securities at FVOCI Total credit loss allowance for debt financial instruments Net margin after сredit loss allowance Fee and commission income Fee and commission expense Customer acquisition expense Net gains/(losses) from derivatives revaluation Net (losses)/gains from foreign exchange translation Net gains/(losses) from operations with foreign currencies Net gains from disposals of debt securities at FVOCI Net gains from financial assets at FVTPL Insurance premiums earned Insurance claims incurred Administrative and other operating expenses Net gains from repurchase of subordinated debt Other operating income Profit before tax Income tax expense Profit for the year Other comprehensive (loss)/income Items that may be reclassified to profit or loss Debt securities at FVOCI and Repurchase receivables: - Net gains arising during the year, net of tax - Net gains reclassified to profit or loss upon disposal, net of tax Other comprehensive (loss)/income for the year, net of tax Total comprehensive income for the year Profit is attributable to: - Shareholders of the Company - Non-controlling interest Total comprehensive income is attributable to: - Shareholders of the Company - Non-controlling interest Earnings per share for profit attributable to the Shareholders of the Company, basic (expressed in RR per share) Earnings per share for profit attributable to the Shareholders of the Company, diluted (expressed in RR per share) 19 19 128,084 111,129 83 118 (21,581) (21,317) (139) (1,745) (134) (1,870) 104,702 87,926 (38,972) (26,551) (369) 139 (39,341) (26,412) 65,361 47,609 (21,599) (22,588) 4,163 (6,850) 1,595 7,210 603 18,567 (3,814) 61,514 35,858 (15,123) (18,177) (2,563) 2,216 (968) 301 389 14,110 (4,891) (35,621) (27,852) 168 1,445 - 722 56,249 45,536 (12,036) 44,213 (9,413) 36,123 3,621 (5,768) (2,147) 5,381 (241) 5,140 42,066 41,263 44,209 36,122 4 1 42,062 41,262 4 1 225.60 193.62 223.73 190.05 The notes № 1-42 are an integral part of these Consolidated Financial Statements. The notes № 1-42 are an integral part of these Consolidated Financial Statements. F-21 F-22 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020                                                                                                      31 DECEMBER 2020 Consolidated Statement of Changes in Equity Attributable to shareholders of the Company e v r e s e r n o i t a u l a v e R n i s t n e m t s e v n i r o f s e i t i r u c e s t b e d - y a p d e s a b - e r a h S e v r e s e r t n e m i m u m e r p e r a h S l a t i p a c e r a h S e t o N s e r a h s y r u s a e r T i s g n n r a e d e n i a t e R g n i l - l o r t n o c - n o N t s e r e t n I l a t o T y t i u q e l a t o T 188 8,623 1,232 (1,144) (3,670) 36,785 42,014 236 42,250 In millions of RR Balance at 31 Decem- ber 2018 Profit for the year - - - - - 36,122 36,122 1 36,123 Other comprehensive income: Investments in debt securities at FVOCI and Repurchase re- ceivables Total comprehensive income for the year Shares issued Secondary public offering costs Acquisition of non-con- trolling interest in subsidiaries Share-based payment reserve Dividends declared Balance at 31 Decem- ber 2019 - - - - 42 18,874 - (499) - - - - - - - - - - - (193) - 19 19 19 27 5,140 - - 5,140 - 5,140 5,140 - 36,122 41,262 1 41,263 - - - - - - - - 18,916 - 18,916 - (499) - (499) - (327) (327) (134) (461) 506 156 469 - (5,856) (5,856) - - 469 (5,856) 230 26,998 1,039 3,996 (3,164) 66,880 95,979 103 96,082 Profit for the year - - - - - 44,209 44,209 4 44,213 Other comprehensive loss: Investments in debt securities at FVOCI and Repurchase re- ceivables Total comprehensive (loss)/income for the year GDRs buy-back Share-based payment reserve Dividends declared Balance at 31 Decem- ber 2020 - - - - - - - - - - 19 19 27 - (2,147) - - (2,147) - (2,147) - (2,147) - 44,209 42,062 4 42,066 - 509 - - - - (661) - (661) 587 (4) 1,092 - - (661) 1,092 - (11,545) (11,545) (18) (11,563) 230 26,998 1,548 1,849 (3,238) 99,540 126,927 89 127,016 Consolidated Statement of Cash Flows In millions of RR Note 2020 2019 Cash flows from operating activities Interest income received calculated using the effective interest rate method Other similar income received Interest expense paid calculated using the effective interest rate method Recoveries from written-off loans Expenses on deposits insurance paid Fees and commissions received Fees and commissions paid Customer acquisition expense paid Gains/(losses) from operations with foreign currencies received/(paid) Losses from operations with derivatives paid Insurance premiums received Insurance claims paid Recoveries from the purchased loans received Other operating income received Administrative and other operating expenses paid Income tax paid Cash flows from operating activities before changes in operating assets and liabilities Changes in operating assets and liabilities Net increase in CBRF mandatory reserves Net decrease/(increase) in due from banks Net increase in loans and advances to customers Net increase in brokerage receivables Net (increase)/decrease in debt securities measured at FVTPL Net increase in guarantee deposits with payment systems Net increase in other financial assets Net (increase)/decrease in other non-financial assets Net increase/(decrease) in due to banks Net increase in customer accounts Net increase in brokerage payables Net increase in other financial liabilities Net decrease in non-financial liabilities Net cash from operating activities Cash flows (used in)/from investing activities Acquisition of tangible fixed assets Acquisition of intangible assets Acquisition of investments in securities, repurchase receivables and other invest- ments Proceeds from sale and redemption of investments in securities Net cash used in investing activities Cash flows (used in)/from financing activities Dividends paid Repayment of debt securities in issue Repayment of subordinated debt GDRs buy-back Repayment of principal of lease liabilities Proceeds from subordinated debt Proceeds from debt securities in issue Proceeds from secondary public offering Secondary public offering costs paid Other financing activities cash flows Net cash (used in)/from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 129,555 11 (22,280) 4,063 (1,792) 47,613 (22,236) (21,116) 831 (934) 18,193 (3,629) 1,750 1,053 (30,456) (12,930) 107,854 175 (21,334) 3,420 (1,673) 35,802 (15,993) (19,272) (968) (647) 16,254 (4,337) 693 1,137 (26,119) (13,606) 87,696 61,386 (1,931) 197 (81,724) (21,265) (3,788) (4,325) (9,708) (1,038) 4,777 201,922 7,999 16,512 (39) 195,285 (2,076) (3,642) (1,013) (1,308) (151,771) (2,799) 5,879 (4,848) (4,046) 19 (2,685) 135,633 1,207 1,387 (524) 36,517 (1,783) (2,539) (375,444) 282,288 (98,874) (108,246) 71,000 (41,568) (11,853) (2,894) (1,937) (661) (758) 710 331 - - - (17,062) 1,438 80,787 55,564 136,351 (5,601) (6,583) - - (1,087) 46 23,254 18,916 (499) (461) 27,985 (1,172) 21,762 33,802 55,564 7 27 28 28 19 28 28 28 19 19 5 5 The notes № 1-42 are an integral part of these Consolidated Financial Statements. The notes № 1-42 are an integral part of these Consolidated Financial Statements. F-23 F-24 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020                                                                                                                                                                   31 DECEMBER 2020 Notes to the Consolidated Financial Statements 1 Introduction These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) for the year ended 31 December 2020 for TCS Group Holding PLC (the “Company”) and its subsidiaries (together referred to as the “Group”), and in accordance with the requirements of the Cyprus Companies Law, Cap.113. The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of the Companies Law, Cap. 113. The Board of directors of the Company at the date of authorisation of these consolidated financial statements consists of: Constantinos Economides, Alexios Ioannides, Mary Trimithiotou, Jacques Der Megreditchian and Martin Robert Cocker. The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol 3036, Cyprus. At 31 December 2020 and 2019 the share capital of the Company is comprised of class A shares and class B shares. A “class A” share is an ordinary share with a nominal value of USD 0.04 per share and carrying one vote. A “class B” share is an ordinary share with a nominal value of USD 0.04 per share and carrying 10 votes. As at 31 December 2020 the number of issued class A shares is 129,391,449 (2019: 119,291,268) and issued class B shares is 69,914,043 (2019: 80,014,224). Refer to Note 19 for further information on the share capital. On 25 October 2013 the Group completed an initial public offering of its class A ordinary shares in the form of global depository receipts (GDRs) listed on the London Stock Exchange plc. On 2 July 2019 the Group completed a secondary public offering (SPO) of its class A shares in the form of GDRs. On 28 October 2019 the Group’s GDRs started trading also on the Moscow Exchange. As at 31 December 2020 and 2019 the entities and the individuals holding either class A or class B shares of the Company were: Guaranty Nominees Limited (JP Morgan Chase Bank NA) Virtue Trustees (Switzerland) AG as Trustee of the Bernina Trust Virtue Trustees (Switzerland) AG as Trustee of the Rigi Trust Ioanna Georgiou Panagiota Charalambous Maria Vyra Chloi Panagiotou Leonora Chagianni Antonis Strati Marios Panayides Altoville Holdings Limited Nemorenti Limited Total Class of shares 31 December 2020 31 December 2019 Country of Incorporation Class A 64.92% 59.85% United Kingdom Class B 18.47% Class B Class A Class A Class A Class A Class A Class A Class A Class B Class B 16.61% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% - - - - - 0.00% 0.00% 0.00% 0.00% 0.00% - 0.00% 18.47% 21.68% Switzerland Switzerland Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus On 14 December 2020 10,100,181 class B shares of the Group held by the Rigi Trust were converted to class A shares. As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 87.03% to 84.38%. As at 31 December 2020 the ultimate controlling party of the Company was Mr. Oleg Tinkov, who controlled approximately 84.38% (2019: 87.03%) of the aggregated voting rights attached to the class A and B shares, excluding voting rights attach- ing to TCS Group Holding PLC GDRs he holds, if any. On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares, and on the same date all issued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of being exercised are equal to the total number of issued shares (currently 199,305,492 shares following the class B share conversion). The number of GDRs in issue remained unchanged. As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 84.38% to 35.08%. As a result his control over the Group was ceased. As at 31 December 2020 and 2019 the six individuals listed in the table above each held one share. The individuals hold them as nominees of Mr. Oleg Tinkov (31 December 2019: as nominees of Altoville Holdings Limited). The subsidiaries of the Group are set out below. Except where stated the Group owns 100% of shares and has 100% of voting rights of each of these subsidiaries as at 31 December 2020 and 2019. JSC “Tinkoff Bank” (the “Bank”) provides on-line retail banking services in Russia. The Bank specialises in issuing credit cards and other credit products. JSC “Tinkoff Insurance” (the “Insurance Company”) provides insurance services such as accident, property, travellers, financial risks and auto insurance. LLC Microfinance company “Т-Finans” provides micro-finance services. TCS Finance D.A.C. is a structured entity which issued debt securities including subordinated perpetual bonds for the Group. The Group neither owns shares nor has voting rights in this company. However, this entity was consolidated as it was specifically set up for the purposes of the Group, and the Group has exposure to substantially all risks and rewards through outstanding guarantees of the entity’s obligations. LLC “TCS” provides printing, distribution and other services to the Group. LLC “Phoenix” is a debt collection agency. LLC “Tinkoff Software DC” and LLC “Fintech DC” provide software development services. In August 2020 the Group ac- quired a 22.15% shareholding in Incantus Holding Limited by transferring its 100% shareholding in LLC “Fintech DC” to In- cantus Holding Limited and by providing a convertible loan (Notes 7 and 38). Incantus Holding Limited is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding CIS) through the mobile banking platform Vivid Money. In October 2020 a new venture capital fund has invested into the share capital of Incantus Holding Limited. As a result the Company’s shareholding in Incantus Holding Limited has decreased to 16.32%. LLC “Tinkoff Mobile” is a mobile virtual network operator set up in 2017 to provide mobile services. LLC “CloudPayments” is a developer of online payment solutions whose core business is online merchant acquiring in Russia. As at 31 December 2020 and 2019 the Group held 95% of the shares of LLC “CloudPayments”. 100.00% 100.00% ANO “Tinkoff Education” is a non-commercial organization set up by the Bank as the sole founder. Guaranty Nominees Limited is a company holding class A shares of the Company for which GDRs are issued under a de- posit agreement made between the Company and JP Morgan Chase Bank NA signed in October 2013. On 19 March 2020 Altoville Holdings Limited and Nemorenti Limited transferred all of the Company’s class B shares owned by them to two Tinkov family trusts. Russian entrepreneur Mr. Oleg Tinkov, who was the beneficial owner of Altoville Hold- ings Limited and Nemorenti Limited at 31 December 2019, remained the ultimate beneficiary of these B shares. LLC “Tinkoff Capital” is an asset management company established in June 2019 to manage investment funds, mutual funds and non-state pension funds. LLC “Tinkoff Invest Lab” is an infrastructure company created for supporting and optimizing of the Group’s investment services. F-25 F-26 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 1 Introduction (Continued) EBT is a special purpose trust which has been specifically created for the long-term incentive programme for Management of the Group (MLTIP). The Group neither owns shares nor has voting rights in EBT. Principal activity. The Group’s principal business activities are retail banking to private individuals, individual entrepre- neurs’ (“IE”) and small and medium enterprises’ (“SME”) accounts and banking services, brokerage services and insurance operations within the Russian Federation through the Bank and the Insurance Company. The Bank operates under general banking license No. 2673 issued by the Central Bank of the Russian Federation (“CBRF”) on 8 December 2006. The Insur- ance Company operates under an insurance license issued by the CBRF. The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law No. 177-FZ “Deposits insurance in banks of the Russian Federation” dated 23 December 2003. The State Deposit Insurance Agency guarantees repayment of up to RR 1.4 million per individual, individual entrepreneur and small enterprise deposits in case of the with- drawal of a license of a bank or a CBRF-imposed moratorium on payments. Registered address and place of business. The Company’s registered address is 25 Spyrou Araouzou, Berengaria 25, 5th floor, Limassol, Cyprus, and place of business is Office 403, Lophitis Business Centre I, Corner of 28th October/Emiliou Chourmouziou Streets, Limassol 3035 Cyprus. The Bank’s registered address is 1-st Volokolamsky proezd, 10, building 1, 123060, Moscow, Russian Federation. The Insurance Company’s registered address is 2-nd Khutorskaya Street, building 38A, 127287, Moscow, Russian Federation. The Group’s principal place of business is the Russian Federation. Presentation currency. These consolidated financial statements are presented in millions of Russian Rubles (RR). 2 Operating Environment of the Group Russian Federation. The Group operates mainly within the Russian Federation. There were a number of significant chang- es in the operating and economic environment during 2020, which had an impact on the Group’s business including: • In March 2020 the World Health Organization (WHO) announced that the spread of the COVID-19 virus across the globe is a pandemic. Significant restrictions on travel and movement of individuals and the closure of non-essential business- es have either been imposed in most countries or have happened as a result of the pandemic. This has led to significant declines in GDP in most if not all large economically strong countries. Russia has not been immune to the negative personal and economic hardships arising from this virus and from the response to it trying to limit its spread. • Oil prices have decreased significantly due to the significant reduction in oil consumption in the current economic cli- mate but demonstrated stable growth during the second quarter of 2020 and the rest of the year. This in turn has led to significant volatility and depreciation of the Russian Rouble exchange rate against the US dollar and the Euro. • Further, the capital markets (equities and bonds) have seen a substantial volatility in prices in many sectors. As of the reporting date and subsequently some of the restrictions imposed by government authorities in the Russian Federation due to the COVID-19 pandemic have been lifted and the Group observes that business activity in the Russian Federation is recovering. However, the level of ongoing uncertainty in relation to further negative developments around the COVID-19 pandemic and possible impact on the Group remains high. Hence it is practically impossible to make a compre- hensive quantitative assessment with a high degree of certainty of the impact of these changes to the economic environ- ment on the Group’s financial position, and in particular in considering credit loss allowances on the loan portfolio which requires to consider the probability of default of most borrowers in the next 12 months and for others over the life of their loan. Some other factors impacting on this are set out below. The Government of the Russian Federation has implemented various support measures for individuals and corporates im- pacted by the COVID-19 pandemic including their right in certain circumstances to obtain repayment holidays on their loans for up to 6 months and reduced rates of interest in this period. The Group has itself implemented several measures to support its clients, especially those who face financial difficulties and a significant decrease of current income due to the situation, including the below: • proposing internally developed loan restructuring programs as an alternative to the State announced programs which will result in either deferral or decrease in the minimal payments of outstanding loan balance for one or more months; • broadened cashback offers for debit cards more tailored to customer individual needs and spending behaviour; • provided several educational resources on its mobile app and website for borrowers to learn how to deal with potential unemployment or income decline, and how to request and obtain the most suitable debt restructuring program; • supported its small and medium-sized entities client base during the pandemic by lowering acquiring and account fees, offering payment holidays, helping SMEs to move online and launching 0% loans to pay salaries in partnership with the Russian Bank for SME support. According to IFRS 9 “Financial Instruments”, the Group uses forecast information in the expected credit loss models, including forecasts of macroeconomic indicators. For the purpose of calculating credit loss allowances as at 31 December 2020, the Group took into account expectations regarding the following macro-factors and allocated higher weight to the pessimistic macroeconomic scenario: • Russian stock market index MOEX; • Moscow Prime Offered Rate; • Debt load of Russian population based on statistics from bureaus of credit history. In order to reflect appropriately the uncertainty associated with the COVID-19 pandemic the Group has made the following changes to their ECL model: • the macro-adjustment calculation approach was refined to reflect the most recent impact of economic developments; • an adjustment to the loss given default was made to address lower expected recoveries during the upcoming quarters; • higher probabilities of default were applied to the loans which have been restructured. More detailed information about the changes and their impact on the results of the Group’s operations for the year ended 31 December 2020 is disclosed in Note 3. The management of the Group considers that the Group has demonstrated over the years and during the current COV- ID-crisis its ability to withstand shocks and retains its positive long-term outlook in particular due to the following advantag- es of the Group’s business model: • using flexible business structure, the Group swiftly shifted some of its resources from businesses that were needed to run more conservatively to businesses with higher growth prospects; • the Group has a highly liquid, diversified, foreign exchange hedged, and well-capitalized consolidated statement of financial position; • the Group’s digital model is exactly what is needed in the current environment and this can be seen in the ongoing increased online payment volumes as well as increased take up of its mobile lifestyle app, current accounts, and broker- age business; The Group regularly stress tests its business to assess the sustainability of its liquidity and capital positions. These tests demonstrate that Group’s current levels of capital and liquidity are more than sufficient to absorb potential economic and operational shocks related to a second wave of the COVID-19 pandemic. F-27 F-28 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies The Group makes estimates and assumptions that affect the amounts recognized in the consolidated financial statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluat- ed and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recog- nized in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: ECL measurement. Calculation and measurement of ECLs is an area of significant judgement and involves methodology, models and data inputs. The following components of ECL calculation have a major impact on credit loss allowance: proba- bility of default (“PD”) (impacted by definition of default, SICR, forward-looking scenarios and theirs weights) and loss given default (“LGD”). Refer to Note 29 for explanation of terms. The Group makes estimates and judgments, which are constantly analyzed based on statistical data, actual and forecast information, as well as management experience, including expec- tations regarding future events that are considered reasonable in the current circumstances. Refer to Note 29 for further information on ECL measurement. In order to address rising credit risks the Group adjusted the main approaches to assessing the level of expected credit losses that have the most significant effect on the amounts recognised in the consolidated financial statements: • the macroeconomic model has become more conservative, based on different scenarios: base, optimistic and pessimistic, and higher weight is assigned to the pessimistic scenario; • for loans in default the Group has applied increased coefficients of LGD; • the Group has estimated the volume of loans to individuals which were restructured despite no evidence of any SICR, as of the reporting date and applied higher PDs to such loans for the purposes of estimation of expected credit losses; The impact of the changed macroeconomic conditions assessed using the approaches described above was approximately RR 5.6 billion of additional credit loss allowance charge in the first half of 2020 and was the main driver of increased cost of risk. This additional credit loss allowance was charged at the end of the first quarter of 2020 in the early days of the pandemic. Despite most problems arising from such loans have rolled into the general ECL model, and also most loans that were restruc- tured in early 2020 as a result of the government of the Russian Federation and the bank’s response to the pandemic have subsequently been repaid and/or normalised, but given the unpredictability of current economic environment and uncertainty regarding its development the Group made a decision to keep the macro-adjustment at this level at 31 December 2020. In the second quarter of 2020 for the purposes of LGD estimation the Group has refined the approach to calculation of the rate used for discounting expected cash flows from defaulted loans. The refined approach is that the Group uses more disaggre- gated and specific discount rates for each credit product in the overall loan portfolio of the Group rather than one generic rate, which makes the estimate more precise. The impact of introducing this change comprised RR 0.9 billion of additional credit loss allowance charge. In the fourth quarter of 2020 having accumulated additional information the Group has refined its behavioural PD model used for PD estimation for credit card loans. Also the Group has refined PD models for secured loans and car loans using the most recent statistical data. The impact of introducing these changes comprised RR 0.2 billion of credit loss allowance recovery. In 2020 the Group has refined its approach to calculation of the impact of modification of original cash flows without derecog- nition on stage 3 loans credit loss allowance and gross carrying amount (refer to Note 7). In particular the Group refined the approach to estimation of timing of receipt of expected cash flows and related discounting effect. This refinement has not affected either amounts recognised in the consolidated statement of profit or loss and other comprehen- sive income or the amounts recognised in consolidated statement of financial position. An increase or decrease in PDs by 2% compared to PDs used in the ECL estimates calculated at 31 December 2020 would result in an increase or decrease in credit loss allowances of RR 5.2 billion (31 December 2019: by 1% RR 2.1 billion). An increase or decrease in LGDs by 2% compared to LGDs used in the ECL estimates calculated at 31 December 2020 would result in an increase or decrease in credit loss allowances of RR 1.5 billion (31 December 2019: by 1% RR 0.5 billion). Credit exposure on revolving credit facilities. For credit card loans, the Group's exposure to credit losses extends beyond the maximum contractual period of the facility. For such facilities the Group measures ECLs over the period that the Group is exposed to credit risk and ECLs are not mitigated by credit risk management actions. Application of this approach requires judgement: determining a period for measuring ECLs — the Group considers historical information and experience about: (a) the length of time for related defaults to occur on similar financial instruments following a SICR and (b) the credit risk management actions that the Group expects to take once the credit risk has increased (e.g. the reduction or removal of undrawn limits). For details of the period over which the Group is exposed to credit risk on revolving facilities and which is used as an approxima- tion of lifetime period for ECL calculation for stage 2 and stage 3 loans and advances to customers, refer to Note 29. Perpetual subordinated bonds. A perpetual subordinated bond issue in June 2017 was initially recognised in the amount of USD 295.8 million (RR 16.9 billion) represented by the funds received from investors less issuance costs. Subsequent measurement of this instrument is consistent with the accounting policy for debt securities in issue. Interest expense on the instrument is calcu- lated using the effective interest rate method and recognised in profit or loss for the year. In the event the accrued interest is paid, the payment decreases the balance of the liability. A cancellation of accrued interest for a given period results in its conversion, at the Group's option, into equity and therefore the respective amount of the liability is reclassified to equity. Foreign exchange translation gains and losses on the bond are recognised in profit or loss for the period. Application of this approach requires judgement: the Group has taken into consideration that there are contingent settlement provisions that could genuinely arise and as such has classified the perpetual subordinated bond instrument in its entirety as a liability, rather than equity, on the basis of the terms of issue which stipulate the possible redemption of the instrument in several cases other than liquidation of the issuer. If the Group had recognized this instrument as equity, then interest expense would only have been recognized when it was paid and treated as a distribution from equity rather than an expense in profit or loss. The Group also from time to time invests in perpetual subordinated bonds issued by third parties. The Group has taken into con- sideration that there are genuine contingent settlement provisions that could arise and as such has classified the investments in perpetual subordinated bonds as investments in debt securities on the basis of terms of issue which stipulate the possible redemption of the instrument in several cases other than liquidation of the issuer. The investments in these instruments are classified as debt investment securities measured at FVTPL since the analysis of the contractual cash flow characteristics resulted in acquired perpetual bonds not passing SPPI test. If the Group had recognized this instrument as equity instrument, then it could have been measured at FVTPL or FVOCI as the Group does not hold it for trading purposes. Interest income recognition. The effective interest method incorporates significant assumptions around expected loan lives as well as judgements of type of fees and costs that are included in interest income. Refer to Note 40. Unbundling of loans and insurance products. Certain loans issued by the Group are forgivable upon events such as the bor- rower's death, or the borrower becoming unemployed because the borrower had opted to purchase the Insurance Company's products to cover repayments of the related loan products issued by the Bank in such cases. The Group is able to measure the loans separately. Also the borrowers are able to take a loan without insurance at the time of issuance with no different interest rate and the borrowers can cancel the insurance products at any time, separately from the loan. Accordingly, the Group unbun- dles the loans from the insurance arrangement. The portion of the fee attributable to the insurance component (i.e. the amount paid to the Insurance Company to cover the insured risk) is recognised within Insurance premiums earned line (refer to Note 23). The remaining portion of the fee approximates a fee that the Bank would have earned on market terms for selling third party insurance products and it is recognised as a fee for selling credit protection within Fee and commission income line (refer to Note 21). The timing of recognition of the two income streams does not materially vary as the insurance coverage is sold on a monthly basis. Tax legislation. Russian and Cypriot tax, currency and customs legislation are subject to varying interpretations. Refer to Note 31. F-29 F-30 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 4 Segment Analysis Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the perfor- mance for the Group. The functions of CODM are performed by the Management of the Bank and the Management of the Insurance Company. Description of products and services from which each reportable segment derives its revenue Since the business of the Group is expanding certain operating segments became significant enough to be considered as separate reportable segments. This triggered changes in the number and composition of segments to be presented. Disclosures for comparative periods were amended accordingly. The Group is organised on the basis of 7 main business segments: Consumer finance – representing retail loans (credit cards, cash loans, consumer loans, car loans, secured loans), deposits and savings, also lifestyles and travel services to individuals. Retail debit cards – representing customer current accounts services to individuals with the loyalty programmes, co-brand- ed offers, and also lifestyles and travel services to individuals. Assets of the segment are represented by placements of the funds attracted in investments in securities, treasury transactions, other financial and non-financial assets. InsurTech – representing insurance services provided to individuals, such as personal accident insurance, personal proper- ty insurance, travel insurance and vehicle insurance (Note 23). SME services – representing customer current accounts, savings, deposits services and loans to individual entrepreneurs and small to medium businesses. Assets of the segment are represented by placements of the funds attracted into invest- ments in securities, treasury transactions, other financial and non-financial assets. Acquiring and payments – providing merchants and businesses the ability to process payments online using internet and offline acquiring services, through direct-to-merchant agreements, aggregators and the Group's own aggregator CloudPay- ments. InvestTech - representing online brokerage platform for investing in a range of securities including Russian and internation- al securities (ETFs, stocks, bonds, etc.). Mobile virtual network operator (MVNO) services - providing full coverage across Russia and international roaming, offering a number of value-added options such as virtual numbers, music and video streaming services, etc. The Group’s principal activities are mainly undertaken within the Russian Federation. Given the retail nature of business of the segments, the Group does not have any significant revenue stream from any single customer. Factors that management used to identify the reportable segments The Group’s segments are strategic business units that focus on different services to the customers of the Group. Their performance is analysed separately by the CODM and they are managed separately because each business unit requires different marketing strategies and represents different types of businesses. Measurement of operating segment profit or loss, assets and liabilities The CODM reviews financial information prepared based on International financial reporting standards adjusted to meet the requirements of internal reporting. The CODM evaluates performance of each segment based on profit before tax. Information about reportable segment assets and liabilities, profit or loss Segment reporting of the Group’s assets and liabilities as at 31 December 2020 is set out below: In millions of RR Reportable seg- ment assets Reportable seg- ment liabilities Con- sumer Finance Retail Debit Cards Insur- Tech SME Services Acquiring and Pay- ments Invest- Tech MVNO servic- es Elimina- tions Total 458,245 245,923 12,437 55,517 15,563 73,773 755 (2,919) 859,294 203,723 345,585 6,901 91,412 649 83,428 3,499 (2,919) 732,278 Segment reporting of the Group’s assets and liabilities as at 31 December 2019 is set out below: Con- sumer Finance Retail Debit Cards Insur- Tech SME Services Acquiring and Pay- ments Invest- Tech MVNO servic- es Elimina- tions Total 386,690 135,925 10,911 36,566 8,812 4,666 734 (4,279) 580,025 198,057 205,840 7,032 62,054 644 13,625 970 (4,279) 483,943 In millions of RR Reportable seg- ment assets Reportable seg- ment liabilities All jointly used assets, such as fixed assets, rights of use assets and intangible assets were allocated to the segments on the basis of detailed analysis of usage of those assets by segments. Segment reporting of the Group’s income and expenses for the year ended 31 December 2020 is set out below: In millions of RR External revenues Interest income calculated using the effective interest rate method Fee and commission income - Fee and commis- sion income on cards' and current accounts' services - Fee for selling cred- it protection - Acquiring commis- sion - MVNO and invest- ments services - Other fees receiv- able Timing of fee and commission income recognition: - At point in time - Over time Consumer Finance Retail Deb- it Cards Insur- Tech SME Services Acquiring and Pay- ments In- vest- Tech MVNO services Elimina- tions Total 113,494 9,092 409 2,358 - 2,804 10 - 128,167 2,715 11,154 4,657 - - - - - 739 982 5,906 2,205 10,396 1,740 - - - - - - - 9,147 - - - - - - 11,049 261 15 - - - - - 4,998 1,815 77 - - 5,346 3,801 11,126 4,927 511 - 332 1,319 - - - - - - - 23,292 4,657 11,049 6,813 1,798 38,212 9,397 F-31 F-32 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 4 Segment Analysis (Continued) Consumer Finance Retail Deb- it Cards Insur- Tech SME Services Acquiring and Pay- ments In- vest- Tech MVNO services Elimina- tions 8,111 12,136 - 9,147 11,126 5,259 1,830 - - 18,567 1,169 - 250 - - - 26 - - - - - - - Total 47,609 18,567 1,445 122,774 21,228 19,226 11,505 11,152 8,063 1,840 - 195,788 In millions of RR Total fee and com- mission income Insurance premiums earned Other operating income Total external rev- enues Revenues from other segments Interest income - 2,737 56 1,244 - Fee and commission income - Acquiring commis- sion - Other fees receiv- able Insurance premiums earned Other operating income Total revenues from other segments - 2 - 371 - 251 - - - - 72 - - - - - 85 - - - 373 2,988 128 1,244 85 - - - - - - - (4,037) - (85) 379 (632) - - (72) (371) 379 (5,197) - - - - - - TOTAL REVENUES 123,147 24,216 19,354 12,749 11,237 8,063 2,219 (5,197) 195,788 Interest expense (16,965) (9,322) (38,243) (372) - - (1,215) (726) - - - - - - 4,037 (23,465) - (39,341) Credit loss allow- ance charge Fee and commission expense Customer acquisi- tion expense Insurance claims incurred Administrative and other operating expenses (1,889) (9,266) (88) (803) (6,976) (1,491) (1,214) 128 (21,599) (12,466) (4,042) (1,143) (1,385) (311) (3,111) (1,028) 898 (22,588) - - (3,842) - - - - 28 (3,814) (17,304) (5,698) (3,759) (4,322) (1,656) (2,027) (961) 106 (35,621) Other (losses)/ gains (610) 5,935 219 1,345 - - - SEGMENT RESULT 35,670 1,451 10,741 5,643 2,294 1,434 (984) - - 6,889 56,249 Segment reporting of the Group’s income and expenses for the year ended 31 December 2019 is set out below: Consumer Finance Retail Debit Cards Insur- Tech SME Services Acquir- ing and Pay- ments Invest- Tech MVNO services Elimina- tions Total 103,077 5,673 322 1,883 - 284 8 - 111,247 In millions of RR External revenues Interest income calculated using the effective interest rate method Fee and commission income - Fee and commission income on cards' and current accounts' services - Fee for selling credit protection - Acquiring commis- sion - MVNO and invest- ments services Timing of fee and commission income recognition: - At point in time - Over time Total fee and commis- sion income Insurance premiums earned Other operating income Total external reve- nues Revenues from other segments Interest income Fee and commission income - Acquiring commis- sion - Other fees receivable Insurance premiums earned Other operating income - - - - - - - - - - 19,339 5,550 8,342 1,525 1,102 28,730 7,128 35,858 14,110 722 2,665 8,759 5,550 - - - - - 7,867 - - - - - - 8,342 33 15 - - - - - 54 635 - 890 - - Other fees receivable 456 592 - - - - - - - - 6,656 2,015 8,122 1,229 8,671 9,351 4,791 3,076 8,396 - 530 138 7,867 8,396 668 - - 14,110 - 364 - 288 69 - - - - 235 670 905 - 1 112,112 15,024 14,720 9,819 8,396 952 914 - 161,937 - - - - 380 3,739 83 1,327 - - 83 - - - - 135 - - - - - 85 - - - - - - - - 1 (5,150) - (85) 250 (333) - - (135) (380) - - - - - F-33 F-34 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                          31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 4 Segment Analysis (Continued) Consumer Finance Retail Debit Cards Insur- Tech SME Services Acquir- ing and Pay- ments Invest- Tech MVNO services Elimina- tions Total 380 3,822 218 1,327 85 - 251 (6,083) - In millions of RR Total revenues from other segments TOTAL REVENUES 112,492 18,846 14,938 11,146 8,481 952 1,165 (6,083) 161,937 Interest expense (18,273) (8,561) (26,429) 61 - - (1,632) (44) - - - - (5) 5,150 (23,321) - - (26,412) Credit loss allowance (charge)/reserval Fee and commission expense Customer acquisition expense Insurance claims incurred Administrative and other operating ex- penses (2,581) (4,682) (21) (729) (6,119) (166) (910) 85 (15,123) (11,380) (2,024) (1,392) (2,150) (112) (841) (1,064) 786 (18,177) - - (4,891) - - - - - (4,891) (15,052) (4,615) (2,320) (3,408) (967) (715) (837) 62 (27,852) Other (losses)/ gains SEGMENT RESULT (1,299) 37,478 581 (16) 109 - - - (394) 6,298 3,292 1,283 (770) (1,651) - - (625) 45,536 Fee and commission income on cards’ and current accounts’ services include SME services commission, SMS fee, inter- change fee, foreign currency exchange transactions fee, fee for money transfers, cash withdrawal fee and replenishment fee. Interest income and interest expense from other segments amounted to RR 4,037 million for the year ended 31 December 2020 (2019: RR 5,150 million) are calculated using the funds transfer pricing curve. 5 Cash and Cash Equivalents In millions of RR Cash on hand Cash balances with the CBRF (other than mandatory reserve deposits) Placements with other banks with original maturities of less than three months: - AA- to AA+ rated - A- to A+ rated - BBB- to BBB+ rated - BB- to BB+ rated - B- to B+ rated - CCC+ rated Non-bank credit organizations: - BBB- to BBB+ rated - Unrated Total Cash and Cash Equivalents 31 December 2020 31 December 2019 21,069 38,646 11,118 16,599 6,404 1,328 1,276 646 499 - 53,764 12,719 136,351 2,302 599 1,430 503 67 2 20,088 2,856 55,564 Cash on hand includes cash balances in ATMs and cash balances in transit. Placements with other banks and organizations with original maturities of less than three months include placements under reverse sale and repurchase agreements in the amount of RR 33,210 million as at 31 December 2020 (31 December 2019: RR 18,449 million). The Group has a right to sell or repledge securities received under reverse sale and repurchase agreements. The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 De- cember 2020: In millions of RR Excellent Good Monitor Sub-standard Cash balances with the CBRF Placements with other banks and non-bank credit organizations - 38,646 - - 7,732 55,686 12,956 262 Total 7,732 94,332 12,956 262 Total cash and cash equivalents, excluding cash on hand 38,646 76,636 115,282 The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 De- cember 2019: In millions of RR Excellent Good Monitor Doubtful Total cash and cash equivalents, excluding cash on hand Cash balances with the CBRF Placements with other banks and non-bank credit organizations - 16,599 - - 16,599 2,901 22,023 2,921 2 27,847 Total 2,901 38,622 2,921 2 44,446 The carrying amount of cash and cash equivalents at 31 December 2020 and 2019 also represents the Group’s maximum exposure to credit risk on these assets. Refer to Note 29 for the description of the Group’s credit risk grading system. For the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1 for excellent, good and monitor credit quality, in Stage 2 for sub-standard and Stage 3 for doubtful credit quality. The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any credit loss allowance for cash and cash equiv- alents. Except for reverse sale and repurchase agreements, amounts of cash and cash equivalents are not collateralised. As at 31 December 2020 the fair value of collateral under reverse sale and repurchase agreements was RR 34,527 million (31 December 2019: RR 20,130 million). There is no material impact of collateral on credit loss allowance for cash and cash equivalents. Refer to Note 36 for the disclosure of the fair value of cash and cash equivalents. ECL measurement approach, interest rate, maturity and geographical risk concentration analysis of cash and cash equivalents are disclosed in Note 29. F-35 F-36 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 6 Due from Other Banks Gross carrying amount and credit loss allowance amount for loans and advances to customers at AC by classes at 31 De- cember 2020 and 2019 are disclosed in the table below: In millions of RR 31 December 2020 31 December 2019 31 December 2020 31 December 2019 Placements with other banks with original maturities of more than three months - BBB- rated - BB- to BB+ rated - B- to B+ rated Total due from other banks - 1,406 481 1,887 204 1,419 461 2,084 The table below discloses the credit quality of due from banks balances based on credit risk grades: In millions of RR Good Monitor Total due from other banks 31 December 2020 31 December 2019 1,406 481 1,887 1,577 507 2,084 The carrying amount of due from other banks at 31 December 2020 and 2019 also represents the Group’s maximum expo- sure to credit risk on these assets. Refer to Note 29 for the description of credit risk grading system used by the Group. For the purpose of ECL measurement due from other banks balances are included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Group did not create any credit loss allowance for due from other banks. Refer to Note 29 for the ECL measurement approach. Refer to Note 36 for the disclosure of the fair value of due from other banks. Interest rate, maturity and geographical risk concentration analysis are disclosed in Note 29. 