Tinkoff
Annual Report 2022

Plain-text annual report

CONTENTS STRATEGIC REVIEW FINANCIALS Key highlights for the year 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 DIRECTORS' REVIEW Chairman’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor's Report . . . . . F-1 International Financial Reporting Standards Separate Financial Statements and Independent Auditor's Report . . . . . . . . . . . F-136 Report from the management team . . . . . . . . . . . . . . . . . . . . . . . . . 5 Investor Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1 Tinkoff is an online ecosystem offering a full range of financial services for individuals and businesses . In 16 years of our history we have secured our place as one of the world’s leading neobanks . Our unique values, entrepreneurial spirit, the culture of innovation and teamwork are the key foundations of our success . Our strategic objective is to grow our customer base profitably by building the most comprehensive, engaging, innovative, and sustainable financial and lifestyle ecosystem in the world. 1 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 are for the year ended 31 December 2022 and 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.STRATEGIC REVIEW DIRECTOR'S REVIEW KEY HIGHLIGHTS FOR THE YEAR Total revenues 366 .2 ₽ bn (+34%) Total customers 28 .9 mn (+39%) Active customers 20 .2 mn (+39%) 2022 Net profit Total assets 20 .8 ₽ bn (-67%) 1,600 ₽ bn (+21%) Customer funds 1,192 ₽ bn (+26%) TCS GROUP (THE GROUP) IS AN INNOVATIVE PROVIDER OF DIGITAL FINANCIAL AND LIFESTYLE SERVICES . BRANCHLESS SINCE ITS INCEPTION IN 2006, THE GROUP HAS DEVELOPED A FULL RANGE OF IN-HOUSE PROPRIETARY TECHNOLOGY SOLUTIONS AND SERVICES, INCLUDING DIGITAL BANKING, BROKERAGE, ACQUIRING AND OTHER MERCHANT SOLUTIONS, INSURANCE, SME BANKING AND MUCH MORE . On 15 March 2023 the Group published TCS Group Audited Con- solidated IFRS Results for FY2022 and on 13 April 2023 its 2022 financial statements on a standalone basis . These are available through the Group’s website and on the LSE pages . The Company’s Board believe that the CMR contained in the Group 2022 financial statements gives an up to date and informative description of the Group’s principal activities, its structure, developments position and performance of the Group’s business, principal risks, environ- mental matters, human resources and diversity matters, as well as covering many aspects of the role and responsibilities of the Board and its committees . A fuller description can also be found in Annual Reports for prior years at https://tinkoff-group .com . Other non-financial highlights include: • In 2022, Tinkoff Credit Broker issued 1 .4 million installment and POS loans for a total of RUB 57 billion, expanding its partner network by 40% . ESG developments • For the second year in a row, Tinkoff received platinum status in the Forbes rating of the best employers in Russia . It also received gold status in the Environment and Corporate Governance categories of the Forbes rating . • In 2022, users of Tinkoff services donated RUB 1 .6 bn to Russian non-profit organisations via the charity and cashback section of the Tinkoff mobile app, as well as via the Bank’s joint initiatives with charitable and educational foundations . Superior and innovative product offering • In December 2022, Tinkoff introduced the Tinkoff Seller platform, a groundbreaking solution for the Russian e-commerce market, which was developed on the basis of artificial intelligence and machine learning technologies . • In December 2022, Tinkoff introduced the Tinkoff Pay payment sticker, a new contactless payment method . 2 3 FINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEW DIRECTOR'S REVIEW DIRECTORS' REVIEW Chairman’s Statement Dear stakeholders, I am writing this Chairman’s Statement during extremely challenging times . We look at the last financial year (2022), which I previously wrote would bring the unexpected . We also look ahead thinking about the future in an attempt to contextualise recent events for our stakeholders . The economic environment in 2022 was dominated by uncertainty . Together with my fellow Board members we made it a priority to main- tain the Group’s resilience and prudent risk management . The fact that risk-related costs and provisions in 2022 remained quite limited despite all the challenges, is evidence of the stability and adaptabil- ity of the Group’s effective business model, its highly professional management team, the top quality of its credit book and the robust management of market risks . As a Board we are very conscious of our duties and commitments to our shareholders, our nearly 65% free float of well-known interna- tional investor names who trusted us in better times with their and their clients' money . The Board is absolutely committed to securing the best possible outcomes for you and is very conscious that in this unprecedented environment, our investors rely on us to navigate steadily through rough waters . I am convinced that as a Board we have made and continue to make powerful contributions during what is one of the most testing times any of us have experienced with our consistent support for the Group’s notable strengths, namely: strong capital and liquidity po- sitions, innovative technologies, good control of risk, and quick and collected reactions to shocks and to the challenges that they create . During 2022, the Board has had to respond to fast-paced develop- ments, high-stakes decisions, a grand reshuffling of global priorities and many other urgent challenges . We have always dealt with these with our duties to you, our investors, top of mind . Finally, I want to say thank you to all those who have contributed this year to the Group to get us to where we are today . It has been a diffi- cult year to say the least, however I have seen everyone work faithfully and diligently to do the hard work that needed to be done, and I acknowledge that the challenges put before us have been difficult often not only professionally, but also personally . Let’s all look forward optimistically to a better 2023 . Yours sincerely Constantinos Economides Chairman of the Board of Directors 4 Report from the management team Dear stakeholders, We have continued to give back to those in need . Our efforts to support vulnerable and less fortunate groups continue through both corporate and employee-driven programs . In 2022, users of Tinkoff services donated RUB 1 .6 bn to Russian non-profit organisations via the charity and cashback section of the Tinkoff mobile app, as well as via the Group’s joint initiatives with charitable and educational foundations . We strongly believe that during volatile times we need to focus on winning customer trust, supporting communities, and investing in people . Let's hope that 2023 brings positive changes in the business environment . Management team Despite optimistic projections at the start of the year, the econom- ic situation in 2022 has been characterised by ongoing challenges . Even in such uncertain days, our tech-driven business model has enabled us to deliver continued growth . We have focused on solid- ifying our business franchise, providing uninterrupted service to our customers (who solely consist of individuals and micro-SMEs), supporting the team, and adjusting the Group’s products to changing market conditions, helped by the continuously evolving functionality of our IT platforms . The number of our total retail customers increased in 2022 and we have remained profitable throughout the year . In 2022, we continued to expand the Tinkoff ecosystem with innovative products and services . This includes Tinkoff Pay, an instant payment service that enables customers to make quick, convenient and secure purchases of products and services in online stores without entering their card details . We also intro- duced Tinkoff ID, a unified sign-in system that enables customers to access the full range of Tinkoff products and partner services with just a few clicks . In December, we also introduced the Tinkoff Seller platform, a groundbreaking solution for the Russian e-com- merce market based on artificial intelligence and machine-learn- ing technologies . The operational and technological changes that we made to our business processes in 2022 have put us in a better position to maintain uninterrupted operations for our customers in the face of heightened external pressure . We are assessing and will continue to assess on an ongoing basis the impact of the recent sanctions and restrictive measures imposed on Tinkoff Bank in late February 2023, to ensure full compliance with all applicable laws and regulations . We are facing a very different crisis from those we have faced be- fore, and this is completely uncharted territory . But as you know, our business model is very flexible, and we can withstand severe shocks . We have ample liquidity and a solid capital position . We are monitoring the operational performance of our business minute-by-minute and have all key systems in place to ensure the security and flow of our customers' funds and assets . We have continued to invest in talent sourcing and retention . Being an appealing employer for IT talent is of paramount importance to the long-term success and sustainability of our business . To attract highly skilled professionals, we continue to invest heavily in partnerships with leading universities, summer IT schools, mathematics competitions, and more . To retain talent, we continue to provide extensive training programs, flexible work environments, ensure a decentralised and horizontal organisa- tional structure, and zealously cultivate our Tinkoff DNA . 