Tinkoff Annual Report 2020

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FY2020 Annual Report · Tinkoff

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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.

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

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020PROVEN 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

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

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.

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.

#12

#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

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

62%

57%

48%

36%

28%

20%

22%

16%

17%

12%

16%

17%

12%

20%

22%

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)

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGY
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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020WHAT 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.

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

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.

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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.

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).

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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.

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020FINANCIAL
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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020accounts 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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020ASSET, 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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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.

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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CORPORATE 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.

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

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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020BOARD
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.

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;

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;

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;

-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.

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.

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

n/a

4/4

n/a

7/7

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.

TCS GROUP HOLDING PLC
ANNUAL REPORT 2019

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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020MANAGEMENT
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

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020CONTINUED

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.

STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020Board 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

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

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

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.

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.

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.

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 202031 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.

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 202031 DECEMBER 2020

Consolidated
Management Report (Continued)

The Board of directors

Number of directors

Role of the Audit Committee

Role of the Remuneration Committee

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 202031 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

•

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

Male

Alexios Ioannides

Mary Trimithiotou

Martin Robert Cocker

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 202031 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

136,351

5,379

1,887

376,521

5,035

238,454

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

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

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

7,18

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)

128,084

111,129

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

42,062

41,262

225.60

193.62

223.73

190.05

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

i
s
t
n
e
m
t
s
e
v
n

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

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

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

36,123

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

18,874

(499)

(193)

5,140

36,122

41,262

41,263

18,916

(499)

(327)

(134)

(461)

506

156

469

(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

44,213

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

(2,147)

44,209

42,062

42,066

509

(661)

587

(4)

1,092

(661)

1,092

(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

27
28
28
19
28
28
28
19
19

5
5

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

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 B

16.61%

0.00%

18.47%

21.68%

Switzerland

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%

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 202031 DECEMBER 2020

Notes to the Consolidated
Financial Statements (Continued)

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)

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’ REVIEWFINANCIALS31 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

128,167

2,715

11,154

4,657

739

982

5,906

2,205

10,396

1,740

9,147

11,049

261

4,998

1,815

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

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

1,244

Fee and commission
income

- Acquiring commis-
sion

- Other fees receiv-
able

Insurance premiums
earned

Other operating
income

Total revenues from
other segments

371

251

373

2,988

128

1,244

(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)

(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

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

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

235

670

905

112,112

15,024 14,720

9,819

8,396

952

914

- 161,937

380

3,739

1,327

135

(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

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)

(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)

(15,123)

(11,380)

(2,024)

(1,392)

(2,150)

(112)

(841)

(1,064)

786

(18,177)

(4,891)

(15,052)

(4,615)

(2,320)

(3,408)

(967)

(715)

(837)

(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

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

2,901

22,023

2,921

27,847

Total

2,901

38,622

2,921

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

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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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
r
o

/
d
e
s
a
h
c
r
u
P

d
e
r
i
a
p
m

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

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

(14,071)

(2,134)

(11,816)

5,713

(14,071)

(2,319)

5,713

(14,071)

(2,319)

(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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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
r
o

/
d
e
s
a
h
c
r
u
P

d
e
r
i
a
p
m

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

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

(5,771)

(12)

14,386

2,438

2,145

17,034

21,617

52,064

4,778

20,733

229

77,804

3,133

(10,999)

(986)

(1,932)

3,133

(10,999)

(1,059)

3,133

(10,999)

(1,059)

(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
(

)

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

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
(

)

R
C
S
r
o
f

L
C
E
e
m

i
t
e
f
i
l
(

3
e
g
a
t
S

2
e
g
a
t
S

t
i
d
e
r
c
r
o
f

)
d
e
r
i
a
p
m

/
d
e
s
a
h
c
r
u
P

d
e
t
a
n
g

i
r
o

t
i
d
e
r
c

d
e
r
i
a
p

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

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

(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

(2,363)

(397)

(1,978)

519

(2,363)

(426)

519

(2,363)

(426)