7 Loans and Advances to Customers In millions of RR 31 December 2020 31 December 2019 Gross carrying amount of loans and advances to customers at AC Less credit loss allowance Total carrying amount of loans and advances to customers at AC Loans and advances to customers at FVTPL Total loans and advances to customers 445,529 (70,900) 374,629 1,892 376,521 383,912 (54,737) 329,175 - 329,175 Loans and advances to customers at FVTPL represent a loan that does not meet SPPI requirement and that was issued to related party (refer to Note 38). In millions of RR Credit card loans Cash loans Secured loans POS loans Car loans Loans to IE and SME Total loans and advances to customers at AC Gross carry- ing amount Credit loss allowance Carrying amount Gross carry- ing amount Credit loss allowance Carrying amount 267,586 68,131 40,232 32,690 33,991 2,899 (54,242) (11,055) (1,099) (1,611) (2,144) (749) 213,344 244,937 (44,129) 200,808 57,076 39,133 31,079 31,847 2,150 62,265 29,601 25,940 20,156 1,013 (8,029) (496) (1,057) (913) (113) 54,236 29,105 24,883 19,243 900 445,529 (70,900) 374,629 383,912 (54,737) 329,175 Credit cards are issued to customers for cash withdrawals or payment for goods or services, within the range of limits established by the Bank. These limits may be increased or decreased from time-to-time based on management decision. Credit card loans are not collateralized. Cash loans represent a product for the borrowers who have a positive credit history and who do not have overdue loans in other banks. Cash loans are loans provided to customers via the Bank’s debit cards. These loans are available for withdraw- al without commission. Secured loans represent loans secured with a car or real estate. POS (“Point of sale”) loans represent loans to fund online and offline purchases through internet and offline shops for indi- vidual borrowers. Car loans represent loans for the purchase of a vehicle which is used as collateral under the loan. Loans to IE and SME represent loans provided by the Bank to individual entrepreneurs and small and medium businesses for the purpose of working capital management. The credit loss allowance for loans and advances to customers recognised in the period is impacted by a variety of factors. The main movements in the tables presented below are described as follows: • new originated or purchased category represents the gross carrying amounts and the related ECL of purchased loans and loans issued during the reporting period (and withdrawals of limits of new credit card borrowers) as at the end of the reporting period or as at the date of transfer of loan out of stage 1 (whichever date is earlier); • transfers between Stage 1, 2 and 3 due to balances experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and lifetime ECL. Transfers present the amount of credit loss allowance charged or recovered at the moment of transfer of a loan among the respective stages; • changes to ECL measurement model assumptions and estimates represent movements due to changes in PDs, EADs and LGDs models during the period; • movements other than transfers and new originated or purchased loans category represent all other movements of ECL in particular related to changes in gross carrying amounts (including drawdowns, repayments, and accrued interest), as well as updates of inputs to ECL model in the period; • write-offs of allowances are related to assets that were written-off during the period; • unwinding of discount (for Stage 3) category represents adjustment to credit loss allowance and gross carrying amount for Stage 3 loans to increase it to discounted amount of the expected cash shortfalls to the reporting date using the effective interest rate; • Modification of original cash flows without derecognition represents adjustment to credit loss allowance and gross carrying amount of Stage 3 loans caused by the modification of terms of those loans which is not substantial. F-37 F-38 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS    31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) The following tables disclose the changes in the credit loss allowance and gross carrying amount for loans and advances to customers between the beginning and the end of the reporting and comparative periods: Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S t i d e r c d e t a n g i i r o / d e s a h c r u P d e r i a p m i l a t o T l a t o T In millions of RR Credit card loans At 31 December 2019 11,704 6,853 25,572 44,129 197,796 11,432 35,373 336 244,937 Movements with impact on credit loss allowance charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measurement model assumptions and estimates Movements other than transfers and new orig- inated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Sales Modification of original cash flows without derecognition 4,037 - - 4,037 49,264 - - 130 49,394 (2,520) 6,396 - 3,876 (11,557) 11,557 - (5,642) (6,697) 29,371 17,032 (27,133) (9,677) 36,810 328 (784) (23) (479) 1,416 (1,388) (28) - - - - - - 2,960 633 1,936 5,529 - - - - - 5,574 1,159 (4,307) 2,426 288 (166) (4,089) (285) (4,252) 4,737 707 26,977 32,421 12,278 326 32,693 (155) 45,142 - - - - - - - 5,713 5,713 (14,071) (14,071) (2,134) (2,134) - (11,816) (11,816) - - - - - - - 5,713 (14,071) (2,319) - - - 5,713 (14,071) (2,319) - (11,816) - (11,816) Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S t i d e r c d e t a n g i i r o / d e s a h c r u P d e r i a p m i l a t o T l a t o T In millions of RR Credit card loans At 31 December 2018 9,266 4,708 19,322 33,296 145,732 6,654 25,497 107 177,990 Movements with impact on credit loss allowance charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measurement model assumptions and estimates Movements other than transfers and new originated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge the year Unwinding of discount (for Stage 3) Write-offs Sales Modification of origi- nal cash flows without derecognition 5,356 - - 5,356 63,177 - (2,478) 6,097 - 3,619 (11,142) 11,142 - - (4,644) (4,111) 21,348 12,593 (21,206) (5,322) 26,528 233 (756) (21) (544) 1,101 (1,077) (24) (387) - (26) (413) - - - 241 63,418 - - - - - - - - 4,358 915 (4,267) 1,006 20,134 35 (5,771) (12) 14,386 2,438 2,145 17,034 21,617 52,064 4,778 20,733 229 77,804 - - - - - - - 3,133 3,133 (10,999) (10,999) (986) (986) - (1,932) (1,932) - - - - - - - 3,133 (10,999) (1,059) - - - 3,133 (10,999) (1,059) - (1,932) - (1,932) At 31 December 2020 16,441 7,560 30,241 54,242 210,074 11,758 45,573 181 267,586 At 31 December 2019 11,704 6,853 25,572 44,129 197,796 11,432 35,373 336 244,937 F-39 F-40 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                                        Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i / d e s a h c r u P d e t a n g i i r o - m i t i d e r c d e r i a p l a t o T l a t o T In millions of RR Cash loans 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) In millions of RR Cash loans At 31 December 2019 2,358 1,882 3,789 8,029 51,925 5,034 4,670 636 62,265 Movements with impact on credit loss allowance charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measurement model assumptions and estimates Movements other than transfers and new originated or pur- chased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Sales Modification of origi- nal cash flows without derecognition 2,532 - - 2,532 40,074 - (686) 3,078 - 2,392 (5,116) 5,116 - - (1,393) (1,809) 5,911 2,709 (4,273) (2,353) 6,626 60 (258) (2) (200) 982 (979) (3) 701 126 291 1,118 - - - 259 40,333 - - - - - - - - 548 (978) (876) (1,306) (27,406) (2,051) (297) (465) (30,219) 1,762 159 5,324 7,245 4,261 (267) 6,326 (206) 10,114 - - - - - - - 519 519 (2,363) (2,363) (397) (397) - (1,978) (1,978) - - - - - - - 519 (2,363) (426) - - - 519 (2,363) (426) - (1,978) - (1,978) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T d e r i a p m i t i d e r c / d e s a h c r u P d e t a n g i i r o l a t o T At 31 December 2018 1,116 545 670 2,331 32,651 1,776 767 301 35,495 Movements with impact on credit loss allowance charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measurement model assumptions and estimates Movements other than transfers and new orig- inated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge the year Unwinding of discount (for Stage 3) Write-offs Sales Modification of original cash flows without derecognition 2,628 - - 2,628 44,199 - (587) 2,960 - 2,373 (5,663) 5,663 - - (897) (528) 3,927 2,502 (3,536) (699) 4,235 14 (78) - (64) 408 (408) (22) - (1) (23) - - - - 422 44,621 - - - - - - - - 106 (1,017) 193 (718) (16,134) (1,298) 676 (87) (16,843) 1,242 1,337 4,119 6,698 19,274 3,258 4,911 335 27,778 - - - - - - - - 138 138 (524) (524) (114) (114) (500) (500) - - - - - - - - 138 (524) (122) - - - 138 (524) (122) (500) - (500) At 31 December 2020 4,120 2,041 4,894 11,055 56,186 4,767 6,748 430 68,131 At 31 December 2019 2,358 1,882 3,789 8,029 51,925 5,034 4,670 636 62,265 F-41 F-42 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Secured Loans At 31 December 2019 150 264 82 496 27,366 2,037 198 29,601 Movements with impact on credit loss allowance charge for the year: New originated or purchased 141 - - 141 21,517 - - 21,517 Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measure- ment model assumptions and estimates Movements other than trans- fers and new originated or purchased loans Total movements with impact on credit loss allow- ance charge for the year Movements without impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Modification of original cash flows (40) 954 - 914 (4,120) 4,120 - (15) (135) 371 221 (524) (355) 879 3 (41) (3) (41) 516 (509) (7) 67 3 9 79 - - - - - - - (50) (563) (21) (634) (9,512) (1,178) (119) (10,809) 106 218 356 680 7,877 2,078 753 10,708 - - - - - - 46 46 (16) (16) (107) (107) - - - - - - 46 (16) 46 (16) (107) (107) At 31 December 2020 256 482 361 1,099 35,243 4,115 874 40,232 Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S 15 r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I 1 r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S l a t o T - 16 2,641 r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S l a t o T - 2,644 ) R C S I 3 In millions of RR Secured Loans At 31 December 2018 Movements with impact on credit loss allowance charge for the year: New originated or purchased 168 - - 168 27,907 - - 27,907 (23) 499 - 476 (2,141) 2,141 - (6) - - - 81 75 (203) - 203 - - 1 (1) - - - - (4) (236) 6 (234) (839) (106) - (945) 135 263 87 485 24,725 2,034 203 26,962 Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) Movements other than transfers and new originated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge the year Unwinding of discount (for Stage 3) Modification of original cash flows At 31 December 2019 150 264 496 27,366 2,037 198 29,601 - - - - 3 3 (8) (8) 82 - - - - 3 3 (8) (8) F-43 F-44 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S l a t o T ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S t i d e r c d e t a n g i i r o / d e s a h c r u P d e r i a p m i l a t o T In millions of RR POS loans At 31 December 2019 298 190 569 1,057 24,031 1,053 658 198 25,940 In millions of RR POS loans Movements with impact on credit loss allowance charge for the year: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measure- ment model assumptions and estimates Movements other than transfers and new origi- nated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Sales Modification of origi- nal cash flows without derecognition 525 - - 525 29,695 - (83) 642 - 559 (1,863) 1,863 - - (119) (234) 1,023 670 (751) (354) 1,105 3 (15) - (12) 206 (206) 40 3 16 59 - - - - 226 29,921 - - - - - - - - (137) (359) (209) (705) (21,040) (1,276) (173) (137) (22,626) 229 37 830 1,096 6,247 27 932 89 7,295 - - - - - - - 46 46 (360) (360) (50) (50) - (178) (178) - - - - - - - 46 (360) (53) - - - 46 (360) (53) Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S ) L C E s h t n o m - 2 1 ( 1 e g a t S r o f L C E e m i t e f i l ( 2 e g a t S ) R C S I r o f L C E e m i t e f i l ( ) d e r i a p m i t i d e r c 3 e g a t S t i d e r c d e t a n g i i r o / d e s a h c r u P d e r i a p m i l a t o T l a t o T At 31 December 2018 190 81 189 460 14,560 505 210 105 15,380 Movements with impact on credit loss allowance charge for the year: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL meas- urement model assump- tions and estimates Movements other than transfers and new originated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge the year Unwinding of discount (for Stage 3) Write-offs Sales Modification of original cash flows without derecognition 357 - - 357 23,779 - (61) 479 - 418 (1,673) 1,673 - - (71) (92) 614 451 (518) (137) 655 1 (7) - (6) 112 (112) (15) (7) (1) (23) - - - - 145 23,924 - - - - - - - - (103) (264) (61) (428) (12,229) (876) (34) (52) (13,191) 108 109 552 769 9,471 548 621 93 10,733 - - - - - - - - 19 19 (131) (131) (23) (23) (37) (37) - - - - - - - - 19 (131) (24) - - - 19 (131) (24) (37) - (37) At 31 December 2020 527 227 857 1,611 30,278 1,080 1,045 287 32,690 F-45 F-46 - (178) - (178) At 31 December 2019 298 190 569 1,057 24,031 1,053 658 198 25,940 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i l a t o T In millions of RR Car Loans At 31 December 2019 368 285 260 913 18,725 1,060 371 20,156 Movements with impact on credit loss allowance charge for the year: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - recovered (from Stage 3 to Stage 2 and from Stage 2 to Stage 1) Changes to ECL measure- ment model assumptions and estimates Movements other than transfers and new originat- ed or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without im- pact on credit loss allow- ance charge for the year: Unwinding of discount (for Stage 3) Write-offs Modification of original cash flows 485 - - 485 21,598 - - 21,598 (141) 844 - 703 (1,926) 1,926 - (184) (232) 770 354 (739) (352) 1,091 10 (50) - (40) 308 (307) (1) 105 13 32 150 - - - - - - - 21 (302) 38 (243) (7,250) (315) (20) (7,585) 296 273 840 1,409 11,991 952 1,070 14,013 - - - - - - 81 (63) 81 (63) (196) (196) - - - - - - 81 (63) 81 (63) (196) (196) At 31 December 2020 664 558 922 2,144 30,716 2,012 1,263 33,991 Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i l a t o T In millions of RR Car Loans At 31 December 2018 56 25 4 85 2,754 78 6 2,838 Movements with impact on credit loss allowance charge for the year: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) Changes to ECL measure- ment model assumptions and estimates Movements other than transfers and new originat- ed or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without im- pact on credit loss allow- ance charge the year Unwinding of discount (for Stage 3) Modification of original cash flows 469 - - 469 18,238 - - 18,238 (98) 466 - 368 (1,087) 1,087 - (72) (23) 248 153 (320) (34) 354 1 (4) (1) - - - (3) 24 (24) (1) - - - - - - - - 13 (179) (1) (167) (884) (47) 2 (929) 312 260 247 819 15,971 982 356 17,309 - - - - 12 12 (3) (3) - - - - 12 12 (3) (3) At 31 December 2019 368 285 260 913 18,725 1,060 371 20,156 F-47 F-48 * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union. TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i l a t o T In millions of RR Loans to IE and SME In millions of RR Loans to IE and SME At 31 December 2019 57 10 46 113 940 21 52 1,013 Movements with impact on credit loss allowance charge for the year: New originated or purchased 28 - - 28 676 - - 676 Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) Movements other than trans- fers and new originated or purchased loans Changes to ECL measurement Movements other than trans- fers and new originated or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs (143) 314 - 171 (375) 375 (16) (13) 77 48 (69) (17) - 86 - - 399 10 (20) - - 3 379 1,268 (56) 13 - - 1 - 1,213 - 399 (20) - 379 1,268 (56) 1 1,213 278 281 80 639 1,500 302 87 1,889 - - - - 11 (14) 11 (14) - - - - 11 (14) 11 (14) Movements with impact on credit loss allowance charge for the year: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) Movements other than transfers and new originat- ed or purchased loans Total movements with impact on credit loss allowance charge for the year Movements without im- pact on credit loss allow- ance charge the year Unwinding of discount (for Stage 3) Modification of original cash flows Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( 3 e g a t S t i d e r c r o f ) d e r i a p m i l a t o T At 31 December 2018 13 10 10 33 332 21 10 363 13 - (4) 26 - - 13 301 - - 301 22 (58) 58 - (8) (7) 44 29 (39) (8) 47 - - - - 1 (1) - - - - 43 (19) (13) 11 403 (49) (10) 344 44 - 31 75 608 - 37 645 - - - - 5 - 46 5 - - - - - 5 - 5 - 113 940 21 52 1,013 At 31 December 2020 335 291 123 749 2,440 323 136 2,899 At 31 December 2019 57 10 The credit loss allowance charge during the year ended 31 December 2020 presented in the tables above differs from the amount presented in the consolidated statement of profit or loss and other comprehensive income for the year due to RR 4,063 million (2019: RR 3,420 million) recovery of amounts previously written-off as uncollectible, due to RR 1,750 million (2019: RR 693 million) recovery from the purchased loans in excess of their gross carrying amount, and due to RR 1,295 mil- lion (2019: RR 201 million) charge of ECL for credit related commitments, including RR 638 million of charge due to changes to ECL measurement model assumptions and estimates. The amount of the recovery received from written-off loans and purchased loans during the year was credited directly to the credit loss allowance line in the consolidated statement of profit or loss and other comprehensive income. F-49 F-50 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) The contractual amount outstanding of loans and advances to customers which were written off during the reporting period ended 31 December 2020 and are still subject to enforcement activity is equal to RR 13,966 million (reporting period ended 31 December 2019: RR 10,095 million). The amount of the ECL for credit related commitments is accounted separately from ECL for credit cards loans and is included in other financial liabilities in the consolidated statement of financial position. During the year ended 31 December 2020 the Group sold credit-impaired loans to third parties (external debt collection agencies) with a gross amount of RR 2,798 million (2019: RR 1,205 million) and credit loss allowance of RR 2,581 million (2019: RR 1,123 million). The difference between the carrying amount of these loans and the consideration received was recognised as losses in the amount of RR 186 million within credit loss allowance for loans and advances to customers and credit related commitments for the year ended 31 December 2020 (2019: losses in the amount of RR 73 million). Presented below is an analysis of issued, activated and utilised cards based on their credit card limits as at the end of the reporting period: In units Credit card limits Up to 20 RR thousand 20-40 RR thousand 40-60 RR thousand 60-80 RR thousand 80-100 RR thousand 100-120 RR thousand 120-140 RR thousand 140-200 RR thousand More than 200 RR thousand Total number of cards (in units) Table above only includes credit cards less than 180 days overdue. 31 December 2020 31 December 2019 1,046,228 538,746 497,940 495,431 479,786 331,606 378,547 870,503 225,417 781,128 482,343 451,425 455,978 440,139 322,726 365,750 772,992 180,731 4,864,204 4,253,212 The following table contains an analysis of the credit risk exposure of loans and advances to customers measured at AC and for which an ECL allowance is recognised. The carrying amount of loans and advances to customers below also repre- sents the Group's maximum exposure to credit risk on these loans. Loans and advances to customers at 31 December 2020 are disclosed as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit impaired) Purchased/ originated credit impaired In millions of RR Credit card loans - Excellent - Good - Monitor - Sub-standard - NPL 68,398 131,957 9,719 - - Gross carrying amount 210,074 Credit loss allowance Carrying amount (16,441) 193,633 Cash loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Secured Loans - Excellent - Good - Monitor - Sub-standard - NPL 33,877 22,053 256 - - 56,186 (4,120) 52,066 21,201 13,937 105 - - Gross carrying amount 35,243 Credit loss allowance Carrying amount (256) 34,987 - 1,891 3,757 6,110 - 11,758 (7,560) 4,198 - 3,189 546 1,032 - 4,767 (2,041) 2,726 - 3,307 442 366 - 4,115 (482) 3,633 - - - 9,326 36,247 45,573 (30,241) 15,332 - - - 989 5,759 6,748 (4,894) 1,854 - - - - 874 874 (361) 513 - - - - 181 181 - 181 - - - - 430 430 - 430 - - - - - - - - Total 68,398 133,848 13,476 15,436 36,428 267,586 (54,242) 213,344 33,877 25,242 802 2,021 6,189 68,131 (11,055) 57,076 21,201 17,244 547 366 874 40,232 (1,099) 39,133 F-51 F-52 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) In millions of RR POS loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Car loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Loans to IE and SME - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit impaired) Purchased/ originated credit impaired 25,159 4,998 121 - - 30,278 (527) 29,751 21,444 9,136 136 - - 30,716 (664) 30,052 1,673 760 7 - - 2,440 (335) 2,105 - 793 121 166 - 1,080 (227) 853 - 1,427 263 322 - 2,012 (558) 1,454 - 295 12 16 - 323 (291) 32 - - - 28 1,017 1,045 (857) 188 - - - - 1,263 1,263 (922) 341 - - - - 136 136 (123) 13 - - - - 287 287 - 287 - - - - - - - - - - - - - - - - Total 25,159 5,791 242 194 1,304 32,690 (1,611) 31,079 21,444 10,563 399 322 1,263 33,991 (2,144) 31,847 1,673 1,055 19 16 136 2,899 (749) 2,150 Loans and advances to customers at 31 December 2019 are disclosed as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit impaired) Purchased/ originated credit impaired In millions of RR Credit card loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount 87,716 102,020 8,060 - - - 1,582 3,722 6,128 - 197,796 11,432 Credit loss allowance Carrying amount (11,704) 186,092 Cash loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Secured Loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount POS loans - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Car loans - Excellent - Good 34,258 17,321 346 - - 51,925 (2,358) 49,567 19,941 7,319 106 - - 27,366 (150) 27,216 19,525 4,406 100 - - 24,031 (298) 23,733 15,581 3,051 (6,853) 4,579 - 3,315 585 1,134 - 5,034 (1,882) 3,152 - 1,496 322 219 - 2,037 (264) 1,773 - 763 117 173 - 1,053 (190) 863 - 702 - - - 6,661 28,712 35,373 (25,572) 9,801 - - - 758 3,912 4,670 (3,789) 881 - - - - 198 198 (82) 116 - - - 26 632 658 (569) 89 - - - - - - 336 336 - 336 - - - - 636 636 - 636 - - - - - - - - - - - - 198 198 - 198 - - Total 87,716 103,602 11,782 12,789 29,048 244,937 (44,129) 200,808 34,258 20,636 931 1,892 4,548 62,265 (8,029) 54,236 19,941 8,815 428 219 198 29,601 (496) 29,105 19,525 5,169 217 199 830 25,940 (1,057) 24,883 15,581 3,753 F-53 F-54 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                      31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 7 Loans and Advances to Customers (Continued) In millions of RR - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Loans to IE and SME - Excellent - Good - Monitor - Sub-standard - NPL Gross carrying amount Credit loss allowance Carrying amount Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit impaired) Purchased/ originated credit impaired 93 - - 157 201 - 18,725 1,060 (368) 18,357 622 314 4 - - 940 (57) 883 (285) 775 - 6 6 9 - 21 (10) 11 - - 371 371 (260) 111 - - - - 52 52 (46) 6 - - - - - - - - - - - - - - Total 250 201 371 20,156 (913) 19,243 622 320 10 9 52 1,013 (113) 900 Stage 3 includes restructured loans that are less than 90 days overdue which are not considered as NPL according to the Group’s credit risk grading master scale. Refer to Note 29 for the description of credit risk grading system used by the Group. Loans in courts are included in Stage 3 and are loans to delinquent borrowers, against which the Group has filed claims to courts in order to recover outstanding balances. As at 31 December 2020 the gross carrying amount of the loans in courts was RR 31,082 million (31 December 2019: RR 22,228 million). Description of collateral held for loans to individuals carried at amortised cost is as follows at 31 December 2020: In millions of RR Loans collateralised by: - residential real estate - cars Total Unsecured exposures Total gross carrying amount (representing exposure to credit risk for each class of loans at AC) Secured loans Car loans Total 37,896 2,084 39,980 252 - 24,713 24,713 9,278 37,896 26,797 64,693 9,530 40,232 33,991 74,223 Description of collateral held for loans to individuals carried at amortised cost is as follows at 31 December 2019: In millions of RR Loans collateralised by: - residential real estate - cars Total Unsecured exposures Total gross carrying amount (representing exposure to credit risk for each class of loans at AC) Secured loans Car loans Total 27,437 1,904 29,341 260 - 15,256 15,256 4,900 27,437 17,160 44,597 5,160 29,601 20,156 49,757 The disclosure above represents the lower of the carrying value of the loan or collateral taken; the remaining part is disclosed within the unsecured exposures which arise mainly due to application of a discount in determining the carrying value of collateral. The extent to which collateral and other credit enhancements mitigate credit risk for financial assets carried at amortised cost that are credit impaired, is presented by disclosing collateral values separately for (i) those assets where collateral and other credit enhancements are equal to or exceed carrying value of the asset (“over-collateralised assets”) and (ii) those assets where collateral and other credit enhancements are less than the carrying value of the asset (“under-collateralised assets”). The effect of collateral on credit impaired assets at 31 December 2020 is as follows. In millions of RR Credit impaired assets: Secured loans Car loans Over-collateralised assets Under-collateralised assets Gross carrying amount of the assets Value of collateral Gross carrying amount of the assets Value of collateral 855 200 2,136 296 19 1,063 10 715 The effect of collateral on credit impaired assets at 31 December 2019 is as follows. In millions of RR Credit impaired assets: Secured loans Car loans Over-collateralised assets Under-collateralised assets Gross carrying amount of the assets Value of collateral Gross carrying amount of the assets Value of collateral 194 25 442 31 4 346 2 208 The values of collateral considered in this disclosure are after a valuation haircut of 20% (2019: 20%) for residential real estate and 30% (2019: 30%) for cars applied to consider liquidity and quality of the pledged assets. All contractual modifications of loans with the lifetime ECL that did not lead to derecognition did not have gains less losses on modification recognised in profit or loss for the year ended 31 December 2020 (2019: same). Refer to Note 36 for the disclosure of the fair value of loans and advances to customers. Interest rate, maturity and geographi- cal risk concentration analysis are disclosed in Note 29. Information on related party balances is disclosed in Note 38. F-55 F-56 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                          31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 8 Investments in Securities and Repurchase Receivables In millions of RR Debt securities measured at fair value through other comprehensive income Securities measured at fair value through profit or loss Total investments in securities Repurchase receivables at fair value through other comprehensive income 31 December 2020 31 December 2019 234,189 4,265 238,454 29 134,765 413 135,178 - Total investments in securities and repurchase receivables 238,483 135,178 Repurchase receivables represent securities sold under sale and repurchase agreements which the counterparty has the right, by contract or custom, to sell or repledge. As at 31 December 2020 the sale and repurchase agreements are short- term and mature in January 2021. 1 Investments in securities and repurchase receivables measured at fair value through other comprehensive income The table below discloses investments in debt securities and repurchase receivables measured at FVOCI by classes: In millions of RR Investments in securities Russian government bonds Corporate bonds Municipal bonds Foreign government bonds Repurchase receivables Corporate bonds 31 December 2020 31 December 2019 123,916 96,200 9,474 4,599 29 56,382 72,032 6,351 - - Total investments in securities and repurchase receivables measured at FVOCI 234,218 134,765 Foreign government bonds Including credit loss allowance 714 345 - Good - Monitor - Sub-standard Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value The table below contains an analysis of the credit risk exposure of investments in securities and repurchase receivables measured at FVOCI at 31 December 2020, for which an ECL allowance is recognised, based on credit risk grades: In millions of RR Russian government bonds - Good Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Corporate bonds - Excellent - Good - Monitor Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Municipal bonds - Good - Monitor Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) 125,422 125,422 (255) (1,251) 123,916 560 85,653 6,726 92,939 (334) 2,953 95,558 7,750 1,523 9,273 (45) 246 9,474 908 3,119 494 4,521 (66) 144 4,599 - - - - - - - 620 620 (14) 36 642 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total 125,422 125,422 (255) (1,251) 123,916 560 85,653 7,346 93,559 (348) 2,989 96,200 7,750 1,523 9,273 (45) 246 9,474 908 3,119 494 4,521 (66) 144 4,599 F-57 F-58 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 8 Investments in Securities and Repurchase Receivables (Continued) The following table explains the changes in the credit loss allowance (including those pledged under repurchase agree- ments) and gross carrying amount for debt securities at FVOCI for the year ended 31 December 2020: 1 Investments in securities and repurchase receivables measured at fair value through other comprehensive income (Continued) The table below contains an analysis of the credit risk exposure of debt securities measured at FVOCI at 31 December 2019, for which an ECL allowance is recognised, based on credit risk grades: In millions of RR Russian government bonds - Good Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Corporate bonds - Excellent - Good - Monitor Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Municipal bonds - Good - Monitor Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) 54,471 54,471 (99) 2,010 56,382 411 61,042 8,192 69,645 (225) 2,612 72,032 5,663 422 6,085 (21) 287 6,351 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total 54,471 54,471 (99) 2,010 56,382 411 61,042 8,192 69,645 (225) 2,612 72,032 5,663 422 6,085 (21) 287 6,351 Refer to Note 29 for the description of credit risk grading system used by the Group and the approach to ECL measurement, including the definition of default and SICR as applicable to investments in securities and repurchase receivables at FVOCI. The investments at FVOCI are not collateralised. Refer to Note 36 for the disclosure of the fair value. Securities at FVOCI reclassified to repurchase receivables continue to be carried at fair value in accordance with account- ing policies for these categories of assets. Refer to Note 13 for the related liabilities. Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Russian government bonds At 31 December 2019 99 - - 99 54,471 - - 54,471 Movements with impact on credit loss allowance charge: New originated or pur- chased Foreign exchange gains Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge At 31 December 2020 Corporate bonds 522 1 (160) (233) 8 (12) 30 156 255 At 31 December 2019 225 Movements with impact on credit loss allowance charge: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) Foreign exchange gains Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge 198 (3) 15 (13) (117) 14 (16) 31 109 - - - - - - - - - - - 3 - - - - (1) 12 14 - - - - - - - - - - - - - - - - - - - 522 289,955 1 767 (160) (89,000) (233) (129,350) 8 5,318 (12) (6,739) 30 - 156 70,951 255 125,422 225 69,645 198 70,438 - 15 (620) 5,061 (13) (4,171) (117) (46,924) 14 (17) 43 4,587 (5,077) - - - - - - - - - - - - 620 - - - 45 (45) - 123 23,294 620 - - - 289,955 767 (89,000) - (129,350) - - - 5,318 (6,739) - - 70,951 - 125,422 - 69,645 - - - - - - - - - 70,438 - 5,061 (4,171) (46,924) 4,632 (5,122) - 23,914 F-59 F-60 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                            31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 8 Investments in Securities and Repurchase Receivables (Continued) The following table explains the changes in the credit loss allowance (including those pledged under repurchase agree- ments) and gross carrying amount for debt securities at FVOCI for the year ended 31 December 2019: 1 Investments in securities and repurchase receivables measured at fair value through other comprehensive income (Continued) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p In millions of RR At 31 December 2020 334 14 Municipal bonds At 31 December 2019 21 Movements with impact on credit loss allowance charge: New originated or pur- chased Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge At 31 December 2020 Foreign government bonds At 31 December 2019 Movements with impact on credit loss allowance charge: New originated or pur- chased Foreign exchange gains Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge At 31 December 2020 25 0 (19) 3 (2) 17 24 45 - 68 1 (11) 1 (1) 8 66 66 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T 348 92,939 2 e g a t S L C E e m i t e f i l ( ) I R C S r o f 620 21 6,085 25 0 7,440 (91) (19) (4,140) 3 (2) 17 474 (495) - 24 3,188 45 9,273 - - 68 1 7,516 246 (11) (3,224) 1 (1) 8 61 (78) - 66 4,521 66 4,521 - - - - - - - - - - - - - - - - - - L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p - - - - - - - - - - - - - - - - - - - l a t o T 93,559 6,085 7,440 (91) (4,140) 474 (495) - 3,188 9,273 - 7,516 246 (3,224) 61 (78) - 4,521 4,521 Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Corporate bonds At 1 January 2019 255 128 Movements with impact on credit loss allowance charge: New originated or pur- chased Transfers: - to lifetime (from Stage 1 to Stage 2) Foreign exchange losses Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge 89 - 24 (12) (12) (91) 12 (12) (28) (26) (6) - (40) 4 (4) (56) (30) (128) At 31 December 2019 225 Russian government bonds At 1 January 2019 66 Movements with impact on credit loss allowance charge: New originated or pur- chased Foreign exchange losses Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge At 31 December 2019 167 (2) (63) (53) 4 (4) (16) 33 99 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 383 64,951 1,607 - 66,558 89 25,936 - - 25,936 (2) (18) (12) 1,318 (1,318) (2,702) (3,609) (96) - (131) (16,348) (193) 16 4,074 (16) (84) (3,975) - 43 (43) - - - - - - - - - (2,798) (3,609) (16,541) 4,117 (4,018) - (158) 4,694 (1,607) - 3,087 225 69,645 66 25,190 167 81,179 (2) (63) (53) 4 (4) (16) (833) (30,858) (20,414) 2,119 (1,912) - 33 29,281 99 54,471 - - - - - - - - - - - - 69,645 - 25,190 - - - - - - - 81,179 (833) (30,858) (20,414) 2,119 (1,912) - - 29,281 - 54,471 F-61 F-62 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 8 Investments in Securities and Repurchase Receivables (Continued) 9 Guarantee Deposits with Payment Systems 1 Investments in securities and repurchase receivables measured at fair value through other comprehensive income (Continued) Credit loss allowance Gross carrying amount s h t n o m - 2 1 ( 1 e g a t S ) L C E L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) I R C S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Municipal bonds At 1 January 2019 35 Movements with impact on credit loss allowance charge: New originated or pur- chased Redemption during the year Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allow- ance charge At 31 December 2019 3 (1) (4) 2 (3) (11) (14) 21 - - - - - - - - - - 35 5,833 - - - - - - - - 3 (1) (4) 2 (3) (11) 968 (482) (216) 469 (487) - (14) 252 21 6,085 - - - - - - - - - 2) Securities measured at fair value through profit or loss The table below discloses investments in securities measured at FVTPL by classes: - - - - - - - - 968 (482) (216) 469 (487) - 252 6,085 In millions of RR Perpetual corporate bonds Other securities Total securities measured at FVTPL 31 December 2020 31 December 2019 4,265 - 4,265 - 413 413 At 31 December 2019 the other securities were represented by assets of the mutual funds which were controlled by the Group and managed by LLC “Tinkoff Capital”. These assets were sold at 30 September 2020. Investments in securities measured at FVTPL are carried at fair value, which also reflects any credit risk related write-downs and best represents Group’s maximum exposure to credit risk. The securities measured at FVTPL are not collateralized. Inter- est rate, maturity and geographical risk concentration analysis of investment in securities are disclosed in Note 29. As at 31 December 2020 and 2019 guarantee deposits were placed in favour of MasterCard with Barclays Bank Plc London (A rated), in favour of Visa with United Overseas Bank Ltd Singapore (AA- rated), and in favour of Russia payment card Mir with Russian National payment card system (NSPK). As at 31 December 2020 the carrying value of guarantee deposits with payment systems was RR 15,475 million (2019: RR 8,877 million). The table below discloses the credit quality of guarantee deposits with payment systems balances based on credit risk grades: - 5,833 Total guarantee deposits with payment systems In millions of RR - Excellent - Good 31 December 2020 31 December 2019 14,803 672 15,475 8,376 501 8,877 The carrying amount of guarantee deposits with payment systems at 31 December 2020 and 2019 also represents the Group's maximum exposure to credit risk on these assets. Refer to Note 29 for the description of credit risk grading system used by the Group. For the purpose of ECL measurement guarantee deposits with payment systems balances are included in Stage 1. Guarantee deposits with payment systems are unsecured financial assets. The ECL for these balances represents an immaterial amount, therefore the Group did not create any credit loss allowance for guarantee deposits with payment systems. Refer to Note 29 for the ECL measurement approach. Interest rate, maturity and geographical risk concentration analysis are disclosed in Note 29. 10 Brokerage Receivables and Brokerage Payables In millions of RR Amounts receivable from brokers and clearing organizations Total brokerage receivables Amounts payable to brokers and clearing organizations Total brokerage payables 31 December 2020 31 December 2019 24,064 24,064 9,206 9,206 2,799 2,799 1,207 1,207 Brokerage receivables represent placements under reverse sale and repurchase agreements made by the Bank with central counterparty to provide customers of the Bank who have brokerage accounts with the Bank with the possibility to acquire securities in case those customers have insufficient own funds to acquire those securities. These balances are fully collateralized by highly liquid securities and have minimal credit risk. As at 31 December 2020 the fair value of collateral of brokerage receivables was RR 24,113 million (31 December 2019: RR 2,239 million). For the purpose of ECL measurement brokerage receivables are included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any credit loss allowance for brokerage receivables. Brokerage payables represent funds attracted under sale and repurchase agreements made by the Bank with central counterparty to provide customers of the Bank who have brokerage accounts with the Bank with the possibility to borrow securities and make a short sale. As at 31 December 2020 the fair value of collateral of brokerage payables was RR 9,696 million (31 December 2019: RR 1,282 million). ECL measurement approach, interest rate, maturity and geographical risk concentration analysis are disclosed in Note 29. Refer to Note 32 for the disclosure of the the offsetting assets and liabilities. Refer to Note 36 for the disclosure of the fair value of brokerage receivables and brokerage payables. F-63 F-64 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS    31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 11 Tangible Fixed Assets, Intangible Assets and Right-of-use Assets The right of use assets by class of underlying items is analysed as follows: In millions of RR Land Building Cost Equip- ment Leasehold improve- ments Total tan- gible fixed assets Intangible assets Vehicles At 31 December 2018 396 4,219 4,341 1,536 Additions Disposals - - - - 1,788 (59) 86 (2) 42 46 - 10,534 6,625 1,920 2,564 (61) At 31 December 2019 396 4,219 6,070 1,620 88 12,393 Additions Disposals - - - - 2,168 (164) 2 (231) - - 2,170 (395) (72) 9,117 3,669 (73) At 31 December 2020 396 4,219 8,074 1,391 88 14,168 12,713 Depreciation and amor- tisation At 31 December 2018 Charge for the year (Note 24) Disposals At 31 December 2019 Charge for the year (Note 24) Disposals At 31 December 2020 Net book value At 31 December 2019 At 31 December 2020 - - - - - - - (90) (1,527) (515) (33) (2,165) (2,402) (43) (1,076) (160) - 9 2 (8) - (1,287) (1,331) 11 51 (133) (2,594) (673) (41) (3,441) (3,682) (43) (1,421) - 103 (149) 128 (4) - (1,617) (1,961) 231 12 (176) (3,912) (694) (45) (4,827) (5,631) 396 396 4,086 3,476 4,043 4,162 947 697 47 43 8,952 5,435 9,341 7,082 Intangible assets additions in the amount of RR 1,854 million related to capitalised the software developments by Tinkoff Software DC during the year ended 31 December 2020 (2019: RR 1,212 million). Other intangible assets acquired during the year ended 31 December 2020 and 2019 mainly represent accounting software, retail banking software, insurance software, licenses and development of software. Right-of-use assets and lease liabilities. Right-of-use-assets relate to the office premises leased by the Group. Rental con- tracts are typically for fixed periods from 1 to 5 years. The Group does not have extension or termination options of its lease agreements other than lease agreements of low value items. In millions of RR Carrying amount at 1 January 2019 Additions Depreciation charge (Note 24) Carrying amount at 31 December 2019 Additions Depreciation charge (Note 24) Carrying amount at 31 December 2020 Office premises 1,671 664 (727) 1,608 234 (702) 1,140 Prior to 1 January 2019 Group’s leases of premises and equipment were classified as operating leases. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset be- comes available for use by the Group. Expenses relating to leases of low-value assets and short-term leases in the amount of RR 548 million are included in ad- ministrative and other operating expenses (2019: RR 410 million). Refer to Note 24. Total cash outflow for leases during the year ended 31 December 2020 was RR 758 million (2019: RR 1,087 million). 12 Other Financial and Non-financial Assets In millions of RR Other Financial Assets Settlement of operations with plastic cards Other Total Other Financial Assets Other Non-Financial Assets Prepaid expenses Other Total Other Non-Financial Assets 31 December 2020 31 December 2019 23,882 7,188 31,070 1,478 1,908 3,386 16,384 5,289 21,673 1,223 1,287 2,510 Settlement of operations with plastic cards represents settlements with payment systems and payment channels on oper- ations of the customers with banking cards due to be settled within 3 working days. This amount also includes prepayment to the payment systems for operations during holiday period. At 31 December 2020, included in other financial assets are receivables, investments in associates and subrogation rights (2019: same). As at 31 December 2020 and 2019 prepaid expenses consist of prepayments for marketing, IT support, security and ATM-service. F-65 F-66 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 12 Other Financial and Non-financial Assets (Continued) The table below discloses the credit quality of other financial assets based on credit risk grades: In millions of RR - Excellent - Good Total other financial assets 31 December 2020 31 December 2019 19,683 11,387 31,070 9,219 12,454 21,673 Refer to Note 29 for the description of the Group’s credit risk grading system. For the purpose of ECL measurement settlement of operations with plastic cards balances and other receivables are included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any credit loss allowance. Refer to Note 29 for the ECL measurement approach. Refer to Note 36 for the disclosure of the fair value of other financial assets. The maturity and geographical risk concentration analysis of amounts of other financial assets is disclosed in Note 29. 13 Due to Banks In millions of RR Correspondent accounts and overnight placements of other banks Sale and repurchase agreements with other banks Total due to banks 31 December 2020 31 December 2019 4,795 24 4,819 23 - 23 At 31 December 2020, included in the amounts due to other banks are liabilities of RR 24 million (31 December 2019: nil) arising from sale and repurchase agreements with debt securities at FVOCI. Refer to Note 8. Refer to Note 36 for the disclosure of the fair value of amounts due to banks. Interest rate, maturity and geographical risk concentration analysis of due to banks is disclosed in Note 29. Refer to Notes 32 and 33 for information on the amounts included in due to banks received under sale and repurchase agreements and fair value of securities pledged. 14 Customer Accounts In millions of RR Individuals - Current/demand accounts - Brokerage accounts - Term deposits IE and SME - Current/demand accounts - Term deposits Other legal entities - Current/demand accounts - Term deposits Total customer accounts 31 December 2020 31 December 2019 323,145 73,970 135,995 89,199 2,213 2,267 48 199,408 12,253 137,292 60,174 1,880 495 112 626,837 411,614 Refer to Note 36 for the disclosure of the fair value of customer accounts. Interest rate, maturity and geographical risk concentration analysis of customer accounts amounts is disclosed in Note 29. Information on related party balances is disclosed in Note 38. 15 Debt Securities in Issue In millions of RR Date of maturity RR denominated bonds issued in April 2019 21 March 2029 RR denominated bonds issued in September 2019 12 September 2029 RR denominated bonds issued in April 2017 RR denominated bonds issued in June 2016 22 April 2022 24 June 2021 Structured debt notes issued in December 2020 5 December 2023 Structured debt notes issued in October 2020 5 October 2023 Structured debt notes issued in December 2020 1 December 2023 EUR denominated ECP issued in December 2019 20 November 2020 EUR denominated ECP issued in February 2019 18 February 2020 USD denominated ECP issued in December 2019 20 November 2020 31 December 2020 31 December 2019 10,134 10,166 2,492 836 119 89 74 - - - 10,158 10,157 2,468 835 - - - 1,030 831 599 Total debt securities in issue 23,910 26,078 On 3 April 2019 the Bank issued RR denominated bonds with a nominal value of RR 10,000 million at 9.25% coupon rate maturing on 21 March 2029. On 25 September 2019 the Bank issued RR denominated bonds with a nominal value of RR 10,000 million at 8.25% coupon rate maturing on 12 September 2029. On 28 April 2017 the Bank issued RR denominated bonds with a nominal value of RR 5,000 million at 9.65% coupon rate maturing on 22 April 2022. On 30 June 2016 the Group issued RR denominated bonds with a nominal value of RR 3,000 million at 11.7% coupon rate maturing on 24 June 2021. During October and December 2020 the Bank issued structured debt notes with the total nominal value of RR 282 million at 0.01% coupon rate maturing in October and December 2023. The structured debt notes are linked to the performance of the underlying assets, such as the gold trust and equity indexes. The derivative instruments embedded in the structured notes were separated and accounted within financial derivatives line in the consolidated statement of financial position. On 20 December 2019 the Group issued two tranches of ECP denominated in USD and EUR maturing on 20 November 2020. USD denominated ECP has a nominal value of USD 10 million with a discount of 3.6%. EUR denominated ECP has a nominal value of EUR 15 million with a discount of 1.0%. On 19 February 2019 the Group issued Euro-Commercial Paper (ECP) denominated in EUR maturing on 18 February 2020, which has a nominal value of EUR 12 million with a discount of 1.25%. The Group redeemed all outstanding ECP at maturity date. All RR denominated bonds and structured debt notes issued by the Bank are traded on the Moscow Exchange. Refer to Note 36 for the disclosure of the fair value of debt securities in issue. Interest rate, maturity and geographical risk concen- tration analysis of debt securities in issue are disclosed in Note 29. F-67 F-68 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS              31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 16 Subordinated Debt As at 31 December 2020 the carrying value of the subordinated debt was RR 20,755 million (31 December 2019: RR 18,487 million). On 15 June 2017 the Group issued perpetual subordinated loan participation notes with a nominal value of USD 300 million with zero premium. The notes have no stated maturity. The Group has a right to repay the notes at its discretion starting from 15 September 2022 and they are repayable in case of certain events other than liquidation. The notes bear a fixed interest rate of 9.25% p.a. payable quarterly starting from 15 September 2017. Interest payments may be cancelled by the Group at any time. The claims of lenders against the Group in respect of the principal and interest on these bonds are subordinated to the claims of other creditors in accordance with the legislation of the Russian Federation. The perpetual subordinated loan participation notes are traded on the Global Exchange Market. Interest rate, maturity and geographical risk concentration analysis of subordinated debt is disclosed in Note 29. Refer to Note 36 for the disclosure of the fair value of financial instruments. 17 Insurance Provisions In millions of RR Insurance Provisions Provision for unearned premiums Loss provisions Total Insurance Provisions 31 December 2020 31 December 2019 3,907 2,160 6,067 3,938 2,342 6,280 Movements in provision for unearned premiums for the year ended 31 December 2020 and 2019 are as follows: 2020 2019 Gross provi- sion Reinsurer’s share of provision Provision net of reinsur- ance Gross provi- sion Reinsurer’s share of provision Provision net of rein- surance 3,938 (31) - (11) 3,927 - - (31) - 1,760 2,178 - (3) - (8) 1,757 2,178 (8) 3,907 (11) 3,896 3,938 (11) 3,927 In millions of RR Provision for unearned premiums as at 1 January Change in provision, gross Change in reinsurers’ share of provision Provision for unearned premiums as at 31 De- cember Movements in loss provisions for the year ended 31 December 2020 and 2019 are as follows: In millions of RR Note Loss provisions as at 31 December 2018 Losses incurred in the current reporting period Changes in OCP, IBNR and claims handling provisions related to prior periods Insurance claims paid Claims handling expenses accrued Claims handling expenses paid Unexpired risk provision charge Unexpired risk provision written off Loss provisions as at 31 December 2019 Losses incurred in the current reporting period Changes in OCP, IBNR and claims handling provisions related to prior periods Insurance claims paid Claims handling expenses accrued Claims handling expenses paid Unexpired risk provision reversal 23 23 23 23 OCP and IBNR 965 4,026 (138) (2,923) - - - - 1,930 3,456 (119) (3,500) - - - Loss provisions as at 31 December 2020 1,767 18 Other Financial and Non-financial Liabilities URP 9 - - - - - 253 (65) 197 - - - - - (197) - Provision for claims handling expenses Total loss provisions 125 1,099 - 4,026 (39) 862 (733) - - (177) (2,923) 862 (733) 253 (65) 215 2,342 - 3,456 147 28 (3,500) 528 (497) (197) 528 (497) - 393 2,160 In millions of RR Other financial liabilities Settlement of operations with plastic cards Trade payables Credit related commitments (Note 31) Other Total other financial liabilities Other non-financial liabilities Accrued administrative expenses Taxes payable other than income tax Lease liabilities Other Total other non-financial liabilities 31 December 2020 31 December 2019 23,079 6,150 3,537 1,571 34,337 2,171 1,731 1,340 663 5,905 6,427 4,621 2,242 1,358 14,648 1,277 1,321 1,694 582 4,874 F-69 F-70 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 18 Other Financial and Non-financial Liabilities (Continued) Settlements of operations with plastic cards include funds that were spent by customers of the Bank by usage of plastic cards but have not yet been compensated to payment systems by the Bank. Accrued administrative expenses are mainly represented by accrued staff costs. During 2020 the Group has managed to apply an online posting mechanism which allowed customer accounts to be debit- ed and payment systems to be credited for their transactions at the time of authorisation of the transaction. In prior periods transactions were posted only after their clearing by payment systems which could require another business day. Movements in the credit loss allowance for credit related commitments were as follows for the year ended 31 December 2020: In millions of RR Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) Gross committed amount At 31 December 2019 2,228 14 Movements with impact on pro- vision for credit related commit- ments charge for the year: New originated or purchased 920 - Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) Changes to ECL measurement model assumptions and esti- mates Movements other than transfers and new originated or purchased loans Total charge to profit or loss for the year At 31 December 2020 (36) (59) 7 (637) 1,090 1,285 3,513 15 (6) (15) (1) 17 10 24 - - - - - - - - - 2,242 920 (21) (65) (8) (638) 1,107 1,295 3,537 Movements in the credit loss allowance for credit related commitments were as follows for the year ended 31 December 2019: In millions of RR Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) At 31 December 2018 2,024 17 Movements with impact on pro- vision for credit related commit- ments charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to credit-impaired (from Stage 1 and Stage 2 to Stage 3) - to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) Changes to ECL measurement model assumptions and estimates Movements other than transfers and new originated or purchased loans Total charge to profit or loss for the year At 31 December 2019 840 (23) (45) 5 (163) (410) 204 2,228 - 9 (7) (15) - 10 (3) 14 - - - - - - - - - Gross committed amount 2,041 840 (14) (52) (10) (163) (400) 201 2,242 The main movements in the table presented above are described as follows: • new originated or purchased category represents the day one 12-month ECL for the undrawn part of the purchased loans and loans to new borrowers (for this particular product) before the first payment became due; • transfers between Stage 1, 2 and 3 due to undrawn limits experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and Lifetime ECL. Transfers present the amount of credit loss allowance for loan commitments charged or recovered at the moment of transfer of a loan commitment among the respective stages; • movements other than transfers and new originated or purchased loans category represents all other movements of ECL for loan commitments in particular related to changes in gross carrying amounts of associated loans, ECL model assumptions and other. Interest rate, maturity and geographical risk concentration analysis of other financial liabilities is disclosed in Note 29. Refer to Note 36 for disclosure of fair value of other financial liabilities. Refer to Note 31 for analysis of loan commitments by credit risk grades. F-71 F-72 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 19 Share Capital, Share Premium and Treasury Shares In millions of RR except for the number of shares Number of authorised shares Number of outstanding shares At 1 January 2019 191,770,766 182,638,825 Shares issued 18,263,882 16,666,667 Secondary public offering (SPO) costs GDRs and shares trans- ferred under MLTIP - - - - Ordinary shares Share pre- mium Treasury shares 8,623 (3,670) 18,874 (499) - - 188 42 - - - 506 506 Total 5,141 18,916 (499) Earnings per share are calculated as follows: In millions of RR except for the number of shares Profit for the year attributable to ordinary shareholders of the Company Weighted average number of ordinary shares in issue used for basic earnings per ordinary share calculation (thousands) Weighted average number of ordinary shares in issue used for diluted earnings per ordinary share calculation (thousands) Basic earnings per ordinary share (expressed in RR per share) Diluted earnings per ordinary share (expressed in RR per share) 2020 44,209 2019 36,122 195,962 186,559 197,604 225.60 223.73 190,070 193.62 190.05 At 31 December 2019 210,034,648 199,305,492 230 26,998 (3,164) 24,064 Information on dividends is disclosed in Note 27. GDRs buy-back GDRs and shares trans- ferred under MLTIP - - - - - - - - (661) (661) Reconciliation of the number of shares used for basic and diluted EPS: 587 587 In thousands Note 2020 2019 Weighted average number of ordinary shares in issue used for basic earnings per ordinary share calculation Number of shares attributable for MLTIP Number of shares transferred out of treasury shares upon vesting under the MLTIP to retained earnings or forfeited 38 Number of shares that would have been issued at fair value Weighted average number of ordinary shares in issue used for diluted earnings per ordinary share calculation 195,962 186,559 15,290 9,940 (8,014) (5,634) (6,158) (271) 197,604 190,070 At 31 December 2020 210,034,648 199,305,492 230 26,998 (3,238) 23,990 At 31 December 2020 the total number of outstanding shares is 199,305,492 shares (31 December 2019: 199,305,492 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share). At 31 December 2020 and 2019 treasury shares represent GDRs of the Group repurchased from the market for the purpos- es permitted by Cyprus law including contribution to MLTIP. Refer to Note 38. At 31 December 2020 the total number of treasury shares is 3,013,379 (31 December 2019: 4,185,166). During the year ended 31 December 2020 the Group repurchased 650,000 GDRs at market price for RR 661 million (2019: no GDRs were repurchased by the Group). During the year ended 31 December 2020 the Group transferred 1,809,681 GDRs (2019: 2,419,187 GDRs), representing 0.91% (2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a transfer of RR 587 million (2019: RR 506 million) out of treasury shares to retained earnings. In June 2019 the Company’s shareholders approved a resolution to increase the authorised share capital to USD 8,401,385.92 by the creation of 18,263,882 new undesignated ordinary shares of nominal value USD 0.04 each. At 31 De- cember 2020 the total number of authorised shares is 210,034,648 shares (31 December 2019: 210,034,648 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share). On 2 July 2019 the Group completed a SPO on the London Stock Exchange plc and issued 16,666,667 class A shares of the Company in the form of GDRs at a price of USD 18.00 per GDR, raising aggregate gross proceeds of USD 300 million (RR 18,916 million). All issued ordinary shares are fully paid. All the incurred SPO costs were primary direct expenses accounted within share premium. Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year, excluding treasury shares. For the purpose of calculating dilut- ed earnings per share the Group considered the dilutive effect of share options granted under MLTIP. F-73 F-74 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 20 Net Margin In millions of RR Interest income calculated using the effective interest rate method Loans and advances to customers, including: Credit card loans Cash loans Secured loans POS loans Car loans Loans to IE and SME Debt securities and repurchase receivables at FVOCI Brokerage operations 89,253 84,325 11,439 11,878 4,950 4,806 3,342 529 10,510 2,629 2,285 3,452 1,512 325 6,705 184 Placements with other banks and non-bank credit organizations with original maturities of less than three months 626 463 Total interest income calculated using the effective interest rate method 128,084 111,129 Other similar income Financial assets at FVTPL Total interest income Interest expense calculated using the effective interest rate method Customer accounts, including: Individuals - Current/demand accounts - Term deposits IE and SME Other legal entities RR denominated bonds Subordinated debt Due to banks Euro-Commercial Paper 83 118 128,167 111,247 9,590 6,499 1,022 24 2,027 1,948 439 32 8,988 7,006 1,421 40 1,282 1,846 634 100 Total interest expense calculated using the effective interest rate method 21,581 21,317 Other similar expense Lease liabilities Total interest expense Expenses on deposit insurance Net margin 2020 2019 In millions of RR 2020 2019 21 Fee and Commission Income and Expense Fee and commission income Acquiring commission SME services commission Brokerage fee Fee for selling credit protection Interchange fee SMS fee Foreign currency exchange transactions fee Fee for money transfers Income from MVNO services Cash withdrawal fee Marketing services fee Replenishment fee Other fees receivable 11,049 7,437 4,998 4,657 3,963 3,945 3,943 3,117 1,815 746 394 141 1,404 8,342 6,757 635 5,550 3,473 3,244 3,024 1,980 890 720 340 141 762 Total fee and commission income 47,609 35,858 SME services commission represents commission for services to individual entrepreneurs and small to medium busi- nesses. Fee for selling credit protection represents fee which the Bank receives for selling voluntary credit insurance to borrowers of the Group. Acquiring commission represents commission for processing card payments from online and offline points of sale. Income from MVNO services represents income from providing mobile services such as full coverage across Russia and international roaming, offering a number of value-added options such as virtual numbers, music and video streaming services, etc. The Group has refined the presentation of the Group's revenue structure by reclassifying the sum of merchant acquiring fee from SME services commission to acquiring commission. The comparative information was amended accordingly. In millions of RR Fee and commission expense Payment systems Service fees Banking and other fees Payment channels Costs of MVNO services 2020 2019 14,684 10,420 2,177 2,225 1,288 1,225 2,043 423 1,327 910 139 134 21,720 21,451 1,745 1,870 104,702 87,926 Total fee and commission expense 21,599 15,123 Payment systems fees represent fees for MasterCard, Visa and other payment systems’ services. Service fees represent fees for statement printing, mailing service, sms services and others. Payment channels represent fees paid to third parties through whom borrowers make loan repayments. Costs of MVNO services represent expenses for the traffic, telecommuni- cations service and roaming. Refer to Note 40 that describes the types of revenues recognized on a point in time basis and on the over time basis. F-75 F-76 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                    31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 22 Customer Acquisition Expense In millions of RR Marketing and advertising Staff costs Taxes other than income tax Partnership expenses Cards issuing expenses Credit bureaux Telecommunication expenses Other acquisition 2020 10,636 6,689 1,869 1,065 890 878 284 277 2019 8,106 5,916 1,413 979 411 697 326 329 Motor vehicle insurance and property insurance provides compensation for damage to a client’s vehicle or other property. Compulsory third party liability insurance (CTP) contracts provide the insured with financial protection from the risk of civil liability of vehicle owners, which may occur as a result of harm to life, health or property of others when using vehicles. Voluntary third party (VTP) risk insurance contracts provide the insured with financial protection in case of insufficiency of insurance payment for compulsory third party liability insurance of motor vehicle owners (CTP) to compensate for harm caused to life, health and / or property. Travel insurance provides compensation in case of medical or other unforeseen expenses of the client while being away from their place of permanent residence.  Staff and administrative expenses for insurance operations are included in Note 24. 24 Administrative and Other Operating Expenses Total customer acquisition expenses 22,588 18,177 Customer acquisition expenses represent expenses paid by the Group on services related to origination of customers which are not directly attributable to the recognised assets and are not incremental. The Group uses a variety of different channels for the acquisition of new customers. Staff costs represent salary expenses and related costs of employees directly involved in customer acquisition. Included in staff costs are statutory social contributions to the state non-budgetary funds in the amount of RR 1,650 million for the year ended 31 December 2020 (2019: RR 1,561 million). 23 Insurance Premiums Earned and Claims Incurred In millions of RR Insurance premiums earned 2020 2019 In millions of RR Staff costs Amortization of intangible assets Depreciation of fixed assets Taxes other than income tax Information services Other provisions Depreciation of right-of-use assets Professional services Short-term and low-value lease Insurance premiums on insurance, co-insurance and reinsurance operations 18,536 16,289 Collection expenses Note 2020 2019 24,335 19,204 11 11 11 11 1,961 1,617 1,421 1,299 1,206 702 600 548 393 391 275 189 684 1,331 1,287 1,473 787 260 727 773 410 165 383 280 167 605 Office maintenance and office supplies Communication services Security expenses Other administrative expenses Total administrative and other operating expenses 35,621 27,852 The total fees charged by the Company's statutory auditor for the statutory audit of the annual consolidated and separate financial statements of the Company for the year ended 31 December 2020 amounted to RR 6.9 million (2019: RR 2.8 mil- lion). The total fees charged by the Company's statutory auditor for the year ended 31 December 2020 for other assurance services amounted to RR 0.8 million (2019: RR 3.8 million), for tax advisory services amounted to RR 3.4 million (2019: RR 2.3 million) and for other non-assurance services amounted to RR 0.1 million (2019: 2.2 million). Change in provision for unearned premiums Reinsurers' share Total Insurance premiums earned Insurance claims incurred Insurance claims on insurance, co-insurance and reinsurance operations Changes in loss provisions Claims handling expenses Reinsurers’ share Total Insurance claims incurred 31 - (2,178) (1) 18,567 14,110 (3,500) 182 (497) 1 (2,923) (1,243) (733) 8 (3,814) (4,891) The Insurance company provides following types of insurance: Personal accident insurance and collective insurance against accidents, illnesses or loss of work provides compensation and financial protection in the event of injuries, disability, death or loss of loss of work of the borrower. It is different from life insurance and medical and health insurance. In accordance with the terms of individual insurance contracts, the policy- holder and beneficiary is an individual who has entered into an insurance contract. In accordance with the terms of the col- lective insurance contract, the insurer is the Bank that has concluded the collective insurance contract with the Insurance Company, the beneficiary is the insured individual. F-77 F-78 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                              31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 24 Administrative and Other Operating Expenses (Continued) A reconciliation between the expected and the actual taxation charge is provided below. Included in staff costs are statutory social contributions to the non-budget funds and share-based remuneration: In millions of RR Statutory social contribution to the non-budget funds Total Share-based remuneration - Management long-term incentive programme - Key employees retention plan Total 2020 4,223 4,223 1,092 372 1,464 2019 3,398 3,398 469 - 469 The average number of employees employed by the Group during the reporting year, including those who are working under civil contracts, was 25,970 (2019: 26,780). 25 Other Operating Income In millions of RR Subrogation fee Reimbursement fee Other Total other operating income 26 Income Taxes Income tax expense comprises the following: In millions of RR Current tax Deferred tax Total income tax expense 2020 250 190 1,005 1,445 2019 218 194 310 722 2020 2019 10,612 13,844 1,424 12,036 (4,431) 9,413 The income tax rate applicable to the majority of the Group’s income is 20% (2019: 20%). The operations of the Group are subject to multiple tax jurisdictions. The income tax rate applicable to the Russian subsidiaries of the Company is 20%. The income tax rate applicable to the Company registered in Cyprus is 12.5% (2019: 12.5%). In millions of RR Profit before tax Theoretical tax expense at statutory rate of 20% (2019: 20%) Tax effect of items, which are not deductible or assessable for taxation purposes: - Non-deductible expenses - Other expenses including dividend tax Unrecognised tax losses Effects of different tax rates: - Income on government and corporate securities taxed at different rates - Results of companies of the Group taxed at different statutory rates 2020 2019 56,249 45,536 11,250 9,107 418 709 109 (448) (2) 272 38 226 (214) (16) Income tax expenses for the year 12,036 9,413 Differences between IFRS and taxation regulations in Russia and other countries give rise to temporary differences be- tween the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. As all of the Group’s temporary differences arise in Russia, the tax effect of the movements in these temporary differences is detailed below and is recorded at the rate of 20% (2019: 20%). In the context of the Group’s current structure and Russian tax legislation, tax losses and current tax assets of different group companies may not be offset against current tax liabilities and taxable profits of other group companies and, accord- ingly, taxes may accrue even where there is a consolidated tax loss. Therefore, deferred tax assets and liabilities are offset only when they relate to the same taxable entity and the same taxa- tion authority. The tax effect of the movements in temporary differences for the year ended 31 December 2020 is detailed below. In millions of RR Tax effect of deductible and taxable temporary differences Loans and advances to customers Tangible fixed assets Right-of-use assets Intangible assets Revaluation of debt investments at FVOCI Revaluation of debt investments at FVTPL Accrued expenses and other temporary differences Lease liabilities Customer accounts Debt securities in issue Financial derivatives Insurance provisions Net deferred tax assets 31 December 2019 (Charged)/credit- ed to profit or loss Credited to OCI 31 Decem- ber 2020 3,515 (604) (322) (271) (1,019) - (187) 339 (44) (62) 40 (10) 1,375 35 98 136 26 - - - - 3,550 (506) (186) (245) (1,117) 663 (1,473) (34) 564 (108) (9) 4 (1,031) 12 (1,424) - - - - - - - 663 (34) 377 231 (53) (58) (991) 2 614 The tax effect of the movements in temporary differences for the year ended 31 December 2019 is detailed below. F-79 F-80 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 26 Income Taxes (Continued) In millions of RR Tax effect of deductible and taxable temporary differences Loans and advances to customers Tangible fixed assets Right-of-use assets Intangible assets Revaluation of debt investment at FVOCI Revaluation of debt investment at FVTPL Accrued expenses and other temporary differences Lease liabilities Customer accounts Debt securities in issue Financial derivatives Insurance provisions 31 Decem- ber 2018 1 January 2019 (IFRS 16 adoption) Credited/ (charged) to profit or loss Charged to OCI 31 December 2019 696 (601) - (285) (487) 1 (773) - (21) (40) (324) 13 - - (334) - - - - 333 - - - - 2,819 (3) 12 14 702 (1) 586 6 (23) (22) 364 (23) - - - - 3,515 (604) (322) (271) (1,234) (1,019) - - - - - - - - (187) 339 (44) (62) 40 (10) Net deferred tax (liabilities)/assets (1,821) (1) 4,431 (1,234) 1,375 27 Dividends The movements in dividends during the year ended 31 December 2020 and 2019 are as follows: In millions of RR Dividends payable at 1 January Dividends declared Dividends paid Foreign exchange differences and other movements Dividends payable at 31 December Dividends per share declared (in USD) 2020 582 11,563 2019 760 5,856 (11,853) (5,601) 364 656 0.80 (433) 582 0.49 Dividends declared in the tables above represent dividends declared by the Board of directors are reduced by RR 74 million for the year ended 31 December 2020 due to dividends on GDRs acquired by the Company from the market not for the immediate purposes of the existing MLTIP (2019: RR 25 million). On 11 November 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.25 (RR 19.10) per share/per GDR with a total amount allocated for dividend payment of around USD 49.8 million (RR 3,807 million). Declared dividends were paid in USD on 30 November 2020. On 5 August 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.20 (RR 14.68) per share/per GDR with a total amount allocated for dividend payment of around USD 39.9 million (RR 2,925 million). Declared dividends were paid in USD on 24 August 2020. On 11 May 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.14 (RR 10.34) per share/per GDR with a total amount allocated for dividend payment of around USD 28 million (RR 2,061 million). Declared dividends were paid in USD on 1 and 2 June 2020. On 10 March 2020 the Board of directors declared an interim dividend of USD 0.21 (RR 14.18) per share/per GDR with a total amount allocated for dividend payment of around USD 41.9 million (RR 2,826 million). Declared dividends were paid in USD on 30 March and 1 April 2020. On 13 May 2019 the Board of directors declared an interim dividend of USD 0.17 (RR 11.09) per share/per GDR amounting to USD 31.05 million (RR 2,026 million). Declared dividends were paid in USD on 28 and 30 May 2019. On 11 March 2019 the Board of directors declared an interim dividend of USD 0.32 (RR 21.11) per share/per GDR amounting to USD 58.4 million (RR 3,855 million). Declared dividends were paid in USD on 25 and 27 March 2019. Dividends were declared and paid in USD throughout the years ended 31 December 2020 and 2019. Dividends payable at 31 December 2020 related to treasury shares acquired under MLTIP amounting to RR 656 million are included in other non-financial liabilities (31 December 2019: RR 582 million). 28 Reconciliation of Liabilities Arising from Financing Activities The table below sets out an analysis of the Group’s debt and the movements in the Group’s debt for each of the periods presented. The debt items are those that are reported as financing in the consolidated statement of cash flows. In millions of RR At 31 December 2018 Adoption of IFRS 16 Cash flows from repayments Cash flows from proceeds Foreign exchange adjustments Other non-cash movements At 31 December 2019 Cash flows from repayments Cash flows from proceeds Foreign exchange adjustments Other non-cash movements Debt securities in issue Perpetual subor- dinated bonds Lease liabilities Total 9,605 20,644 - 30,249 - (6,583) 23,254 (432) 234 26,078 (2,894) 331 459 (64) - - 46 (2,267) 64 18,487 (1,937) 710 3,609 (114) 1,665 (1,087) - 1,116 1,694 (758) - - 404 1,340 1,665 (7,670) 23,300 (2,699) 1,414 46,259 (5,589) 1,041 4,068 226 46,005 At 31 December 2020 23,910 20,755 F-81 F-82 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management The risk management function within the Group is carried out with respect to financial risks, operational risks and legal risks by the management of the Bank and Insurance Company. Financial risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The primary function of financial risk management is to establish risk limits and to ensure that any exposure to risk stays within these limits. The operational and legal risk man- agement functions are intended to ensure the proper functioning of internal policies and procedures in order to minimize operational and legal risks. Credit risk. The Group exposes itself to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. Exposure to credit risk arises as a result of the Group’s lending and other transactions with counterparties giving rise to financial assets. The Group grants retail loans and SME loans to customers across all regions of Russia, therefore its credit risk is broadly diversified. The management of the Group takes special measures to mitigate growing credit risk such as decreasing of credit limits for unreliable clients, diversifying of modes of work with overdue borrowers, toughening of scoring for the new borrowers etc., giving rise to financial assets and off-balance sheet credit-related commitments. The Group’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets in the consolidated statement of financial position. For financial guarantees issued, commitments to extend credit, undrawn credit lines, the maximum exposure to credit risk is the amount of the commitment (Note 31). The Bank created a credit committee, which establishes general principles for lending to individual borrowers. According to these principles, the minimum requirements for potential customers are listed below: • Citizenship of the Russian Federation; • Age from 18 to 70 y.o., but not older than 70 y.o. at the time of loan repayment; • Availability of a cell-phone; • Permanent employment; • Permanent income. For cash loans, minimum requirements are listed below: • The requested loan term is from 3 to 36 months; For car loans minimum requirements are listed below: • The requested loan term is from 1 to 5 years; • Car loan volumes up to RR 3,000 thousand; • The requirement for the car is with an age not more than 18 years and availability of vehicle passport. For loans to SME minimum requirements are listed below: • Working capital loan: loan volumes up to RR 10,000 thousand and loan term to 6 months; • Credit for individual entrepreneurs for any purpose: loan volumes up to RR 2,000 thousand and loan term to 36 months; • Credit for individual entrepreneurs secured by real estate: loan volumes up to RR 15 million and loan term to 15 years. The requirement for the real estate is an apartment in the apartment building within the Russian Federation, which is free from any encumbrances; • Investment credit line secured by real estate: loan volumes up to RR 15 million and loan term to 5 years. The require- ment for the real estate is an apartment in the apartment building within the Russian Federation, which is free from any encumbrances; • For SME with a turnover from RR 120 million per year: loan volumes up to RR 60 million and loan term to 5 years. A credit decision process includes: • Validation of the application data. The system checks the validity of the data provided (addresses, telephone numbers, age, if the applicant already uses any other products of the Bank); • Phone verification of the application information about the potential customer, his/her employment, social and property status, etc. This step may be omitted for POS loans; • Requesting of the previous credit history of the applicant from the three largest credit bureaus in Russia – Equifax, UCB (United Credit Bureau) and NBCH (National Bureau of Credit Histories); • Based on all available information, the credit score of the applicant is calculated and a final decision is made about the approval of the credit product; • The approved loan amount, loan term and tariff plan are calculated depending on the score and declared income. Management of the Group manages the credit risk on unused limits on credit cards in the following way: a) if the credit card loan is overdue for more than 7 days, its account will be blocked till repayment; • Cash loan volumes range between RR 50 thousand and RR 2,000 thousand. b) if the borrower had lost his/her source of income, then borrower account might be blocked till verification of his/her new For POS loans minimum requirements are listed below: • The requested loan amount should exceed RR 3 thousand; • The requested loan term is from 3 to 36 months; • The amount of one POS loan does not exceed RR 500 thousand. For secured loans minimum requirements are listed below: employment; c) if borrower’s loan debt burden in other banks is substantially bigger than at the time of loan origination or the credit qual- ity of the borrower decreases significantly then the borrower’s limit for credit might be reduced accordingly. When a customer experiences serious difficulties with his/her current debt servicing, he/she may be offered loan restructuring. In this case the Bank stops accrual of interest, commissions and fines and the debt amount is restructured according to a fixed instalment payment plan with not more than 36 equal monthly payments. Another way of working with overdue loans is initiation of the state court process. This collection option statistically gives greater recovery than the sale of credit-impaired loans. Defaulted clients that could be subject to the court process are chosen by the Bank’s Collection Department considering the following criteria: • The requested loan secured with a car amount should be between RR 100 thousand and RR 3,000 thousand, loan term is from 3 months to 5 years. The requirement for the car is in good condition of driving with an age not more than 15 years, availability of a vehicle registration certificate and vehicle passport; • The requested loan secured with a real estate amount should be between RR 200 thousand and RR 15,000 thousand, loan term is from 3 months to 15 years. The requirement for the real estate is an apartment in the apartment building within the Russian Federation, which is free from any encumbrances. a) the client’s account balance was fixed, accrual of interest stopped; b) information about the client is considered to be up to date; c) the client denied restructuring program; d) term of limitation of court actions has not expired; e) court process is economically justified. F-83 F-84 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) When loans become unrecoverable or not economically viable to pursue further collection efforts, the Collection Depart- ment may decide to sell these loans to a debt collection agency. The Collection Department considers the following criteria for credit-impaired loans qualifying for sale to external debt collection agencies: a) loans remain unpaid after all collection procedures were performed (no payment during last 4-6 months); b) the debtor cannot be either reached or found for the previous 4 months; c) the debtor has no assets and there is no expectation he/she will have any in the future; d) the debtor has died and there is no known estate or guarantor; e) it is determined that it is not cost effective to continue collection efforts. Credit risk grading system. For measuring credit risk and grading financial instruments except for loans and advances to customers by the level of credit risk, the Group applies risk grades estimated by external international rating agencies in case these financial instruments have risk grades estimated by external international rating agencies (using Fitch ratings and in case of their absence - Moody’s or Standard & Poor’s ratings adjusting them to Fitch’s categories using a reconcilia- tion table): Master scale credit risk grade Corresponding ratings of external international rating agency (Fitch) Excellent Good Monitor Sub-standard Doubtful Default AAA, AA+ to AA-, A+ to A- BBB+ to BBB-, BB+ BB to B+ B, B- CCC+ to CC- C, D Each master scale credit risk grade is assigned a specific degree of creditworthiness: • Excellent – high credit quality with lowest or very low expected credit risk; • Good – good credit quality with currently low expected credit risk; • Monitor – adequate credit quality with a moderate credit risk; • Sub-standard – moderate credit quality with a satisfactory credit risk; • Doubtful – facilities that require closer monitoring and remedial management; and • Default – facilities in which a default has occurred. For measuring credit risk and grading loans and advances to customers, credit related commitments and those financial in- struments which do not have risk grades estimated by external international rating agencies, the Group applies risk grades and the corresponding range of probabilities of default (PD): Master scale credit risk grade Corresponding interval Excellent Good Monitor Sub-standard NPL For credit cards: non-overdue with PD < 5%; for other types of loans: non-overdue for the last 12 months with PD < 5% or with early repayments 1-30 days overdue for all types of loans or without first due date for credit card loans 31-90 days overdue or restructured loans 0-90 days overdue all other non-overdue loans 90+ days overdue The condition of early repayments is satisfied, as described in the table above, if cumulative amount of early repayments exceed 5% of the gross carrying amount at the date of recognition of the loan. Each master scale credit risk grade is assigned a specific degree of creditworthiness: • Excellent – strong credit quality with minimum expected credit risk; • Good – adequate credit quality with low expected credit risk; • Monitor – adequate credit quality with a moderate credit risk and credit cards loans before the first due date; • Sub-standard – low credit quality with a substantial credit risk, includes restructured loans that are less than 90 days overdue; • NPL – non-performing loans, credit-impaired loans more than 90 days overdue. The rating models are regularly reviewed by the Credit Risk Department, backtested on actual default data and updated if necessary. Despite the method used, the Group regularly validates the accuracy of ratings estimates and appraises the predictive power of the models. Expected credit loss (ECL) measurement – definitions and description of estimation techniques. ECL is a probability-weighted estimate of the present value of future cash shortfalls (i.e., the weighted average of credit losses, with the respective risks of default occurring in a given time period used as weights). ECL measurement is based on the following components used by the Group: Default occurs when a financial asset is 90 days past due or less than 90 days overdue but with the final statement issued, i.e. the limit is closed, the balance is fixed, interest and commissions are no longer accrued. Probability of Default (PD) – an estimate of the likelihood of default to occur over a given time period. Exposure at Default (EAD) – an estimate of exposure at a future default date, taking into account expected changes in exposure after the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities. Loss Given Default (LGD) – an estimate of the loss arising on default as a percentage of the EAD. It is based on the differ- ence between the contractual cash flows due and those that the Group would expect to receive. Discount Rate – a rate to discount an expected loss to its present value at the reporting date. The discount rate represents the effective interest rate (EIR) for the financial instrument or an approximation thereof. Lifetime period – the maximum period over which ECL should be measured. For loans with fixed maturity, the lifetime peri- od is equal to 20 months. For revolving facilities, it is based on statistics of the average period between the moment of the loan falling into the Stage 2 until the write-off or attrition. Currently the Group estimates that this period equals to 4 years, though it is subject to periodical reassessment. Lifetime ECL – losses that result from all possible default events over the remaining lifetime period of the financial instru- ment. 12-month ECL – the portion of lifetime ECLs that represent the ECLs resulting from default events on a financial instrument that are possible within 12 months after the reporting date that are limited by the remaining contractual life of the financial instrument. Forward looking information – the information that includes the key macroeconomic variables impacting credit risk and expected credit losses for each portfolio segment. A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking information. Credit Conversion Factor (CCF) – a coefficient that shows that the probability of conversion of an off-balance sheet amount to exposure on the consolidated statement of financial position within a defined period. It can be calculated for a 12-month or lifetime period. Based on the analysis performed, the Group considers that 12-month and lifetime CCFs are the same. Purchased or originated credit-impaired (POCI) financial assets - financial assets that are credit-impaired upon initial recog- nition. F-85 F-86 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) Default and credit-impaired assets – assets for which a default event has occurred. The default definition stated above should be applied to all types of financial assets of the Group. An instrument is considered to no longer be in default (i.e. to have “cured”) when it no longer meets any of the default criteria. Significant increase in credit risk (SICR) – the SICR assessment is performed on an individual basis for all financial assets by monitoring the triggers stated below. The criteria used to identify SICR are monitored and reviewed periodically for appro- priateness by the Group’s Risk Management Department. The Group considers a financial instrument to have experienced a SICR when one or more of the following quantitative, qualitative or backstop criteria have been met. For interbank operations, bonds issued by banks and bonds issued by corporates and sovereigns: • 30 days past due; • award of risk grade “Doubtful”; • decrease of assigned external rating by 2 notches, which corresponds to an approximate increase of PD by 2.5 times. For credit card loans: • 30 days past due; or • threshold defined on an individual basis using existing scoring models: increase of the 12-month PD compared to 12-month PD estimated 18 months ago or as of the date of initial recognition (if it occurred less than 18 months ago) by 3 times or PD reaching 50% and above. 18-month period was determined as the weighted average period of the most recent date where the credit limit was revised by at least 25%, which is considered to be a substantial revision. For all other loans: • 30 days past due; or ECL for POCI financial assets is always measured on a lifetime basis (Stage 3), so at the reporting date, the Group only recognises the cumulative changes in lifetime expected credit losses. The Group carries out two separate approaches for ECL measurement: • for loans and advances to customers: assessment on a portfolio basis: internal ratings are estimated on an individual basis but the same credit risk parameters (e.g. PD, LGD) are applied during the process of ECL calculations for the same credit risk ratings and homogeneous segments of the loan portfolio; • for all other financial assets except FVTPL: assessment based on external ratings. The Group performs an assessment on a portfolio basis for the retail loans. This approach incorporates aggregating the portfolio into homogeneous segments based on borrower-specific information, such as delinquency, the historical data on losses and other. Principles of assessment on portfolio basis – to assess the staging of exposure and to measure a loss allowance on a collective basis, the Group combines its exposures into segments on the basis of shared credit risk characteristics, such as that exposures to risk within a group are homogeneous. Examples of shared characteristics include type of customer, product type, credit risk rating, date of initial recognition, overdue level and repayment statistics. The different segments reflect differences in PD. The appropriateness of groupings is monitored and reviewed on a periodic basis by the Risk Management Department. In general, ECL is the multiplication of the following credit risk parameters: EAD, PD and LGD (definitions of the parameters are provided above). The general approach used for ECL calculation is stated below. • if the loans were past due for more than 30 days during the last 6 months or if the loans fell past due during the last 4 months more than once. where: If the SICR criteria are no longer met, the instrument will be transferred back to Stage 1. General principle of techniques applied For non-POCI financial assets, ECLs are generally measured based on the risk of default over one of two different time peri- ods, depending on whether or not the credit risk of the borrower has increased significantly since initial recognition. This approach can be summarised in a three-stage model for ECL measurement: • Stage 1 – a financial instrument that is not credit-impaired on initial recognition and its credit risk has not increased significantly since initial recognition, the loss allowance is based on 12-month ECLs; • Stage 2 – if since the date, which was assumed to be the date of initial recognition is identified a SICR, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-impaired, the loss allowance is based on lifetime ECLs; • Stage 3 – if the financial instrument is credit-impaired or restructured, the financial instrument is then moved to Stage 3 and the loss allowance is based on lifetime ECLs. – probability of default in moment (can’t be higher than 100%); – exposure at default in moment ; – loss given default in moment ; – number of months in the loan’s lifetime; – effective interest rate; – remaining amount of payments. The ECL is determined by predicting credit risk parameters (EAD, PD and LGD) for each future month during the lifetime period for each exposure or segment. These three components are multiplied together. This effectively calculates an ECL for each future month, which is then discounted back to the reporting date and summed up. The discount rate used in the ECL calculation is the effective interest rate or an approximation thereof. F-87 F-88 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) The EADs are determined based on the expected payment profile, on an individual basis. For revolving products, the EAD is predict- ed by taking the current withdrawn balance and adding a “credit conversion factor” that accounts for the expected drawdown of the remaining limit of utilised loans by the time of default. These assumptions vary by product type, current limit utilisation and other bor- rower-specific behavioural characteristics. For other products EAD is equal to current exposure as there is no credit limit to utilize. Two types of PDs are used for calculating ECLs: 12-month and lifetime PD: • 12-month PDs – the estimated probability of a default occurring within the next 12 months. This parameter is used to calculate 12-month ECLs. An assessment of a 12-month PD is based on the latest available historic default data using borrower-specific behavioural characteristics and adjusted for forward-looking information when appropriate. Based on borrower-specific PDs the exposures are allocated to segments to which average PD for the segment is applied. • Lifetime PDs – the estimated probability of a default occurring over the remaining life of the financial instrument. This parameter is used to calculate lifetime ECLs for Stage 2 and Stage 3 exposures. An assessment of a lifetime PD is based on the latest available historic default data using product specific lifetime periods defined above. To calculate Lifetime PD, the Group developed lifetime PD curves based on the 12-month PD data. LGD represents the Group's expectation of the extent of loss on a defaulted exposure. For credit card loans, cash loans and POS loans LGDs are calculated on portfolio basis based on recovery statistics of defaulted loans over the period of 24 or 36 months. For secured loans, car loans and loans to SME LGDs are calculated using current market data in relation to the expected recoveries. ECL measurement for loan commitments. The ECL measurement for these instruments includes the same steps as de- scribed above for on-balance sheet exposures and differs with respect to EAD calculation. The EAD is a product of credit conversion factor (“CCF”) and amount of the commitment. CCF for undrawn credit limits of credit cards and overdrafts is defined based on statistical analysis of exposures at default. Principles of assessment based on external ratings – the principles of ECL calculations based on external ratings are the same as for their assessment on a portfolio basis. Credit risk parameters (PD and LGD) are taken from the default and recovery statistics published by international rating agencies (Fitch and in case of their absence - Moody’s or Standard & Poor’s). Forward-looking information incorporated in the ECL models. The calculation of ECLs incorporates forward-looking infor- mation. The Group has performed historical analysis and identified the key economic variables impacting credit risk and ECLs for each portfolio. The list of variables: • Russian stock market index MOEX; • Moscow Prime Offered Rate; • Debt load of Russian population based on statistics from bureaus of credit history. The impact of these economic variables on the ECL has been determined by performing statistical regression analysis in order to understand the way how changes in these variables historically impacted default rates. Three different scenarios are used: base, optimistic and pessimistic. The scenarios are weighted accordingly with base scenario having the 71.1% (2019: 90.8%) weight, optimistic scenario having the 0.1% (2019: 1.3%) weight and pessimistic scenario having the 28.8% (2019: 7.9%) weight. Backtesting – the Group regularly reviews its methodology and assumptions to reduce any difference between the esti- mates and the actual loss of credit. Such backtesting is performed on a quarterly basis. The results of backtesting the ECL measurement methodology are communicated to Group Management and further steps for refining models and assumptions are defined after discussions between authorised persons. Market risk. The Group takes on exposure to market risks. Market risks of the Group arise from open positions in (a) currency and (b) interest rate, both of which are exposed to general and specific market movements. The priority goal of market risk man- agement is to maintain the risks assumed by the Group at a level determined by the Group in accordance with its own strategic objectives. Management sets limits on the value of risk that may be accepted, which is monitored on a daily basis. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Currency risk. In respect of currency risk, the management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summarizes the Group’s exposure to foreign currency exchange rate risk at the end of the year: 31 December 2020 At 31 December 2019 Non-de- rivative monetary financial assets Non-de- rivative monetary financial liabilities Non-de- rivative monetary financial assets Non-de- rivative monetary financial liabilities Deriva- tives Net posi- tion Deriva- tives Net posi- tion 674,171 (545,395) (24,276) 104,500 491,635 (390,010) (12,995) 88,630 116,693 (140,851) 29,207 5,049 46,930 (62,098) 13,422 (1,746) 35,019 (31,909) (5) 3,105 18,902 (20,261) (595) (1,954) 1,405 1,942 (1,414) (2,455) - - (9) (513) 677 87 (675) (788) (32) - (30) (701) 829,230 (722,024) 4,926 112,132 558,231 (473,832) (200) 84,199 In millions of RR RR USD Euro GBP Others Total Derivatives presented above are monetary financial assets or monetary financial liabilities but are presented separately in order to show the Group’s gross exposure. Amounts disclosed in respect of derivatives represent the fair value, at the end of the reporting period, of the respective currency that the Group agreed to buy (positive amount) or sell (negative amount) before netting of positions and payments with the counterparty. The amounts by currency are presented gross as stated in Note 35. The net total represents the fair value of the currency derivatives. The above analysis includes only monetary assets and liabilities. The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the end of the reporting period, with all other variables held constant: In millions of RR USD strengthening by 20% (2019: by 20%) USD weakening by 20% (2019: by 20%) Euro strengthening by 20% (2019: by 20%) Euro weakening by 20% (2019: by 20%) GBP strengthening by 20% (2019: by 20%) GBP weakening by 20% (2019: by 20%) 31 December 2020 At 31 December 2019 Impact on profit for the year Impact on total equity Impact on profit for the year Impact on total equity 794 (794) 488 (488) (1) 1 794 (794) 488 (488) (1) 1 (277) 277 (310) 310 (5) 5 (277) 277 (310) 310 (5) 5 The exposure was calculated only for monetary balances denominated in currencies other than the functional currency of the respective entity of the Group. Interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. Management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken. F-89 F-90 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) The Group is exposed to prepayment risk through providing fixed rate loans, which give the borrower the right to repay the loans early. The Group’s current year profit and equity at the end of the current reporting period would not have been sig- nificantly impacted by changes in prepayment rates because such loans are carried at amortised cost and the prepayment right is at or close to the amortised cost of the loans and advances to customers (2019: no material impact). The table below summarizes the Group’s exposure to interest rate risks. The table presents the aggregated amounts of the Group’s financial assets and liabilities at carrying amounts, categorized by the earlier of contractual interest repricing or maturity dates: Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 3 years More than 3 years Total In millions of RR 31 December 2020 Total financial assets 249,316 149,031 77,988 138,248 219,682 834,265 Total financial liabilities (379,481) (165,961) (75,564) (90,975) (10,152) (722,133) Net interest sensitivity gap at 31 December 2020 31 December 2019 (130,165) (16,930) 2,424 47,273 209,530 112,132 Total financial assets 136,773 153,392 66,962 121,755 80,306 559,188 Total financial liabilities (200,447) (155,323) (62,923) (44,109) (12,187) (474,989) Net interest sensitivity gap at 31 December 2019 (63,674) (1,931) 4,039 77,646 68,119 84,199 The Group has no significant risk associated with variable interest rates on loans and advances provided to customers or loans received. The aim of interest rate risk management is to maintain the risks assumed by the Group within the limits determined by the Group in accordance with its own strategic objectives. The interest rate risk is managed by setting caps and floors in relation to interest rates on financial assets and liabilities depending on their types and maturities and balancing the assets and liabilities which are sensitive to changes in interest rates. The assessment of the magnitude of interest rate risk is carried out by performing a sensitivity analysis which imply assess- ment of impact on net interest income of a shift in interest rates by 200 basis points. At 31 December 2020, if interest rates at that date had been 200 basis points lower/higher (2019: 200 basis points), with all other variables held constant, profit for the year would have been RR 2,243 million (2019: RR 1,684 million) lower/higher, equity would have been RR 2,243 million (2019: RR 1,684 million) lower/higher. The Group monitors interest rates for its financial instruments. The table below summarizes interest rates for the years 2020 and 2019 based on reports reviewed by key management personnel. For securities, the interest rates represent yields to maturity based on market quotations at the reporting date: In % p.a. Assets 31 December 2020 At 31 December 2019 RR USD EURO GPB Other RR USD EURO GPB Other 0.0 0.0 0.0 Cash and cash equivalents 0.0 0.0 Loans and advances to customers 33.5 Due from banks Investments in securities Repurchase receivables 3.2 6.9 6.9 - - 2.6 3.3 0.0 1.7 - 1.3 - Brokerage receivables 15.5 15.4 13.5 Liabilities Due to banks Customer accounts Debt securities in issue Brokerage payables Subordinated debt 4.4 3.3 8.6 0.0 0.5 - 15.6 15.6 - 10.0 - 0.1 - - - 0.0 0.0 - - - - - - - - - - - - 0.1 0.0 - - - - - - 0.0 37.2 5.3 7.9 6.5 0.0 - 1.6 4.3 4.3 - - 2.4 3.1 15.4 14.7 13.7 6.2 5.1 9.0 15.8 - 0.0 1 3.8 15.3 10.0 - 0.1 1.2 - - - - - - - - 0.1 - - - - - - - - - 0.0 - - - The sign “-” in the table above means that the Group does not have the respective assets or liabilities in the corresponding currency. F-91 F-92 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                  31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) Geographical risk concentrations. The geographical concentration of the Group’s financial assets and liabilities at 31 December 2020 is set out below: In millions of RR Financial assets Russia OECD Other Non-OECD Listed Total Cash and cash equivalents 128,536 7,815 Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Investments in securities Repurchase receivables Brokerage receivables 5,379 1,887 374,629 5,035 231,872 29 24,064 - - - - - - Guarantee deposits with payment systems 672 14,803 - - - 1,892 - 6,582 - - - 30,912 - 158 803,015 22,618 8,632 Other financial assets Total financial assets Financial liabilities Due to banks Customer accounts Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Total financial liabilities Credit related commitments (Note 31) 204,868 4,819 626,837 - 109 9,206 - 2,160 34,291 677,422 - - - - - - - - - - - - - - - - - 46 46 - - - - - - - - - - - - - - 136,351 5,379 1,887 376,521 5,035 238,454 29 24,064 15,475 31,070 834,265 4,819 626,837 23,910 23,910 - - 109 9,206 20,755 20,755 - - 2,160 34,337 44,665 722,133 204,868 The geographical concentration of the Group’s financial assets and liabilities at 31 December 2019 is set out below: Russia OECD Other Non-OECD Listed Total In millions of RR Financial assets Cash and cash equivalents Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Investments in securities Brokerage receivables Guarantee deposits with payment systems Other financial assets Total financial assets Financial liabilities Due to banks Customer accounts Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Total financial liabilities 52,661 3,448 2,084 329,175 390 134,765 2,799 501 21,673 2,903 - - - 413 - 8,376 - 547,496 11,692 23 411,504 2,460 590 1,207 - 2,342 14,589 432,715 - - - - - - 59 59 - - - - - - - - - - - - - - - - - - - - - - 55,564 3,448 2,084 329,175 390 135,178 2,799 8,877 21,673 559,188 23 110 - 411,614 - - - - - 23,618 26,078 - - 590 1,207 18,487 18,487 2,342 - 14,648 110 42,105 474,989 - 168,059 Credit related commitments (Note 31) 168,059 Assets, liabilities and credit related commitments have been based on the country in which the counterparty is located. Cash on hand has been allocated based on the country in which they are physically held. Balances with Russian coun- terparties actually outstanding to/from offshore companies of these Russian counterparties, are allocated to the caption “Russia”. Other risk concentrations. Management monitors and discloses concentrations of credit risk by obtaining reports listing exposures to borrowers with aggregated loan balances in excess of 10% of net assets. The Group did not have any such significant risk concentrations at 31 December 2020 and 2019. Liquidity risk. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group is exposed to daily calls on its available cash resources from unused limits on issued credit cards, re- tail deposits from customers, current accounts and due to banks. The Group does not maintain cash resources to meet all of these needs as experience shows that only a certain level of calls will take place and it can be predicted with a high level of certainty. Liquidity risk is managed by the Financial Committee of the Bank. The Group seeks to maintain a stable funding base primarily consisting of amounts due to institutional investors, corporate and retail customer deposits and debt securi- ties. The Group keeps all available cash in diversified portfolios of liquid instruments such as a correspondent account with CBRF and overnight placements in high-rated commercial banks, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements. The available cash at all times exceeds all accrued financing costs falling due within half a year plus two months of regular operating costs. F-93 F-94 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) The maturity analysis of financial liabilities at 31 December 2019 is as follows: The liquidity management of the Group requires consideration of the level of liquid assets necessary to settle obligations as they fall due; maintaining access to a range of funding sources; maintaining funding contingency plans; and monitoring liquidity ratios against regulatory requirements. The liquidity analysis takes into account the covenant requirements and ability of the Group to waive any potential breach- es within the grace period. The Bank calculates liquidity ratios on a daily basis in accordance with the requirements of the CBRF. The Bank has complied with these ratios throughout 2020 and 2019. The CFO receives information about the liquidity profile of the financial assets and liabilities. This includes daily, weekly, monthly and quarterly updates on the level of credit card transactions and repayments, statistics on credit card issuance and credit card limit utilisation, inflow and outflow of retail deposits, changes in the investment securities portfolio, level of expected outflows such as operating costs and financing activities. The CFO then ensures the availability of an adequate portfolio of short-term liquid assets, made up of an amount on the correspondent account with the CBRF and overnight deposits with banks, to ensure that sufficient liquidity is maintained within the Group as a whole. Regular liquidity stress testing under a variety of scenarios covering both normal and more severe market conditions and credit card portfolio behaviour is reviewed by the CFO. The table below shows liabilities at 31 December 2020 by their remaining contractual maturity. The amounts of liabilities disclosed in the maturity table are the contractual undiscounted cash flows and gross loan commitments. Such undiscount- ed cash flows differ from the amount included in the consolidated statement of financial position because the consolidat- ed statement of financial position amount is based on discounted cash flows. When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the reporting date. Foreign currency payments are translated using the spot exchange rate at the end of the reporting period. The maturity analysis of financial liabilities at 31 December 2020 is as follows: In millions of RR Liabilities Due to banks Demand and less than 1 month From 1 to 3 months From 3 to 6 months From 6 to 12 months More than 1 year Total - - - - 4,819 4,819 Customer accounts 335,710 84,412 80,149 80,306 49,184 629,761 Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Lease liabilities 173 51 9,206 168 345 34,337 64 316 198 - 322 207 - 102 515 251 - 496 953 - 166 1,930 23,245 26,179 501 25,842 26,843 - 998 358 - 330 - 9,206 22,126 24,110 297 2,160 - 34,337 686 1,348 Credit related commitments (Note 31) Total potential future payments for financial obligations 204,868 - - - - 204,868 584,922 85,557 82,530 84,423 126,199 963,631 In millions of RR Liabilities Due to banks Demand and less than 1 month From 1 to 3 months From 3 to 6 months From 6 to 12 months More than 1 year Total 23 - - - - 23 Customer accounts 189,176 84,108 70,530 60,627 11,605 416,046 Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Lease liabilities 168 - 1,207 149 463 14,648 11 338 199 - 291 917 - 109 487 203 - 440 438 - 111 2,082 23,795 26,870 399 19,833 20,634 - 891 296 - - 1,207 18,541 20,312 228 2,342 - 14,648 209 1,254 1,694 Credit related commitments (Note 31) Total potential future payments for financial obligations 168,059 - - - - 168,059 373,904 85,962 72,209 64,504 75,256 671,835 Financial derivatives receivable and payable are disclosed in the Note 35. The tables above present only the gross payables. Insurance provisions are disclosed in the table above based on their expected maturities. Customer accounts are classified in the above analysis based on contractual maturities. However, in accordance with the Russian Civil Code, individuals have a right to withdraw their deposits prior to maturity if they forfeit their right to accrued interest. The Group takes on exposure to liquidity risk, which is the risk of cash surplus in case of assets-liabilities cash-flow profile mismatch. Exposure to liquidity risk arises as a result of the Group’s borrowing and operational activities that assume cash payment obligations. The Group uses daily, short-term and long-term reporting, stress-testing and forecasting practices to monitor and prevent potential liquidity problems. The Group is actively increasing the number of counterparties for in- terbank lending, looks for new wholesale markets, improves and creates additional debit and credit products to have more instruments over cash-flow management. The recent economic situation has resulted in increased liquidity risk. In response the management of the Group preserves cash safety cushions for possible cash outflows and has planned Group’s liquidity position for the next year to ensure it can cover all upcoming payment obligations. F-95 F-96 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 31 December 2020 is presented in the table below. Demand and less than 1 month In millions of RR Assets From 1 to 3 months From 3 to 6 months From 6 to 12 months From 1 to 5 years More than 5 years Total Cash and cash equivalents 136,351 - - - - 2,756 - 546 - 454 - 531 - 1,092 1,887 - - - 136,351 5,379 1,887 Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers 52,623 67,843 69,011 72,407 98,002 16,635 376,521 Financial derivatives 82 Investments in securities 238,454 Repurchase receivables 29 Brokerage receivables 24,064 - - - - - - - - - 4,953 - - - - - 5,035 238,454 29 24,064 Guarantee deposits with payment systems 2,163 2,788 2,836 2,976 4,028 684 15,475 The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 31 December 2019 is presented in the table below. Demand and less than 1 month From 1 to 3 months From 3 to 6 months From 6 to 12 months From 1 to 5 years More than 5 years In millions of RR Assets Cash and cash equivalents 55,564 - 510 - - 346 46 - 513 - - 571 2,038 - - - 1,508 - Total 55,564 3,448 2,084 Mandatory cash balances with the CBRF Due from other banks Loans and advances to custom- ers Financial derivatives Investments in securities Brokerage receivables Guarantee deposits with pay- ment systems Other financial assets 48,391 63,640 63,466 61,884 79,105 12,689 329,175 - 135,178 2,799 1,304 21,569 - - - - - - 390 - - - 390 135,178 2,799 1,717 63 1,712 20 1,669 10 2,133 11 342 - 8,877 21,673 Total financial assets 266,313 65,930 65,590 64,076 84,248 13,031 559,188 Liabilities Due to banks 23 - - - - - - 23 411,614 Other financial assets 30,820 44 21 12 173 - 31,070 Customer accounts 180,017 60,879 41,259 61,298 68,161 Total financial assets 487,342 71,221 72,322 75,926 110,135 17,319 834,265 Liabilities Due to banks - - - - 4,819 Customer accounts 321,104 63,601 52,958 61,899 127,275 - - 4,819 626,837 Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions - 76 9,206 - 345 Other financial liabilities 34,337 870 944 981 11,281 9,834 23,910 - - 481 207 - - - 481 953 - - - 961 358 - 33 - 18,832 297 - - - - - - 109 9,206 20,755 2,160 34,337 Total financial liabilities 365,068 65,159 55,336 64,199 162,537 9,834 722,133 Net liquidity gap at 31 December 2020 Cumulative liquidity gap at 31 December 2020 122,274 6,062 16,986 11,727 (52,402) 7,485 112,132 122,274 128,336 145,322 157,049 104,647 112,132 - Provision for unearned premiums in the amount of RR 3,907 million is not included in the insurance provisions stated above. Refer to Note 17. Debt securities in issue Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities - - 1,207 - 463 14,648 411 - 158 917 - 599 1,008 12,463 11,597 26,078 - - 438 - - - 296 - 590 18,329 228 - - - - - 590 1,207 18,487 2,342 14,648 Total financial liabilities 196,358 62,365 42,296 62,602 99,771 11,597 474,989 Net liquidity gap at 31 December 2019 Cumulative liquidity gap at 31 December 2019 69,955 3,565 23,294 1,474 (15,523) 1,434 84,199 69,955 73,520 96,814 98,288 82,765 84,199 - Provision for unearned premiums in the amount of RR 1,760 million is not included in the insurance provisions stated above. Refer to Note 17. As at the 31 December 2020 all the investment in debt securities are classified within demand and less than one month as they are easy repoable in CBR or on the open market securities and can provide immediate liquidity to the Group. All current accounts of individuals are classified within demand and less than one month (2019: the same). The allocation of deposits of individuals considers the statistics of autoprolongations and top-ups of longer deposits with the funds from shorter deposits after their expiration in case when the customers have more than one active deposit. The matching and/or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks ever to be completely matched since business transacted is often of an uncertain term and of different types. F-97 F-98 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                          31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 29 Financial and Insurance Risk Management (Continued) Effect of changes in the key assumptions as at 31 December 2020: An unmatched position potentially enhances profitability but can also increase the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important fac- tors in assessing the liquidity of the Group and its exposure to changes in interest and exchange rates. Management believes that in spite of a substantial portion of customer accounts being on demand, diversification of these deposits by number and type of depositors, and the past experience of the Group would indicate that these customer ac- counts provide a long-term and stable source of funding for the Group. Insurance risk. Insurance risk is the risk associated with insurance contracts, consisting in the possibility of the occur- rence of an insurance event and the uncertainty of the amount and time of occurrence of the loss associated with it. The insurance risk management process covers all stages, from the stage of development of insurance rates to the settle- ment of losses. The main steps in the insurance risk management process include: • Underwriting and regulation of tariff policy; • Efficiency of the loss settlement process; • Diversification of the insurance portfolio. Tariff policy. The process of underwriting and regulation of the tariff policy includes the formation of tariffs for certain areas of activity based on the analysis of results for previous periods, existing market conditions and the Insurance Company's strategy. The insurance tariff is set on the basis of the analysis of the expected loss ratio based on Group’s insurance portfolio and similar products on the market, the commission ratio based on the analysis of product profitability and commission rates for similar products on the market, and the analysis of the average market rate. When developing tariffs, factors such as expect- ed inflation and changes in the legislation of the Russian Federation are also taken into account. The Insurance Company monitors the correctness of the calculation of the insurance premium under the insurance con- tract by analyzing, on a regular basis, the deviations of the actual received premiums from the estimated premiums. Loss settlement process. In accordance with the insurance contract, the policyholder is obliged to notify the insurance company of a loss within a certain period of time. Losses are settled by specialized units, other than selling business units. The insurance claims will be paid only after receiving all the necessary documents confirming the fact of the insured event. Also, if necessary, economic security department and legal department are involved in checking documents for settlement of losses. If at the time of payment of the insurance claims the policyholder had outstanding debt of the insurance premium, the unpaid part is deducted from the amount of compensation. If there is a third party that caused an insurance loss to the insured client, the Group has a right to pursue third parties responsible for loss for payment of some or all costs related to the claims settlement process of the Group. Diversification of the insurance portfolio. To reduce insurance risk, the Group also uses the diversification of its insurance portfolio - it insures a large number of small risks, which, in particular, is achieved through the remote provision of insur- ance services almost throughout the Russian Federation. The company does not operate outside the Russian Federation and is exposed to risks associated with the geographical features of the regions of the Russian Federation. Sensitivity analysis. The following analyses the possible changes in the key assumptions used in the calculation of insur- ance liabilities under contracts other than life insurance, provided that the other assumptions are constant. This analysis reflects the impact on gross and net liabilities, profit before tax and equity of the Group. In millions of RR except for the number of claims The average cost of insurance claims The average number of claims Effect on insurance obligations other than life insurance Change in assump- tions Effect on the reinsur- ers' share in insurance obligations other than life insurance Effect on profit be- fore tax Effect on equity – 10% + 10% – 10% + 10% (180) 180 (180) 180 1 (1) 1 (1) 179 (179) 179 (179) 143 (143) 143 (143) Effect of changes in the key assumptions as at 31 December 2019: In millions of RR except for the number of claims Change in assumptions Effect on insurance obligations other than life insurance Effect on the reinsur- ers' share in insurance obligations other than life insurance Effect on profit be- fore tax Effect on equity The average cost of insurance claims The average number of claims 30 Management of Capital – 10% + 10% – 10% + 10% (193) 193 (193) 193 1 (1) 1 (1) 193 (193) (193) 193 154 (154) 154 (154) The Group’s objectives when managing capital are (i) for the Bank to comply with the capital requirements set by the Cen- tral Bank of Russian Federation (CBRF), (ii) for the Insurance Company to comply with the capital requirements set by the legislation of the Russian Federation, (iii) for the Group to comply with the financial covenants set by the terms of securities issued; (iv) to safeguard the Group’s ability to continue as a going concern. The Group considers total capital under management to be equity attributable to shareholders of the Company as shown in the consolidated statement of financial position. The amount of capital that the Group managed as of 31 December 2020 was RR 127,016 million (31 December 2019: RR 96,082 million). Compliance with capital adequacy ratios set by the CBRF is monitored daily and submitted to the CBRF monthly with reports outlining their calculation reviewed and signed by the Bank’s Chief Executive Officer and Chief Accountant. Other objectives of capital management are evaluated annually. The amount of regulatory capital of Tinkoff Bank calculated in accordance with the methodology set by CBRF as at 31 December 2020 was RR 121,350 million, and the equity capital adequacy ratio (N1.0) was 13.07% (31 December 2019: RR 99,731 million and 12.12%). Minimum required statutory equity capital adequacy ratio (N1.0) was 8% as at 31 December 2020 (31 December 2019: 8%). F-99 F-100 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 30 Management of Capital (Continued) The Group also monitors capital requirements including capital adequacy ratio under the Basel III methodology of the Basel Committee on Banking Supervision: global regulatory framework for more resilient banks and banking systems (hereinafter “Basel III”). The composition of the Group’s capital calculated in accordance with the methodology set by Basel Committee with capital adjustments as set out in Basel III is as follows: In millions of RR Share capital Share premium Treasury shares Share-based payment reserve Retained earnings Revaluation reserve for investments in debt securities Less intangible assets Non-controlling interest Common Equity Tier 1 (CET1) Additional Tier 1 Tier 1 capital Total capital Risk weighted assets (RWA) Credit risk Operational risk Market risk 31 December 2020 31 December 2019 230 26,998 (3,238) 1,548 99,540 1,849 (7,082) 89 119,934 20,755 140,689 140,689 562,918 199,184 24,707 230 26,998 (3,164) 1,039 66,880 3,996 (5,435) 103 90,647 18,487 109,134 109,134 412,741 152,881 12,170 Total risk weighted assets (RWA) 786,809 577,792 Common equity Tier 1 capital adequacy ratio (CET1/ Total RWA), % Tier 1 capital adequacy ratio (Tier 1 capital / Total RWA), % Total capital adequacy ratio (Total capital / Total RWA), % 15.24% 17.88% 17.88% 15.69% 18.89% 18.89% The Group and the Bank have complied with all externally imposed capital requirements throughout the years ended 31 De- cember 2020 and 2019. The Insurance Company has complied with all capital requirements set by the legislation of the Russian Federation throughout the years ended 31 December 2020 and 2019. 31 Contingencies and Commitments Legal proceedings. From time to time and in the normal course of business, claims against the Group may be received. On the basis of its own estimates and internal professional advice, management is of the opinion that no material unprovided losses will be incurred in respect of claims. Tax contingencies. 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 documentation supporting the tax positions may be challenged tax au- thorities. Russian tax administration is gradually strengthening, including 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 decision about review was made. Under certain circumstances reviews may cover longer periods. The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Develop- ment (OECD), although it has specific features. This 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. Tax liabilities arising from controlled transactions are determined based on their actual transaction prices. It is possible, with the evolution of the interpretation of transfer pricing rules, that such transfer prices could be challenged. 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. The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the as- sumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. The Company is a tax resident of Cyprus only and full beneficial owner of the Bank and Insurance Company. This interpretation of relevant legislation may be challenged 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-cor- porate structures (including trusts) controlled by Russian tax residents (controlling parties). The CFC income is subject to a 20% tax rate if the CFC is controlled by a legal entity and a rate of 13% if it is controlled by an individual. As a result, manage- ment reassessed the Group’s tax positions and recognised current tax expense as well as deferred taxes that arose from the expected taxable manner of recovery of the relevant Group’s operations to which the CFC legislation applies to and to the extent that the Group (rather than its owners) is obliged to settle such taxes. In third quarter 2020 amendments to Russia-Cyprus double tax treaty were made. The Group is currently assessing the impact of those amendments. As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, inter- pretations 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 outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities. 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. As at 31 December 2020 and 2019 no material tax risks were identified. Future lease payments related to leases where leased asset is of low value The future cash outflows to which the Group is exposed and which are not reflected in the lease liabilities amounted to RR 233 million at 31 December 2020 and relate primarily to leases of assets which are of low value (31 December 2019: RR 268 million). Compliance with covenants. The Group is subject to certain covenants related primarily to its subordinated perpetual debt. Non-compliance with such covenants may result in negative consequences for the Group. Management believes that the Group was in compliance with all such covenants as at 31 December 2020 and 31 December 2019. Credit related commitments and performance guarantees issued. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Commitments to extend credit represent unused portions of authorizations to extend credit in the form of credit card loans, guarantees. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments, if the unused amounts were to be drawn down. Most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit related commitments because longer-term commit- ments generally have a greater degree of credit risk than shorter-term commitments. F-101 F-102 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS    31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 31 Contingencies and Commitments (Continued) Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obliga- tion. Such contracts do not transfer credit risk. The risk under performance guarantee contracts is the possibility that the insured event (i.e. the failure to perform the contractual obligation by another party) occurs. The key risks the Group faces are significant fluctuations in the frequency and severity of payments incurred on such contracts relative to expectations. The Group uses a scoring model to predict levels of such payments. Claims must be made before the contract matures and most claims are settled within short term. This allows the Group to achieve a high degree of certainty about the estimated payments and therefore future cash flows. Outstanding credit related commitments and performance guarantees are as follows: In millions of RR Unused limits on credit card loans Credit loss allowance Total credit related commitments, net of сredit loss allowance Performance guarantees issued Provisions Total performance guarantees issued, net of provisions 31 December 2020 31 December 2019 208,405 (3,537) 204,868 498 (4) 494 168,059 (2,242) 165,817 660 (3) 657 The total outstanding contractual amount of unused limits on contingencies and commitments liability does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded. In ac- cordance with credit card service conditions the Group has a right to refuse the issuance, activation, reissuing or unblock- ing of a credit card, and is providing a credit card limit at its own discretion and without explaining its reasons. The following table contains an analysis of credit related commitments by credit quality at 31 December 2020 based on credit risk grades. In millions of RR (12-months ECL) (lifetime ECL for SICR) (lifetime ECL for credit impaired) Stage 1 Stage 2 Stage 3 Credit related commitments - Excellent - Good - Monitor Unrecognised gross amount Credit loss allowance Unrecognised net amount 180,619 14,905 12,546 208,070 (3,513) 204,557 - 84 251 335 (24) 311 - - - - - - Total 180,619 14,989 12,797 208,405 (3,537) 204,868 The following table contains an analysis of credit related commitments by credit quality at 31 December 2019 based on credit risk grades. In millions of RR Credit related commitments - Excellent - Good - Monitor Unrecognised gross amount Credit loss allowance Unrecognised net amount Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit impaired) 145,154 12,285 10,360 167,799 (2,228) 165,571 - 84 176 260 (14) 246 - - - - - - Total 145,154 12,369 10,536 168,059 (2,242) 165,817 Also, the Group may decide to increase or decrease a credit card limit using a scoring model, which is based on the client's behaviour model. Therefore, the fair value of the contractual amount of revocable unused limits on contingencies and com- mitments is close to zero. Credit related commitments are denominated in RR. The following table contains an analysis of performance guarantees issued by credit quality based on credit risk grades. In millions of RR Performance guarantees issued - Excellent - Good Unrecognised gross amount Provisions Unrecognised net amount 31 December 2020 31 December 2019 Stage 1 Stage 1 (12-months ECL) (12-months ECL) 310 188 498 (4) 494 415 245 660 (3) 657 Mandatory cash balances with the CBRF of RR 5,379 million as at 31 December 2020 (31 December 2019: RR 3,448 million) represent mandatory reserve deposits which are not available to finance the Bank's day to day operations. F-103 F-104 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS              31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 32 Offsetting Financial Assets and Financial Liabilities Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 De- cember 2020: Gross amounts set off in the consolidated statement of financial position Net amount after offset- ting in the consolidated statement of financial position Gross amounts before off- setting Amounts subject to master netting and similar arrange- ments not set off in the consolidated statement of financial position Net amount of expo- sure Financial instruments Cash collat- eral In millions of RR ASSETS Reverse repurchase agreements Brokerage receivables Financial derivatives Total assets subject to offset- ting, master netting and similar arrangement LIABILITIES Due to banks Brokerage payables Total liabilities subject to offset- ting, master netting and similar arrangement 33,210 24,064 4,920 62,194 4,819 9,206 14,025 - - - - - - - 4,819 9,206 4,949 9,696 14,025 14,645 - - - (130) (490) (620) Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 De- cember 2019: Gross amounts before offset- ting 18,449 2,799 204 20 21,472 23 1,207 227 1,457 In millions of RR ASSETS Reverse repurchase agreements Brokerage receivables Due from banks Financial derivatives Total assets subject to offsetting, master netting and similar arrange- ment LIABILITIES Due to banks Brokerage payables Financial derivatives Total liabilities subject to offset- ting, master netting and similar arrangement Gross amounts set off in the con- solidated statement of financial position Net amount after offset- ting in the consolidated statement of financial position Amounts subject to master netting and similar arrange- ments not set off in the consolidated statement of financial position Net amount of expo- sure Financial instruments Cash collateral - - - - - - - - - 18,449 2,799 204 20 20,130 2,239 227 - - - - 23 (1,681) 560 (23) (3) 21,472 22,596 23 (1,147) 23 1,207 227 20 1,282 - - - 204 3 (75) 23 1,457 1,302 204 (49) As at 31 December 2020 the Group has master netting arrangements with counterparty banks, which are enforceable in case of default. The Group also made margin deposits with clearing house counterparty as collateral for its outstanding derivative positions. The counterparty may set off the Group’s liabilities with the margin deposit in case of default (2019: same). The disclosure does not apply to loans and advances to customers and related customer deposits. 33 Transfers of Financial Assets The Group transferred financial assets in transactions that did not qualify for derecognition in the current periods. The table below shows the amount of operations under sale and repurchase agreements which the Group enters into in the normal course of business: 33,210 24,064 4,920 34,527 24,113 - - - 4,795 (1,317) (49) 125 In millions of RR Debt securities at FVOCI pledged under repur- chase agreements Notes 13 62,194 58,640 4,795 (1,241) Total 31 December 2020 31 December 2019 Carrying amount of the assets Carrying amount of the associat- ed liabilities Carrying amount of the assets Carrying amount of the associat- ed liabilities 29 29 24 24 - - - - In the normal course of business, the Group makes borrowings on interbank market using different financial instruments as collateral to support its everyday operations in terms of liquidity. The Group also enters into reverse sale and repurchase agreements. The summary of such operations is provided in the table below: 31 December 2020 31 December 2019 Amounts granted under repo agree- ments Fair value of securities received as collateral Amounts granted under repo agree- ments Fair value of securities received as collateral  33,210 34,527 18,449 24,064 24,113 2,799 20,130 2,239 57,274 58,640 21,248 22,369 Notes 5 10 In millions of RR Cash and cash equivalents  Brokerage receivables Total 34 Non-Controlling Interest The following table provides information about each subsidiary that has non-controlling interest: Place of business (and coun- try of incor- po-ration if different) Propor- tion of non-con- trolling interest Proportion of non-con- trolling inter- est’s voting rights held Profit or loss attribu-table to non-con- trolling interest Accumu-lat- ed non-con- trolling in- terest in the subsidiary Dividends paid to non-con- trolling in- terest during the year In millions of RR Year ended 31 December 2020  LLC “Cloudpayments” Russia 5% Year ended 31 December 2019  LLC “Cloudpayments” Russia 5% 5% 5% 4 1 89 103 18 - F-105 F-106 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                          LLC “Cloudpayments” 329 301 136 - 512 91 91 2 Investments in securities 232,198 6,256 Repurchase receivables 29 - 238,454 133,239 1,939 29 - - (a) Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the consolidated statement of financial position at the end of each reporting period. The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows: In millions of RR Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 31 December 2020 31 December 2019 ASSETS AT FAIR VALUE Loans and advances to custom- ers Financial derivatives - - - 1,892 1,892 5,035 5,035 - - - 390 - - - - - - - - 390 135,178 - Total assets recurring fair value measurements LIABILITIES AT FAIR VALUE Other financial liabilities Financial derivatives Total liabilities recurring fair value measurements 232,227 11,291 1,892 245,410 133,239 2,329 - 135,568 - - - - 109 109 - - - - 161 - 109 - 590 109 161 590 - - - 161 590 751 Investments in securities categorised in level 2 are represented by liquid debt securities classified in “Good” credit risk grade. 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 34 Non-Controlling Interest (Continued) The summarised financial information of these subsidiaries was as follows: Current assets Non-cur- rent assets Current liabilities Non-cur- rent liabilities Revenue Profit Total com- pre-hensive income Cash flows In millions of RR Year ended 31 Decem- ber 2020 LLC “Cloudpayments” 389 277 105 - 1,226 606 606 (13) Year ended 31 Decem- ber 2019 35 Financial Derivatives The table below sets out fair values, at the end of the reporting period, of currencies receivable or payable under foreign exchange forwards and swap contracts entered into by the Group. The table reflects gross positions before the netting of any counterparty positions (and payments) and covers the contracts with settlement dates after the end of the respective reporting period. 31 December 2020 31 December 2019 Contracts with positive fair value Contracts with negative fair value Contracts with positive fair value Contracts with negative fair value In millions of RR Foreign exchange forwards and swaps: discounted notional amounts, at the end of the reporting period, of - USD receivable on settlement (+) - USD payable on settlement (-) - RR receivable on settlement (+) - RR payable on settlement (-) - EUR payable on settlement (-) - GBP payable on settlement (-) Fair value of foreign exchange forwards and swaps 5,035 (109) 36 Fair Value of Financial Instruments 29,311 - 75 (24,351) - - - (104) - - (5) - 8,768 (1,570) 1,896 (8,388) (301) (15) 390 8,888 (2,664) 2,971 (9,474) (294) (17) (590) Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unob- servable inputs). F-107 F-108 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                            31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 36 Fair Value of Financial Instruments (Continued) The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 and level 3 measurements at 31 December 2020 are as follows: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE Investments in securities 6,256 Observable quotes for comparable secu- rities adjusted by multiplicator depending on the degree of the market activity Quotes from the automated fair value system for financial instruments of NSD Price Center* Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 5,035 11,291 Discounted cash flows adjusted for coun- terparty credit risk Russian rouble curve. USD Dollar Swaps Curve. EUR Swaps Curve. CDS quotes assessment of counter- party credit risk or reference entities. Revaluation of the convertible loan based on the Incantus Holding Limited’s share price as per its most recent sale purchase transactions with shares of Incantus Holding Limited (Note 38) Share price as per the most recent sale purchase transaction Discounted cash flows adjusted for coun- terparty credit risk Russian rouble curve. USD Dollar Swaps Curve. EUR Swaps Curve. CDS quotes assessment of counter- party credit risk or reference entities. Loans and advances to customers Total recurring fair value measurements at level 3 1,892 1,892 Liabilities AT FAIR VALUE Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 109 109 The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2019 are as follows: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE Investments in securities 1,939 Observable quotes for comparable secu- rities adjusted by multiplicator depending on the degree of the market activity Quotes from the automated fair value system for financial instruments of NSD Price Center* Foreign exchange swaps and forwards 390 Discounted cash flows adjusted for coun- terparty credit risk Russian rouble curve. USD Dollar Swaps Curve. EUR Swaps Curve. CDS quotes assessment of counter- party credit risk or reference entities. Total recurring fair value measurements at level 2 2,329 Liabilities AT FAIR VALUE Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 590 590 Discounted cash flows adjusted for coun- terparty credit risk Russian rouble curve. USD Dollar Swaps Curve. EUR Swaps Curve. CDS quotes assessment of counter- party credit risk or reference entities. There were no changes in the valuation techniques for level 2 recurring fair value measurements during the year ended 31 December 2020 and 2019. Level 2 derivatives comprise foreign exchange forwards and swaps. The foreign exchange forwards have been fair valued using forward exchange rates that are quoted in an active market. Foreign exchange swaps are fair valued using forward interest rates extracted from observable yield curves. The effects of discounting are generally insignificant for level 2 derivatives. Changes of the fair value measurements at Level 3 for the year ended 31 December 2020 are as follows: In millions of RR Fair value at the date of recognition Other interest income Net gains from foreign exchange translation Net gains from revaluation of convertible loan Fair value as at 31 December 2020 - Level 3 Loans and advances to customers 1,374 8 16 494 1,892 As at 31 December 2020, if the share price had been 10% lower/higher, fair value of loans and advances to customers car- ried at fair value would have been RR 64 million lower/higher. F-109 F-110 * NSD Valuation Center is a fair value measurement service for bonds and other financial instruments, accredited by the CBRF. TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 36 Fair Value of Financial Instruments (Continued) (b) Assets and liabilities not measured at fair value but for which fair value is disclosed Fair values analysed by level in the fair value hierarchy and carrying value of liabilities not measured at fair value are as follows: 31 December 2020 31 December 2019 Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as follows: 31 December 2020 31 December 2019 In millions of RR Level 1 Level 2 Level 3 FINANCIAL LIABILITIES CARRIED AT AMORTISED COST Level 1 Level 2 Level 3 In millions of RR Level 1 Level 2 Level 3 FINANCIAL ASSETS CARRIED AT AMORTISED COST Cash and cash equiva- lents Carrying value Level 1 Level 2 Level 3 Carrying value - Cash on hand 21,069 - - 21,069 11,118 - - 11,118 - Cash balances with the CBRF (other than mandato- ry reserve deposits) - Placements with other banks and non-bank credit organizations with original maturities of less than three months Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Guarantee deposits with payment systems Brokerage receivables Other financial assets Settlement of operations with plastic cards receiv- able Other receivables Total financial assets car- ried at amortised cost - 38,646 - 38,646 - 16,599 - 16,599 - 76,636 - 76,636 - - - - - - - 5,379 1,887 - - 5,379 1,887 - 374,996 374,629 - 15,475 15,475 24,064 - 24,064 23,882 7,188 - - 23,882 7,188 - - - - - - - - 27,847 3,448 2,084 - - - 27,847 3,448 2,084 - 329,340 329,175 - 8,877 8,877 2,799 - 2,799 16,384 5,289 - - 16,384 5,289 21,069 177,682 390,471 588,855 11,118 74,450 338,217 423,620 Due to banks Brokerage payables Customer accounts Individuals -Current/demand accounts - Brokerage accounts -Term deposits SME -Current/demand accounts -Term deposits Other legal entities -Current/demand accounts -Term deposits Debt securities in issue RR Bonds issued on domes- tic market Euro-Commercial Paper Subordinated debt Perpetual subordinated bonds Other financial liabilities Settlement of operations with plastic cards Trade payables Credit related commitments Other financial liabilities Total financial liabilities carried at amortised cost Carrying value 4,819 9,206 323,145 73,970 135,995 89,199 2,213 2,267 48 - - - - - - - - - - - - - - - - - - - - 23 1,207 199,408 12,253 139,114 60,174 1,879 495 112 Carrying value 23 1,207 199,408 12,253 137,292 60,174 1,880 495 112 23,618 2,460 - - - - - - - - - - - 23,910 24,442 - - - 2,460 - 20,755 19,604 - - 18,487 - - - - - - - - - 4,819 9,206 323,145 73,970 138,971 89,199 1,915 2,267 48 24,824 - 22,174 - - - - - - - 23,079 6,150 - 1,571 - - - - 23,079 6,150 3,537 1,571 - - - - 6,427 4,621 - 1,358 - - - - 6,427 4,621 2,242 1,358 46,998 674,340 - 719,864 44,046 429,531 - 472,057 F-111 F-112 Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. Where quoted market prices are not available, the Group used valuation techniques. The fair value of floating rate instruments that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity. As at 31 December 2020 and 2019 the fair value of the debt securities in issue and subordinated debt has been calculated based on quoted prices from the Moscow Exchange MICEX-RTS, St. Petersburg Exchange and Global Exchange Market, where the Group’s debt securities are listed and traded. TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                                                                                                                        The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2019: In millions of RR Cash and cash equivalents - Cash on hand - Cash balances with the CBRF (other than mandatory reserve deposits) 16,599 - Placements with other banks and non-bank credit organizations with original maturities of less than three months Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Guarantee deposits with payment systems Investments in securities Brokerage receivables Other financial assets - Settlement of operations with plastic cards receivable - Other receivables TOTAL FINANCIAL ASSETS AC FVTPL FVOCI Total 11,118 27,847 3,448 2,084 329,175 - - - - - - 390 8,877 - - - - - - - - 11,118 16,599 27,847 3,448 2,084 329,175 390 8,877 - 413 134,765 135,178 2,799 16,384 5,289 - - - - - - 2,799 16,384 5,289 423,620 803 134,765 559,188 As of 31 December 2020 and 2019 all of the Group’s financial liabilities except derivatives were carried at amortised cost. 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 36 Fair Value of Financial Instruments (Continued) Weighted average discount rates used in determining fair value as of 31 December 2020 and 2019 are disclosed below: In % p.a. Assets Cash and cash equivalents Due from other banks Loans and advances to customers Investments in securities Repurchase receivables Brokerage receivables Liabilities Due to banks Customer accounts Debt securities in issue Brokerage payables Subordinated debt 31 December 2020 31 December 2019 0.0 3.2 33.5 5.4 5.1 15.4 4.4 2.2 6.1 15.6 5.3 0.0 5.2 37.2 7.1 4.7 15.2 7.2 3.9 7.5 15.5 6.8 37 Presentation of Financial Instruments by Measurement Category For the purposes of measurement, IFRS 9 “Financial Instruments” classifies financial assets into the following categories: (a) financial assets at FVTPL; (b) financial assets at FVOCI and (c) financial assets at AC. Financial assets at FVTPL have two sub-categories: (i) assets measured at FVTPL mandatorily, and (ii) assets designated as such upon initial recognition. The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2020: In millions of RR Cash and cash equivalents - Cash on hand - Cash balances with the CBRF (other than mandatory reserve deposits) - Placements with other banks and non-bank credit organiza- tions with original maturities of less than three months Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Guarantee deposits with payment systems Investments in securities Repurchase receivables Brokerage receivables Other financial assets - Settlement of operations with plastic cards receivable - Other receivables AC FVTPL FVOCI Total 21,069 38,646 76,636 5,379 1,887 374,629 - 15,475 - - 24,064 23,882 7,188 - - - - 1,892 5,035 - - - - - - - - 21,069 38,646 76,636 5,379 1,887 376,521 5,035 15,475 4,265 234,189 238,454 - - - - 29 29 - - - 24,064 23,882 7,188 TOTAL FINANCIAL ASSETS 588,855 11,192 234,218 834,265 F-113 F-114 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 38 Related Party Transactions Parties are generally considered to be related if the parties are under common control or one party has the ability to control the other party or can exercise significant influence over the other party in making financial or operational decisions. In con- sidering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Other related parties (excluding associates and joint ventures) in the tables below are represented by entities which are under the control of the Group’s ultimate controlling party Oleg Tinkov. The outstanding balances with related parties were as follows: In millions of RR ASSETS Gross amounts of loans and advances to cus- tomers (contractual interest rate: 1.7-16.5% p.a. (31 December 2019: 11.7-25.7% p.a.)) Other financial assets TOTAL ASSETS LIABILITIES Customer accounts (contractual interest rate: 0.8-3.7% p.a. (31 December 2019: 0.5-7.2% p.a.)) Debt securities in issue (yield: 1.0-3.6% p.a. (31 December 2019: 1.0-3.6% p.a.)) Other non-financial liabilities TOTAL LIABILITIES EQUITY Share-based payment reserve 31 December 2020 31 December 2019 Key management personnel Associates, joint ventures and other relat- ed parties Key management personnel Associates, joint ventures and other related parties 422 - 422 1,892 158 2,050 437 - 437 150 843 993 1,221 2,086 1,779 227 - 584 - - - 521 1,805 2,086 2,300 2,460 - 2,687 - - - Management long-term incentive program TOTAL EQUITY 1,378 1,378 - - 930 930 At 31 August 2020 the Group acquired 22.15% shareholding in Incantus Holding Limited, which is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding CIS). The investment in Incantus Holding Limited was classified as an investment in associates and accounted for using the equity method. Also the Group provided a convertible loan to Incantus Holding Limited in the amount of EUR 15.4 million (RR 1,374 million) at 1.7% p.a. with a maturity date of 31 August 2025. The convertible loan agreement implies that the Group may convert the loan into the borrower's shares at the price of initial acquisition of shares of Incantus Holding Limited by the Group subject to compliance with a number of conversion requirements including a cap in relation to overall shareholding of the Group in Incantus Holding Limited of 24.5%. As at 31 December 2020 the shareholding of the Group in Incantus Holding Limited is equal to 16.32%, and the carrying val- ue of the convertible loan is equal to RR 1,892 million. The Company has extended rights under the Shareholder Agreement at the board meeting level (Board Reserved matters) and at the shareholder meeting level (Shareholder Reserved matters) in Incantus Holding Limited which provides the Company significant influence over it and allows to treat it as associate. The income and expense items with related parties were as follows: In millions of RR Interest income calculated using the effective interest rate method Other similar income Interest expense calculated using effective interest rate method Net (losses)/gains from foreign exchange translation Net gains from financial assets at FVTPL Administrative and other operating expenses Other operating income Key management compensation is presented below: In millions of RR Short-term benefits: - Salaries - Short-term bonuses Long-term benefits: - Management long-term incentive programme - Key employees retention plan Total 2020 2019 Associ- ates, joint ventures and other related parties Key manage- ment personnel Associ- ates, joint ventures and other related parties Key manage- ment personnel 18 - (29) - - (2,895) - 32 8 (33) (40) 494 (248) 447 2 - (64) - - (1,913) - 27 - (101) 31 - (173) 49 2020 2019 1,086 921 862 26 906 586 421 - 2,895 1,913 Key employees retention plan (KERP). On 14 April 2020 the Group launched a new long term incentive program for more than 250 senior and middle management level employees. The purpose of the program is to retain and motivate key em- ployees with high potential. This is a performance-based cash-settled program linked to the market price of GDRs. The ex- penses related to those participants who are considered to be key management personnel are disclosed in the table above. Management long-term incentive program. On 31 March 2016 the Group introduced a MLTIP as both a long-term incen- tive and a retention tool for the management of the Group. Total number of GDRs attributable to the management is 15,290 thousand as at 31 December 2020 (31 December 2019: 9,940 thousand). Participants of the program receive the vested parts of their grants provided that they remain employed by the Group throughout the vesting period. Participants are entitled to the dividends, if any. Participants who leave the Group lose their right for the unvested parts of the grants. The fair value of the awards as at grant dates (31 March 2016, 8 February 2017, 22 February 2018, 15 January 2019, 5 June 2020 and 11 December 2020) is determined on the basis of market quotes of GDRs as at those dates. Each grant before 2020 is divided into 4 equal awards. Each award vests over 4 years in equal tranches. The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates 31  March, as well as each subsequent 31 March (with the exception of 2019 when the vesting date for all participants was 31 January 2019) until 2022 for participants joining in 2016, until 2023 for participants joining in 2017, until 2024 for participants joining in 2018, until 2025 for participants joining in 2019. F-115 F-116 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                        31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 38 Related Party Transactions (Continued) Each grant provided in 2020 is divided into 5 equal tranches. The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates 31  August, as well as each subsequent 31 August until 2025. The following table discloses the changes in the numbers of GDRs attributable to the MLTIP: In thousands At 31 December 2018 Granted Vested Forfeited At 31 December 2019 Granted Vested Forfeited At 31 December 2020 Number of GDRs attributa- ble to the MLTIP 6,178 91 (2,419) (68) 3,782 5,350 (1,810) (46) 7,276 39 Events after the End of the Reporting Period On 10 March 2021 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.24 per share/per GDR with a total amount allocated for dividend payment of approximately USD 47.8 million. On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares and on the same date all isued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of being exercised are equal to the total number of issued shares (currently 199,305,492 shares following the class B share conversion). As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Group decreased from 84.38% to 35.08%. As a result his control over the Group was ceased. 