5 FINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022 31 DECEMBER 2022 TCS Group Holding PLC International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor’s Report Board of directors and other officers Board of Directors Contents 21 Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-74 Except where stated otherwise, all directors served throughout 2022 and through to the date of these consolidated financial statements. 22 Fee and Commission Income and Expense . . . . . . . . . . . . . F-75 Director Role Retirement Appointment Board of Directors and other officers . . . . . . . . . . . . . . . . . . . . . F-2 Consolidated Management Report . . . . . . . . . . . . . . . . . . . . . . . F-3 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . F-11 23 Customer Acquisition Expense . . . . . . . . . . . . . . . . . . . . . . . F-76 Sergey Arsenyev Independent Non-Executive Director 24 Insurance Premiums Earned and Claims Incurred . . . . . . . F-77 Constantinos Economides Chairman of the Board, Executive director - - 25 Administrative and Other Operating Expenses . . . . . . . . . F-78 Margarita Hadjitofi Independent non-executive director February 2023 26 Other Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-79 Maria Pavlou Executive director February 2023 CONSOLIDATED FINANCIAL STATEMENTS 27 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-79 Mary Trimithiotou Executive director Consolidated Statement of Financial Position . . . . . . . . . . . . . F-17 Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-18 Consolidated Statement of Changes in Equity . . . . . . . . . . . . . F-19 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . F-20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82 Daniel Wolfe Independent Non-Executive Director 29 Reconciliation of Liabilities Arising from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82 30 Financial and Insurance Risk Management . . . . . . . . . . . . .F-83 31 Management of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-101 32 Contingencies and Commitments . . . . . . . . . . . . . . . . . . . F-102 33 Offsetting Financial Assets and Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-105 34 Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . F-106 Martin Robert Cocker Independent non-executive director Ashley Dunster Independent non-executive director Pavel Fedorov Maria Gordon Group CEO, Executive director Independent non-executive director Nicholas Huber Independent non-executive director Oliver Hughes Nitin Saigal Group CEO, Executive director Independent non-executive director - - March 2022 March 2022 April 2022 April 2022 March 2022 April 2022 March 2022 September 2022 - - - - April 2022 - - - - - - - 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21 35 Financial Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-107 2 Operating Environment of the Group . . . . . . . . . . . . . . . . . . F-22 36 Fair Value of Financial Instruments . . . . . . . . . . . . . . . . . . F-108 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . . . . . . . . F-23 37 Presentation of Financial Instruments by Measurement Category . . . . . . . . . . . . . . . . . . . . . . . . . F-115 4 Segment Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26 38 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . F-117 5 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . F-30 39 Events after the End of the Reporting Period . . . . . . . . . . F-120 6 Due from Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31 40 Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . F-120 7 Investments in Securities and Repurchase Receivables . . F-32 41 Adoption of New or Revised Standards and Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-133 42 New Accounting Pronouncements . . . . . . . . . . . . . . . . . . . F-134 8 Loans and Advances to Customers . . . . . . . . . . . . . . . . . . . F-43 9 Guarantee Deposits with Payment Systems . . . . . . . . . . . . F-63 10 Brokerage Receivables and Brokerage Payables . . . . . . . F-63 11 Tangible Fixed Assets, Intangible Assets and Right-of-use Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-64 12 Other Financial and Non-financial Assets . . . . . . . . . . . . . . F-65 13 Due to Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-66 14 Customer Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67 15 Debt Securities in Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67 16 Other Borrowed Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-68 17 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-68 18 Insurance Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69 19 Other Financial and Non-financial Liabilities . . . . . . . . . . . F-70 20 Share Capital, Share Premium and Treasury Shares . . . . . F-72 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 2023 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 F-1 F-2 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW31 DECEMBER 2022 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 (collectively the “Group”) for the year ended 31 December 2022 . 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 financial operations, through its subsidiaries JSC “Tinkoff Bank” (the “Bank”), LLC Microfinance company "T-Finance", LLC “Phoenix” and other operations through its subsidiaries, such as insurance operations through JSC “Tinkoff Insurance” (the “Insurance Company) . 2 . The Bank specialises in consumer finance, retail banking for individuals, individual entrepreneurs (“IE”), small and medium enterprises (“SME”), acquiring and payments services and bro- kerage 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 . As at 31 December 2022 in accordance with IFRS 10 definition of control the Group has no ultimate controlling party . Changes in group structure 9 . 3 . There were no significant changes in the structure of the Group in 2022 . Review of developments, position and performance of the Group’s business 4 . The Group operates a flexible business model. Its virtual network enables it to quickly and easily increase business or slow down customer acquisition depending 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, afford it a geographic reach across Russia resulting in a highly diversified portfolio. 5 . In October 2021 the Bank was added to the Bank of Russia’s list of 13 systemically important banking institutions due to a recog- nition of the Bank’s growing presence in the financial market and expanding customer base of its ecosystem . As a result, the Bank is obliged to comply with the additional capital adequacy buffers, as well as advanced risk management requirements . The Bank is operating with ample liquidity and capital buffers above regula- tory minimums and intends to continue comfortably meeting all applicable requirements comfortably . 6 . As a result of attaining systemically important bank sta- tus, management made a decision to create a portfolio of investments in debt securities managed under a “hold to collect” business model . These securities were accounted for at amortised cost (AC), as opposed to fair value, they will be held until full maturity and will not be susceptible to market price fluctuations. This portfolio was created from the Bank’s existing portfolio of high-grade bonds, consisting of Russian government bonds. On 1 January 2022 the Group reclassified these bonds amounted to RR 122,805 million, previously accounted for under “Hold to collect and sell” business model, into “‘Hold to collect” business model and hence accounted for at AC, resulting in reversal of RR 14,867 million of negative revaluation reserve recognised through other comprehensive income . Refer to Note 7 for more information . 7 . The Bank is operating with ample liquidity and capital buffers above regulatory minimums and expects to continue meeting all applicable requirements comfortably . 8 . The key offerings of JSC “Tinkoff Insurance” are personal 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) (Note 24) . The Insurance Company focuses on online sales .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 3 .5 billion of addi- tional credit loss allowance as at 31 December 2021 (2020: RR 5 .6 billion) . Refer to Notes 2 and 3 . In terms of financial performance the profit of the Group for the year ended 31 December 2022 was RR 20,802 million (2021: RR 63,368 million). Such a gradual decline in profit by 67% was driven by the escalating geopolitical tension in the region that affected the economic and operating environment of the Group and led to an increase in credit risks, volatility in financial markets and wind-down of lending during 1st and 2nd quarters of 2022. In order to reflect appropriately the impact of macroeconomic uncertainty on loan portfolio, the Group has made changes to its expected credit loss allow- ance model, which resulted in approximately RR 15 .1 billion of additional credit loss allowance . Net interest income growth slowed down in 2022, by 8 .6% to RR 143,897 million, compared to 2021 increase of 26 .6% to RR 132,558 million, which was driven by Central Bank key rate hike in the first half of 2022 . The 90 days plus overdue loans ratio (“NPL”) increased to 12 .1% as at 31 December 2022 (2021: 8 .6%) . The NPL coverage ratio increased to 141 .5% as at 31 Decem- ber 2022 (2021: 131 .9%) . The growth of the operating costs was driven mainly by the increase in personnel compensa- tions as the result of expanding customer base . Environmental matters 10 . 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 environmental impacts and does not believe its operations are exposed to any material environmental risks . Still the Group management provides its strategic vision and supervise the Climate Strategy by driving of the relevant initiatives and allocating the necessary resources . 