(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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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

t
i
d
e
r
c

/
d
e
s
a
h
c
r
u
P

d
e
t
a
n
g

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

44,199

(587)

2,960

2,373

(5,663)

5,663

(897)

(528)

3,927

2,502

(3,536)

(699)

4,235

(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

(524)

(114)

(500)

138

(524)

(122)

138

(524)

(122)

(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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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

496

27,366

2,037

198 29,601

Movements with impact on
credit loss allowance charge
for the year:

New originated or purchased

141

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

(41)

(3)

(41)

516

(509)

(7)

(50)

(563)

(21)

(634)

(9,512)

(1,178)

(119)

(10,809)

106

218

356

680

7,877

2,078

753

10,708

(16)

(107)

(16)

(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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

2
e
g
a
t
S

)

R
C
S

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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

2,641

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

t
i
d
e
r
c

3
e
g
a
t
S

l
a
t
o
T

2,644

)

R
C
S

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

27,907

(23)

499

476

(2,141)

2,141

(6)

(203)

203

(1)

(4)

(236)

(234)

(839)

(106)

(945)

135

263

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

(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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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
r
o

/
d
e
s
a
h
c
r
u
P

d
e
r
i
a
p
m

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

29,695

(83)

642

559

(1,863)

1,863

(119)

(234)

1,023

670

(751)

(354)

1,105

(15)

(12)

206

(206)

226

29,921

(137)

(359)

(209)

(705)

(21,040)

(1,276)

(173)

(137)

(22,626)

229

830

1,096

6,247

932

7,295

(360)

(50)

(178)

(360)

(53)

(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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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

r
o
f
L
C
E
e
m

i
t
e
f
i
l
(

)
d
e
r
i
a
p
m

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
r
o

/
d
e
s
a
h
c
r
u
P

d
e
r
i
a
p
m

l
a
t
o
T

At 31 December 2018

190

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

23,779

(61)

479

418

(1,673)

1,673

(71)

(92)

614

451

(518)

(137)

655

(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

10,733

(131)

(23)

(37)

(131)

(24)

(131)

(24)

(37)

At 31 December 2020

527

227

857

1,611

30,278

1,080

1,045

287

32,690

F-45

F-46

(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
(

)

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

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
(

)

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

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

21,598

(141)

844

703

(1,926)

1,926

(184)

(232)

770

354

(739)

(352)

1,091

(50)

(40)

308

(307)

(1)

105

150

(302)

(243)

(7,250)

(315)

(20)

(7,585)

296

273

840

1,409

11,991

952

1,070

14,013

(63)

(196)

(63)

(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
(

)

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

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
(

)

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

l
a
t
o
T

In millions of RR

Car Loans

At 31 December 2018

2,754

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

18,238

(98)

466

368

(1,087)

1,087

(72)

(23)

248

153

(320)

(34)

354

(4)

(1)

(3)

(24)

(1)

(179)

(1)

(167)

(884)

(47)

(929)

312

260

247

819

15,971

982

356

17,309

(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
(

)

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

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
(

)

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

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

113

940

1,013

Movements with impact on
credit loss allowance charge
for the year:

New originated or purchased

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)

(69)

(17)

399

(20)

379

1,268

(56)

1,213

399

(20)

379

1,268

(56)

1,213

278

281

639

1,500

302

1,889

(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
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)
L
C
E

L
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i
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f
i
l
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
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m

i
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f
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(

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e
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S

t
i
d
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r
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o
f

)
d
e
r
i
a
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m

s
h
t
n
o
m
-
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1
(

1
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g
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L
C
E

l
a
t
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T

L
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e
m

i
t
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f
i
l
(

)

R
C
S
r
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f

2
e
g
a
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S

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m

i
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f
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l
(

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g
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i
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e
r
c
r
o
f

)
d
e
r
i
a
p
m

l
a
t
o
T

At 31 December 2018

332

363

(4)

301

(58)

(8)

(7)

(39)

(8)

(1)

(19)

(13)