40 Significant Accounting Policies Basis of preparation. These consolidated financial statements have been prepared in accordance with International Finan- cial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law Cap. 113. The consolidated financial statements have been prepared under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, and by revaluation of financial instruments categorised at fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”). The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Refer to Note 41. Management prepared these consolidated financial statements on a going concern basis. Consolidated financial statements. Subsidiaries are those investees, including structured entities, that the Group controls because the Group (i) has power to direct relevant activities of the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the investees, and (iii) has the ability to use its power over the investees to affect the amount of investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be substantive, the holder must have practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than majori- ty of voting power in an investee. In such a case, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes of investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group (ac- quisition date) and are deconsolidated from the date on which control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries other than those acquired from parties under common control. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The Group measures non-controlling interest that represents present ownership interest and entitles the holder to a proportionate share of net assets in the event of liquidation on a transaction by transaction basis, either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the acquiree. Non-controlling interests that are not present ownership interests are measured at fair value. Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed, and reviews appropriateness of their measurement. The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration arrange- ments, but excludes acquisition related costs such as advisory, legal, valuation and similar professional services. Transac- tion costs incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt are deducted from its carrying amount and all other transaction costs associated with the acquisition are expensed. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unre- alised losses are also eliminated unless the cost cannot be recovered. The Company and all of its subsidiaries use uniform accounting policies consistent with the Group’s policies. Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests which are not owned, directly or indirectly, by the Group. Non-controlling interest forms a separate component of the Group’s equity. When the Group acquires a dormant company with no business operations holding an asset and this asset is the main rea- son of acquisition of the company such transaction is treated as an asset acquisition. No goodwill is recognized as a result of such acquisition. Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for trans- actions with owners of non-controlling interest. Any difference between the purchase consideration and the carrying amount of non-controlling interest acquired is recorded as a capital transaction directly in equity. The Group recognises the difference between sales consideration and carrying amount of non-controlling interest sold as a capital transaction in the consolidated statement of changes in equity. Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The carrying amount of associates includes goodwill identified on acquisition less accumulated credit losses, if any. Dividends received from associates re- duce the carrying value of the investment in associates. Other post-acquisition changes in Group’s share of net assets of an associate are recognised as follows: (i) the Group’s share of profits or losses of associates is recorded in the consolidated profit or loss for the year as share of result of associates, (ii) the Group’s share of other comprehensive income is recog- nised in other comprehensive income and presented separately, (iii); all other changes in the Group’s share of the carrying value of net assets of associates are recognised in profit or loss within the share of result of associates. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made pay- ments on behalf of the associate. Otherwise the Group continue to recognise further losses if it has commitments to fund the associate’s operations. F-117 F-118 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group applies the impairment requirements in IFRS 9 to long-term loans and similar long-term interest that in sub- stance form part of the investment in associate before reducing the carrying value of the investment by a share of a loss of the investee that exceeds the amount of the Group’s interest in the ordinary shares. Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Financial instruments – key measurement terms. Depending on their classification financial instruments are carried at fair value or amortised cost as described below. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is price in an active market. An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the entity. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price. The price within the bid-ask spread which management considers to be the most representative of fair value for quoted financial assets and liabilities is the last bid price of the business day. A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (an asset) for a particular risk exposure or paid to transfer a net short position (a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date. This is applicable for assets carried at fair value on a recurring basis if the Group: (a) manages the group of financial assets and financial liabilities on the basis of the entity’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the entity’s documented risk management or investment strategy; (b) it provides information on that basis about the group of assets and liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities is substantially the same. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consid- eration of financial data of the investees, are used to measure fair value of certain financial instruments for which external market pricing information is not available. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period. Refer to Note 36. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial in- strument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs. Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any prin- cipal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of related items in the consolidated statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or secured that are integral to the effective interest rate such as origination fees. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs that are incremental and directly attributable to the acquisition or the issue of the financial asset or financial liability. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instru- ment or by a valuation technique whose inputs include only data from observable markets. After the initial recognition, an ECL allowance is recognised for financial assets measured at AC and investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the Group commits to deliver a financial asset. The Group uses discounted cash flow valuation techniques to determine the fair value of currency swaps, foreign exchange forwards that are not traded in an active market. Differences may arise between the fair value at initial recognition, which is considered to be the transaction price, and the amount determined at initial recognition using a valuation technique. The differences are immediately recognised in profit or loss if the valuation uses only level 1 or level 2 inputs. Financial assets – classification and subsequent measurement – measurement categories. The Group classifies finan- cial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measure- ment of debt financial assets depends on: • the Group’s business model for managing the related assets portfolio and • the cash flow characteristics of the asset. F-119 F-120 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Financial assets – classification and subsequent measurement – business model. The business model reflects how the Group manages the assets in order to generate cash flows – whether the Group’s objective is: • solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”); or • to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”); • if neither of i) and ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the Group undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the Group in determining the business model include the purpose and composition of a portfolio, past experience on how the cash flows for the respective assets were collected, how risks are assessed and managed, how the assets’ performance is assessed and how managers are compensated. Based on the analysis performed the Group included the following financial instruments in the business model “hold to col- lect contractual cash flows” since the Group manages these financial instruments solely to collect contractual cash flows: cash and cash equivalents, mandatory cash balances with the CBRF, due from other banks, loans and advances to cus- tomers, guarantee deposits with payment systems, brokerage receivables and other financial assets. The Group included debt securities at FVOCI in the business model “hold to collect contractual cash flows and sell” since the Group manages these financial instruments to collect both the contractual cash flows and the cash flows arising from the sale of assets. The Group included debt securities measured at FVTPL and financial derivatives in the business model “other”. Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Group assesses whether the cash flows represent solely payments of principal and interest (the SPPI test). Financial assets with embedded deriva- tives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending ar- rangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an as- set and it is not subsequently reassessed. However, if the contractual terms of the asset are modified, the Group considers if the contractual cash flows continue to be consistent with a basic lending arrangement in assessing whether the modifica- tion is substantial. See below for “Financial assets – modification”. Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. The Group did not change its business model during the current and comparative period and did not make any reclassifications. Financial assets – impairment – credit loss allowance for ECL. The Group assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at AC and FVOCI and for the exposure arising from loan commitments and financial guarantee contracts. The Group measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: 1) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes; 2) the time value of money; and 3) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions. Debt instruments measured at AC are presented in the consolidated statement of financial position net of the allowance for ECL. For loan commitments (where those components can be separated from the loan) and financial guarantees, a separate provision for ECL is recognised as a financial liability in the consolidated statement of financial position. For debt instru- ments at FVOCI, changes in amortised cost, net of allowance for ECL, are recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses on debt instruments at FVOCI. The Group applies a “three stage” model for impairment in accordance with IFRS 9, based on changes in credit quality since initial recognition: 1) A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 months ECL”). 2) If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“lifetime ECL”). Refer to Note 29 for a description of how the Group determines when a SICR has occurred. 3) If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is meas- ured as a lifetime ECL. Refer to Note 29 for a description of how the Group defines credit-impaired assets and default. For financial assets that are purchased or originated credit-impaired (“POCI Assets”), the ECL is always measured at a lifetime ECL. Note 29 provides information about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the Group incorporates forward-looking information in the ECL models. As an exception, for certain financial instruments, such as credit cards, that may include both a loan and an undrawn com- mitment component, the Group measures expected credit losses over the period that the Group is exposed to credit risk, that is, until the expected credit losses would be mitigated by credit risk management actions, even if that period extends beyond the maximum contractual period. This is because contractual ability to demand repayment and cancel the undrawn commitment does not limit the exposure to credit losses to such contractual notice period. Refer to Note 3 for critical judge- ments applied by the Group in determining the period for measuring ECL. Financial assets – write-off. Uncollectible assets are partly written-off against the related сredit loss allowance usually after one year since they become overdue. The amount of uncollectible part of loan is estimated on a loan portfolio basis taking into account defaulted loans recovery statistics. The Group writes-off financial assets that are mostly still subject to enforcement activity, however, there is no reasonable expectation of recovery. If credit-impaired loans are sold to third parties, the Group remeasures the amount of ECL prior to sale taking into consideration the expected sales proceeds so that there are no gains or losses on derecognition upon sale. Repayments of written-off loans. Recovery of amounts previously written-off as uncollectible is credited directly to the credit loss allowance line in the consolidated statement of profit or loss and other comprehensive income. Cash flows relat- ed to repayments of written-off loans are separately presented within recoveries from written-off loan in the consolidated statement of cash flows. Financial assets – derecognition. The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale. Financial assets – modification. The Group sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Group assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset, signifi- cant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset, or a significant extension of a loan when the borrower is not in financial difficulties. If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Group derec- ognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. F-121 F-122 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) The Group also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners. In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Group compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. Brokerage receivables and brokerage payables. Brokerage receivables represent placements under reverse sale and repurchase agreements made by the Bank with central counterparty to provide customers of the Bank who have brokerage accounts with the Bank with possibility to acquire securities in case those customers have insufficient own funds to acquire those securities. Brokerage payables represent funds attracted under sale and repurchase agreements made by the Bank with central counterparty to provide customers of the Bank who have brokerage accounts with the Bank with the possibility to borrow securities and make a short sale. Brokerage receivables and payables are short-term and accounted at amortised cost. Mandatory cash balances with the CBRF. Mandatory cash balances with the CBRF are carried at amortised cost and represent non-interest bearing mandatory reserve deposits which are not available to finance the Group’s day to day opera- tions and hence are not considered as part of cash and cash equivalents for the purposes of the consolidated statement of cash flows. The Group recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets) and recognises a modification gain or loss in profit or loss. Usually modifications of stage 3 loans do not result in derecognition since they do not change the expected cash flows substantially and represent the way of collection of past due balances. Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or determinable dates. Amounts due from other banks are carried at amortised cost as: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities). Financial liabilities – derecognition. Financial liabilities are derecognised when they are extinguished (i.e. when the obli- gation specified in the contract is discharged, cancelled or expires). An exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the dis- counted present value of the cash flows under the new terms, including any fees paid net of any fees received and discount- ed using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumula- tive catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners. Cash and cash equivalents. Cash and cash equivalents are short-term, highly liquid investments that are readily converti- ble to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents include all interbank placements and reverse sale and repurchase agreements with other banks with original maturities of less than three months. Funds restricted for a period of more than three months on origination are excluded from cash and cash equivalents. Cash and cash equivalents are carried at amortised cost as: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. The payments or receipts presented in the consolidated statement of cash flows represent transfers of cash and cash equivalents by the Group, including amounts charged or credited to current accounts of the Group’s counterparties held with the Group, such as loan interest income or principal collected by charging the customer’s current account or interest payments or disbursement of loans credited to the customer’s current account, which represents cash or cash equivalent from the customer’s perspective. Certain bank deposits are subject to the “bail-in” legislation that permits or requires a national resolving authority to im- pose losses on holders in particular circumstances. Where the bail-in clauses are included in the contractual terms of the instrument and would apply even if legislation subsequently changes, the SPPI test is not met and such instruments are mandatorily measured at FVTPL. The Group did not identify such balances due from other banks. Where such clauses in the contract merely acknowledge the existence of the legislation and do not create any additional rights or obligation for the Group, the SPPI criterion is met and the respective instruments are carried at AC. Investments in debt securities. Based on the business model and the contractual cash flow characteristics, the Group classifies investments in debt securities as carried at AC, FVOCI or FVTPL. Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows repre- sent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting mismatch. Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated using the effective interest method and recognised in profit or loss. An impairment allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All other changes in the carrying value are recognised in OCI except for foreign exchange translation gains/(losses) and interest income calculated using the effective interest rate method. When the debt security is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from OCI to profit or loss. Investments in debt securities are carried at FVTPL if they do not meet the criteria for AC or FVOCI. The Group may also irrevocably designate investments in debt securities at FVTPL on initial recognition if applying this option significantly reduces an accounting mismatch between financial assets and liabilities being recognised or measured on different ac- counting bases. Loans and advances to customers. Loans and advances to customers are recorded when the Group advances money to purchase or originate a loan due from a customer. Based on the business model and the cash flow characteristics, the Group classifies loans and advances to customers into one of the following measurement categories: 1) AC: loans that are held for collection of contractual cash flows and those cash flows represent SPPI and loans that are not voluntarily designated at FVTPL; 2) FVTPL: loans that do not meet the criteria for AC or FVOCI are measured at FVTPL (mandatory FVTPL). Impairment allowances of the loans measured at AC are determined based on the forward-looking ECL model. Note 29 pro- vides information about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the Group incorporates forward-looking information in the ECL models. F-123 F-124 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Credit related commitments. The Group issues commitments to provide loans. Commitments to provide loans are initially recognised at their fair value, which is normally evidenced by the amount of fees received. Such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition. At the end of each reporting period, the com- mitments are measured at the amount of the loss allowance determined based on the expected credit loss model. For loan commitments (where those components can be separated from the loan), a separate provision for ECL is recognised as a liability in the consolidated statement of financial position. Performance guarantees. Performance guarantees are contracts that provide compensation if another party fails to per- form a contractual obligation. Such contracts transfer non-financial performance risk in addition to credit risk. Performance guarantees are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of the contract. At the end of each reporting period, the perfor- mance guarantee contracts are measured at the higher of (i) the unamortised balance of the amount at initial recognition and (ii) the best estimate of expenditure required to settle the contract at the end of each reporting period, discounted to present value. Where the Group has the contractual right to revert to its customer for recovering amounts paid to settle the performance guarantee contracts, such amounts will be recognised as an asset upon transfer of the loss compensation to the guarantee’s beneficiary. These fees are recognised within fee and commission income in profit or loss. Sale and repurchase agreements and lending of securities. Sale and repurchase agreements (“repo agreements”), which effectively provide a lender’s return to the counterparty, are treated as secured financing transactions. Securities sold under such sale and repurchase agreements are not derecognised. The securities are not reclassified in the consoli- dated statement of financial position unless the transferee has the right by contract or custom to sell or repledge the securi- ties, in which case they are reclassified as repurchase receivables. The corresponding liability is presented within amounts due to other banks or other borrowed funds. Securities purchased under agreements to resell (“reverse repo agreements”), which effectively provide a lender’s return to the Group, are recorded as due from other banks or loans and advances to customers, as appropriate. The difference between the sale and repurchase price, adjusted by interest and dividend income collected by the counterparty, is treated as interest income and accrued over the life of reverse repo agreements using the effective interest method. Securities lent to counterparties for a fixed fee are retained in the consolidated financial statements in their original catego- ry in the consolidated statement of financial position unless the counterparty has the right by contract or custom to sell or repledge the securities, in which case they are reclassified and presented separately. Securities borrowed for a fixed fee are not recorded in the consolidated financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded in profit or loss for the year within gains less losses arising from trading securities. The obligation to return the securities is recorded at fair value in other borrowed funds. Based on classification of securities sold under the sale and repurchase agreements, the Group classifies repurchase receivables into one of the following measurement categories: AC, FVOCI, FVTPL. Guarantee deposits with payment systems. Amounts of guarantee deposits with payment systems are recorded when the Group advances money to payment systems with no intention of trading the resulting unquoted non-derivative receiva- ble. Amounts of guarantee deposits with payment systems are carried at amortised cost. Tangible fixed assets. Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment, where required. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Costs of replacing major parts or compo- nents of premises and equipment items are capitalised, and the replaced part is retired. At the end of each reporting period management assesses whether there is any indication of impairment of tangible fixed assets. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell. Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year (within other operating income or expenses). Depreciation. Depreciation of each item of tangible fixed assets is calculated using the straight-line method to allocate its cost to its residual value over its estimated useful life as follows: Building Equipment Vehicles Useful lives in years 99 3 to 10 5 to 7 Leasehold improvements Shorter of their useful economic life and the term of the underlying lease Others (safes, fireproof cabinets) 20 The residual value of an asset is an estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Intangible assets. Intangible assets are stated at cost less accumulated amortization. The Group’s intangible assets other than insurance license have definite useful life and include capitalised acquired computer software and internally developed software. Development costs that are directly associated with identifiable and unique software controlled by the Group are recorded as intangible assets if the inflow of incremental economic benefits exceeding costs is probable. Capitalised costs include staff costs of the software development team and an appropriate portion of relevant overheads. Computer software licenses acquired are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. All other costs associated with computer software, e.g. its maintenance, are expensed when incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 1 to 10 years. At each reporting date management assesses whether there is any indication of impairment of intangible assets with an indefinite useful life. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to deter- mine the asset’s value in use or fair value less costs to sell. Intangible assets including goodwill with indefinite useful life are tested annually for impairment. Accounting for leases by the Group as a lessee. Leases, where the Group is the lessee, are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease pay- ment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. F-125 F-126 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable under cancellable and non-cancellable operating leases; • variable lease payments that are based on an index or a rate and that are initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the lessee under residual value guarantees; • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term includes any non-cancellable and optional extension periods which have been assessed as reasonably cer- tain to be exercised. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability, • any lease payments made at or before the commencement date less any lease incentives received, • any initial direct costs, and • dismantling and restoration costs. As an exception to the above, the Group accounts for short-term leases and leases of low value assets by recognising the lease payments as an operating expense on a straight line basis. Short-term leases are leases with a lease term of 12 months or less, and the lease does not provide for the possibility of repurchase of the asset at the end of the contract. Low value assets are assets with a value of RR 300,000 or less at the date of conclusion of the contract. Right-of-use assets are included in tangible fixed assets, lease liabilities are included in other non-financial liabilities in the consolidated statement of financial position. Depreciation of right-of-use assets are recognised in administrative and other operating expenses in the consolidated statement of profit or loss and other comprehensive income. Finance cost is recognised within other similar expense line of the consolidated statement of profit or loss and other comprehensive in- come. Repayment of principal of lease liabilities is disclosed within cash flows from financing activities of the consolidated statement of cash flows. Due to other banks. Amounts due to banks are recorded when money or other assets are advanced to the Group by coun- terparty banks. Non-derivative liability is carried at amortised cost. Customer accounts. Customer accounts are non-derivative liabilities to corporate entities and individuals and are carried at amortised cost. Debt securities in issue. Debt securities are stated at amortised cost. If the Group purchases its own debt securities in issue, they are removed from the consolidated statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in a separate line of consolidated statement of profit or loss and other comprehensive income. Subordinated debt. Subordinated debt can only be paid in the event of a liquidation after the claims of other higher priority creditors have been met. Subordinated debt is carried at AC. Financial derivatives. Financial derivatives represented by forwards and foreign currency swaps are carried at their fair value. Derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of financial derivatives are recorded in profit or loss within Net gains/(losses) from derivatives revaluation. The Group does not apply hedge accounting. Income taxes. Income taxes have been provided for in the consolidated financial statements in accordance with Russian legislation and Cyprus legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for the year except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity. Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if the consolidated financial state- ments are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within administrative and other operating expenses. Deferred income tax is provided using the liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of reporting period which are expected to apply to the period when the temporary differences will reverse or the tax loss carry forwards will be utilised. Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised. Deferred income tax is not recognised on post-acquisition retained earnings and other post acquisition movements in reserves of subsidiaries, where the Group controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or otherwise in the foreseeable future. Uncertain tax positions. The Group's uncertain tax positions are assessed by management at the end of each reporting period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted at the end of reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period. Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of uncertain timing or amount. They are accrued when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Levies and charges, such as taxes other than income tax or regulatory fees based on information related to a period before the obligation to pay arises, are recognised as liabilities when the obligating event that gives rise to pay a levy occurs, as identified by the legislation that triggers the obligation to pay the levy. If a levy is paid before the obligating event, it is recog- nised as a prepayment. Other liabilities. Other liabilities are accrued when the counterparty has performed its obligations under the contract and are carried at amortised cost. Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds and debited against share premium. Share premium. Share premium is the difference between the fair value of the consideration receivable for the issue of shares and the nominal value of the shares. The share premium account can only be resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital. Treasury shares. Where the Company or its subsidiaries purchase the Company’s equity instruments, the consideration paid, including any directly attributable incremental external costs, net of income taxes, is deducted from equity attributa- ble to the owners of the Company until the equity instruments are reissued, disposed of or cancelled. Where such shares are subsequently disposed of or reissued, any consideration received is included in equity. The value of GDRs transferred out of treasury shares for the purposes of the long-term incentive programme for management of the Group are determined based on the weighted average cost. F-127 F-128 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the consolidated financial statements are authorised for issue, are disclosed in the Note 39. The accounting reports of the Group entities are the basis for profit distribution and other appropriations. The sepa- rate financial statements of the Company prepared in accordance with IFRS as adopted by the EU and in accordance with Cyprus Companies Law is the basis of available reserves for distribution. Dividend distribution to the Company's shareholders is recognised as a liability in the Company's consolidated financial statements in the year in which the dividends are appropriately authorised and are no longer at the discretion of the Com- pany. More specifically, interim dividends are recognised as a liability in the period in which these are authorised by the Board of directors and in the case of final dividends, these are recognised in the period in which these are approved by the Company's shareholders. Interest income and expense recognition. Interest income and expense calculated using effective interest method are recorded for all debt instruments, other than those at FVTPL, on an accrual basis using the effective interest method. This method defers, as part of interest income or expense, all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Fees integral to the effective interest rate include origination fees (e.g. interchange fee on credit card loans) received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a financial liability. Commitment fees (e.g. annual fee on credit card loans) received by the Group to originate loans at market interest rates are integral to the effective interest rate if it is probable that the Group will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination. The Group does not designate loan commitments as financial liabilities at FVTPL. For financial assets that are originated or purchased credit-impaired, the effective interest rate is the rate that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial recognition (normally represent- ed by the purchase price). As a result, the effective interest is credit-adjusted. Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: i) financial assets that have become credit-impaired (Stage 3), for which interest revenue is calculated by applying the effective interest rate to their AC (net of the ECL provision); and ii) financial assets that are purchased or originated credit-impaired, for which the original credit-adjusted effective interest rate is applied to the AC. Customer acquisition expense recognition. Customer acquisition expenses are represented by the costs incurred by the Group on services related to attraction of the client, mailing of advertising materials, processing of responses etc. Those costs, which can be directly attributed to the acquisition of a particular client, are included in the effective interest rate of the originated financial instruments; the remaining costs are expensed on the basis of the actual services provided. Other income and expense recognition. All other income is generally recorded on an accrual basis by reference to completion of the specific performance obligation assessed on the basis of measurement of the Group’s progress towards complete satisfaction of that performance obligation. All other expenses are generally recorded on an accrual basis by reference to completion of the specific transaction as- sessed on the basis of the actual service provided as a proportion of the total services to be provided. Other similar income. Other similar income represents interest income recorded for debt instruments measured at fair value through profit or loss (“FVTPL”) and is recognised on an accrual basis using nominal interest rate. Other similar expense. Other similar expense represents finance cost related to the discounted lease payments using the incremental borrowing rate. Fee and commission income and expense. Fee and commission income is recognised over time as the services are ren- dered, when the customer simultaneously receives and consumes the benefits provided by the Group’s performance. Such income includes SMS fee, part of SME services commission, part of brokerage fee and income from MVNO services which represents fixed monthly payments. Variable fees are recognised only to the extent that management determines that it is highly probable that a significant reversal will not occur. Other fee and commission income is recognised at a point in time when the Group satisfies its performance obligation, usually upon execution of the underlying transaction. The amount of fee or commission received or receivable represents the transaction price for the services identified as distinct performance obligations. Such income includes acquiring com- mission, part of SME services commission, brokerage fee and income from MVNO services, which represents payments for each transaction, fee for selling credit protection, interchange fee, cash withdrawal fee, foreign currency exchange transactions fee, fee for money transfers and other. All fee and commission expenses are generally recorded on an accrual basis by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Customer loyalty program. The group operates loyalty programs where retail clients accumulate points, which entitle them to reimbursement of purchases made with credit and debit cards. A financial liability is recognised for the amount of fair value of points expected to be redeemed until they are actually redeemed or expire with the corresponding entries to interest income calculated using the effective interest rate method or commission expenses depending on whether the points were accumulated by credit card clients or debit card clients respectively. Insurance contracts. Insurance contracts are those contracts that transfer significant insurance risk. Insurance risk exists when the Group has uncertainty in respect of at least one of the following matters at inception of the contract: occurrence of insurance event, date of occurrence of the insurance event, and the claim value in respect of the occurred insurance event. Such contracts may also transfer financial risk. Non-life insurance (short-term insurance). The below items from the consolidated statement of financial position of the Group are accounted within Other financial assets and Other financial liabilities lines, the below items from the consolidat- ed statement of profit or loss and other comprehensive income of these consolidated financial statements are accounted within Income from insurance operations and Insurance claims incurred lines. • Premiums written. Premiums (hereafter – “premiums” or “insurance premiums”) under insurance contracts are re- corded as written upon inception of a contract and are earned on a pro-rata basis over the term of the related contract coverage. Reduction of premium written in subsequent periods (under amendments to the signed original contacts, for example) is accounted by debiting of premiums written in current period. • Claims. Claims are charged to the consolidated statement of profit or loss and other comprehensive income as compen- sation is paid to policyholders (beneficiaries) or third parties. • Claims handling expenses. Claims handling expenses are recognised in profit or loss for the period as incurred and include direct expenses related to negotiations and subsequent claims handling, as well as indirect expenses, including expenses of claims handling department and administrative expenses directly related to activities of this department. • Reinsurance. The Group assumes and cedes reinsurance in the normal course of business. Ceded reinsurance con- tracts do not relieve the Group from its obligations to the policyholders under insurance contract. Amounts due from re- insurers are measured consistently with the amounts associated with the direct insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance assets arising from outward reinsurance contracts include reinsurers share in paid claims, including claims handling expenses. Liabilities under outward reinsurance operations are obligations of the Group for payment of premiums to reinsurers. Reinsurance assets include premiums ceded to the Group under inward reinsurance contracts. The Group's liabilities under inward reinsurance contracts are obligations to compensate the Group's share in paid claims, including claims handling expenses to reinsurers. The Group assesses its reinsurance assets for impairment on a regular basis. If there is objective evidence that the re- insurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the consolidated statement of profit or loss and other comprehensive income. The Group gathers the evidence that a reinsurance asset is impaired using the same process adopted for financial as- sets carried at amortised cost. The impairment loss is also calculated following the same method used for the financial assets carried at amortised cost. F-129 F-130 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) • Subrogation income. The Group has a right to pursue third parties responsible for loss for payment of some or all costs related to the claims settlement process of the Group (subrogation). Reimbursements are recognised as income only if the Group is confident in receipt of these amounts from these third parties. Under inward reinsurance contracts, amounts of reimbursement due to the Group as a result of settlement of reinsurer's subrogation claims are treated as the Group's income as at the date of acceptance of the invoice received from the reinsurer and including calculation of the Group's share in the subrogation claim. • Deferred acquisition costs. Deferred acquisition costs (“DAC”) are calculated (for non-life insurance contracts) sep- arately for each insurance product. Acquisition costs include remuneration to agents for concluding agreements with corporate clients and individuals and brokerage fees for underwriting of assumed reinsurance agreements. They vary with and fully depend on the premium earned under acquired or renewed insurance policies. These acquisition costs are deferred and amortised over the period in which the related written premiums are earned. They are reviewed by line of business at the time of the policy issue and at the end of each accounting period to ensure they are recoverable based on future estimates. For the insurance contracts with duration of less than one month and with automatic prolongation condition amortisation of one-off acquisition costs occurs over the period determined based on statistical assessment of duration of the insurance contract taking into account all of the expected future prolongations. Insurance provisions • Provision for unearned premiums. Provision for unearned premiums (“UEPR”) represents the proportion of premiums written that relate to the unexpired term of policies in force as at the reporting date, calculated on a time apportionment basis. UEPR is recognised within liabilities on a gross basis. • Loss provisions. Loss provisions represent the accumulation of estimates for ultimate losses and include outstanding claims provision (“OCP”) and provision for losses incurred but not yet reported (“IBNR”). Loss provisions are recognised within liabilities on a gross basis. Estimates of claims handling expenses are included in both OCP and IBNR. OCP is provided in respect of claims reported, but not settled as at the reporting date. The estimation is made on the basis of information received by the Group during settlement of the insured event, including information received after the reporting date. IBNR is determined by the Group by line of business using actuarial methods, and includes assumptions based on prior years’ claims and claims handling experience. IBNR is calculated for each occurrence period as the difference between the projected maximum amount of future payments resulting from the events that occurred during the period and the amount of future payments resulting from the event already reported but not settled at the reporting date within the same period. The methods of determining such estimates and establishing the resulting provisions are continually reviewed and updated. Resulting adjustments are reflected in the consolidated statement of profit or loss and other comprehensive income as they arise. Loss provisions are estimated on an undiscounted basis due to relatively quick pattern of claims notification and payment. • Unexpired risk provision. Unexpired risk provision (“URP”) is recorded when unearned premiums are insufficient to meet claims and expenses, which may be incurred after the end of the financial year. To estimate the unexpired risk provision the Group uses historical experience and forward looking assumptions of ultimate loss ratios (including claims handling expenses) and the level of in-force portfolio maintenance expenses. The expected claims are calculated having regard to events that have occurred prior to the reporting date. For the purposes of final presentation of consolidated financial statements unexpired risk provision is written off against deferred acquisition costs. • Liability adequacy testing. As at each reporting date the adequacy of the insurance reserves is tested. Testing of insur- ance reserves for non-life insurance is performed to ensure adequacy of contract liabilities. In performing these tests, current estimates of future contractual cash flows, claims handling and administration expenses are used. As a result of liability adequacy testing for non-life insurance, the Group sets up its URP. Foreign currency translation and operations. The functional currency of the Company and each of the Group’s consoli- dated entities is the Russian Rouble (“RR”), which is the currency of the primary economic environment in which each entity operates. Monetary assets and liabilities are translated into each entity’s functional currency at the official exchange rate of the CBRF at the end of the respective reporting period. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities into each entity’s func- tional currency at year-end official exchange rates of the CBRF are recognised in profit or loss for the year as Net (losses)/ gains from foreign exchange translation. Foreign exchange gains and losses resulting from the settlement of transactions with foreign currencies are recognised in profit or loss for the year as net gains/(losses) from operations with foreign currencies (except for clients’ foreign currency exchange transactions fee, which is recognised in profit or loss as fee and commission income). Translation at year-end rates does not apply to non-monetary items that are measured at historical cost. At 31 December 2020 the rate of exchange used for translating foreign currency balances was USD 1 = RR 73.8757 (31 De- cember 2019: USD 1 = RR 61.9057), and the average rate of exchange was USD 1 = RR 72.1464 (2019: USD 1 = RR 64.7362). Offsetting. Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be con- tingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business, (ii) the event of default and (iii) the event of insolvency or bankruptcy. Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to owners of the Company by the weighted average number of participating shares outstanding during the reporting year, excluding treasury shares. For the purpose of diluted earnings per share calculation the Group considers dilutive effects of shares granted under employee share option plans. Staff costs and related contributions. Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group. The Group has no legal or constructive obligation to make pension or similar benefit payments beyond the payments to the statutory defined contribution scheme. Segment reporting. Segments are reported in a manner consistent with the internal reporting provided to the Group’s chief operating decision maker. Segments whose revenue, result or assets are ten percent or more of all the segments are reported separately. Equity-settled share-based payment. The expense is recognized over the vesting period and is measured at the fair value of the award determined at the grant date, which is amortized over the service (vesting) period. The fair value of the equity award is estimated only once at the grant date and is trued up to the estimated number of instruments that are expected to vest. Dividends declared during the vesting period accrue and are paid to the employee together with the sale proceeds of the vested shares upon a liquidity event. Expected dividends (including those expected during the vesting period) are therefore included in the determination of fair value of the share-based payment. Cash-settled share-based program. The expense is recognized gradually over the vesting period and is measured at the fair value of the liability at each end of the reporting period. The fair value of the liability reflects all vesting conditions, ex- cept for the requirement of the employee to stay in service which is reflected through the amortization schedule. The liabil- ity is measured, initially and at the end of each reporting period until settled, at fair value, taking into account the terms and conditions on which the instruments were granted and the extent to which the employees have rendered service to date. Amendments of the consolidated financial statements after issue. The Board of directors of the Company has the power to amend the consolidated financial statements after issue. Changes in presentation. In 2020 because of significant growth in the brokerage operations and the related balances and volumes of transactions, the Group made a detailed review of the relevant accounting policies to achieve more relevant and reliable presentation. As a result of such review and because of significantly increased balances the Group reclassified broker- age receivables and brokerage payables from cash and cash equivalents and due to banks, respectively, into separate line items in the Consolidated statement of financial position. Also the Group identifed that certain portion of brokerage operations fee and commission income related to margin trading of Group’s clients has more characteristics of being interest income rather than fee and commission income. Hence the Group made relevant reclassification from fee and commission income into interest income in the Consolidated statement of profit or loss and other comprehensive income. Similar reclassifications were made in the Consolidated statement of cash flows. Management considers that the above reclassifications will result in a more reliable and relevant presentation of the financial information which is more consistent with the market practice of many other banks. F-131 F-132 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS 31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) In September 2020 as a result of a detailed review of the marketing agreements with the payment systems the Group changed its accounting policy in relation to income received under these agreements by reclassifying it from Other operat- ing income to reduce the Payment System fees accounted for in Interest income and Fee and commission expenses. Part of the net payment system fees which relates to the borrowers’ transactions is included in the effective interest income of the loans. Another part which relates to the customer’s transactions was reclassified to Fee and commission expenses and presented on a net basis within the payment systems. Management considers that this reclassification results in a more re- liable and relevant presentation of the substance of these agreements since such income from payment systems primarily represents volume rebates, hence it could be offset against related expenses. In December 2020 given the increase in the related amounts the Group refined its accounting policy in relation to recov- eries received in excess of gross carrying amount of purchased loans and reclassified them from Other operating income line to Credit loss allowance for loans and advances to customers and credit related commitments line of consolidated statement of profit or loss and other comprehensive income. The effect of changes described above on the consolidated statement of financial position for the year ended 31 December 2019 is as follows: In millions of RR Cash and cash equivalents Due to banks Brokerage receivables Brokerage payables As originally pre- sented Reclassification As reclassified 57,796 663 - - (2,232) (640) 2,799 1,207 55,564 23 2,799 1,207 The effect of changes described above on the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2019 is as follows: In millions of RR Interest income calculated using the effective interest rate method Credit loss allowance for loans and advances to customers and credit related commitments Fee and commission income Fee and commission expense Other operating income The effect of changes described above on the consolidated statement of cash flows for the year ended 31 December 2019 is as follows: In millions of RR Interest income received calculated using the effective interest rate method Fees and commissions received Fees and commissions paid Recoveries from the purchased loans received Other operating income received Net increase in cash and cash equivalents Net increase in brokerage receivables Net decrease in due to banks Net increase in brokerage payables As originally pre- sented Reclassification As reclassified 106,975 35,986 (17,492) - 4,024 23,994 - (2,045) - 879 (184) 1,499 693 (2,887) (2,232) (2,799) (640) 1,207 107,854 35,802 (15,993) 693 1,137 21,762 (2,799) (2,685) 1,207 41 Adoption of New or Revised Standards and Interpretations The following amended standards became effective from 1 January 2020, but did not have any material impact on the Group: • Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020). • Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020). • Definition of material - Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods As originally pre- sented Reclassification As reclassified beginning on or after 1 January 2020). 109,972 1,157 111,129 for annual periods beginning on or after 1 January 2020). • Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019 and effective (27,244) 36,042 (17,448) 4,713 693 (184) 2,325 (3,991) (26,551) 35,858 (15,123) 722 42 New Accounting Pronouncements Certain new amendments have been issued that are mandatory for the annual periods beginning on or after 1 January 2021, which the Group has not early adopted: IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023)*. IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Group is currently assessing the impact of IFRS 17 on the insurance contracts issued by the Insurance Company as well as the impact for credit cards and similar loan products which may include insurance component. * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union. F-133 F-134 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Consolidated Financial Statements (Continued) 42 New Accounting Pronouncements (Continued) Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods begin- ning on or after 1 January 2023)*. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made: effective date, expected recovery of insurance acquisition cash flows, contractual service margin attributable to investment services, reinsurance contracts held – recovery of losses and other amendments. The following other new pronouncements are not expected to have any material impact on the Group when adopted: (a) 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)*. (b) 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)*. (c) 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)*. (d) 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)*. (e) 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 annual periods beginning on or after 1 January 2021). (f) Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020). * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union. F-135 F-136 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSBoard of Directors and other officers Board of Directors Constantinos Economides, Chairman Alexios Ioannides Mary Trimithiotou Jacques Der Megreditchian Martin Robert Cocker The above all served throughout 2020 and through to the date of these separate financial statements. The Company’s Articles of Association include regulations for the retirement by rotation of Directors at each annual general meeting. These regulations will operate in 2021 on the basis of the composition of the Board at the relevant date. Company Secretary Caelion Secretarial Limited 25 Spyrou Araouzou Berengaria 25, 5th floor, 3036, Limassol, Cyprus Registered office 25 Spyrou Araouzou Berengaria 25, 5th floor, 3036, Limassol, Cyprus 31 DECEMBER 2020 TCS Group Holding PLC International Financial Reporting Standards Separate Financial Statements and Independent Auditor’s Report Contents 15 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-180 16 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-181 Board of Directors and other officers . . . . . . . . . . . . . . F-138 17 Reconciliation of Liabilities Arising Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-139 from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . .F-182 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . .F-147 18 Financial Risk Management . . . . . . . . . . . . . . . . . . . . .F-182 SEPARATE FINANCIAL STATEMENTS 19 Contingencies and Commitments . . . . . . . . . . . . . . F-189 20 Fair Value of Financial Instruments . . . . . . . . . . . . . F-189 21 Presentation of Financial Instruments by Separate Statement of Financial Position . . . . . . . . . . .F-155 Measurement Category . . . . . . . . . . . . . . . . . . . . . . . . F-194 Separate Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . F-156 22 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . .F-195 23 Events after the End of the Reporting Period . . . . .F-197 Separate Statement of Changes in Equity . . . . . . . . . . .F-157 Separate Statement of Cash Flows . . . . . . . . . . . . . . . . F-158 NOTES TO THE SEPARATE FINANCIAL STATEMENTS 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-159 2 Operating Environment of the Company . . . . . . . . . F-161 3 Significant Accounting Policies . . . . . . . . . . . . . . . . . .F-162 4 5 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . . . . .F-173 Adoption of New or Revised Standards and Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-173 6 New Accounting Pronouncements . . . . . . . . . . . . . .F-174 7 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . .F-174 8 Loans and Deposit Placements with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-175 9 Investments in Equity Securities . . . . . . . . . . . . . . . . .F-176 10 Debt Securities in Issue . . . . . . . . . . . . . . . . . . . . . . . . .F-177 11 Other Financial and Non-financial Liabilities . . . . .F-178 12 Share Capital, Share Premium and Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-178 13 Interest income and expense . . . . . . . . . . . . . . . . . . . .F-179 14 Administrative and Other Operating Expenses . . .F-179 F-137 F-138 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020channels are Internet and Mobile, but it also uses Direct Sales Agents and partnerships (co-brands) to acquire new customers. These customer acquisition models, combined with the Bank’s virtual network, af- ford it a geographic reach across all of Russia’s regions resulting in a highly diversified portfolio. move freely. The Company utilizes all types of forums to promote continual dialogue – such as email, online chat rooms, flash meetings, as well as formalized meeting structures. The Company offers clear far-reaching career path for its employees, a unique work environment and fair and transparent compensation. 5. The key offerings of JSC “Tinkoff Insurance” are per- 9. Clear performance evaluation processes and fair com- 31 DECEMBER 2020 Management Report The Board of directors presents its report together with the audited separate financial statements of TCS Group Holding PLC (the “Company”) for the year ended 31 Decem- ber 2020. Principal activities and nature of operations of the Company 1. The principal activities of the Company are holding of investments in subsidiary companies operating in the Russian Federation and offering call center services to customers and potential customers in the Russian Federation following the launch of Cyprus based home call center. The main subsidiaries are JSC “Tinkoff Bank” (the “Bank”), JSC “Tinkoff Insurance” (the “Insurance company”), LLC “Phoenix”, LLC “CloudPayments”, LLC “Тinkoff Mobile”, LLC “Tinkoff Software DC”, LLC “Tink- off Invest Lab” and LLC “Tinkoff Capital” (the Company and its subsidiaries collectively the “Group”). Refer to Note 1. 2. The Bank specialises in retail banking for individuals, individual entrepreneurs (“IE”), small and medium-sized enterprises (“SME”) and brokerage services. The Bank, which is fully licensed by the Central Bank of Russia, launched its operations in the summer of 2007 and is a member of the Russian Deposit Insurance System. The Insurance Company specialises in providing non-life insurance coverage such as accident, property, travel, credit protection and auto insurance. LLC “Phoenix” is a debt collection agency. LLC “CloudPayments” is a developer of online payment solutions whose core business is online merchant acquiring in Russia. LLC “Tinkoff Mobile” is a mobile virtual network operator pro- viding mobile services. LLC “Tinkoff Software DC” pro- vides software development services to the Company. LLC “Tinkoff Invest Lab” is an infrastructure company to support and optimize the Group’s investment services. The founder of the Company is Oleg Tinkov who was also the controlling shareholder throughout 2020. Review of developments, position and performance of the Company’s business 3. During 2020 the Company actively continued the de- velopment of its call-center and software development services in Cyprus, providing training so that these employees might provide a wider range of services to the Bank and, indirectly, its customers. 4. The Group operates a flexible business model. Its virtual network enables it to quickly and easily increase business or slow down customer acquisition de- pending upon the availability of funding and market conditions. The Bank’s primary customer acquisition sonal accident insurance, collective insurance against accidents and illnesses, travel insurance, motor vehicle insurance and property insurance, compulsory third party liability insurance (CTP) and voluntary third party liability insurance (VTP). The Insurance Company focuses on online sales. 6. The profit of the Company for the year ended 31 De- cember 2020 was RR 16,890 million (2019: RR 15,816 million). This result is driven by receipt of dividends from the Company’s subsidiaries and primarily from the Bank and the Insurance Company. The increased prof- its of those subsidiaries are driven by two major con- tinuing trends: the ongoing growth of the Company’s consumer finance business and a growing contribution from the non-credit fees-and-commission business lines. Thus the Company continues to demonstrate an active growth of income from acquiring services. At 31 December 2020 the total assets of the Company were RR 481,030 million (2019: RR 263,567 million) and the net assets were RR 480,328 million (2019: RR 260,273 million). Environmental matters 7. As the Group is an online-only financial institution, the management of the Group believes none of the Group’s business relationships, products or services are likely to have any significant actual or potential significant environmental impacts and do not believe its opera- tions are exposed to any material environmental risks. Management, in reaching this view, have taken into account the risk of adverse impacts that may stem from the Company’s own activities as well as its business relationships including its supply and subcontracting chains. This belief is based on continuous scrutiny of the business. The Group is continuously reviewing its processes to identify opportunities to reduce their environmental impact. Human resources 8. Empowerment is an important ingredient in the success of our organization. To achieve this, decision-making is delegated to levels deep below the management team, discussion, idea generation and exchange and trans- parency are actively promoted and encouraged and an open leadership style ensures that information can pensation are essential. Compensation is a combination of fixed rate salary and supplemental bonuses and is based on employee performance. Employees are evalu- ated on a regular basis in order to monitor their achieve- ment against their Key Performance Indicators as well as to provide feedback which can be used for their career development and to determine incentive compensation. 10. Prior to its IPO in 2013, the Company set up share-based management long term incentive plans as retention and motivational tools for key and senior managers. In March 2016, the Company announced a consolidated long-term management incentive and retention plan, covering around 50 key, senior and middle managers (MLTIP). Since then the Company has announced the expansion of MLTIP. The total size of the MLTIP pool was 8.13% of the Company’s share capital as at 31 December 2020. The plan is designed to align more closely managers’ interests with those of shareholders to grow the Group's value. Current MLTIP is awarded over four years with each such annual award vesting over the subsequent three years. The Company believes that participation in its share capital is an effective motivation and retention tool. The management incentive and retention plan embraces more managers, for two main reasons: firstly, internal promotions as some employees were promoted to key managerial positions; and, secondly, as part of its expansion and transformation into a financial market- place, the Company has hired a significant number of new managers to develop and manage new business lines and to strengthen internal controls, including cyber security. Principal risks and uncertainties 12. The Company’s business and financial results are im- pacted by the uncertainties and volatilities in the Russian economic environment which can be impacted by global factors and/or by national factors. 13. The Company’s subsidiaries and the Company on its own are subject to a number of principal risks which might adversely impact its performance. The principal activi- ties of the Company through its subsidiaries are banking and insurance operations and so it is within this area that the principal risks occur. Management considers that those principal risks are: financial risks, operational risks and legal risks. Financial risks comprise market risks (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. 14. The Board has put in place arrangements to identify, evaluate and manage the principal risks and uncer- tainties faced by the Company. The Company has an established risk management program that focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. This is overseen by a dedicated Risk Management function, which works with senior management of the operating companies in Russia as well as the Board of directors in this area. The primary objectives of the financial risk management function are to establish acceptable risk limits, and then ensure that the exposures remain within these limits. The operation- al and legal risk management functions are intended to ensure the proper functioning of internal policies and procedures that minimize operational and legal risks. The risk management strategy is established so as to identify, assess, monitor and manage the risks arising from Company's and subsidiaries’ activities. These risks as well as other risks and uncertainties, which affect the Company and how these are managed, are presented in Notes 18 and 19 of the separate financial statements. Non-Financial Information and Diversity Statement 15. Analysis of impact of COVID-19 pandemic on the Company is disclosed in Note 2 to the separate financial statements. 11. The Company’s policies and other information that provide an understanding of the development, perfor- mance, position and impact of the Company’s activities in the areas of environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters can be found in the Company’s most recently published Non-Financial Information and Di- versity Statement (Sustainability Report). The Company will publish its Sustainability Report for the year ended 2020, on the Company’s website, www.tcsgh.com.cy (and www.tinkoff.ru/eng) no later than 30 June 2021. Contingencies 16. The Company’s contingencies are disclosed in Note 19 to the separate financial statements. F-139 F-140 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Management Report (Continued) Future developments Treasury shares Independent auditor The Company’s Home State is Cyprus. 17. The strategic objective of the Company and so, by 22. At 31 December 2020 the Company held 3,013,379 extension, of the Company and its subsidiaries is to be a full service, online financial and lifestyle ecosystem with a broad range of financial, insurance and quasi-financial products, serving customers through a high-tech online and mobile platform that offers premium quality service and convenience, while maintaining high growth rates, profitability and effective data-driven risk management. Results 18. The Company’s results for the year are set out on page 2 of the separate financial statements. Information on distribution of profits is presented in Note 16. Any important events for the Company that have occurred after the end of the financial year 19. Important events for the Company that have occurred after the end of the financial year are presented in Note 23. Share capital, redesignation and conversion of class B and class A shares 20. As at 31 December 2020 the issued share capital of the Company was 199,305,492 shares (2019: same). Of these 129,391,449 were class A shares (2019: 119,291,268) and 69,914,043 class B shares (2019: 80,014,224) with a par value of USD 0.04 per share. In December 2020 10,100,181 class B shares in the Com- pany held by the Rigi Trust were converted to class A shares. As a result of the conversion, Mr. Oleg Tinkov's voting rights decreased from 87.03% to 84.38% as at 31 December 2020. 21. On 7 January 2021 all 69,914,043 issued class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares, and on the same date all issued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of being exercised is equal to the total number of issued shares (currently 199,305,492 shares following the class B share conversion). As a result of the conversion, Mr. Oleg Tinkov's voting rights in the Company decreased from 84.38% to 35.08%. As a result his ability to exercise control over the Company and the Group was ceased. (2019: 4,185,166) of its own GDRs, equivalent to approx- imately RR 3,238 million (2019: RR 3,164 million) and which represent 1.5% (2019: 2.1%) of the issued shares. 23. Treasury shares are GDRs of the Company that are held by a special purpose trust which has been specifically created for the long-term incentive programme for the management of the Company’s subsidiaries (MLTIP) (see Note 22 for further information). 24. During 2020 the Company repurchased 650,000 GDRs at market price for RR 661 million (2019: no GDRs were repurchased). 25. During 2020 the Company transferred 1,809,681 GDRs (2019: 2,419,187 GDRs), representing 0.91% (2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a transfer of RR 587 million (2019: RR 506 million) out of treasury shares to retained earnings. Research and development activities 26. The Company has not undertaken any significant re- search and development activities during the year end- ed 31 December 2020 though it continues to identify opportunities and ways to further develop its business in line with its strategic objective as set out above. Board of directors 27. The members of the Board of directors as of 31 Decem- ber 2020 and at the date of this report are presented above. All served throughout the year ended 31 De- cember 2020 and through to the date of these separate financial statements. 28. There were no significant changes in the assignment of responsibilities or remuneration of the Board of directors. Branches 29. The Company did not operate through any branches during the year. 30. The Independent Auditor, PricewaterhouseCoopers Limited, has expressed its willingness to continue in office. A resolution giving authority to the Board of directors to fix its remuneration will be proposed at the Annual General Meeting (AGM). Going concern 31. Directors have access to all information necessary to exercise their duties. The Directors continue to adopt the going concern basis in preparing the separate financial statements based on the fact that, after mak- ing enquiries and following a review of the Company’s budget for 2021, including cash flows and funding facilities, the Directors consider that the Company has adequate resources to continue in operation for the foreseeable future. This assessment was made with the available information to the Company as at the date of approving the financial statements. Corporate Governance Statement GDRs of TCS Group Holding PLC (a Cyprus incorporated company), with each GDR issued under a deposit agreement dated on or about 24 October 2013 with JPMorganChase Bank N.A. as depositary representing one ordinary (formerly class A) share, are listed on the London Stock Exchange. The Compa- ny’s GDRs are also listed on the Moscow Exchange. No shares of TCS Group Holding PLC are directly listed on any exchange. The Company is required to comply with the UK corporate governance regime to the extent it applies to foreign issuers of GDRs listed on the London Stock Exchange. The Company has not adopted corporate governance measures of the same standard in all respects as those adopted by UK incorporated companies or companies with a premium listing on the London Stock Exchange. As the shares themselves are not listed on the Cyprus Stock Exchange (or elsewhere), the Cypriot corporate governance regime, which only relates to companies that are listed on the Cyprus Stock Exchange, does not apply to the Company and accordingly the Company does not monitor its compliance with that regime. From the IPO in 2013 until 7 January 2021, the Company main- tained a capital structure with two classes of shares, class A and class B. On 7 January 2021, all class B shares were convert- ed to class A and simultaneously all shares were reclassified and redesignated as ordinary shares all ranking pari passu for all purposes and in all respects with the other existing shares, with the provisions in the Articles of Association of the Compa- ny relating to class B shares deemed deleted. A description of the terms and conditions of the GDRs can be found at “Terms and Conditions of the Global Depositary Receipts”, “Summary of the Provisions relating to the GDRs whilst still in Master Form” and “Description of Arrange- ments to Safeguard the Rights of the Holders of the GDRs” in the Prospectus issued by the Company dated 22 October 2013 and on the website at www.tinkoff.ru/eng. Copies of the Articles of Association of the Company adopted on 21 October 2013, the terms of reference of the Committees, and other corporate governance related as well as investor relations related materials can also be found on the website www.tinkoff.ru/eng, at the Company’s main website (www.tcsgh.com.cy), on the Company’s page on the London Stock Exchange website (www.londonstock- exchange.com/exchange/prices-and-markets/stocks/sum- mary) and at the official site of the Department of Registrar of Companies, Cyprus (http://www.mcit.gov.cy/). The Board of directors The role of the Board is to provide entrepreneurial leadership to the Company within a framework of prudent and effective controls which enable risk to be assessed and managed. The Board sets the Company’s strategic objectives, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews manage- ment’s performance. The Board also sets the Company’s val- ues and standards and ensures that its obligations towards the shareholders and other stakeholders are understood and met. The Board operates under a formal schedule of matters reserved to the Board for its decision, approved by share- holders in 2013. The authorities of the members of the Board are specified by the Articles of Association of the Company and by law. The current five strong Board of directors is comprised of three executive directors including the chairman, and two non-ex- ecutive directors both of whom are independent. There was no change in the composition of the Board or status of the directors in 2020. The longest serving director is Mr. Constantinos Econo- mides who became a director in 2008, and later took over the role of Chairman of the Board of directors in June 2015. The names of the people who served on the Board during 2020 are listed at the Board of directors and other officers. The Company has established two Committees of the Board. Specific responsibilities have been delegated to those com- mittees as described below. The Board is required to undertake a formal and rigorous review annually of its own performance, that of its commit- F-141 F-142 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Management Report (Continued) tees and of its individual directors. That review was recently carried out, in-house, in relation to 2020, looking at overall performance. All directors completed detailed question- naires on the Board’s, the committees’ and individual director’s performance. The role of appraising the Chairman of the Board for 2020 was performed by the Chairman of the Audit Committee. Analysis of the resultant feedback will be discussed at a meeting of the Board of directors on 10 March 2021 and no changes are expected to be made in the perfor- mance of the Board, its committees or individual directors. The Board has not appointed a senior independent director. There are only two independent directors of whom at least one will retire each year. Number of directors Unless and until otherwise determined by the Company in general meeting, the number of directors shall be no less than four, of whom two must be non-executive, and until 7 January 2021 was not permitted to exceed seven, when class B shares were in issue. From 7 January 2021, there is no maximum number of directors. The Articles of Association of the Company provide for the retirement by rotation of certain directors at each Annual General Meeting (AGM). At the AGM on 24 August 2020 the director who retired by rotation was Mr. Jacques Der Megreditchian who was duly reappointed that day by vote of all the shareholders. Committees of the Board of directors The Company has established two Committees of the Board of directors: the Audit Committee and the Remuner- ation Committee. Their terms of reference are summarized below. Both Committees were formed in October 2013. The Board reserves the right to amend their terms of reference and arranges a periodic review of each Committee’s role and activities and considers the appropriateness of addi- tional committees. Committees-current composition The Audit Committee is chaired by an independent non-ex- ecutive director Mr Martin Cocker, and had, until 16 August 2019, two other members both non-executive directors, one of whom was independent. From 16 August 2019 the Audit Committee has comprised its chairman Mr Martin Cocker and one independent non-executive director. The Remuneration Committee is also chaired by an inde- pendent non-executive director, Mr Jacques Der Megred- itchian, and had until 16 August 2019 two other members both non-executive directors, one of whom was independ- ent. From 16 August 2019 the Remuneration Committee has comprised its chairman Mr Jacques Der Megreditchian and one independent non-executive director. The current terms of reference of both Committees are available to the public and can be found on the Company’s websites. A short summary of both is set out below. Role of the Audit Committee The Audit Committee’s primary purpose and responsibility is to assist the Board in its oversight responsibilities. In executing this role the Audit Committee monitors the in- tegrity of the separate financial statements of the Company prepared under International Financial Reporting Stand- ards (“IFRS”) as adopted by the European Union (EU) and any formal announcements relating to the Group’s and the Company’s financial performance, reviewing significant financial reporting judgments contained in them, oversees the financial reporting controls and procedures imple- mented by the Company and monitors and assesses the effectiveness of the Company’s internal financial controls, risk management systems, internal audit function, the inde- pendence and qualifications of the independent auditor and the effectiveness of the external audit process. The Audit Committee is required to meet at appropriate times in the reporting and audit cycle but in practice meets more often as required. Under its terms of reference, the Audit Committee is required, at least once each year, to review its own performance, consti- tution and terms of reference to ensure it is operating at max- imum effectiveness and to recommend any changes it con- siders necessary for Board approval. The Audit Committee met this obligation through members participating in the main Board review described above. After consideration of the review, no changes were proposed to the committee’s terms of reference. The Audit Committee operates a structured framework around the extensive work it does on non-financial statements related matters holding at least two additional meetings annually, at least one of which would typically be held at the Bank’s head office in Moscow, to consider specific, non-financial statements related areas within its terms of reference. No such meeting was held in 2020 due to COVID-19 travel restrictions but at least two are planned for 2021. The Audit Committee has developed a risk matrix which constantly evolves to reflect new risks, the perceived impact of, and the Company’s appetite for, any given risk and the measures taken to mitigate those risks. This matrix is run in conjunction with the internal audit function. a committee duly authorized by the Board of directors or by a shareholder or shareholders together holding or repre- senting shares which in aggregate constitute or represent at least 5% in number of votes carried or conferred by the shares giving a right to vote at a general meeting. The Board of directors may at any time appoint any person to the office of director either to fill a vacancy or as an addi- tional director and every such director shall hold office only until the next following annual general meeting and shall not be taken into account in determining the directors who are to retire by rotation. One third of the directors (or if their number is not a multi- ple of three, the number nearest to three but not exceeding one-third) shall retire by rotation at every annual general meeting. Directors holding an executive office are excluded from retirement by rotation. Directors may be removed from office by the sharehold- ers at a general meeting with the sanction of an ordinary resolution, subject to giving 28 days’ notice to that director in accordance with the Articles of Association. The office of director shall be vacated if the director: • becomes bankrupt or makes any arrangement or com- position with his creditors generally; or • becomes prohibited from being a director by reason of any court order made under Section 180 (disqualifica- tion from holding the position of director on the basis of fraudulent or other conduct) of the Cyprus Companies Law; or • becomes, or may be, of unsound mind; or • resigns his office by notice in writing to the Company left at the registered office; or • is absent from meetings of the board for six consecutive months without permission of the Board of directors and his alternative director (if any) does not attend in his place and the Board of directors resolves that his office be vacated. At any time when class B Shares cease to exist by virtue of conversion into class A Shares, each Director B shall thereby become (undesignated) a director and shall remain in office until the next annual general meeting and such director will not be taken into account in determining the directors who are to retire by rotation at such meeting. Role of the Remuneration Committee The Remuneration Committee is responsible for determin- ing and reviewing among other things the framework of remuneration of the executive directors, senior manage- ment and its overall cost and the Company’s remuneration policies. The objective is to ensure that the executive man- agement of the Company are provided with appropriate incentives to encourage enhanced performance and are in a fair and responsible manner rewarded for their individual contributions to the success of the Company. The Remu- neration Committee’s terms of reference include reviewing the design and determining targets for any performance related pay schemes and reviewing the design of all share incentive plans for approval by the Board. The Remunera- tion Committee is required to meet at least twice a year but in practice meets far more often. The Remuneration Committee continued with its work into 2020 on its ongoing review of the operation of the Com- pany’s MLTIP which launched in 2016 and in considering additional awards to both existing and new participants for this and subsequent years. The Committee has also been working on plans for an incentive and compensation arrangement within MLTIP for when, in the period 2022 to 2024, existing awards made to MLTIP joiners in 2016-2017 start to go into run off. The Remuneration Committee recommended in June 2020 and December 2020 7 and 8 members of key management re- spectively be granted new awards under MLTIP in Q3 2021. Under its terms of reference the Remuneration Committee is required at least once each year to review its own per- formance, constitution and terms of reference to ensure it is operating at maximum effectiveness and to recommend any changes it considers necessary for Board approval. The Remuneration Committee met this obligation through members participating in the main Board review (described above) under which detailed questionnaires were complet- ed by all directors assessing the operation of the Board and both committees as well as individual directors. Although earlier reviews had resulted in certain minor changes to the Remuneration Committee’s terms of reference, no further changes were felt required based on the most recent re- view. The Committee continues to meet as required. Appointment, retirement, rotation and removal of directors The directors of the Company are appointed by the general meeting of shareholders with the sanction of an ordinary resolution. Such an appointment may be made to fill a vacancy or as an additional director. But no director may be appointed unless nominated by the Board of directors or by F-143 F-144 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Management Report (Continued) Significant direct/indirect holdings For the significant direct and indirect shareholdings held in the share capital of the Company, please refer to Note 1 of the separate financial statements. Internal control and risk management systems in relation to the financial reporting process In addition the Company has implemented an online analyti- cal processing management system based on a common SAS data warehouse that is updated on a daily basis. The set of daily reports includes but is not limited to sales reports, application processing reports, reports on the risk characteristics of the card portfolios, vintage reports, tran- sition matrix (roll rates) reports, reports on the pre-, early and late collections activities, reports on compliance with CBR requirements, capital adequacy and liquidity reports, operational liquidity forecast reports and information on intra-day cash flows. Policies, procedures and controls exist around financial reporting. Management is responsible for executing and assessing the effectiveness of these controls. Diversity policy The Company is committed to offering equal opportunity to all current and prospective employees, such that no appli- cant or employee is discriminated in favour of or against on the grounds of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation in recruitment, training, promotion or any other aspect of employment. Recruitment, training and promotion are exclusively based on merit. All the Company’s and the Company’s employees involved in the recruitment and management of staff are responsible for ensuring the policy is fairly applied within their areas of responsibility. The Company applies this approach throughout, at all levels. This includes its administrative, management and supervisory bodies, including the Board of directors of the Company. Financial reporting process The Board of Directors is responsible for the preparation of the separate financial statements in accordance with IFRS as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113, and for such internal control as the Board of directors determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial state- ments, the Board of directors is responsible for assessing the Company’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 the Board of directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board has delegated to the Audit Committee the re- sponsibility for reviewing the separate financial statements to ensure that they are in compliance with the applicable framework and legislation and for recommending these to the Board for approval. The Audit Committee is responsible for overseeing the Company’s financial reporting process. Internal Controls and Risk Management Management is responsible for setting the principles in relation to risk management. The risk management organisation is divided between Policy Making Bodies and Policy Implementation Bodies. Policy Making Bodies are responsible for establishing risk management policies and procedures, including the establishment of limits. The main Policy Making Bodies are the Board of directors, the Management Board, the Finance Committee, the Credit Committee and the Business Development Committee. The policy implementation level of the Group’s risk manage- ment organisation consists of the Finance Department, the Risk Management Department, the Collections Department and the Internal Control Service. The composition and diversity information of the Board of directors of the Company for the year ended and as at 31 Decem- ber 2020 is set out below: Name Age Male/Female Educational/professional background Constantinos Economides 45 Male ICAEW, MSc in Management Sciences, experience in ‘Big Four’ professional services firms ICAEW, ICPAC, BSc in Business Administration, Alexios Ioannides Mary Trimithiotou Martin Robert Cocker Jacques Der Megreditchian 44 43 61 61 Male experience in ‘Big Four’ professional services firms Female Male Male ICPAC, FCCA, Licensed insolvency practitioner, expe- rience in ‘Big Four’ professional services firms ICAEW, BSc in Mathematics and Economics, experience in ‘Big Four’ professional services firms BSc in Business Administration and in Financial Anal- ysis, banking and finance experience Further details of the corporate governance regime of the Company can be found on the website: https://www.tinkoff.ru/eng/investor-relations/corporate-governance/. By Order of the Board Constantinos Economides Chairman of the Board Limassol 23 March 2021 F-145 F-146 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020F-147 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Separate Statement of Financial Position Separate Statement of Profit or Loss and Other Comprehensive Income Note 31 December 2020 31 December 2019 In millions of RR Note 2020 In millions of RR ASSETS Cash and cash equivalents Loans and deposit placements with related parties Investments in equity securities Other financial assets Other non-financial assets TOTAL ASSETS LIABILITIES Debt securities in issue Deferred income tax liabilities Other financial liabilities Other non-financial liabilities TOTAL LIABILITIES EQUITY Share capital Share premium Treasury shares Share-based payment reserve Accumulated losses Revaluation reserve TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 7 8 9 10 11 11 12 12 12 - - 46 656 702 230 26,998 (3,238) 1,548 (5,556) 460,346 480,328 481,030 2,460 168 81 585 3,294 230 26,998 (3,164) 1,039 (10,901) 246,071 260,273 263,567 777 7,664 472,395 164 30 598 5,594 257,293 64 18 Interest income calculated using the effective interest rate method Other similar income Interest expense calculated using the effective interest rate method Net interest income/ (expense) Dividend income Net losses from derivatives revaluation 481,030 263,567 Net gains from foreign exchange translation 13 13 13 53 8 (32) 29 2019 272 28 (732) (432) 9 17,954 17,158 (3) 183 (45) 494 (926) (500) 603 (678) 477 111 31 - (251) 284 17,789 16,700 15 (899) (884) 16,890 15,816 214,111 37,362 168 1,019 214,279 38,381 231,169 54,197 Net (losses)/gains from operations with foreign currencies Net gains from financial assets at FVTPL Share of result of associates and joint ventures Administrative and other operating expenses 14 Other operating income Profit before tax Income tax expense Profit for the year Other comprehensive income: Items that will not be reclassified subsequently to profit or loss: Net gains arising during the year on investments in equity securities at fair value through other comprehensive income Income tax credit recorded directly in other comprehensive income Other comprehensive income for the year net of tax Total comprehensive income for the year Approved for issue and signed on behalf of the Board of Directors on 23 March 2021. Constantinos Economides Director Mary Trimithiotou Director The notes № 1-23 are an integral part of these Separate Financial Statements. The notes № 1-23 are an integral part of these Separate Financial Statements. F-155 F-156 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020                                                                        31 DECEMBER 2020 Separate Statement of Changes in Equity In millions of RR l a t i p a c e r a h S - i m e r p e r a h S m u n o i t a u l a v e R e v r e s e r d e s a b - e r a h S t n e m y a p - t a l u m u c c A / ) s e s s o l ( d e e m o c n i e t o N y r u s a e r T s e r a h s l a t o T Balance at 31 December 2018 188 8,623 207,534 1,232 (20,861) (3,670) 193,046 Profit for the year Other comprehensive income: Investments in equity securities at FVOCI Income tax credit recorded directly in other comprehensive income Total comprehensive income for the year Shares issued Secondary public offering costs Share-based payment reserve Dividends - - - - - - - - - - 15,816 - 15,816 37,362 1,019 - - - - - 37,362 - 1,019 38,381 - 15,816 - 54,197 12 12 12 16 42 18,874 - - - (499) - - - - - - 156 (193) - - - - - 18,916 (499) 506 469 - - (5,856) - (5,856) Balance at 31 December 2019 230 26,998 246,071 1,039 (10,901) (3,164) 260,273 Profit for the year Other comprehensive income: Investments in equity securities at FVOCI Income tax credit recorded directly in other comprehensive income Total comprehensive income for the period GDRs buy-back Share-based payment reserve Dividends 12 12 16 - - - - - - - - - - - - 16,890 - 16,890 214,111 168 - - - - - 214,111 - 168 - - - - (4) - - 509 - - (661) (661) 587 1,092 - (11,545) - (11,545) Balance at 31 December 2020 230 26,998 460,346 1,548 (5,556) (3,238) 480,328 - 214,279 - 16,890 - 231,169 Dividends paid Separate Statement of Cash Flows In millions of RR Cash flows used in operating activities Interest income calculated using the effective interest rate method received Interest expense calculated using the effective interest rate method paid Administrative and other operating expenses paid Income tax paid Cash paid from operations with financial derivatives Cash received from trading in foreign currencies Other operating income received Note 2020 2019 60 - (485) (2) (10) - 180 248 (741) (456) (26) (651) 111 300 Cash flows from operating activities before changes in operating assets and liabilities (257) (1,215) Changes in operating assets and liabilities Net increase in loans and deposit placement with related parties Net decrease in other non-financial liabilities Net increase in investments in debt securities at FVTPL Net cash used in operating activities Cash flows from/(used in) investing activities Dividend received from subsidiaries Acquisition of investments in equity securities at FVOCI Acquisition of debt securities at FVOCI Proceeds from sale and redemption of debt securities at FVOCI Proceeds from investments in equity securities at FVOCI Net cash from investing activities Cash flows (used in)/from financing activities Repayment of debt securities in issue GDRs buy-back Proceeds from secondary public offering Proceeds from debt securities in issue Loans repaid Secondary public offering costs paid Repayment of principal of lease liabilities Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year (1,552) (5,215) (39) - (373) 410 (1,848) (6,393) 17,056 17,583 (575) (416) - - - (21,317) 21,312 206 16,481 17,368 (11,835) (2,938) (661) - - - - - (5,601) (3,418) - 18,916 2,527 (23,092) (499) (3) (15,434) (11,170) 980 179 598 777 32 (163) 761 598 16 17 12 12 17 17 12 7 7 The notes № 1-23 are an integral part of these Separate Financial Statements. The notes № 1-23 are an integral part of these Separate Financial Statements. F-157 F-158 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020                                                                                                                           31 DECEMBER 2020 Notes to the Separate Financial Statements 1 Introduction These separate financial statements have been prepared in accordance with International Financial Reporting Stand- ards (“IFRS”) as adopted by the European Union (“EU”) for the year ended 31 December 2020 for TCS Group Holding PLC (the “Company”), and in accordance with the requirements of the Cyprus Companies Law, Cap.113. The Соmраnу has also prepared consolidated financial statements in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law Cap. 113 for the Company and its subsidiaries (“the Group”) for the year ended 31 December 2020. These are available to view on https://tinkoffgroup.com/financials/quarterly-earnings/. The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of the Companies Law, Cap.113. The Board of directors of the Company at the date of authorisation of these separate financial statements consists of: Con- stantinos Economides, Alexios Ioannides, Mary Trimithiotou, Jacques Der Megreditchian and Martin Robert Cocker. The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol, Cyprus. At 31 December 2020 and 2019 the share capital of the Company is comprised of class A shares and class B shares. A “class A” share is an ordinary share with a nominal value of USD 0.04 per share and carrying one vote. A “class B” share is an ordinary share with a nominal value of USD 0.04 per share and carrying 10 votes. As at 31 December 2020 the number of issued class A shares is 129,391,449 (2019: 119,291,268) and issued class B shares is 69,914,043 (2019: 80,014,224). Refer to Note 12 for further information on the share capital. On 25 October 2013 the Company completed an initial public offering of its class A ordinary shares in the form of global depository receipts (GDRs) listed on the London Stock Exchange plc. On 2 July 2019 the Company completed a secondary public offering (SPO) of its class A shares in the form of GDRs. On 28 Octo- ber 2019 the Company’s GDRs started trading also on the Moscow Exchange. As at 31 December 2020 and 2019 the entities and the individuals holding either class A or class B shares of the Company were: Class of shares 31 December 2020 31 December 2019 Country of Incorporation Guaranty Nominees Limited is a company holding class A shares of the Company for which GDRs are issued under a de- posit agreement made between the Company and JP Morgan Chase Bank NA signed in October 2013. On 19 March 2020 Altoville Holdings Limited and Nemorenti Limited transferred all of the Company’s class B shares owned by them to two Tinkov family trusts. Russian entrepreneur Mr. Oleg Tinkov, who was the beneficial owner of Altoville Hold- ings Limited and Nemorenti Limited at 31 December 2019, remained the ultimate beneficiary of these class B shares. On 14 December 2020 10,100,181 class B shares in the Company held by the Rigi Trust were converted to class A shares. As a result of the conversion, Mr. Oleg Tinkov's voting rights decreased from 87.03% to 84.38% as at 31 December 2020. As at 31 December 2020 the ultimate controlling party of the Company was Mr. Oleg Tinkov, who controlled approximately 84.38% (2019: 87.03%) of the aggregated voting rights attached to the class A and B shares, excluding voting rights attach- ing to TCS Group Holding PLC GDRs he holds, if any. On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares, and on the same date all issued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of be- ing exercised are equal to the total number of issued shares (currently 199,305,492 shares following the class B share con- version). The number of GDRs in issue remained unchanged. As a result of the conversion, Mr. Oleg Tinkov's voting rights decreased from 84.38% to 35.08%. As a result his ability to exercise control over the Company and the Group was ceased. As at 31 December 2020 and 2019 the six individuals listed in the table above each held one share as nominees of Mr. Oleg Tinkov (31 December 2019: as nominees of Altoville Holdings Limited). The Company owns 100% of the shares and has 100% of the voting rights (directly or indirectly) of the following subsidiaries at 31 December 2020: JSC “Tinkoff Bank” (“the Bank”), LLC "Microfinance company “Т-Finans”, LLC TCS, LLC “Phoenix”, LLC “Tinkoff Software DC”, LLC “Тinkoff Mobile”, LLC “Tinkoff Capital”, ANO “Tinkoff Education” and LLC “Tinkoff Invest Lab” (2019: the Bank, LLC "Microfinance company “Т-Finans”, LLC TCS, LLC “Phoenix”, LLC “Tinkoff Software DC”, LLC “Тinkoff Mobile”, Goward Group Limited (since February 2018 Goward Group Ltd was in liquidation process, and on 16 April 2019 the company was liquidated), LLC “Fintech DC”, LLC “Tinkoff Capital” and ANO “Tinkoff Education”). As at 31 December 2020 the Company owns 88.98% and the Bank owns 11.02% of the shares of the JSC “Tinkoff Insurance” (“the Insurance Company”) (2019: the Company owns 80.08% and the Bank owns 9.92%). Guaranty Nominees Limited (JP Morgan Chase Bank NA) Virtue Trustees (Switzerland) AG as Trustee of the Bernina Trust Virtue Trustees (Switzerland) AG as Trustee of the Rigi Trust Ioanna Georgiou Panagiota Charalambous Maria Vyra Antonis Strati Chloi Panagiotou Leonora Chagianni Marios Panayides Altoville Holdings Limited Nemorenti Limited Total Class A 64.92% 59.85% United Kingdom At 31 December 2020, the Company owns directly 95% of the shares of LLC “CloudPayments” (2019: directly 55% and indi- rectly 40% through the shares owned by the Bank). In 2020 the Company acquired 40% of the shares held by the Bank. Class B 18.47% Class B Class A Class A Class A Class A Class A Class A Class A Class B Class B 16.61% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% - - - - - Switzerland Switzerland 0.00% 0.00% 0.00% - 0.00% 0.00% 0.00% 18.47% 21.68% Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus Cyprus The Company and its subsidiaries together referred to as the “Group”. Principal activity. The Company’s principal business activities are the holding of investments in Russian subsidiary companies and starting from December 2017 offering Cyprus based home call center services to customers and potential customers outside of Russia. The Bank operates under general banking license No. 2673 issued by the Central Bank of the Russian Federation (“CBRF”) since 8 December 2006. The Insurance Company operates under an insurance license issued by the CBRF. The Bank participates in the state deposit insurance scheme, which was introduced by Federal Law No. 177-FZ “Deposits insurance in banks of the Russian Federation” dated 23 December 2003. The State Deposit Insurance Agency guarantees repayment of insurance compensation up to RR 1.4 million per individual, individual entrepreneur and small enterprise deposits in case of the withdrawal of a licence of a bank or a CBRF-imposed moratorium on payments. JSC “Tinkoff Insurance” (the “Insurance Company”) provides insurance services such as accident, property, travellers, financial risks and auto insurance. The subsidiary LLC “Microfinance company “Т-Finans” provides micro-finance services to clients. 