11 . Addressing climate change is a major element in the Group’s sustainability strategy that is integrated into key business practices, policies, processes, and initiatives that ensure the long-term sustainability of the Group’s business . In 2021 the Group became a signatory to the UN Principles for Responsible Banking and has joined the Science Based Targets Initiative (SBTI) . In order to realise its SBTI plans and Net Zero commitments, the Group has established an internal transformation team to support the relevant developments and initiatives . 12 . The Group is implementing a climate risk assessment process that covers both physical and transitional risks . The assess- ment is made based on the country and sectoral context of their likelihood and consequences . 13 . As of 31 December 2022 the Group considered RCP8 .5 IPPC AR5 scenario as the current and most likely scenario for mid-term (until 2040) physical climate change . The manage- ment of the Group is planning for climate stress testing to assess the mid- and long-term impact of climate risks on its financial portfolio. Human resources 14 . 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 transparency are actively pro- moted 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, on- line 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 . 15 . Clear performance evaluation processes and fair compensa- tion 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 Perfor- mance Indicators as well as to provide feedback which can be used for their career development and to determine incentive compensation . 16 . 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 management long-term incentive and retention plan (MLTIP) . Since then the Group has announced an expansion of MLTIP during the next 6 years . The MLTIP programs are designed to grow the Group's value by aligning more closely managers’ interests with those of shareholders . The Group believes that participation in its share capital is an effective motivation and retention tool. The MLTIP programs embrace a growing number of managers, for two main reasons: firstly, internal promotions as some employees were promoted to key managerial positions in line with the growth of the Group; and, secondly, as part of its expansion and transformation into a financial marketplace, the Group has hired a significant number of new managers to de- velop and manage new business lines and to strengthen internal controls, including cyber security . The total size of the unvested pool of the expanded MLTIP programs was 3 .4% of the Group’s share capital as at 31 December 2022 (2021: 3 .6%) 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, an- ti-corruption and bribery matters can be found in the Group’s most recently published Non-Financial Information and Diver- sity Statement (Sustainability Report) . The Group will publish its Sustainability Report for the year ended 2022, if it forms part of an integrated annual report on the Company’s website, www.tcsgh.com.cy (and www.tinkoff.ru/eng) by 30 April 2023, but in any case no later than 30 June 2023 . Principal risks and uncertainties 18 . The Group’s business and financial results are impacted by uncertainties and volatilities in the Russian economic environment which can be impacted by global factors and/or by national factors as disclosed in Note 2 to the consolidated financial statements. 19 . The Group is subject to a number of principal risks which might adversely impact its performance . The principal activities 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 financial risks, oper- ational 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 pro- gram that focuses on the unpredictability of financial markets and seeks to minimize potential adverse 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 those limits . The operational and legal risk management functions F-3 F-4 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW31 DECEMBER 2022 Consolidated Management Report (Continued) are intended to ensure the proper functioning of internal poli- cies 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 Group's activities . These risks as well as other risks and uncertain- ties which affect the Group and how these are managed, are presented in Notes 30 and 32 of the consolidated financial statements . 21 . Analysis of impact of the current geopolitical situation in the region on the Group is disclosed in Note 2 to the consolidated financial statements. Contingencies 22 . The Group’s contingencies are disclosed in Note 32 to the consolidated financial statements. Future developments 23 . The Group's strategic objective is to grow its customer base prof- itably by building the most comprehensive, engaging, innovative, and sustainable financial and lifestyle ecosystem in the world. Results 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 28. Share capital 27 . At the beginning of 2021 the Group underwent a major re- structuring of its shareholder structure . On 7 January 2021 all issued 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 100% of 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). The number of GDRs in issue was not affected by the conversion . Then the shares held by the two trusts were transferred to The New Rigi Trust . After the conversion the Trust’s voting rights dropped to approximately 35 .08% . 28 . On 28 April 2022 The New Rigi Trust, a major shareholder of the Company, disposed of its entire interest in the Company . Interros, a leading Russian investment group with a diverse portfolio of assets including in banking, has acquired an interest in the Group, and consequently now holds approximately 35 .08% of the outstanding shares in the Company . The deal was ap- proved by the Central Bank of the Russian Federation . As a re- sult of the aforementioned deal Mr Vladimir Potanin, ultimate beneficiary owner of Interros, became a minority shareholder with a total shareholding of 35 .08% (2021: Mr Oleg Tinkov with a shareholding of 35 .08%) . 29 . As at 31 December 2022 and 2021 in accordance with IFRS 10 definition of control the Group has no ultimate controlling party. Any important events for the Group that have occurred after the end of the financial year Treasury shares 25 . Since February 2022 the economic situation in the Russian Federation has been and is still affected by escalated military and political conflict and the associated international sanctions against a number of Russian institutions, companies, banks and individuals . On 25 February 2023, the Bank and became subject to an asset freeze in the EU under the Council Implementing Regulation (EU) No 2023/429, implementing Council Regulation (EU) No 269/2014 (the "EC Regulation 269"). The Company and its controlled subsidiary undertakings (other than the Bank and any controlled subsidiary undertakings of the Bank) are not subject to an asset freeze pursuant to EC Regulation 269 or to other EU sanctions . Management of the Group is assessing its impact on the business . 26 . As a result, the Bank’s ability to make payments under its Eurobonds issued in 2017 and 2021 through the usual channels was undermined by the assets freeze restrictions . In this regard, the Bank cancelled interest payments for the one upcoming coupon period under its Eurobonds to avoid discrimination of all bondholders and to focus on finding a practical and lawful solution to remedy this situation by the time of the next coupon payment. The Bank has sufficient funds for this purpose and will resume payments under the relevant Eurobonds as soon as it becomes legally attainable . 30 . At 31 December 2022 the Group held 602,975 (2021: 1,237,583) of its own GDRs, equivalent to approximately RR 1,885 million (2021: RR 2,567 million) and which represent 0 .3% (2021: 0 .6%) of the issued shares . 31 . Treasury shares are GDRs of TCS Group Holding PLC and in- clude those that are held by a special purpose trust which has been specifically created for the long-term incentive program for the MLTIP (see Note 38 for further information) . 32 . During 2022 no GDRs were repurchased by the Group (2021: 425,017 GDRs were repurchased at market price for RR 1,877 million) . 33 . During 2022 the Group transferred 634,608 GDRs (2021: 2,200,813 GDRs), representing 0 .32% (2021: 1 .10%) of the issued shares, upon vesting under the MLTIP . This resulted in a transfer of RR 682 million (2021: RR 2,548 million) out of treasury shares to retained earnings . Research and development activities 34 . During the years ended 31 December 2022 and 2021 the Group has undertaken research and development activities related to software including greater use of biometrics, voice assistant, social networking, machine learning and intelligence . 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 . Research and development activities 35 . The members of the Board of directors as of 31 December 2022 and at the date of this report are presented above . All served throughout the year ended 31 December 2022 and through to the date of these consolidated financial statements, except where stated above . 