403

(49)

(10)

344

608

645

113

940

1,013

At 31 December 2020

335

291

123

749

2,440

323

136

2,899

At 31 December 2019

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

(361)

513

181

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

2,440

(335)

2,105

793

121

166

1,080

(227)

853

1,427

263

322

2,012

(558)

1,454

295

323

(291)

1,017

1,045

(857)

188

1,263

(922)

341

136

(123)

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

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

(82)

116

632

658

(569)

336

636

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

157

201

18,725

1,060

(368)

18,357

622

314

940

(57)

883

(285)

775

(10)

371

(260)

111

(46)

Total

250

201

371

20,156

(913)

19,243

622

320

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

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

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

1,063

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

442

346

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)

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

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.

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

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

(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

(14)

642

Total

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)

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:

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

(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

(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
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g
a
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L
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(

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2
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m

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f
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(

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i
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f

3
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g
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)
d
e
r
i
a
p

s
h
t
n
o
m
-
2
1
(

1
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g
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)
L
C
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l
a
t
o
T

L
C
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e
m

i
t
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f
i
l
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

t
i
d
e
r
c
r
o
f

3
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g
a
t
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)
d
e
r
i
a
p

l
a
t
o
T

In millions of RR

Russian government bonds

At 31 December 2019

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

(160)

(233)

(12)

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)

(13)

(117)

(16)

109

(1)

522

289,955

767

(160)

(89,000)

(233)

(129,350)

5,318

(12)

(6,739)

156

70,951

255

125,422

225

69,645

198

70,438

(620)

5,061

(13)

(4,171)

(117)

(46,924)

(17)

4,587

(5,077)

620

(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)

Investments in Securities and Repurchase Receivables (Continued)

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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

Municipal bonds

At 31 December 2019

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

(19)

(2)

(11)

(1)

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
(

)

R
C
S
r
o
f

620

6,085

7,440

(91)

(19)

(4,140)

(2)

474

(495)

3,188

9,273

7,516

246

(11)

(3,224)

(1)

(78)

4,521

L
C
E
e
m

i
t
e
f
i
l
(

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)

(78)

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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

(12)

(91)

(12)

(28)

(26)

(6)

(40)

(4)

(56)

(30)

(128)

At 31 December 2019

225

Russian government bonds

At 1 January 2019

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)

(16)

383

64,951

1,607

66,558

25,936

(2)

(18)

(12)

1,318

(1,318)

(2,702)

(3,609)

(96)

(131)

(16,348)

(193)

4,074

(16)

(84)

(3,975)

(43)

(2,798)

(3,609)

(16,541)

4,117

(4,018)

(158)

4,694

(1,607)

3,087

225

69,645

25,190

167

81,179

(2)

(63)

(53)

(4)

(16)

(833)

(30,858)

(20,414)

2,119

(1,912)

29,281

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)

Investments in Securities and Repurchase Receivables (Continued)

9 Guarantee Deposits with Payment Systems

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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
(

)

R
C
S
r
o
f

2
e
g
a
t
S

L
C
E
e
m

i
t
e
f
i
l
(

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

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

(1)

(4)

(3)

(11)

(14)

5,833

(1)

(4)

(3)

(11)

968

(482)

(216)

469

(487)

(14)

252

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

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

9,206

2,799

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)

(2)

10,534

6,625

1,920

2,564

(61)

At 31 December 2019

396

4,219

6,070

1,620

12,393

Additions

Disposals

2,168

(164)

(231)

2,170

(395)

(72)

9,117

3,669

(73)

At 31 December 2020

396

4,219

8,074

1,391

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)

(8)

(1,287)

(1,331)

(133)

(2,594)

(673)

(41)

(3,441)

(3,682)

(43)

(1,421)

103

(149)

128

(4)

(1,617)

(1,961)

231

(176)

(3,912)

(694)

(45)

(4,827)

(5,631)

396

4,086

3,476

4,043

4,162

947

697

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

4,819

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

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

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

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

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

(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

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)

(637)

1,090

1,285

3,513

(6)

(15)

(1)

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

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)

(163)

(410)

204

2,228

(7)

(15)

(3)

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.