100.00% 100.00% The subsidiary LLC “TCS” provides printing and distribution services to the Bank. F-159 F-160 STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 1 Introduction (Continued) The subsidiary LLC “Tinkoff Mobile” is a mobile virtual network operator set up in 2017 to provide mobile services. The subsidiary LLC “CloudPayments” is a developer of online payment solutions whose core business is online merchant acquiring in Russia. The subsidiary LLC “Phoenix” is a debt collection agency. LLC “Tinkoff Software DC” and LLC “Fintech DC” provide software development services. In August 2020 the Group acquired a 22.15% shareholding in Incantus Holding Limited by transferring its 100% shareholding in LLC “Fintech DC” to Incantus Holding Limited and by providing a convertible loan (Notes 8 and 22). Incantus Holding Limited is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding the CIS) through the mobile banking platform Vivid Money. In October 2020 a new venture capital fund invested into the share capital of Incantus Holding Limited. As a result the Company’s shareholding in Incantus Holding Limited has decreased to 16.32%. LLC “Tinkoff Capital” is an asset management company established in June 2019 to manage investment funds, mutual funds and non-state pension funds. ANO “Tinkoff Education” is a non-commercial organization set up by the Bank as the sole founder. LLC “Tinkoff Invest Lab” is an infrastructure company created for supporting and optimizing of the Group’s investment services. EBT is a special purpose trust which has been specifically created for the long-term incentive programme for Management of the Company (MLTIP). Registered address and place of business. The Company’s registered address is 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol, Cyprus. Presentation currency. These separate financial statements are presented in millions of Russian Rubles (RR). 2 Operating Environment of the Company Russian Federation. The Company’s main subsidiaries all operate within the Russian Federation, which displays certain characteristics of an emerging market. There were a number of significant changes in the operating and economic environ- ment during 2020, which had an impact on the Company’s business and its subsidiaries including: • In March 2020 the World Health Organization (WHO) announced that the spread of the COVID-19 virus across the globe is a pandemic. Significant restrictions on travel and movement of individuals and the closure of non-essential business- es have either been imposed in most countries or have happened as a result of the pandemic. This has led to significant declines in GDP in most if not all large economically strong countries. Russia has not been immune to the negative personal and economic hardships arising from this virus and from the response to it trying to limit its spread. • Oil prices have decreased significantly due to the significant reduction in oil consumption in the current economic cli- mate but demonstrated stable growth during the second quarter of 2020 and the rest of the year. This in turn has led to significant volatility and depreciation of the Russian Rouble exchange rate against the US dollar and the Euro. • Further, the capital markets (equities and bonds) have seen a substantial volatility in prices in many sectors. As of the reporting date and subsequently some of the restrictions imposed by government authorities in the Russian Fed- eration due to the COVID-19 pandemic have been lifted and the Company and its subsidiaries observe that business activity in the Russian Federation is recovering. However, the level of ongoing uncertainty in relation to further negative develop- ments around the COVID-19 pandemic and possible impact on the Company and its subsidiaries remain high. Hence it is practically impossible to make a comprehensive quantitative assessment with a high degree of certainty of the impact of these changes to the economic environment on the Company’s and its subsidiaries’ financial position, and in particular in considering credit loss allowances on the loan portfolio which requires to consider the probability of default of most borrowers in the next 12 months and for others over the life of their loan. The Government of the Russian Federation has implemented various support measures for individuals and corporates impacted by the COVID-19 pandemic including their right in certain circumstances to obtain repayment holidays on their loans for up to 6 months and reduced rates of interest in this period. 3 Significant Accounting Policies Basis of preparation. These separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law Cap.113. The Company has prepared these separate financial statements for compliance with the requirements of the Cyprus ln- come Тах Law and the Disclosure Rule as issued by the Financial Security Authority of the United Kingdom. The separate financial statements have been prepared under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, and by revaluation of financial instruments categorised at fair value through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”). The principal accounting policies applied in the preparation of these separate financial statements are set out below. Management prepared these separate financial statements on a going concern basis. Financial instruments – key measurement terms. Depending on their classification financial instruments are carried at fair value or amortised cost as described below. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is the quoted price in an active market. An ac- tive market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the entity. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price. The price within the bid-ask spread which management considers to be the most representative of fair value for quoted financial assets and liabilities is the last bid price of the business day. A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (an asset) for a particular risk exposure or paid to transfer a net short position (a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date. This is applicable for assets carried at fair value on a recurring basis if the Company: (a) manages the group of financial assets and financial liabilities on the basis of the entity’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the entity’s documented risk management or investment strategy; (b) it provides information on that basis about the group of assets and liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities is substantially the same. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consid- eration of financial data of the investees, are used to measure fair value of certain financial instruments for which external market pricing information is not available. F-161 F-162 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period. Refer to Note 20. Associates. Associates are entities over which the Company has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The carrying amount of associ- ates includes goodwill identified on acquisition less accumulated credit losses, if any. Dividends received from associates reduce the carrying value of the investment in associates. Other post-acquisition changes in Company’s share of net assets of an associate are recognised as follows: (i) the Company’s share of profits or losses of associates is recorded in the profit or loss for the year as share of result of associates, (ii) the Company’s share of other comprehensive income is recognised in other comprehensive income and presented separately, (iii); all other changes in the Company’s share of the carrying value of net assets of associates are recognised in profit or loss within the share of result of associates. However, when the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Otherwise the Company continue to recognise further losses if it has commitments to fund the associate’s operations. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Company applies the impairment requirements in IFRS 9 to long-term loans and similar long-term interest that in sub- stance form part of the investment in associate before reducing the carrying value of the investment by a share of a loss of the investee that exceeds the amount of the Company’s interest in the ordinary shares. Disposals of subsidiaries, associates or joint ventures. When the Company ceases to have control or significant influ- ence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained inter- est as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial in- strument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs. Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any prin- cipal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premi- um (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of related items in the separate statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or secured that are integral to the effective interest rate such as origination fees. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. For assets that are purchased or originated credit impaired (“POCI”) at initial rec- ognition, the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs that are incremental and directly attributable to the acquisition or the issue of the financial asset or financial liability. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instru- ment or by a valuation technique whose inputs include only data from observable markets. After the initial recognition, an ECL allowance is recognised for financial assets measured at AC and investments in debt instruments measured at FVOCI, resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or mar- ket convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the Company commits to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual provisions of the instrument. The Company uses discounted cash flow valuation techniques to determine the fair value of currency swaps, foreign exchange forwards that are not traded in an active market. Differences may arise between the fair value at initial recog- nition, which is considered to be the transaction price, and the amount determined at initial recognition using a valuation technique. The differences are immediately recognised in profit or loss if the valuation uses only level 1 or level 2 inputs. Financial assets – classification and subsequent measurement – measurement categories. The Company classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent meas- urement of debt financial assets depends on: • the Company’s business model for managing the related financial assets portfolio; and • the cash flow characteristics of the financial asset. Financial assets – classification and subsequent measurement – business model. The business model reflects how the Company manages the assets in order to generate cash flows – whether the Company’s objective is: • solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”); or • to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”); • if neither of i) and ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL. F-163 F-164 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activi- ties that the Company undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the Company in determining the business model include the purpose and composition of a portfolio, past experience on how the cash flows for the respective assets were collected, how risks are assessed and managed, how the assets’ performance is assessed and how managers are compensated. Based on the analysis performed the Company included the following financial instruments in the business model “hold to collect contractual cash flows” since the Company manages these financial instruments solely to collect contractual cash flows: cash and cash equivalents, loans and deposit placements with related parties and other financial assets. The Company included debt securities at FVOCI in the business model “hold to collect contractual cash flows and sell” since the Company manages these financial instruments to collect the contractual cash flows.). The Company included debt securities measured at FVTPL and financial derivatives in the business model “other”. Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Company assesses whether the cash flows represent solely payments of principal and interest (the SPPI test). Financial assets with embedded deriva- tives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the Company considers whether the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed. However, if the contractual terms of the asset are modified, the Company con- siders if the contractual cash flows continue to be consistent with a basic lending arrangement in assessing whether the modification is substantial. See below for “Financial assets – modification”. Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. The Company did not change its business model during the current and comparative period and did not make any reclassifications. The Company applies a “three stage” model for impairment in accordance with IFRS 9, based on changes in credit quality since initial recognition: 1) A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 months ECL”). 2) If the Company identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“lifetime ECL”). Refer to Note 18 for a description of how the Company determines when a SICR has occurred. 3) If the Company determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a lifetime ECL. Refer to Note 18 for a description of how the Company defines credit-impaired assets and default. Note 18 provides information about inputs, assumptions and estimation techniques used in measuring ECL. Financial assets – write-off. Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecog- nition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery. Financial assets – derecognition. The Company derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Company has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of owner- ship, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale. Financial assets – modification. The Company sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Company assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset, signifi- cant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset, or a significant extension of a loan when the borrower is not in financial difficulties. Financial assets – impairment – credit loss allowance for ECL. The Company assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at AC and FVOCI and for the exposure arising from loan commitments and financial guarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is consid- ered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. The measurement of ECL reflects: 1) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes; 2) the time value of money; and 3) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions. Debt instruments measured at AC are presented in the separate statement of financial position net of the allowance for ECL. For financial guarantees a separate provision for ECL is recognised as a financial liability in the separate statement of finan- cial position. For debt instruments at FVOCI, changes in amortised cost, net of allowance for ECL, are recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses on debt instruments at FVOCI. The Company also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners. In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the orig- inally agreed payments, the Company compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss. Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities). Financial liabilities – derecognition. Financial liabilities are derecognised when they are extinguished (i.e. when the obli- gation specified in the contract is discharged, cancelled or expires). F-165 F-166 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Depreciation. Depreciation of each item of tangible fixed assets is calculated using the straight-line method to allocate its cost to its residual value over its estimated useful life as follows: An exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguish- ment of the original financial liability and the recognition of a new financial liability. Equipment Useful lives in years 3 to 10 The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumula- tive catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners. Cash and cash equivalents. Cash and cash equivalents include deposits held at call with banks, and other short-term high- ly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designat- ed at FVTPL. Loans and deposit placements with related parties. Loans and deposit placement with related parties are recorded when the Company advances money to purchase or originate receivable from related party due on fixed or determinable dates and has no intention of trading the receivable. Loans and deposit placement with related parties are classified within held to collect business model and carried at amortised cost using effective interest rate if they pass SPPI test. Other- wise loans and deposit placement with related parties are classified within other business model and carried at fair value through profit or loss. Refer to Note 8 for details of ECL measurement for loans and deposit placements with related parties. Financial derivatives. Financial derivatives represented by foreign exchange swaps and forwards are carried at their fair value. Derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of financial derivatives are recorded within Net losses from derivatives revaluation. The Company does not apply hedge accounting. Tangible fixed assets. Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment, where required. Costs of minor repairs and day-to-day maintenance are expensed when incurred. Costs of replacing major parts or compo- nents of premises and equipment items are capitalised, and the replaced part is retired. At the end of each reporting period management assesses whether there is any indication of impairment of tangible fixed assets. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell. Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year (within other operating income or expenses). The residual value of an asset is an estimated amount that the Company would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Accounting for leases by the Company as a lessee. Leases, where the Company is the lessee, are recognised as a right- of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable under cancellable and non-cancellable operating leases; • variable lease payments that are based on an index or a rate and that are initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the lessee under residual value guarantees; • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term includes any non-cancellable and optional extension periods which have been assessed as reasonably certain to be exercised. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company’s incremental borrowing rate is used, being the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms, security and conditions. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentives received; • any initial direct costs; and • dismantling and restoration costs. As an exception to the above, the Company accounts for short-term leases and leases of low value assets by recognising the lease payments as an operating expense in profit or loss on a straight line basis. Short-term leases are leases with a lease term of 12 months or less, and the lease does not provide for the possibility of repurchase of the asset at the end of the contract. Low value assets are assets with a value of RR 300,000 or less at the date of conclusion of the contract. Right-of-use assets are included in other non-financial assets, lease liabilities are included in other non-financial liabilities in the separate statement of financial position. Depreciation of right-of-use assets are recognised in administrative and other operating expenses in the separate statement of profit or loss and other comprehensive income. Finance cost is recog- nised within interest expense of the separate statement of profit or loss and other comprehensive income. Repayment of principal of lease liabilities is disclosed within cash flows from financing activities of the separate statement of cash flows. F-167 F-168 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Right-of-use asset are reviewed for impairment in accordance with the Company’s accounting policy for impairment of non-financial assets. Investments in debt securities. Based on the business model and the contractual cash flow characteristics, the Company classifies investments in debt securities as carried at AC, FVOCI or FVTPL. Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows repre- sent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting mismatch. Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated using the ef- fective interest method and recognised in profit or loss. An impairment allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All other changes in the carrying value are recognised in OCI except for net results from operations with foreign currencies and interest income calculated using the effective interest rate method. When the debt security is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from OCI to profit or loss. Investments in debt securities are carried at FVTPL if they do not meet the criteria for AC or FVOCI. The Company may also irrevocably designate investments in debt securities at FVTPL on initial recognition if applying this option significant- ly reduces an accounting mismatch between financial assets and liabilities being recognised or measured on different accounting bases. Sale and repurchase agreements and lending of securities. Sale and repurchase agreements (“repo agreements”), which effectively provide a lender’s return to the counterparty, are treated as secured financing transactions. Securities sold under such sale and repurchase agreements are not derecognised. The securities are not reclassified in the separate statement of financial position unless the transferee has the right by contract or custom to sell or repledge the securities, in which case they are reclassified as repurchase receivables. The corresponding liability is presented within amounts loans received. Securities purchased under agreements to resell (“reverse repo agreements”), which effectively provide a lender’s return to the Company, are recorded as loans received. The difference between the sale and repurchase price, adjusted by interest and dividend income collected by the counterparty, is treated as interest income and accrued over the life of reverse repo agreements using the effective interest method. Securities lent to counterparties for a fixed fee are retained in the separate financial statements in their original category in the separate statement of financial position unless the counterparty has the right by contract or custom to sell or repledge the securities, in which case they are reclassified and presented separately. Securities borrowed for a fixed fee are not recorded in the separate financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded in profit or loss for the year within gains less losses arising from trading securities. The obligation to return the securities is recorded at fair value in other borrowed funds. Based on classification of securities sold under the sale and repurchase agreements, the Company classifies repurchase receivables into one of the following measurement categories: AC, FVOCI or FVTPL. Investments in equity securities. Financial assets that meet the definition of equity from the issuer’s perspective, i.e. instruments that do not contain a contractual obligation to pay cash and that evidence a residual interest in the issuer’s net assets, are considered as investments in equity securities by the Company. Investments in equity securities are measured at FVTPL, except where the Company elects at initial recognition to irrevocably designate an equity investment at FVO- CI. The Company’s policy is to designate equity investments (including Invesments in subsidiaries) as FVOCI when those investments are held for strategic purposes other than solely to generate investment returns. When the FVOCI election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses and their reversals, if any, are not measured separately from other changes in fair value. Dividends continue to be recognised in profit or loss when the Company’s right to receive payments is established except when they represent a recovery of an investment rather than a return on such investment. Investments in equity securities include investments in subsidiaries. Subsidiaries are all entities (including structured enti- ties) over which the Company has control. The Company controls an entity when the Company 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. In cases of acquisitions of subsidiaries from entities under common control or subsidiaries of the Company, the cost of acquisition is determined to be the fair value of the investment acquired as opposed to the transaction price. Any differences between the transaction price and the fair value of the investment acquired reflect notional contributions/ distributions from entities under common control or subsidiaries and are recognised as such, i.e. directly in equity in cases of transactions with common control entities and as an additional contribution to or distribution from the subsidiary trans- ferring the investment to the Company. Debt securities in issue. Debt securities are stated at amortised cost. If the Company purchases its own debt securities in issue, they are removed from the separate statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in a separate line of the separate statement of profit or loss and other comprehensive income. Other liabilities. Other liabilities are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Other liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Income taxes. Income taxes have been provided for in the separate financial statements in accordance with Cyprus leg- islation enacted or substantively enacted as of the end of the reporting period. The income tax (charge)/credit comprises current tax and deferred tax and is recognised in profit or loss for the year except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity. Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable profits or losses for the current and prior periods. Taxes other than on income are recorded within administrative and other operating expenses. Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differ- ences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial rec- ognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially record- ed, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of the reporting period which are expected to apply to the period when the temporary differences will reverse or the tax loss carry forwards will be utilised. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised. Deferred income tax is not recognised on post-acquisition retained earnings and other post acquisition movements in reserves of subsidiaries where the Company controls the subsidiary’s dividend policy, and it is probable that the difference will not reverse through dividends or otherwise in the foreseeable future. Provision for deferred tax on the undistribut- ed profits of the Company’s subsidiaries is made when the dividend payment is probable to be made out of economic resources of the subsidiaries at the reporting date and is recognised in other comprehensive income. Withholding taxes incurred on actual dividend distributions by subsidiaries are recognised in profit or loss once the right of dividend income is established. Uncertain tax positions. The Company’s uncertain tax positions are assessed by management at the end of each report- ing period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted at the end of reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recog- nised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period. F-169 F-170 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of uncertain timing or amount. They are accrued when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a relia- ble estimate of the amount of the obligation can be made. Levies and charges, such as taxes other than income tax or regulatory fees based on information related to a period before the obligation to pay arises, are recognised as liabilities when the obligating event that gives rise to pay a levy occurs, as identified by the legislation that triggers the obligation to pay the levy. If a levy is paid before the obligating event, it is recog- nised as a prepayment. Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds and debited against share premium. Share premium. Share premium is the difference between the fair value of the consideration receivable for the issue of shares and the nominal value of the shares. The share premium account can only be resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital. Treasury shares. Where the Company purchases the Company’s equity instruments, the consideration paid, including any directly attributable incremental external costs, net of income taxes, is deducted from equity attributable to the owners of the Company until the equity instruments are reissued, disposed of or cancelled. Where such shares are subsequently disposed of or reissued, any consideration received is included in equity. The value of GDRs transferred out of treasury shares for the purposes of the long-term incentive programme for management of the Company are determined based on the weighted average cost. The Company's equity instruments acquired by employee share trust entity are treated as treasury shares when the Compa- ny retains the majority of the risks and rewards relating to the funding arrangement for the trust entity. Share-based payments. The Company grants equity settled share based payments to employees of its subsidiary. No share-based payment charge is recognised as no employees are providing services to the Company. The Company records a debit to the investment in the subsidiaries as a capital contribution from the parent to the subsidiary and a credit to share- based payment reserve within equity. When the rewards granted under share-based payment programs vest the Company reclassifies accumulated share based payment reserve to revaluation reserve. Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the separate financial statements are authorised for issue, are disclosed in the Note 23. The separate financial statements of the Company prepared in accordance with IFRS as adopted by the EU and in accord- ance with Cyprus Companies Law is the basis of available reserves for distribution. Management considers the Revaluation Reserve to be a distributable reserve. Dividend distribution to the Company's shareholders is recognised as a liability in the Company's separate financial statements in the year in which the dividends are appropriately authorised and are no longer at the discretion of the Company. More specifically, interim dividends are recognised as a liability in the period in which these are authorised by the Board of directors and in the case of final dividends, these are recognised in the period in which these are approved by the Company's shareholders. Interest income and expense recognition. Interest income and expense are recorded for all debt instruments, other than those at FVTPL, on an accrual basis using the effective interest method. This method defers, as part of interest income or expense, all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a financial liability. Commitment fees received by the Company to originate loans at market interest rates are integral to the effective interest rate if it is probable that the Company will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination. The Company does not designate loan commitments as financial liabilities at FVTPL. For financial assets that are originated or purchased credit-impaired, the effective interest rate is the rate that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial recognition (normally represent- ed by the purchase price). As a result, the effective interest is credit-adjusted. Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: i) financial assets that have become credit-impaired (Stage 3), for which interest revenue is calculated by applying the effective interest rate to their AC (net of the ECL provision); and ii) financial assets that are purchased or originated credit-impaired, for which the original credit-adjusted effective inter- est rate is applied to the AC. Other income and expense recognition. All other income is generally recorded on an accrual basis by reference to com- pletion of the specific performance obligation assessed on the basis of measurement of the Company’s progress towards complete satisfaction of that performance obligation. All other expenses are generally recorded on an accrual basis by reference to completion of the specific transaction as- sessed on the basis of the actual service provided as a proportion of the total services to be provided. Other similar income. Other similar income represents interest income recorded for debt instruments measured at fair value through profit or loss (“FVTPL”) and is recognised on an accrual basis using nominal interest rate. Other similar expense. Other similar expense represents finance cost related to the discounted lease payments using the incremental borrowing rate. Foreign currency translation. Functional currency is the currency of the primary economic environment in which the entity operates. The Company’s results are dependent upon the receipt of dividends from and the valuation of its primary subsidiaries which operate in the Russian Federation. Therefore the functional currency of the Company is the national currency of the Russian Federation, Russian Rouble (“RR”). The Russian Rouble is also the presentation currency of the Company. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities into each entity’s functional currency at year-end official exchange rates of the CBRF are recognised in profit or loss for the year as Net gains/ (losses) from foreign exchange translation. Foreign exchange gains and losses resulting from the settlement of transactions with foreign currencies are recognised in profit or loss for the year as Net gains from operations with foreign currencies. At 31 December 2020 the rate of exchange used for translating foreign currency balances was USD 1 = RR 73.8757 (31 De- cember 2019: USD 1 = RR 61.9057), and the average rate of exchange was USD  1 = RR 72.1464 ( 2019: USD 1 = RR 64.7362). Offsetting. Financial assets and liabilities are offset and the net amount reported in the separate statement of financial posi- tion only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business, (ii) the event of default and (iii) the event of insolvency or bankruptcy. Amendments of the separate financial statements after issue. The Board of directors of the Company has the power to amend the separate financial statements after issue. F-171 F-172 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies The Company makes estimates and assumptions that affect the amounts recognised in the separate financial statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the separate financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Investments in subsidiaries. The estimated fair value of investments in subsidiaries recognises that the majority of the value of the Company resides in its main operating subsidiaries. Thus in estimating the fair value of the subsidiaries the primary input is the market quote of the Company’s GDRs which are traded on the London and Moscow Stock Exchanges. Other inputs include the estimated fair value of the assets and liabilities held by the Company other than its investment in the subsidiaries. Refer to Note 20. Perpetual subordinated bonds. The Company from time to time invests in perpetual subordinated bonds issued by third parties. The Company has taken into consideration that there are genuine contingent settlement provisions that could arise and as such has classified the investments in perpetual subordinated bonds as investments in debt securities on the basis of terms of issue which stipulate the possible redemption of the instrument in several cases other than liquidation of the issuer. The investments in these instruments are classified as debt investment securities measured at FVTPL since the analysis of the contractual cash flow characteristics resulted in acquired perpetual bonds not passing SPPI test. If the Company had recognized this instrument as equity instrument, then it could have been measured at FVTPL or FVOCI as the Company does not hold it for trading purposes. Initial recognition of related party transactions. In the normal course of business the Company enters into transactions with its related parties. IFRS 9 requires initial recognition of financial instruments based on their fair values. Judgement is applied in determining if transactions are priced at market or non-market interest rates, where there is no active market for such transactions. The basis for judgement is pricing for similar types of transactions with unrelated parties and effective interest rate analysis. Terms and conditions of related party balances are disclosed in Note 22. Determination of functional currency. The Company follows the guidance of IAS 21 “The Effects of Changes in Foreign Exchange Rates” for the determination of the functional currency of the Company. The Company’s functional currency is RR. Tax legislation. Cypriot and Russian tax, currency and customs legislation are subject to varying interpretations. Refer to Note 19. 5 Adoption of New or Revised Standards and Interpretations The following amended standards became effective from 1 January 2020, but did not have any material impact on the Company: 6 New Accounting Pronouncements Certain new amendments have been issued that are mandatory for the annual periods beginning on or after 1 January 2021, which the Company has not early adopted: IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023)*. IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Company is currently assessing the impact of IFRS 17 on the insurance contracts issued by the Insurance Company as well as the impact for credit cards and similar loan products which may include insurance component. 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)*. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made: effective date, expected recovery of insurance acquisi- tion cash flows, contractual service margin attributable to investment services, reinsurance contracts held – recovery of losses and other amendments. The following other new pronouncements are not expected to have any material impact on the Company when adopted: (a) 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)*. (b) 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)*. (c) 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)*. (d) Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – nar- row 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)*. (e) 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 annual periods beginning on or after 1 January 2021). (f) Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 28 May 2020 and effective for annual periods begin- ning on or after 1 June 2020). 7 Cash and Cash Equivalents • Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual In millions of RR periods beginning on or after 1 January 2020). Placements with other banks with original maturities of less than three months • Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the - placements with UK Bank (A+ rated) beginning of annual reporting period that starts on or after 1 January 2020). • Definition of material - Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020). • Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019 and effective for annual periods beginning on or after 1 January 2020). - placements with European bank (B- rated) - placements with European bank (CCC+ rated) Total cash and cash equivalents 31 December 2020 31 December 2019 705 72 - 777 596 - 2 598 F-173 F-174 * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union. TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 7 Cash and Cash Equivalents (Continued) The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 De- cember 2020. The gross carrying amount of cash and cash equivalents at 31 December 2020 below also represents the Company's maximum exposure to credit risk on these assets: In millions of RR Placements with other banks with original maturities of less than three months Excellent Sub-standard Doubtful Total cash and cash equivalents 31 December 2020 31 December 2019 705 72 - 777 596 - 2 598 Refer to Note 18 for the description of the Company’s credit risk grading system. For the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1. The ECL for these bal- ances represents an immaterial amount, therefore the Company did not recognise any credit loss allowance for cash and cash equivalents. Amounts of cash and cash equivalents are not collateralised. Refer to Note 18 for the ECL measurement approach. Interest rate, maturity and geographical risk concentration analysis of cash and cash equivalents is disclosed in Note 18. Refer to Note 20 for the disclosure of the fair value of cash and cash equivalents. 8 Loans and Deposit Placements with Related Parties In millions of RR Deposit placements with subsidiary Bank Loans and advances to related parties at FVTPL Total loans and deposit placements with related parties 31 December 2020 31 December 2019 5,772 1,892 7,664 5,594 - 5,594 At 31 December 2020 the deposit placements with subsidiary Bank are represented by three deposits: deposit placement in USD with a nominal value of RR 30 million at 0.90% per annum maturing on 10 August 2021, deposit placement in EUR with a nominal value of RR 13 million at 0.29% per annum maturing on 4 August 2021, deposit placement in RR with a nomi- nal value of RR 5,729 million at 4.50% per annum maturing on 24 December 2021. Loans and advances to customers at FVTPL represent a loan that does not meet SPPI requirement and that was issued to a related party (refer to Note 22) in EUR with a nominal value of RR 1,892 million at 1.70% per annum maturing on 31 August 2025. At 31 December 2019 the deposit placements with subsidiary Bank are represented by three deposits: deposit placement in USD with a nominal value of RR 2,114 million at 2.5% per annum matured on 10 August 2020, deposit placement in EUR with a nominal value of RR 1,806 million at 0.35% per annum matured on 7 February 2020, deposit placement in RR with a nominal value of RR 1,674 million at 7.5% per annum matured on 25 December 2020. For the purpose of ECL measurement deposit placements with subsidiary Bank balances are included in Stage 1. The ECL for these balances represents an immaterial amount, therefore the Company did not create any credit loss allowance for deposit placements with subsidiary Bank. Refer to Note 18 for the ECL measurement approach. As at 31 December 2020 for the purpose of credit risk measurement loans and deposit placements with related parties bal- ances are included in “Monitor” credit risk grade based on credit risk grade master scale (31 December 2019: same). Refer to Note 18 for the description of the credit risk grading system. Refer to Note 20 for the disclosure of the fair value of loans and deposit placements with related parties. Interest rate, maturity and geographical risk concentration analysis are disclosed in Note 18. Information on related party balances is disclosed in Note 22. 