36 . There were significant changes in the structure and assign- ment of responsibilities of the Board of directors . The new list of the Board of directors is presented above . Branches 37 . The Group did not operate through any branches during the year . Independent auditor 38 . The Independent auditor, Kiteserve Limited, which was ap- pointed at the 2022 Annual General Meeting (AGM) of share- holders in Limassol in November 2022, has expressed its willingness to remain in office. A resolution giving authority to the Board of directors to fix its remuneration will be proposed at the 2023 AGM . Going concern 39 . The Directors have access to all information necessary 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 business plan and budget for 2023-2024, including cash flows and funding facilities, the Directors consider that the Group has adequate resources to continue in operation for the foreseeable future . This as- sessment was made based on the information available to the Group as at the date of approving the financial statements. Corporate Governance Statement As the shares themselves are not listed on the Cyprus Stock Ex- change (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 . All shares are ordinary shares, each ranking pari passu for all purposes and in all respects with all other existing shares . The Company’s Home State, for EU regulatory purposes, 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 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. Copies of the Articles of Association of the Company adopted on 19 November 2021, 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 . londonstockexchange .com/exchange/prices-and-markets/stocks/ summary) 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 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 resources are in place for the Group to meet its objectives and re- views management’s performance . The Board also sets the Group’s values 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 making process, adopted in 2013 . GDRs of TCS Group Holding PLC (a Cyprus incorporated company), with each GDR issued under a deposit agreement dated on or about 24th 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 authorities of the members of the Board are specified by the Articles of Association of the Company and by law . The current Board of directors is comprised of two executive directors includ- ing the chairman, and two independent non-executive directors . The changes in the composition of the Board during the year are disclosed above . 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 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 2022 are listed at the Board of directors and other officers. F-5 F-6 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW31 DECEMBER 2022 Consolidated Management Report (Continued) The Group has established four Committees of the Board. Specific responsibilities have been delegated to those committees as described below . The Strategy Committee comprises its chair Mr .Sergey Arsenyev, one other independent non-executive director and one executive director . The Board is required to undertake a formal and rigorous review annually of its own performance, that of its committees and of its individual directors . That review was recently initiated, in-house, in relation to 2022, looking at overall performance . All directors were invited to provide feedback on the Board’s, the committees’ and individual director’s performance . Analysis of the resultant feedback will be discussed at a meeting of the Board of directors scheduled for early 2023 . The Board has not appointed a senior independent director . As of the year ended 2022 there were three independent non-executive directors, of whom at least one must 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 two executive . From 7 January 2021 there has been no maximum number of directors . The Articles of Association of the Company provide for the retire- ment by rotation of a number of directors at each Annual General Meeting (AGM) . At the AGM on 22 November 2022 one director, Margarita Hadjitofi retired by rotation and she was duly re-elected to the Board until February 2023, when she resigned from the Com- pany . Two other directors, whose initial appointment was made by the Board, also retired then and were duly reelected to the Board: Mr Daniel Wolfe and Mr Sergey Arsenyev . Committees of the Board of directors The Company has established four Committees of the Board of directors: the Audit Committee, the Remuneration Committee, the Strategy Committee and the Risk and Emerging Risk (Sustainability) Committee . Their terms of reference are summarized below . The Audit Committee and the Remuneration Committees were formed in October 2013, whereas the other two were formed in 2021 . 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 additional committees . Committees-current composition The Audit Committee comprises two independent non-executive directors; a chair is appointed on a meeting by meeting basis . The Remuneration Committee comprises two independent non- executive directors, and is chaired by Mr Daniel Wolfe . The Risk and Emerging Risk (Sustainability) Committee currently has no members . All the chairs are (or will be) independent . The current terms of reference of all Committees are available to the public and can be found on the Group’s websites . A short summary of them 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 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 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 effectiveness of the Company’s internal financial controls, risk management systems, internal audit func- tion, the independence and qualifications of the independent au- ditor 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, constitu- tion 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 operates a structured framework around the extensive work it carries out on specific, non-financial statements related areas within its terms of reference . 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 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 Remuneration 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 Remuneration 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 2022 on an ongoing review of the operation of the Group’s MLTIP which launched in 2016 and in considering additional awards to existing and new participants for this and subsequent years . It also with the assistance of external consultants carried out an in-depth review of chief executive officer level compensation packages. effectiveness and to recommend any changes it considers necessary for Board approval . Under its terms of reference the Remuneration Committee is required at least once each 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 consid- ers necessary for Board approval . Role of the Risk and Emerging Risk (Sustainability) Committee The primary purpose and responsibility of the Sustainability Com- mittee is to oversee management and advise the Board of the Com- pany on matters required to enable the Group to (a) operate on a sustainable basis for the benefit of current and future generations; (b) embed sustainable practices and adopt best industry practices across the full range of the Group’s businesses; (c) to enhance the Company’s reputation as a good corporate citizen; (d) drive sustainable growth by maintaining and enhancing the Group’s economic, environmental, human, technological and social capital in the long term; and (e) the effective management of the Group’s sustainability-related risks . In this context sustainable and sustainability encompass the following elements (which are all of equal importance): social, environmental and governance, including climate change; health and safety; security and cybersecurity; diversity and inclusion; responsible lending and sustainable finance; relationships with employees; relationships with communities and other stakehold- ers; and ethical, elements affecting, or relevant to, the Group’s business or operations . Under its terms of reference the Sustainability Committee is required at least once each 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 consid- ers necessary for Board approval . Role of the Strategy Committee The primary purpose and responsibility of the Strategy Commit- tee is (i) to assess the strategic development plans, business plans, major financing and investment proposals and other material issues that affect the development of the Group; (ii) define top-priority areas, strategic targets and major principles of strategic development of the Group and its sustainable devel- opment; and (iii) to provide fresh perspectives on strategy and economic trends, act as a sounding board for new ideas, to look at big picture, long range trends, disruptive new technologies and their potential to be or become opportunities or threats to the Group . Appointment, retirement, rotation and removal of directors The directors of the Company are appointed by the general meeting of shareholders with the sanction of an ordinary resolu- tion. Such an appointment may be made to fill a vacancy or as an additional director . But no director may be appointed unless nom- inated by the Board of directors or a committee duly authorised by the Board of directors or by a shareholder or shareholders togeth- er 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 additional 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, sub- ject 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 composition with his creditors generally; or • • • • becomes prohibited from being a director by reason of any court order made under Section 180 (disqualification from hold- ing 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. Under its terms of reference the Strategy Committee is required at least once each year to review its own performance, constitu- tion and terms of reference to ensure it is operating at maximum In 2022 Mr Stanislav Bliznyuk took over as chair of the management board of Tinkoff Bank. Changes in the top management team F-7 F-8 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW31 DECEMBER 2022 Consolidated Management Report (Continued) 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, 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 liquidity 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 . Significant direct/indirect holdings For the significant direct and indirect shareholdings held in the share capital of the Company, please refer to Note 1 to the consoli- dated financial statements. Internal control and risk management systems in relation to the financial reporting process Policies, procedures and controls exist around financial reporting. Management