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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

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)

Reconciliation of the number of shares used for basic and diluted EPS:

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

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.

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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

118

128,167

111,247

9,590

6,499

1,022

2,027

1,948

439

8,988

7,006

1,421

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.

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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

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

(2,178)

(1)

18,567

14,110

(3,500)

182

(497)

(2,923)

(1,243)

(733)

(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.

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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

1,092

372

1,464

2019

3,398

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

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)

(10)

1,375

136

3,550

(506)

(186)

(245)

(1,117)

663

(1,473)

(34)

564

(108)

(9)

(1,031)

(1,424)

663

(34)

377

231

(53)

(58)

(991)

614

The tax effect of the movements in temporary differences for the year ended 31 December 2019 is detailed below.

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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)

(773)

(21)

(40)

(324)

(334)

333

2,819

(3)

702

(1)

586

(23)

(22)

364

(23)

3,515

(604)

(322)

(271)

(1,234)

(1,019)

(187)

339

(44)

(62)

(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)

(2,267)

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

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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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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.

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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

(675)

(788)

(32)

(30)

(701)

829,230

(722,024)

4,926

112,132

558,231

(473,832)

(200)

84,199

In millions
of 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)

794

(794)

488

(488)

(1)

(277)

277

(310)

310

(5)

(277)

277

(310)

310

(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.

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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

USD EURO

GPB Other

USD EURO

GPB Other

0.0

Cash and cash equivalents

0.0

Loans and advances to customers

33.5

Due from banks

Investments in securities

Repurchase receivables

3.2

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

10.0

0.1

0.0

0.1

0.0

37.2

5.3

7.9

6.5

0.0

1.6

4.3

2.4

3.1

15.4

14.7

13.7

6.2

5.1

9.0

15.8

0.0

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.

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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

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

136,351

5,379

1,887

376,521

5,035

238,454

24,064

15,475

31,070

834,265

4,819

626,837

23,910

109

9,206

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

411,504

2,460

590

1,207

2,342

14,589

432,715

55,564

3,448

2,084

329,175

390

135,178

2,799

8,877

21,673

559,188

110

411,614

23,618

26,078

590

1,207

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.

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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

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

9,206

168

345

34,337

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

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

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

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

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

Investments in securities

238,454

Repurchase receivables

Brokerage receivables

24,064

4,953

5,035

238,454

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

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

135,178

2,799

1,717

1,712

1,669

2,133

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

411,614

Other financial assets

30,820

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

9,206

345

Other financial liabilities

34,337

870

944

981

11,281

9,834

23,910

481

207

481

953

961

358

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)

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)

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’ REVIEWFINANCIALS31 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)

119,934

20,755

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

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%

15.69%

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

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

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

(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

21,472

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

20,130

2,239

227

(1,681)

560

(23)

(3)

21,472

22,596

(1,147)

1,207

227

1,282

204

(75)

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

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

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

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

Year ended 31 December 2019

LLC “Cloudpayments”

Russia

103

F-105

F-106

TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS

LLC “Cloudpayments”

329

301

136

512

Investments in securities

232,198

6,256

Repurchase receivables

238,454

133,239

1,939

(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

5,035

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

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

(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

(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

Liabilities AT FAIR
VALUE

Foreign exchange swaps
and forwards

Total recurring fair value
measurements at level 2

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

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

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’ REVIEWFINANCIALS31 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

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

16,599

76,636

5,379

1,887

5,379

1,887

374,996

374,629

15,475

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

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

1,207

199,408

12,253

139,114

60,174

1,879

495

112

Carrying
value

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

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

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

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

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

1,892

158

2,050

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

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

(29)

(2,895)

(33)

(40)

494

(248)

447

(64)

(1,913)

(101)

(173)

2020

2019

1,086

921

862

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

(2,419)

(68)

3,782

5,350

(1,810)

(46)

7,276

39 Events after the End of the Reporting Period

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.