9 Investments in Equity Securities In millions of RR Investments in subsidiaries including: - Investments in financial institutions - Investments in non-financial institutions Other investments in equity securities Total investments in securities 31 December 2020 31 December 2019 472,221 443,921 28,300 174 256,443 231,535 24,908 850 472,395 257,293 As at 31 December 2020 investments in financial institutions include investments in share capital of JSC “Tinkoff Bank”, JSC “Tinkoff Insurance”, LLC "Microfinance company “Т-Finans”, LLC “Tinkoff Capital” and LLC “Tinkoff Invest Lab” (2019: JSC “Tinkoff Bank”, JSC “Tinkoff Insurance”, LLC "Microfinance company “Т-Finans”, LLC “Tinkoff Capital”). As at 31 December 2020 investments in non-financial institutions include investments in share capital of LLC “CloudPay- ments”, LLC “Тinkoff Mobile”, LLC “Phoenix”, LLC “Tinkoff Software DC”, LLC “TCS” and ANO “Tinkoff Education” (2019: LLC “CloudPayments”, LLC “Тinkoff Mobile”, LLC “Phoenix”, LLC “Tinkoff Software DC”, LLC “TCS”, LLC “Fintech DC” and ANO “Tinkoff Education”). On 16 April 2019 Goward Group Limited was liquidated. The Bank is registered in the Russian Federation and was acquired by the Company in November 2006 (Note 1). The Bank is 100% owned and controlled by the Company. The Insurance Company is registered in the Russian Federation and was acquired by the Company in August 2013 (Note 1). In June 2019 the Company sold 10% in the Insurance Company to the Bank for cash consideration of RR 206 million, there were no transfers of any cumulative gain or loss within equity relating to these changes. As at 31 December 2020 the Company owns 88.98% of the shares of the Insurance Company and controls it, the Bank owns 11.02% of the shares of the Insurance Company (2019: the Company owns 80.08%, the Bank owns 9.92%). In October 2017 the Company acquired a 55% shareholding in LLC “CloudPayments”. During 2019 the Bank acquired a 40% shareholding in LLC “CloudPayments”, and thus the Company owns directly and indirectly a 95% holding in the shares of LLC “CloudPayments”. As at 31 December 2020 the Company owns 95% shares of LLC “CloudPayments”. Investments in subsidiaries are stated at fair value at the end of each reporting period (Notes 3, 4 and 20). The movements in investments in subsidiaries for the period ended 31 December 2020 are as follows: In millions of RR Carrying amount at 1 January Investments in subsidiaries Revaluation of investment in subsidiaries Share-based payment Carrying amount at 31 December 2020 256,443 575 214,111 1,092 472,221 F-175 F-176 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS              31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 9 Investments in Equity Securities (Continued) 11 Other Financial and Non-financial Liabilities The movements in investments in subsidiaries for the period ended 31 December 2019 are as follows: In millions of RR Carrying amount at 1 January Investments in subsidiaries Revaluation of investment in subsidiaries Share-based payment Carrying amount at 31 December Dividend income from investments in subsidiaries recognised during the year is as follows: In millions of RR Investment in JSC “Tinkoff Insurance” Investment in JSC “Tinkoff Bank” Investment in LLC “Phoenix” Investment in LLC “CloudPayments” Total dividend income 2019 218,818 (206) 37,362 469 256,443 2019 4,461 12,697 - - 2020 8,185 7,998 1,421 350 17,954 17,158 Interest rate, maturity and geographical risk concentration analysis of investment in equity securities are disclosed in Note 18. Refer to Note 20 for the disclosure of the fair value of investments in equity securities. 10 Debt Securities in Issue In millions of RR Date of maturity 31 December 2019 EUR denominated ECP issued in December 2019 EUR denominated ECP issued in February 2019 USD denominated ECP issued in December 2019 Total Debt Securities in Issue 20 November 2020 18 February 2020 20 November 2020 1,030 831 599 2,460 No debt securities were issued during 2020 and none were outstanding as at 31 December 2020. On 20 December 2019 the Company issued two tranches of Euro-Commercial Paper (ECP) denominated in USD and EUR maturing on 20 November 2020. USD denominated ECP had a nominal value of USD 10 million at 3.6% coupon rate. EUR denominated ECP had a nominal value of EUR 15 million at 1.0% coupon rate. On 19 February 2019 the Company issued Euro-Commercial Paper (ECP) denominated in EUR maturing on 18 February 2020. EUR denominated ECP had a nominal value of EUR 12 million at 1.25% coupon rate. The Company redeemed all outstanding ECP at maturity date. Refer to Note 20 for the disclosure of the fair value of debt securities in issue. Maturity analysis of debt securities in issue are disclosed in Note 18. Reconciliation of liabilities arising from financing activities is disclosed in Note 17. In millions of RR Other Financial Liabilities Accrued audit and accountancy fees Advances payable Total Other Financial Liabilities Other Non-financial Liabilities Dividends payable under GDRs repurchased for MLTIP purposes Other provision Total Other Non-financial Liabilities 31 December 2020 31 December 2019 46 - 46 656 - 656 18 63 81 582 3 585 Interest rate, maturity and geographical risk concentration analysis of other financial liabilities are disclosed in Note 18. Refer to Note 20 for disclosure of fair value of other financial liabilities. 12 Share Capital, Share Premium and Treasury Shares In millions of RR except for the number of shares Number of author- ised shares Number of out- standing shares Ordinary shares Share premium Treasury shares Total At 31 December 2018 191,770,766 182,638,825 188 8,623 (3,670) 5,141 Shares issued 18,263,882 16,666,667 42 18,874 - 18,916 Secondary public offering costs GDRs and shares trans- ferred under MLTIP - - - - - - (499) - (499) - 506 506 At 31 December 2019 210,034,648 199,305,492 230 26,998 (3,164) 24,064 GDRs buy-back GDRs and shares trans- ferred under MLTIP - - - - - - - - (661) (661) 587 587 At 31 December 2020 210,034,648 199,305,492 230 26,998 (3,238) 23,990 At 31 December 2020 the total number of outstanding shares is 199,305,492 (31 December 2019: 199,305,492 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share). At 31 December 2020 and 2019 treasury shares represent GDRs of the Company repurchased from the market for the pur- poses permitted by Cyprus law including contribution to MLTIP. Refer to Note 22. At 31 December 2020 the total number of treasury shares is 3,013,379 (31 December 2019: 4,185,166). During the year ended 31 December 2020 the Company repurchased 650,000 GDRs at market price for RR 661 million (2019: no GDRs were repurchased by the Company). During the year ended 31 December 2020 the Company transferred 1,809,681 GDRs (2019: 2,419,187 GDRs), representing 0.91% (2019: 1.21%) of the issued shares, upon vesting under the MLTIP. This resulted in a transfer of RR 587 million (2019: RR 506 million) out of treasury shares to retained earnings. F-177 F-178 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS           31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 12 Share Capital, Share Premium and Treasury Shares (Continued) In June 2019 the Company’s shareholders approved a resolution to increase the authorised share capital to USD 8,401,385.92 by the creation of 18,263,882 new undesignated ordinary shares of nominal value USD 0.04 each. At 31 De- cember 2020 the total number of authorised shares is 210,034,648 shares (31 December 2019: 210,034,648 shares) with a par value of USD 0.04 per share (31 December 2019: USD 0.04 per share). On 2 July 2019 the Company completed a SPO on the London Stock Exchange plc and issued 16,666,667 class A shares of the Company in the form of GDRs at a price of USD 18.00 per GDR, raising aggregate gross proceeds of USD 300 million (RR 18,916 million). All issued ordinary shares are fully paid. All the incurred SPO costs were primary direct expenses accounted within share premium. 13 Interest income and expense In millions of RR 2020 2019 Interest income calculated using the effective interest rate method Loans and deposit placement with related parties including: Deposit placements with subsidiary Bank Debt securities and repurchase receivables at FVOCI Total Interest income calculated using the effective interest rate method Other similar income Financial assets at FVTPL Total interest income Interest expense calculated using the effective interest rate method Euro-Commercial Papers Loans from subsidiary Bank Loans from subsidiary company Other loans received Total Interest expense calculated using the effective interest rate method Net interest income/ (expense) 14 Administrative and Other Operating Expenses In millions of RR Legal and consulting fees Staff costs Audit and accountancy fees Other administrative expenses Depreciation of right-of-use assets Depreciation of tangible fixed assets Taxes other than income tax 53 - 53 8 61 32 - - - 32 29 2020 270 177 43 5 4 1 - 228 44 272 28 300 100 536 86 10 732 (432) 2019 110 99 30 3 3 1 5 Total administrative and other operating expenses 500 251 The total fees charged by the Company's statutory auditor for the statutory audit of the annual consolidated and separate financial statements of the Company for the year ended 31 December 2020 amounted to RR 6.9 million (2019: RR 2.8 mil- lion). The total fees charged by the Company's statutory auditor for the year ended 31 December 2020 for other assurance services amounted to RR 0.8 million (2019: RR 3.8 million), for tax advisory services amounted to RR 3.4 million (2019: RR 2.3 million) and for other non-assurance services amounted to RR 0.1 million (2019: 2.2 million). Included in staff costs are statutory social contributions to the non-budget funds: In millions of RR Statutory social contribution to the non-budget funds 2020 31 2019 12 At 31 December 2020 there are 50 employees employed by the Company (31 December 2019: 63). The average number of employees employed by the Company during the reporting year was 56 (2019: 53). 15 Income Taxes Income tax expense comprises the following: In millions of RR Corporation tax Overseas tax withheld at source Income tax expense for the year 2020 2 897 899 2019 26 858 884 The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows: In millions of RR Profit before income tax Theoretical tax charge at statutory rate of 12.5% (2019: 12.5%) Tax effect of expenses not deductible for tax purposes Tax effect of allowances and income not subject to tax Overseas tax withheld at source Underprovision of tax for prior year Income tax expense for the year 2020 17,789 2,224 173 (2,395) 897 - 899 2019 16,700 2,088 111 (2,191) 858 18 884 Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc.) are exempt from Cyprus income tax. At 31 December 2020 and 2019 the Company had no tax losses carried forward. F-179 F-180 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 15 Income Taxes (Continued) Differences between IFRS and statutory taxation regulations in Cyprus give rise to temporary differences between the car- rying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is detailed below. In millions of RR Investments in subsidiaries Net deferred tax liabilities In millions of RR Investments in subsidiaries Income tax expense for the year 16 Dividends The movement in dividends during the year are as follows: In millions of RR Dividends payable at 1 January Dividends declared during the year Dividends paid during the year Foreign exchange differences and other movements Dividends payable at 31 December Dividends per share declared during the year (in USD) Dividends per share paid during the year (in USD) 31 December 2019 Credited to OCI 31 December 2020 (168) (168) 168 168 - - 31 December 2018 Credited to OCI 31 December 2019 (1,187) (1,187) 1,019 1,019 (168) (168) 2020 582 11,545 (11,835) 364 656 0.80 0.80 2019 760 5,856 (5,601) (433) 582 0.49 0.49 Dividends declared in the tables above represent dividends declared by the Board of directors are reduced by RR 74 million for the year ended 31 December 2020 due to dividends on GDRs acquired by the Company from the market not for the immediate purposes of the existing MLTIP (2019: RR 25 million). On 11 November 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.25 (RR 19.10) per share/per GDR with a total amount allocated for dividend payment of around USD 49.8 million (RR 3,807 million). Declared dividends were paid in USD on 30 November 2020. On 5 August 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.20 (RR 14.68) per share/per GDR with a total amount allocated for dividend payment of around USD 39.9 million (RR 2,925 million). Declared dividends were paid in USD on 24 August 2020. On 11 May 2020 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.14 (RR 10.34) per share/per GDR with a total amount allocated for dividend payment of around USD 28 million (RR 2,061 million). Declared dividends were paid in USD on 1 and 2 June 2020. On 10 March 2020 the Board of directors declared an interim dividend of USD 0.21 (RR 14.18) per share/per GDR with a total amount allocated for dividend payment of around USD 41.9 million (RR 2,826 million). Declared dividends were paid in USD on 30 March and 1 April 2020. On 13 May 2019 the Board of directors declared an interim dividend of USD 0.17 (RR 11.09) per share/per GDR amounting to USD 31.05 million (RR 2,026 million). Declared dividends were paid in USD on 28 and 30 May 2019. On 11 March 2019 the Board of directors declared an interim dividend of USD 0.32 (RR 21.11) per share/per GDR amounting to USD 58.4 million (RR 3,855 million). Declared dividends were paid in USD on 25 and 27 March 2019. Dividends were declared and paid in USD throughout the years ended 31 December 2020 and 2019. Dividends payable at 31 December 2020 relating to treasury shares acquired under MLTIP amounting to RR 656 million are included in other non-financial liabilities (31 December 2019: RR 582 million). 17 Reconciliation of Liabilities Arising from Financing Activities The table below sets out an analysis of the Company’s debt and the movements in the Company’s debt for each of the peri- ods presented. The debt items are those that are reported as financing in the separate statement of cash flows. In millions of RR Debt securities in issue Loans received Liabilities from financing activities Net debt at 31 December 2018 Cash flows from repayments Cash flows from proceeds Foreign exchange adjustments Other non-cash movements Net debt at 31 December 2019 Cash flows from repayments Foreign exchange adjustments Net debt at 31 December 2020 3,754 (3,418) 2,527 (403) - 2,460 (2,938) 478 - 23,243 (23,092) - 45 (196) - - - - Total 26,997 (26,510) 2,527 (358) (196) 2,460 (2,938) 478 - 18 Financial Risk Management The risk management function within the Company is carried out in respect of financial risks (credit, market, currency, li- quidity and interest rate), operational risks and legal risks. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise opera- tional and legal risks. Credit risk. The Company takes on exposure to credit risk which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Exposure to credit risk arises as a result of the debt financial instruments, cash and cash equivalents and Company’s lending and other transactions with counterparties giving rise to financial assets. The Company’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets on the separate statement of financial position. The credit risk is controlled by management of the Company, by approving limits on the level of credit risk by borrowers. F-181 F-182 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS  31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 18 Financial Risk Management (Continued) Credit risk grading system. For measuring credit risk and grading financial instruments by the level of credit risk, the Company applies risk grades estimated by external international rating agencies in case these financial instruments have risk grades estimated by external international rating agencies (Fitch and in case of their absence - Moody’s or Standard & Poor’s ratings adjusting them to Fitch’s categories using a reconciliation table): Master scale credit risk grade Excellent Good Monitor Sub-standard Doubtful Default Corresponding ratings of external international rating agency (Fitch) AAA, AA+ to AA-, A+ to A- BBB+ to BBB-, BB+ BB to B+ B, B- CCC+ to CC- C, D Each master scale credit risk grade is assigned a specific degree of creditworthiness: • Excellent – high credit quality with lowest or very low expected credit risk; • Good – good credit quality with currently low expected credit risk; • Monitor – adequate credit quality with a moderate credit risk; • Sub-standard – moderate credit quality with a satisfactory credit risk; • Doubtful – facilities that require closer monitoring and remedial management; and • Default – facilities in which a default has occurred. For measuring credit risk and grading those financial instruments which do not have risk grades estimated by external inter- national rating agencies, the Company applies risk grades and the corresponding range of probabilities of default (PD): Master scale credit risk grade Corresponding interval Excellent Good Monitor Sub-standard NPL non-overdue for the last 12 months with PD < 5% or with early repayments all other non-overdue loans 1-30 days overdue 31-90 days overdue 90+ days overdue Each master scale credit risk grade is assigned a specific degree of creditworthiness: • Excellent – strong credit quality with minimum expected credit risk; • Good – adequate credit quality with low expected credit risk; • Monitor – adequate credit quality with a moderate credit risk; • Sub-standard – low credit quality with a substantial credit risk; • NPL – financial instruments for which a default has occured. The rating models are regularly reviewed by the Credit Risk Department, backtested on actual default data and updated if necessary. Expected credit loss (ECL) measurement – definitions and description of estimation techniques. ECL is a probability-weighted estimate of the present value of future cash shortfalls (i.e. the weighted average of credit losses, with the respective risks of default occurring in a given time period used as weights). ECL measurement is based on the following components used by the Company: Default occurs when a financial asset is 90 days past due. Probability of Default (PD) – an estimate of the likelihood of default to occur over a given time period. Exposure at Default (EAD) – an estimate of exposure at a future default date, taking into account expected changes in exposure after the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities. Loss Given Default (LGD) – an estimate of the loss arising on default as a percentage of the EAD. It is based on the differ- ence between the contractual cash flows due and those that the Company would expect to receive. Discount Rate – a rate to discount an expected loss to its present value at the reporting date. The discount rate represents the effective interest rate (EIR) for the financial instrument or an approximation thereof. Lifetime period – the maximum period over which ECL should be measured. For financial instruments held by the Company the lifetime period is equal to contractual maturity of the respective financial instruments. Lifetime ECL – losses that result from all possible default events over the remaining lifetime period of the financial instru- ment. 12-month ECL – the portion of lifetime ECLs that represent the ECLs resulting from default events on a financial instrument that are possible within 12 months after the reporting date that are limited by the remaining contractual life of the financial instrument. Credit Conversion Factor (CCF) – a coefficient that shows that the probability of conversion of an off-balance sheet amount to exposure on the statement of financial position within a defined period. It can be calculated for a 12-month or lifetime period. Based on the analysis performed, the Company considers that 12-month and lifetime CCFs are the same. Default and credit-impaired assets – assets for which a default event has occurred. The default definition stated above should be applied to all types of financial assets of the Company.An instrument is con- sidered to no longer be in default (i.e. to have “cured”) when it no longer meets any of the default criteria. Significant increase in credit risk (SICR) - the SICR assessment is performed on an individual basis for all financial assets by monitoring the triggers stated below. The criteria used to identify SICR are monitored and reviewed periodically for appro- priateness by the Company’s Risk Management Department. The Company considers a financial instrument to have experienced a SICR when one or more of the following quantitative, qualitative or backstop criteria have been met: • 30 days past due; • award of risk grade “Doubtful”; • decrease of assigned external rating by 2 notches, which corresponds to an approximate increase of PD by 2.5 times. If the SICR criteria are no longer met, the instrument will be transferred back to Stage 1. General principle of techniques applied For financial assets, ECLs are generally measured based on the risk of default over one of two different time periods, de- pending on whether or not the credit risk of the borrower has increased significantly since initial recognition. F-183 F-184 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS 31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 18 Financial Risk Management (Continued) This approach can be summarised in a three-stage model for ECL measurement: The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the end of the reporting period, with all other variables held constant: At 31 December 2020 At 31 December 2019 • Stage 1 – a financial instrument that is not credit-impaired on initial recognition and its credit risk has not increased significantly since initial recognition, the loss allowance is based on 12-month ECLs; In millions of RR Impact on profit for the year Impact on total equity Impact on profit for the year Impact on total equity • Stage 2 – if since the date, which was assumed to be the date of initial recognition has identified a SICR, the financial USD strengthening by 20% (2019: by 20%) instrument is moved to Stage 2 but is not yet deemed to be credit-impaired, the loss allowance is based on lifetime ECLs; • Stage 3 – if the financial instrument is credit-impaired or restructured, the financial instrument is then moved to Stage 3 and the loss allowance is based on lifetime ECLs. The Company carries out the following approach for ECL measurement: • For financial instruments which have external ratings – assessment based on external ratings; • For financial instruments which do not have external ratings – assessment based on discounted cash flow technique. Principles of assessment based on external ratings – the principles of ECL calculations based on external ratings are the same as for their assessment on a portfolio basis. Credit risk parameters (PD and LGD) are taken from the default and recovery statistics published by international rating agencies (Fitch and in case of their absence – Moody’s or Standard & Poor’s). Market risk. The Company takes on exposure to market risks. Market risks arise from open positions in (a) currency, (b) interest rate and (c) equity products, all of which are exposed to general and specific market movements. Management sets limits on the value of risk that may be accepted, which are monitored on a daily basis. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Currency risk. In respect of currency risk, the management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summarises the Company’s exposure to foreign currency exchange rate risk at the end of the reporting period: Non-de- rivative monetary financial assets 5,732 739 2,134 8,605 In millions of RR RR US Dollars EUR Total At 31 December 2020 Non-de- rivative mon- etary financial liabilities Derivatives At 31 December 2019 Non-de- rivative monetary financial assets Non-de- rivative monetary financial liabilities Derivatives Net bal- ance sheet position Net bal- ance sheet position - - (46) (46) - - - - 5,732 739 1,738 2,710 - (677) 2,088 1,808 (1,864) 8,559 6,256 (2,541) - - - - 1,738 2,033 (56) 3,715 The above analysis includes only monetary assets and liabilities. Non-monetary assets are not considered to give rise to any material currency risk. USD weakening by 20% (2019: by 20%) EUR strengthening by 20% (2019: by 20%) EUR weakening by 20% (2019: by 20%) 155 (155) 439 (439) 155 (155) (439) 439 385 (385) (11) 11 385 (385) (11) 11 Interest rate risk. The Company takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event of unexpected movements. Management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken. The table below summarises the Company’s exposure to interest rate risk. The table presents the aggregated amounts of the Company’s financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates. On demand and less than 1 month From 1 to 6 months From 6 to 12 months More than 1 year Non-inter- est bearing financial instruments Total 777 - 777 164 (46) 118 5,772 1,892 472,395 481,000 - - - (46) 5,772 1,892 472,395 480,954 In millions of RR 31 December 2020 Total financial assets Total financial liabilities Net interest sensitivity gap at 31 December 2020 At 31 December 2020 if interest rates at that date had been 200 basis points higher/lower (2019: 200 basis points higher/ lower), with all other variables held constant, profit and equity would have been RR 171 million higher/lower (2019: RR 72 million higher/lower). Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years Non-inter- est bearing financial instruments Total 598 - 1,870 (912) 3,788 (1,629) 598 958 2,159 - - - 257,293 263,549 - (2,541) 257,293 261,008 In millions of RR 31 December 2019 Total financial assets Total financial liabilities Net interest sensitivity gap at 31 December 2019 F-185 F-186 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                            31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 18 Financial Risk Management (Continued) The geographical concentration of the Company’s financial assets and liabilities at 31 December 2019 is set out below: The Company monitors interest rates for its financial instruments. The table below summarises effective interest rates set as at 31 December 2020 and 2019 based on reports reviewed by key management personnel: In % p.a. Assets 2020 2019 RR USD EUR RR USD EUR Cash and cash equivalents - - - - - - Loans and deposit placements with related parties - Deposit placements with subsidiary Bank - Convertible loan to subsidiary Bank Liabilities Debt securities in issue 4.5 0.9 - - - - 0.3 1.7 - 7.5 - - 2.5 - 0.4 - In millions of RR Financial assets Russian Fed- eration OECD Other Non-OECD Total Cash and cash equivalents - 596 Loans and deposit placements with related parties Investments in equity securities Other financial assets Total financial assets Financial liabilities Debt securities in issue Other financial liabilities Total financial liabilities 5,594 257,293 - - - - 262,887 596 2,460 15 2,475 - 63 63 2 - - 64 66 - 3 3 598 5,594 257,293 64 263,549 2,460 81 2,541 3.8 1.2 Net separate statement of financial position 260,412 533 63 261,008 The sign “-” in the table above means that the Company does not have the respective assets or liabilities in the correspond- ing currency. Assets and liabilities have been based on the country in which the counterparty is located. Cash and cash equivalents have been allocated based on the country in which they are physically held. Other price risk. The Company has exposure to equity price risk mainly as a result of a decrease in the fair value of invest- ments in subsidiaries. Sensitivity analysis of investments in subsidiaries is disclosed in Note 20. Geographical risk concentrations. The geographical concentration of the Company’s financial assets and liabilities at 31 December 2020 is set out below: In millions of RR Financial assets Russian Federation OECD Other Non-OECD Cash and cash equivalents - 705 Loans and deposit placements with related parties Investments in equity securities Other financial assets Total financial assets Financial liabilities Other financial liabilities Total financial liabilities Total 777 7,664 72 1,892 - 472,395 164 164 5,772 472,395 - - - - 478,167 705 2,128 481,000 - - - - 46 46 46 46 Net separate statement of financial position 478,167 705 2,082 480,954 Other risk concentrations. Most financial assets are due from the subsidiary Bank. Liquidity risk. Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The table below shows liabilities at 31 December 2020 by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows. Such undiscounted cash flows differ from the amount in- cluded in the separate statement of financial position because the separate statement of financial position amount is based on discounted cash flows. When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the reporting date. Foreign currency payments are translated using the spot exchange rate at the end of the reporting period. The maturity analysis of financial liabilities at 31 December 2020 is as follows: In millions of RR Liabilities Other financial liabilities Total potential future payments for financial obligations Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years - - 46 46 - - - - Total 46 46 F-187 F-188 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                    31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 18 Financial Risk Management (Continued) The maturity analysis of financial liabilities at 31 December 2019 is as follows: In millions of RR Liabilities Debt securities in issue Other financial liabilities Total potential future payments for financial obligations Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years 4 - 4 846 81 927 1,671 - 1,671 - - - Total 2,521 81 2,602 19 Contingencies and Commitments Legal proceedings. From time to time and in the normal course of business, claims against the Company may be received. On the basis of its own estimates and internal professional advice management is of the opinion that no material losses will be incurred in respect of any current or potential claims and accordingly no provision has been made in these separate financial statements. Taxation. Cypriot tax legislation is subject to varying interpretations. There are transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax audit issues based on esti- mates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. The Company is incorporated outside Russia. Tax liabilities of the Company are determined on the assumption that it is not subject to Russian profits tax because it does not have a permanent estab- lishment in Russia. The Company is a tax resident of Cyprus only and full beneficial owner of the Bank and Insurance Com- pany. This interpretation of relevant legislation may be challenged 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 Company. During the third quarter of 2020 amendments to Russia-Cyprus double tax treaty were made. The Company is currently assessing the impact of those amendments. 20 Fair Value of Financial Instruments Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unob- servable inputs). (a) Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the separate statement of financial position at the end of each reporting period. The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows: In millions of RR Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 31 December 2020 31 December 2019 ASSETS AT FAIR VALUE Loans and advances to related parties at FVTPL Investments in subsidiaries Other investments in equity securities Total assets recurring fair value measurements - - - - 1,892 1,892 - - - - 472,221 - 472,221 - 256,443 - 256,443 - 174 174 - - 850 850 - 472,221 2,066 474,287 - 256,443 850 257,293 Investments in subsidiaries are stated at fair value based on market valuation (2019: same). The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2020 are as follows: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE The estimated fair value of investments in subsidiaries recognises that the majority of the value of the Company resides in its main operating subsidiaries. Thus in estimating the fair value of the subsidiaries the primary input is the market quote of the Company’s GDRs which are traded on the London and Moscow Stock Exchanges. Other inputs include the estimated fair value of the assets and liabilities held by the Company other than its investment in the subsidiaries Market quote of USD 32.9 for 1 share at 31 December 2020; Market interest rates Investments in subsidiaries 472,221 Total recurring fair value measure- ments at level 2 472,221 F-189 F-190 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                  31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 20 Fair Value of Financial Instruments (Continued) The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2019 are as follows: In millions of RR Fair value Valuation technique Inputs used ASSETS AT FAIR VALUE The estimated fair value of investments in sub- sidiaries recognises that the majority of the val- ue of the Company resides in its main operating subsidiaries. Thus in estimating the fair value of the subsidiaries the primary input is the market quote of the Company’s GDRs which are traded on the London and Moscow Stock Exchanges. Other inputs include the estimated fair value of the assets and liabilities held by the Company other than its investment in the subsidiaries Market quote of USD 21.3 for 1 share at 31 December  2019; Market interest rates Investments in subsidiaries 256,443 Total recurring fair value meas- urements at level 2 256,443 There were no changes in the valuation techniques for level 2 recurring fair value measurements during the years ended 31 December 2020 and 2019. At 31 December 2020 if market quote of GDR of the Company at that date had been 69% higher/lower (2019: 60% higher/ lower), with all other variables held constant, the fair value of the investments in equity securities would have been RR 329,192 million higher/lower (2019: RR 154,370 million higher/lower). The description of valuation techniques and the description of the inputs used in the fair value measurement for level 3 measurements at 31 December 2020 are as follows: In millions of RR Fair value Valuation technique Inputs used ASSETS AT FAIR VALUE Loans and advances to related parties at FVTPL 1,892 Other investments in equity secu- rities Total recurring fair value meas- urements at level 3 174 2,066 Revaluation of the convertible loan based on the Incantus Holding Limited’s share price as per its most recent sale purchase transactions with shares of Incantus Holding Limited (Note 22) Cost less impairment approach Share price as per the most recent sale purchase transaction Cost of acqui- sition. Share in post-acquisi- tion profit The description of valuation techniques and the description of the inputs used in the fair value measurement for level 3 measurements at 31 December 2019 are as follows: In millions of RR Fair value Valuation technique Inputs used ASSETS AT FAIR VALUE Other investments in equity secu- rities Total recurring fair value meas- urements at level 3 850 850 Cost less impairment approach Cost of acquisition. Share in post-acquisi- tion profit Changes of the fair value measurements at Level 3 for the year ended 31 December 2020 are as follows: In millions of RR Loans and advances to related parties at FVTPL Fair value at the date of recognition Other interest income Net gains from foreign exchange translation Net gains from revaluation of convertible loan Fair value - Level 3 31 December 2020 1,374 8 16 494 1,892 As at 31 December 2020, if the share price had been 10% lower/higher, fair value of loans and advances to related parties at FVTPL would have been RR 64 million lower/higher. F-191 F-192 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS            31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 20 Fair Value of Financial Instruments (Continued) (b) Assets and liabilities not measured at fair value but for which fair value is disclosed Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as follows: The fair values in level 2 and level 3 of the fair value hierarchy were estimated using the discounted cash flows valuation technique. The fair value of floating rate instruments that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity. 31 December 2020 31 December 2019 21 Presentation of Financial Instruments by Measurement Category In millions of RR Level 1 Level 2 Level 3 FINANCIAL ASSETS CARRIED AT AMORTISED COST Carrying value Level 1 Level 2 Level 3 Carrying value Cash and cash equiva- lents - placements with UK Bank (A+ rated) - placements with European bank (B- rated) Loans and deposit place- ments with related parties Deposit placements with subsidiary Bank Loans and advances to related parties at FVTPL Other financial assets Total financial assets car- ried at amortised cost - - - - - - 705 72 - - 705 72 - - 5,772 5,772 1,892 1,892 164 - 164 - - - - - 596 2 - - 64 - - 596 2 5,774 5,594 - - - 64 941 7,664 8,605 - 662 5,774 6,256 FINANCIAL LIABILITIES CARRIED AT AMORTISED COST Debt securities in issue Other financial liabilities Total financial liabilities carried at amortised cost - - - - 46 46 - - - - 46 46 - - - 2,460 81 2,541 - - - 2,460 81 2,541 Weighted average discount rates used in determining fair value as of 31 December 2020 and 31 December 2019 depend on currency: In % p.a. Assets Cash and cash equivalents Loans and deposit placements with related parties - Loans and advances to related parties at FVTPL - Deposit placements with subsidiary Bank Liabilities Debt securities in issue 31 December 2020 31 December 2019 - 1.7 4.5 - - - 2.8 1.9 For the purposes of measurement, IFRS 9 “Financial Instruments” classifies financial assets into the following categories: (a) financial assets at FVTPL; (b) financial assets at FVOCI and (c) financial assets at AC. Financial assets at FVTPL have two sub-categories: (i) assets measured at FVTPL mandatorily, and (ii) assets designated as such upon initial recognition. The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2020: In millions of RR Cash and cash equivalents AC 777 FVTPL FVOCI Loans and deposit placements with related parties 5,772 1,892 Investment in equity securities Other financial assets TOTAL FINANCIAL ASSETS - 157 - 7 472,395 472,395 - 164 6,706 1,899 472,395 481,000 The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2019: FVTPL FVOCI Total 777 7,664 Total 598 5,594 - - - - In millions of RR Cash and cash equivalents Loans and deposit placements with related parties: Deposit placements with subsidiary Bank Investment in equity securities Other financial assets TOTAL FINANCIAL ASSETS AC 598 5,594 - 64 257,293 257,293 - 64 6,256 - 257,293 263,549 - - - - - As of 31 December 2020 and 2019 all of the Company’s financial liabilities were carried at amortised cost. F-193 F-194 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                                                                          31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 22 Related Party Transactions The income and expense items with related parties were as follows: Parties are generally considered to be related if the parties are under common control or one party has the ability to control the other party or can exercise significant influence over the other party in making financial or operational decisions. In con- sidering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Other related parties (excluding associates and joint ventures) in the tables below are represented by entities which are under the control of the Company's major shareholder Oleg Tinkov, who until 7 January 2021 was the Company’s ultimate controlling shareholder (see Note 1). The outstanding balances with related parties were as follows: In millions of RR Subsidiary Associ- ates, joint ventures and other related parties Associ- ates, joint ventures and other related parties Subsidiary 31 December 2020 31 December 2019 In millions of RR ASSETS 31 December 2020 31 December 2019 Associ- ates, joint ventures and other related parties Subsidiary Associates, joint ven- tures and other relat- ed parties Subsidiary Investments in equity securities 472,221 174 256,443 850 Loans and advances to related parties (contractual interest rate 2020: from 0.29% to 4.5%; 2019: from 0.35% to 7.5%) Other financial assets TOTAL ASSETS LIABILITIES Debt securities in issue Other non financial liabilities TOTAL LIABILITIES 5,772 129 1,892 5,594 - 64 - - 478,122 2,066 262,101 850 -  - - - 656 656 - - - 2,460 582 3,042 On 31 August 2020 the Company acquired a 22.15% shareholding in Incantus Holding Limited, which is a group of fintech start-ups launched in 2020 to provide a range of services to retail customers in Europe (excluding the CIS). The investment in Incantus Holding Limited was classified as an investment in associates and accounted for using the equity method. Also, the Company provided a convertible loan to Incantus Holding Limited in the amount of EUR 15.4 million (RR 1,374 million) at 1.7% p.a. with a maturity date of 31 August 2025. The convertible loan agreement implies that the Company may convert the loan into the borrower's shares at the price of initial acquisition of shares of Incantus Holding Limited by the Company subject to compliance with a number of conversion requirements including a cap in relation to overall shareholding of the Company in Incantus Holding Limited of 24.5%. As at 31 December 2020 the shareholding of the Company in Incantus Holding Limited is equal to 16.32%, and the carrying value of the convertible loan is equal to RR 1,892 million. The Company, in addition to the convertible loan, has extended rights under the Shareholder Agreement at the board meeting level (Board Reserved matters) and at the shareholder meet- ing level (Shareholder Reserved matters) in Incantus Holding Limited which provides the Company significant influence over it and allows to treat it as associate. Interest income calculated using the effective interest rate method Interest expense calculated using the effective interest rate method Net gains/(losses) from foreign exchange translation Net gains from financial assets at FVTPL Dividend income Net gains from operations with foreign currencies Net losses from derivatives revaluation Other comprehensive income: 53 8 228 - - 965 - 17,954 - - (32) (424) 494 - - (622) (94) - 17,158 111 (678) (110) 403 - - - - - Revaluation of investments in subsidiaries 214,111 - 37,362 In 2020 the total remuneration of Directors listed in the Board of directors and other officers amounted to RR 17.4 million (2019: RR 17,3 million). Management long-term incentive program. On 31 March 2016 the Company introduced a MLTIP as both a long-term incentive and a retention tool for the management of the Company. Total number of GDRs attributable to the management is 15,290 thousand as at 31 December 2020 (31 December 2019: 9,940 thousand). Participants of the program receive the vested parts of their grants provided that they remain employed by the Company throughout the vesting period. Participants are entitled to the dividends, if any. Participants who leave the Company lose their right for the unvested parts of the grants. The fair value of the awards as at grant dates (31 March 2016, 8 February 2017, 22 February 2018, 15 January 2019, 5 June 2020 and 11 December 2020) is determined on the basis of market quotes of GDRs as at those dates. Each grant before 2020 is divided into 4 equal awards. Each award vests over 4 years in equal tranches. The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates 31  March, as well as each subsequent 31 March (with the exception of 2019 when the vesting date for all participants was 31 January 2019) until 2022 for participants joining in 2016, until 2023 for participants joining in 2017, until 2024 for participants joining in 2018, until 2025 for participants joining in 2019. Each grant provided in 2020 is divided into 5 equal tranches. The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates 31 August, as well as each subsequent 31 August until 2025. F-195 F-196 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS                              31 DECEMBER 2020 Notes to the Separate Financial Statements (Continued) 22 Related Party Transactions (Continued) The following table discloses the changes in the numbers of GDRs attributable to the MLTIP: In thousands At 31 December 2018 Granted Vested Forfeited At 31 December 2019 Granted Vested Forfeited At 31 December 2020 Number of GDRs attributa- ble to the MLTIP 6,178 91 (2,419) (68) 3,782 5,350 (1,810) (46) 7,276 23 Events after the End of the Reporting Period On 10 March 2021 the Board of directors declared an interim dividend in line with the current dividend policy of USD 0.24 per share/per GDR with a total amount allocated for dividend payment of approximately USD 47.8 million. The Board at the same time announced its intent to not pay any further dividends in 2021, but to keep the funds inside the Group to provide for organic and/or inorganic growth opportunities. On 7 January 2021 all 69,914,043 class B shares (35.08% of the total number of issued shares) held by the Rigi Trust and the Bernina Trust were converted to class A shares and on the same date all issued shares were reclassified and redesignated as ordinary shares. Following the conversion, each share carries a single vote, and the total number of votes capable of being exercised are equal to the total number of issued shares (currently 199,305,492 shares following the class B share conversion). As a result of the conversion, Mr. Oleg Tinkov's voting rights decreased from 84.38% to 35.08%. As a result his ability to exercise control over the Company and the Group was ceased. F-197 F-198 TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSGLOSSARY Active Users Artificial Intelligence Anti-money laundering Average cost of funding Average interest rate on loans Capital adequacy ratio CBRF Charge-off rate Charge-offs Class A share Class B share AU АI AML n/a n/a CAR CBRF n/a n/a n/a n/a A performance metric for the success of an internet prod- uct commonly assessed per month (MAU), per week (WAU), or per day (DAU) n/a Laws regulating money laundering and terrorist financing Interest expense / Average IEL Core revenue on loans / Average net loan portfolio Capital/RWA Central Bank of the Russian Federation Loan charge-off / Average gross loans Loans written off the balance One share in TCSGH PLC having one vote One share in TCSGH PLC having ten votes Compound Annnual Growth Rate CAGR Compulsory car insurance programme OSAGO Corporate social responsibility CSR n/a n/a n/a Cost of borrowing Cost of risk Cost to income ratio Cost to income ratio (excl. acquisition costs) Country by Country Reporting CRM Cyprus Securities and Exchange Commission Days past due Financial Conduct Authority GIBDD Global depositary receipt Gross portfolio yield Interest-earning assets Interest-earning liabilities International financial reporting standards IPO KASKO n/a n/a C/I n/a CbCR n/a CySec dpd FCA GIBDD GDR n/a IEA IEL IFRS n/a Interest expense/interest bearing liabilities Loan loss provision / Average gross loans Operating and acquisition expense / Core revenue Operating expense / Core revenue Online customer relationship management system Cyprus regulator of financial markets n/a UK regulator of financial markets Law enforcement agency responsible for traffic One TCS Group Holding PLC GDR represents an interest in one class A share Core revenue on loans /Average gross loan portfolio Gross loans + interbank loans and accounts + securities + interest earning cash equivalents Deposits + interbank + debt securities + subordinated loans + syndicated loan n/a Initial public offering, in the case of TCSGH plc with listing on the London Stock Exchange in October 2013 KASKO Voluntary car insurance programme Key performance indicators Loan loss provision London Stock Exchange M&A KPI LLP LSE - n/a Allowance for bad loans n/a Mergers and acquisitions activity, consolidation of compa- nies Management report/consolidated management report MR/CMR Mobile virtual network operator MVNO n/a n/a N1.0 Net charge-offs Net interest margin Net Promoter Score NFC N1.0 n/a NIM NPS NFC Russian statutory capital adequacy ratio Loan charge-offs less recoveries Net interest income / Average IEA n/a Near Field Communication Non-financial statement/consolidated non-financial statement NFS/CFNS n/a Non-performing loans NPV Person discharging managerial responsibilities NPLs NPV PDMR PIE POS Revenue Return on average assets Return on average equity Risk-adjusted net interest margin Risk-weighted assets Russian accounting standards Smart Couriers SMEs The Group’s management long term incentive plan Public interest entity Point-of-Sale loans n/a ROAA ROAE Risk-adjusted NIM RWA RAS n/a n/a MLTIP Loans 90+ days overdue Net present value n/a n/a Credit offering at merchant and retail points of sale Operating income Net income / Average assets Net income / Average equity (Net interest income - PL provisions) / Average IEA Assets weighted by risk as per the CBRF methodology n/a The Group’s courier network, completing KYC and delivering cards to customers Small and medium enterprises n/a Treasury portfolio n/a Investment securities and repos G-1 G-2 TCS GROUP HOLDING PLCANNUAL REPORT 2020  INVESTOR INFORMATION Detailed below are contacts and various addresses investors may find useful. More up to date investor information, including the Group’s current and historic share prices, corporate news, latest operational and financial results, presentations and other updates, is available on the TCS Group corporate websites at www.tinkoff.ru/eng More up to date information can be found at the TCS Group Holding corporate website at www.tcsgh.com.cy and www.tinkoff.ru/eng Company Secretary Caelion Secretarial Limited (registered number HE351260) 4th floor Berengaria 25 Spyrou Araouzou 25 Limassol 3036 Cyprus Telephone: +357 2504 0404 Fax: +357 2504 0415 TCS Group Holding PLC (registered number HE107963) Telephone: +357 2505 0668 Email: administration@tcsgh.com.cy Registered office address: 5th floor Berengaria 25 Spyrou Araouzou 25 Limassol 3036 Cyprus Mail to: PO Box 56356, 3306 Limassol. Principal business premises: Interlink Hermes Plaza, Ayiou Athanasiou Avenue 46, Office 301B, Limassol 4102 Cyprus Telephone: +357 25 05 0668 administration@tcsgh.com.cy Larisa Chernysheva, Head of Investor Relations ir@tcsgh.com.cy ir@tinkoff.ru stakeholderengagement@tcsgh.com.cy Artem Lebedev, Head of PR pr@tcsgh.com.cy pr@tinkoff.ru Depositary Existing investors are encouraged in the first instance to speak to their brokers/custodians, and then direct queries and questions through the Depositary’s contacts page on adr.com https://adr.com/contact/jpmorgan Custodian HSBC Bank plc (acting by way of its Athens branch) HSBC Bank plc (Greece) via its department HSBC Securities Services, Greece 109–111, Messoghion Ave. 115 26 Athens Greece Auditors PricewaterhouseCoopers Limited City House, 6 Karaiskakis Street CY-3032 Limassol Cyprus G-3 TCS GROUP HOLDING PLCANNUAL REPORT 2020tinkoff.ru/eng 2020 

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