is responsible for executing and assessing the effec- tiveness 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 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 consolidat- ed financial 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 applica- ble, 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 alterna- tive but to do so . The Board has delegated to the Audit Committee the responsibility 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 organization is divided between Policy Making Bodies and Policy Implementation Bodies . Policy Making Bodies are responsible for establishing risk manage- ment policies and procedures, including the establishment of limits . The main Policy Making Bodies are the Board of directors, the Management Board, the Finance Committee, the Credit Committee and the Business Development Committee . The policy implementation level of the Group’s risk management organization consists of the Finance Department, the Risk Man- agement 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 The composition and diversity information of the Board of directors of the Group for the year ended and as at 31 December 2022 is set out below: Name Sergey Arsenyev Age 51 Male Male/Female Educational/professional background Constantinos Economides 47 Male Margarita Hadjitofi (retired in February 2023) 42 Female Chartered Institute for Securities and Investment, London; European Business School, BA European Business Administration, experience in banking ICAEW, MSc in Management Sciences, experience in ‘Big Four’ profes- sional services firms Lawyer, LLB (Law), Bachelor of Commerce (Business and Finance) Western Sydney University, LLM (Law) University of Sydney, Sustaina- bility Leadership and Corporate Maria Pavlou (retired in February 2023) Mary Trimithiotou Daniel Wolfe 41 44 57 Responsibility at London Business School Female Lawyer, MA Modern History, Law at BPP Law School Female Male ICPAC, FCCA, Licensed insolvency practitioner, experience in ‘Big Four’ professional services firms JD Columbia University School of Law, Dartmouth College BA, USA, experience in investment management Further details of the corporate governance regime of the Company can be found on the website: https://tinkoff-group.com/corporate-governance/tcs-group-holding-plc/. By Order of the Board Constantinos Economides Chairman of the Board Limassol 14 March 2023 F-9 F-10 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEWIndependent Auditor’s Report To the Members of TCS Group Holding PLC Report on the Audit of the Consolidated Financial Statements Our opinion In our opinion, the accompanying consolidated financial statements of TCS Group Holding PLC (the “Company”) and its subsidiaries (together the “Group”) give a true and fair view of the consolidated financial position of the Group as at 31 December 2022, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap . 113 . What we have audited We have audited the consolidated financial statements which are presented in pages 1 to 122 and comprise: • • • • • the consolidated statement of financial position as at 31 December 2022; the consolidated statement of profit or loss and other comprehensive income for the year then ended; the consolidated statement of changes in equity for the year then ended; the consolidated statement of cash flows for the year then ended; and the notes to the consolidated financial statements, which include a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the consolidated financial statements is International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap . 113 . Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) . Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical require- ments that are relevant to our audit of the consolidated financial statements in Cyprus and we have fulfilled our other ethical responsibili- ties in accordance with these requirements and the IESBA Code . Our audit approach Overview As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Board of Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain . As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud . Kiteserve Limited, Correspondence Address: 6, Karaiskakis Street, City House, 3rd floor, CY-3032, Limassol, Cyprus Kiteserve Limited is a private company registered in Cyprus (Reg . No . 435188) . A list of the company's directors including for individuals the present name and surname, as well as any previous names and for legal entities the corporate name, is kept by the Secretary of the company at its registered office at 31 Gladstonos Street, CY-1095 Nicosia, and appears on the company's web site . F-11 (1) STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEWMateriality Audit scope • Overall group materiality: Russian Roubles (“RR”) 4 000 million, which represents approximately 2% of net assets . • We planned and conducted our audit to cover the two largest business com- ponents of the Group, being Banking and Insurance operations, for which we performed full scope audits of each of their complete financial information. • For the other components, we performed substantive audit procedures where necessary . Key audit matters We have identified the following key audit matter: We determined the level of involvement we needed to have in the audit work at the business reporting components to be able to conclude whether sufficient appropriate audit evidence was obtained as a basis for our opinion on the consolidated financial statements as a whole. We worked with other audit firms in relation to the activities of the Group in the Russian Federation. Overall, we have obtained sufficient and appropriate audit evidence regarding the consolidated financial information of the Group as a whole to provide a basis for our audit opinion on the consolidated financial statements. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters . • Credit loss allowance for loans and advances to customers, using the expected credit loss model in line with the requirements of IFRS 9 “Financial Instruments” . Key Audit Matter How our audit addressed the Key Audit Matter Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole. Overall group materiality RR 4 000 million How we determined it Approximately 2% of net assets . Rationale for the materiality benchmark applied We chose net assets as the benchmark because, in our view, it is the benchmark against which the net financial position of the Group is most commonly measured by the users of the consolidated financial statements, and it is a generally accepted bench- mark in particular during periods of volatility of earnings . We chose 2%, which in our experience is an acceptable quantitative threshold for this materiality benchmark . We agreed with the Audit Committee that we would report to them misstatements identified during our audit above RR 200 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons . How we tailored our group audit scope TCS Group Holding PLC is the parent of a group of companies. The financial information of this Group is included in the consolidated finan- cial statements of TCS Group Holding PLC . Considering our ultimate responsibility for the opinion on the Group’s consolidated financial statements we are responsible for the direction, supervision and performance of the group audit . In this context, we tailored the scope of our audit and determined the nature and extent of the audit procedures for the components of the Group to ensure that we perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the significance and/or risk profile of the group entities or activities, the accounting processes and controls, and the industry in which the Group operates. The Group has two primary business components, being Banking (which includes retail business for individuals and small and medium-sized entities business) and Insurance operations, both of which operate primarily in the Russian Federation . The Banking business comprises a number of reporting units being primarily JSC Tinkoff Bank, LLC Microfinance company Т-Finans and LLC Phoenix. The Insurance business comprises solely JSC Tinkoff Insurance. Full scope audit procedures were performed in respect of the Banking and Insurance operations. Other Group business reporting components are not considered to be primary business components for audit purposes . Where necessary, additional substantive audit procedures were carried out across these non-primary components at the financial statement item level in order to achieve the desired level of audit evidence. The consolidated financial statements are a consolidation of all of the above business reporting components . Credit loss allowance for loans and advances to customers, using the expected credit loss model in line with the requirements of IFRS 9 “Financial Instruments” This is a complex accounting standard for which models have been developed by the Group as a basis to calculate expected credit losses (“ECL”) . These calculations involve the application of significant management judgement and estimates . Therefore, we applied focus to the “expected credit loss” models used by the Management for the purpose of compliance with IFRS 9 . These models are described in more detail in Note 40 “Significant Accounting Policies” and Note 30 “Financial and Insurance Risk Management” to the consolidated financial statements. An assessment of the credit loss allowance for loans and advances to customers is performed on a portfolio basis, with the key assumptions being the probability of an account falling into arrears and subsequently defaulting (which is impacted by the definitions of “significant increase in credit risk” and “default”), the estimated recoveries from de- faulted loans and the lifetime period for revolving credit facilities . Statistical models are used for the assessment of the probability of