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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.

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.

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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.

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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 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.

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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

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)

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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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.

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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

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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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’ REVIEWFINANCIALSBoard 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.

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

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-159

2 Operating Environment of the Company . . . . . . . . . F-161

3 Significant Accounting Policies . . . . . . . . . . . . . . . . . .F-162

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

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 2020channels 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-

4. The Group operates a flexible business model. Its

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.

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STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 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.

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-

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STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 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

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 office of director shall be vacated if the director:

• becomes bankrupt or makes any arrangement or com-

position with his creditors generally; 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

•

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.

Appointment, retirement, rotation and removal of
directors

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STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 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 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

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

Male

experience in ‘Big Four’ professional services firms

Female

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

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STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 202031 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

656

702

230

26,998

(3,238)

1,548

(5,556)

460,346

480,328

481,030

2,460

168

585

3,294

230

26,998

(3,164)

1,039

(10,901)

246,071

260,273

263,567

777

7,664

472,395

164

598

5,594

257,293

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

(32)

2019

272

(732)

(432)

17,954

17,158

(3)

183

(45)

494

(926)

(500)

603

(678)

477

111

(251)

284

17,789

16,700

(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

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.

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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

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

37,362

1,019

37,362

1,019

38,381

15,816

54,197

18,874

(499)

156

(193)

18,916

(499)

506

469

(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

16,890

214,111

168

214,111

168

(4)

509

(661)

587

1,092

(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

(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

(163)

761

598

The notes № 1-23 are an integral part of these Separate Financial Statements.

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STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2020

31 DECEMBER 2020

Notes to the Separate Financial Statements

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

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.

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 B

16.61%

0.00%

Switzerland

0.00%

18.47%

21.68%

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%

The subsidiary LLC “TCS” provides printing and distribution services to the Bank.

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Notes to the Separate Financial Statements
(Continued)

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-

• 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.

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.

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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.

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 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.

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.

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TCS GROUP HOLDING PLCANNUAL REPORT 2020STRATEGIC REVIEWDIRECTORS’ REVIEWFINANCIALS31 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:

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 – derecognition. Financial liabilities are derecognised when they are extinguished (i.e. when the obli-
gation specified in the contract is discharged, cancelled or expires).

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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.

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.

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.

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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.

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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.

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.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except
for:

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.

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.

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.

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Notes to the Separate Financial Statements
(Continued)

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

777

596

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’ REVIEWFINANCIALS31 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

777

596

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

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.

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)

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

656

582

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

18,874

18,916

Secondary public offering
costs

GDRs and shares trans-
ferred under MLTIP

(499)

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)

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)

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

2020

270

177

228

272

300

100

536

732

(432)

2019

110

Total administrative and other operating expenses

500

251

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

2019

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

897

899

2019

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

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

31 December
2018

Credited
to OCI

31 December
2019

(1,187)

1,019

(168)

2020

582

11,545

(11,835)

364

656

0.80

2019

760

5,856

(5,601)

(433)

582

0.49

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)

(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.

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.

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:

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.

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

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

(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)

385

(385)

(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

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

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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

USD

EUR

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

2,475

598

5,594

257,293

263,549

2,460

2,541

3.8

1.2

Net separate statement of financial position

260,412

533

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

1,892

472,395

164

5,772

472,395

478,167

705

2,128

481,000

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

Total

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

846

927

1,671

Total

2,521

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

(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

472,221

256,443

- 256,443

174

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

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

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

5,772

1,892

164

596

5,774

5,594

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

2,460

2,541

2,460

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

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

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

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

598

5,594

257,293

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

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

478,122

2,066

262,101

850

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:

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.

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

(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’ REVIEWFINANCIALSGLOSSARY

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

АI

AML

n/a

CAR

CBRF

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

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

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

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

MLTIP

Loans 90+ days overdue

Net present value

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 2020tinkoﬀ.ru/eng

2020