default, recovery rate and the lifetime period for revolving credit facilities . In addition, calculation of the expected credit loss allowance incorporates forward-look- ing information, taking into consideration different macro-economic scenarios and adjusting the probability of default . In relation to the ECL models for measuring credit loss allowance we assessed the appropriateness of the key assumptions used in the methodologies and models of the Group and their compliance with the requirements of IFRS 9 . We reviewed the Group’s back-testing of probabilities of default estimated on the basis of the models by comparing them to the actual default rates evidenced in the loan portfolios . In addition we performed our own back-testing of default probabili- ties based on actual movements into the Stage 3 category of loans in 2022 to ensure the reasonableness of the application of the policies and models used . For a sample of inputs into estimation of recovery rate, we tested them for accuracy and criteria for inclusion into the calculation . With regard to the controls relating to the credit loss allowance calculation process, we assessed and tested on a sample basis the design and operating effectiveness of the key controls over credit loss data and calculations . These key controls included those over classification of certain loans by loan portfolios, allocation of cash received from customers to respective loans and advances to customers, identification of the overdue loans and the data transfer from source systems to the credit loss allowance models . We assessed if and to what extent we could place reliance upon these key controls for the purposes of our audit . In addition, we performed testing, on a sample basis, of the accuracy of allocation of loans to the different “stages” and the completeness of restructured credit- impaired loans . We tested a sample of post model accounting adjustments where applicable, including considering the basis for the adjustment, the logic applied, the source data used, the key assumptions adopted and consistency with prior periods. We verified management assumptions in the context of the economic environment that is affected by the current geopolitical situation . We assessed if the disclosures made in the consolidated financial statements comply with the relevant accounting standards in terms of completeness and accuracy . Reporting on other information The Board of Directors is responsible for the other information . The other information comprises the information included in the Consolidat- ed Management Report including the Corporate Governance Statement, which we obtained prior to the date of this auditor’s report, and the Group’s complete Annual Report and Non-Financial Information and Diversity Statement, which is expected to be made available to us after that date. Other information does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon . (2) (3) In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated . If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact . We have nothing to report in this regard . When we read the Group’s complete Annual Report and Non-Financial Information and Diversity Statement, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members of the Company at the Company's Annual General Meeting and we will take such other action as may be required . Responsibilities of the Board of Directors and those charged with governance for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accord- ance with International Financial Reporting Standards 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 consolidated financial 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 . Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists . Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit . We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion . The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control . • From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal Requirements Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: • • • • • In our opinion, based on the work undertaken in the course of our audit, the consolidated management report has been prepared in ac- cordance with the requirements of the Cyprus Companies Law, Cap . 113, and the information given is consistent with the consolidated financial statements. In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the consolidated management report. We have nothing to report in this respect. In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113, and which is included as a specific section of the consolidated management report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and is consistent with the consolidated financial statements. In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113 . In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we are required to re- port if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113 . We have nothing to report in this respect . Other Matters This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 69 of the Auditors Law of 2017 and for no other purpose . We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to . As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these consolidated financial statements form part of the European Single Electronic Format (ESEF)- prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (ESEF RTS) . This independent auditor’s report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. The consolidated financial statements of TCS Group Holding PLC for the year ended 31 December 2021, were audited by another auditor who expressed an unmodified opinion on those statements on 3 March 2022. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors . • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern . If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report . However, future events or conditions may cause the Group to cease to continue as a going concern . • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit . We remain solely responsible for our audit opinion . • We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our inde- pendence, and where applicable, actions taken to eliminate threats or safeguards applied . The engagement partner on the audit resulting in this independent auditor’s report is Olga Menelaou . Olga Menelaou Certified Public Accountant and Registered Auditor for and on behalf of Kiteserve Limited Certified Public Accountants and Registered Auditors 15 March 2023 (4) (5) 31 DECEMBER 2022 Consolidated Statement of Financial Position Consolidated Statement of Profit or Loss and Other Comprehensive Income Note 31 December 2022 31 December 2021 In millions of RR Note 2022 2020 In millions of RR ASSETS Cash and cash equivalents Mandatory cash balances with the CBRF Due from other banks Investments in securities Repurchase receivables Loans and advances to customers Financial derivatives 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 Other borrowed funds Financial derivatives Brokerage payables Current income tax liabilities 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 Translation reserve Equity attributable to shareholders of the Company Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 5 6 7 7 8 35 9 10 27 11 11 12 12 13 14 15 16 35 10 27 17 18 19 19 20 20 20 38 511,561 1,690 450 325,802 - 606,455 1,020 6 26,747 109 1,946 34,890 24,097 39,217 25,485 316,476 8,589 542 215,311 5,826 606,308 5,963 15,171 49,138 3,524 - 13,964 15,069 52,969 8,895 1,599,475 1,317,745 2,060 1,191,986 301 2,199 217 8,258 2,437 7 45,913 15,844 96,229 28,248 1,393,699 230 26,998 (1,885) 2,731 180,729 (3,214) 243 205,832 (56) 205,776 1,599,475 11,313 945,723 21,680 3,806 90 9,634 125 1,860 59,657 10,365 69,302 8,099 1,141,654 230 26,998 (2,567) 4,745 159,491 (13,131) - 175,766 325 176,091 1,317,745 Approved for issue and signed on behalf of the Board of directors on 14 March 2023 . 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 programme Net interest income Credit loss allowance for loans and advances to customers and credit related commitments Credit loss allowance for debt securities 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 (losses)/gains from derivatives revaluation Net losses from foreign exchange translation Net (losses)/gains from operations with foreign currencies Net losses from precious metals revaluation Net gains from disposals of investments in securities Net gains from financial assets at FVTPL Insurance premiums earned Insurance claims incurred Administrative and other operating expenses Other provisions (charge)/recovery and impairment (loss)/reversal Net (losses)/gains from repurchase of subordinated debt Other operating income Profit before tax Income tax expense Profit for the year Other comprehensive loss Items that may be reclassified to profit or loss Debt securities at FVOCI and Repurchase receivables: - Net (losses)/gains arising during the year, net of tax - Reversal of revaluation reserve, net of tax - Net gains reclassified to profit or loss upon disposal, net of tax Currency translation differences Other comprehensive loss for the year, net of tax Total comprehensive income for the year Profit/(loss) is attributable to: - Shareholders of the Company - Non-controlling interest Total comprehensive income/(loss) is attributable to: - Shareholders of the Company - Non-controlling interest 21 21 21 21 21 21 8 7 22 22 23 24 24 25 17 26 27 205,603 163,620 149 192 (56,772) (28,430) (1,007) (4,076) (80) (2,744) 143,897 132,558 (65,431) (2,071) (67,502) 76,395 125,083 (40,973) (43,478) (8,156) 5,335 (380) (3,785) (130) (7,185) 33,793 (10,454) (95,803) (6,608) (6,608) 1,608 29,826 (9,024) 20,802 (2,081) 11,894 104 243 10,160 30,962 21,024 (222) 31,184 (222) (21,673) (10) (21,683) 110,875 86,069 (38,779) (43,442) (100) (866) (730) - 1,016 7,523 23,063 (4,964) (59,449) 11 (101) 923 81,038 (17,670) 63,368 (14,367) - (613) - (14,980) 48,388 63,471 (103) 48,491 (103) Constantinos Economides Director Mary Trimithiotou Director The notes № 1-42 are an integral part of these Consolidated Financial Statements. 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) 20 20 105.81 321.80 102.55 314.88 F-17 F-18 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW                                                      31 DECEMBER 2022 Consolidated Statement of Changes in Equity Attributable to shareholders of the Company - y a p d e s a b - e r a h S e v r e s e r t n e m i m u m e r p e r a h S e v r e s e r n o i t a u l a v e R n i s t n e m t s e v n i r o f s e i t i r u c e s t b e d s e r a h s y r u s a e r T s g n i n r a e d e n i a t e R - e r n o i t - a l s n a r T e v r e s l a t i p a c e r a h S e t o N 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 230 26,998 1,548 1,849 (3,238) 99,540 - 126,927 89 127,016 In millions of RR Balance at 31 Decem- ber 2020 Profit/(loss) for the year - - - - - 63,471 - 63,471 (103) 63,368 - (14,980) - - - (14,980) - (14,980) - (14,980) - 63,471 - 48,491 (103) 48,388 Other comprehensive income: Investments in debt securities at FVOCI and Repurchase receivables Total comprehensive (loss)/income for the year GDRs buy-back 20 Share-based payment reserve Dividends declared 20,38 28 Changes from business combinations and assets acquisitions Balance at 31 Decem- ber 2021 - - - - - - - - - - - - - - (1,877) 12 3,197 - - - - - 2,548 20 - (3,552) - - - - - - - - - - - (1,865) 5,765 - - (1,865) 5,765 (3,552) (7) (3,559) - 346 346 175,766 325 176,091 21,024 (222) 20,802 (1,977) - (1,977) 11,894 - - 11,894 243 230 26,998 4,745 (13,131) (2,567) 159,491 Profit/(loss) for the year - - - - - 21,024 Other comprehensive loss: Investments in debt securities at FVOCI and Repurchase receivables Reversal of revaluation reserve Currency translation differences Total comprehensive (loss)/income for the year Share-based payment reserve Changes from business combinations and assets acquisitions Balance at 31 Decem- ber 2022 - - - - - - - - - (1,977) - 11,894 - - - - - - - - - 243 243 9,917 - 21,024 243 31,184 (222) 30,962 20,38 - - (2,014) - 682 214 - (1,118) - (1,118) - - - - - - - - (159) (159) 230 26,998 2,731 (3,214) (1,885) 180,729 243 205,832 ( 56) 205,776 Consolidated Statement of Cash Flows In millions of RR Cash flows from/(used in) 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 from operations with foreign currencies received 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 decrease/(increase) in CBRF mandatory reserves Net decrease in due from banks Net increase in loans and advances to customers Net decrease/(increase) in brokerage receivables Net decrease in debt securities measured at FVTPL Net decrease/(increase) in guarantee deposits with payment systems Net decrease/(increase) in other financial assets Net increase in other non-financial assets Net (decrease)/increase in due to banks Net increase in customer accounts Net (decrease)/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 investments Proceeds from sale and redemption of investments in securities Net cash used in investing activities Cash flows from/(used in) financing activities Repayment of debt securities in issue Repayment of subordinated debt Repayment of securitisation Repayment of principal of lease liabilities Proceeds from subordinated debt Proceeds from securitisation Dividends paid GDR’s buy-back Net cash from/(used in) 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 The notes № 1-42 are an integral part of these Consolidated Financial Statements. Note 2022 2021 8 8 205,096 136 (57,499) 5,660 (3,874) 127,689 (35,712) (38,989) (2,532) (1,194) 37,074 (8,440) 3,902 1,403 (82,761) (9,525) 162,165 128 (28,315) 4,510 (2,369) 86,069 (43,554) (44,213) 426 (981) 25,379 (4,090) 3,991 1,093 (47,462) (11,705) 140,434 101,072 6,899 92 (75,511) 22,391 3,509 17,568 3,844 (20,161) (9,924) 269,993 (1,376) 18,098 (185) 158,427 (5,272) (6,884) (33,727) 34,507 375,671 (21,098) (4,427) (1,604) (659) - - - - 32,845 (35,209) 195,085 316,476 511,561 (3,210) 1,345 (255,612) (25,074) 1,541 (728) (18,916) (436) 6,528 320,992 428 30,851 (354) 158,427 (5,272) (6,884) (33,727) 34,507 (11,376) (2,247) (7,745) (1,823) (820) 45,362 5,623 (3,628) (1,877) 32,845 229 180,125 136,351 316,476 29 29 11,29 29 16 28 20 5 5 F-19 F-20 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW                                                 31 DECEMBER 2022 Notes to the Consolidated Financial Statements 1 Introduction These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) for the year ended 31 December 2022 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, Mary Trimithiotou, Daniel Wolfe (from 1 April 2022) and Sergey Arsenyev (from 9 September 2022) . to RR 1 .4 million per individual, individual entrepreneur and small enterprise deposits in case of the withdrawal 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, 3036, Cyprus, and place of business is Interlink Hermes Plaza, Ayiou Athanasiou Avenue 46, Limassol, 4102, Cyprus. The Bank’s and the Insurance Company’s registered address is 2-nd Khutorskaya Street, 38A, building 26, 127287, Moscow, Russian Federation . Presentation currency. These consolidated financial statements are presented in millions of Russian Rubles (RR). The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol 3036, Cyprus. 2 Operating Environment of the Group At 31 December 2022 the share capital of the Company is comprised of ordinary shares (31 December 2021: same) . Each ordinary share has a nominal value of USD 0 .04 per share and carries one vote . As at 31 December 2022 the number of issued ordinary shares is 199,305,492 (31 December 2021: same) . Refer to Note 20 for further information on the share capital . On 25 October 2013 the Group completed an initial public offering of its 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 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 2022 and 2021 in accordance with IFRS 10 definition of control the Group has no ultimate controlling party. On 28 April 2022 The New Rigi Trust, a major shareholder of the Company, disposed of its entire interest in the Company . Interros, a leading Russian investment group with a diverse portfolio of assets including in banking, has acquired an interest in the Group, and consequently now holds approximately 35 .08% of the outstanding shares in the Company . The deal was approved by the Central Bank of the Russian Federation. As a result of the aforementioned deal Mr Vladimir Potanin, ultimate beneficiary owner of Interros, became a minority shareholder with a total shareholding of 35.08% (2021: Mr Oleg Tinkov with a shareholding of 35.08%). The free float of the Company amounts to approximately 64 .92% of the Company’s issued share capital and Guaranty Nominees Limited is the company that holds the ordinary shares of the Company for which GDRs are issued under a deposit agreement made between the Company and JPMorgan Chase Bank NA signed in October 2013 . The free float of the Company amounts to approximately 64.92% of the Company’s issued share capital and Guaranty Nominees Limited is the company that holds the ordinary shares of the Company for which GDRs are issued under a deposit agreement made between the Company and JPMorgan Chase Bank . The material subsidiaries of the Group are set out below . The Group owns 100% of shares and has 100% of voting rights of each of these subsidiaries as at 31 December 2022 and 2021 . JSC “Tinkoff Bank” (the “Bank”) provides on-line retail financial services in Russia, such as retail loans (credit cards, cash loans, consumer loans, car loans, secured loans), deposits and savings, retail debit cards, investment services, SME services, acquiring and payments, other lifestyles and travel services to individuals . 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. LLC “Phoenix” is a debt collection agency . Principal activity. The Group’s principal business activities are retail banking to private individuals, individual entrepreneurs’ and small and medium enterprises’ (“SME”) accounts and banking services, brokerage services, insurance operations, acquiring and pay- ments’ services 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 . This license was re-issued on 11 April 2022 due to changes in requirements related to certain banking operations . The Insurance Company operates under an insur- ance license No . 0191 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 Russian Federation. The Group operates mainly within the Russian Federation . In February 2022, the economic situation in Russia was negatively affected by the geopolitical tension in the region, as well as expanded international sanctions against certain Russian companies, citizens and institutions . The sanctions imposed by the UK, EU and the USA made technically impossible to process pay- ments under Group’ obligations denominated in Euro, US dollar and several other currencies to bond and noteholders the title of which is registered in international clearing systems or depositories. These factors led to a significant increase in volatility in the financial markets, frequent and significant price changes, and an increase in trading spreads. During the period from 18 February to 31 December 2022: • the exchange rate of the Central Bank of the Russian Federation (the CBR) fluctuated in the range from 51.16 to 120.38 rubles per USD (from 55 .3 to 72 .13 rubles per USD during 4Q 2022) and from 53 .86 rubles to 132 .96 rubles per Euro (from 52 .74 to 76 .64 rubles per Euro during 4Q 2022); • RTS stock index fluctuated in the range from 742.9 to 1,465.6 points (in 4Q 2022 the index increased to the level of 1,132 points then decreased to 966 .4 points at the end of the year); • • • the international sanctions list was expanded, which meant that the access for some companies to international financial markets in order to raise funds was limited; the cost of a barrel of oil on international markets is in the range from $53.51 to $128.46 per 1 barrel (during 4Q 2022 oil price fluctu- ated in the range from $53 .51 to $74 .68) . In 3Q 2022 the CBR has improved GDP forecast for 2022 from −4.2% to −3.5%. The CBR predicts that Russian economy will continue to decline in 2023 and return to growth in 2024. Current forecast sees inflation of 12-13% in 2022 and 5-7% in 2023. At the same time, Russian ruble appreciated by approximately 58% against USD for the year ended 31 December 2022 and reached 51 .16, amid fundamental support from large trade surplus and imposed capital controls . From 28 February 2022 the CBR’s Board of Directors decided to increase the key rate to 20% per annum to curb inflationary pressures and protect the savings of citizens from depreciation, which resulted in substantial increase in cost of funding in Russian money markets and customer deposits. Due to the gradual weakening of inflationary pressures, the CBR held few key rate meetings during 2022, follow- ing which the key rate was reduced from 20% to 7 .5% as at 31 December 2022 in order to limit the risks of a large-scale drop in economic activity . The gradual reduction of financial stability risks allowed the regulator to soften currency control measures, including: • • • • cancellation of the 30% limit on advance payments for foreign trade contracts in a number of industries and for small businesses for contracts amounting to less than 15 thousand US dollars; cancellation of the commission previously set at 12% for the purchase of currency through brokers; extends period for sale of foreign currency earnings by exporters from 3 to 120 business days; cancellation of restrictions to sell citizens foreign currency apart from US dollar and euro . Because of the increased volatility in the financial sector, the CBR introduced a number of support measures, being: • The ability to report shares and bonds acquired before 18 February 2022 at market value as of 18 February 2022, and acquired from 18 February to 31 December 2022 - at fair value as of the acquisition date. Applicable for the purposes of regulatory reporting. Effective until 31 December 2022 . F-21 F-22 STRATEGIC REVIEWFINANCIALSTCS GROUP HOLDING PLCANNUAL REPORT 2022DIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 2 Operating Environment of the Group (Continued) • The ability to report shares and bonds acquired before 18 February 2022 at market value as of 18 February 2022, and acquired from 18 February to 31 December 2022 - at fair value as of the acquisition date. Applicable for the purposes of regulatory reporting. Effective until 31 December 2022 . • The ability to use for the purposes of calculating mandatory ratios the values of foreign exchange rates as of 18 February 2022 . Applicable for the purposes of regulatory reporting. Effective until 31 December 2022. • • • • • Relaxation of short-term liquidity ratios for systemically important banks and brokers. Effective until 31 December 2022. To improve the ability of banks to manage liquidity, the CBR intends to reduce to zero the additional and increased additional rates of insurance premiums for banks participating in the deposit insurance system for deposits in rubles and foreign currency attracted in the first and second quarters. The ability not to decrease the estimates of borrowers’ financial standing and debt service quality for loan loss provisioning purposes if borrowers’ financial standing deteriorated after 18 February 2022 as a result of the sanctions. Applicable for the purposes of regulatory reporting. Effective until 31 December 2022. The ability to use the assessments made as of 18 February 2022 for the assets recorded on banks’ balance sheets for loan loss provi- sioning on loans where security assets are classified under quality category I and II. Applicable for the purposes of regulatory reporting. Effective until 31 December 2022. The implementation of the countercyclical macroprudential policy (release of the accumulated macroprudential capital buffer for unse- cured consumer loans and mortgage loans in rubles and foreign currency), starting from 28 February 2022 . This measure has no time limit . The value of add-ons to risk weights for claims issued after 1 March 2022 are released or decreased . On 3 June 2022, the European Union imposed sanctions against the National Settlement Depository (NSD) as the largest securities depository in Russia . As a result, the Bank's funds in euros were blocked on correspondent account in NSD, and all payments on matured coupons and bonds were frozen. The management of the Group made a decision to reclassify these amounts to other financial assets and create provisions for impairments for these blocked amounts . Refer to Note 12 . On 21 September 2022, a partial mobilization of military reservists in Russia has started . The Group, based on the Government law, has implemented repayment holidays for military personnel and members of their families on their loans for the period of service under a contract or mobilization, or for the period of participation in a special operation . As of 31 December 2022 the Group complied with all the required ratios including capital adequacy and liquidity ratios . The Group has formed in advance a liquidity reserve, including cash in rubles and foreign currency, which will ensure the stability of customer service and the stability of the Group . All necessary measures have been taken to ensure uninterrupted non-cash payments and meet the needs of the Group's custom- ers, backing cash desks and ATMs with cash banknotes . Depending on the stress scenario, the Group provides for a liquidity recovery plan that includes a wide range of measures aimed at protecting the funds, assets and interests of customers, as well as ensuring the regular operation of all functions . The Group maintains adequate capital and liquidity and closely monitors its foreign exchange position and cash flow, also it has all the neces- sary technological capabilities for maintaining its operations without interruptions . The Group regularly perfoms stress testing of its business to assess the sustainability of its liquidity and capital positions . These tests demon- strate that Group’s current levels of capital and liquidity are more than sufficient to absorb operational impacts from potential economic shocks and market volatility . 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies The Group makes estimates and assumptions that affect the amounts recognized in the consolidated financial statements and the car- rying 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 ac- counting policies. Judgements that have the most significant effect on the amounts recognized 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: probability of default (“PD”) (impacted by definition of default, SICR, forward-looking scenarios and theirs weights) and loss given default (“LGD”). The Group makes estimates and judgments, which are constantly analysed based on statistical data, actual and forecast information, as well as manage- ment experience, including expectations regarding future events that are considered reasonable in the current circumstances . Refer to Note 30 for further information on ECL measurement . An increase or decrease in PDs by 0 .5% compared to PDs used in the ECL estimates calculated at 31 December 2022 would result in an increase or decrease in credit loss allowances of RR 3 .4 billion (2021: by 0 .5% RR 2 .3 billion) . An increase or decrease in LGDs by 1% compared to LGDs used in the ECL estimates calculated at 31 December 2022 would result in an increase or decrease in credit loss allowances of RR 1 .3 billion (2021: by 1% RR 0 .8 billion) . In 2022, given the high degree of uncertainty associated with the current geopolitical situation, the Group has assessed the impact of the economic environment on the applicable estimates used in calculating ECLs . In determining the amount of impairment, the Group uses forward looking information based on forecasts and data received in the previous economic crisis, which results in a direct ad- justment to the probability of default . As with any forecast, however, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected. The effect of the revision of forecast data led to an increase in the amount of the credit loss allowance by RR 15 .1 billion of additional credit loss allowance as at 31 December 2022 . Refer to Note 8 for detailed breakdown of the charges made as the result of this forward-looking information . In 2021, 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 (refer to Note 30 for details on distribution of scenarios and sensitivity analysis) The impact of the changed macroeconomic conditions assessed using the approaches described above was approximately RR 3 .5 billion of additional credit loss allowance as at 31 December 2021 . The Group implemented a new behavioural model for calculating probabilities of default for retail annuity loans (cash loans, secured loans, POS loans and car loans). Management of the Group believes that the new model results in a more refined assessment of expect- ed credit losses . The impact of this change was accounted for as a change in accounting estimate and was recognized by including in profit or loss RR 78 million of additional credit loss allowance charge. Refer to Note 8 to see impact on each class of loans separately. 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 approximation of lifetime period for ECL calculation for stage 2 and stage 3 loans and advances to customers, refer to Note 30 . Perpetual subordinated debts. A perpetual subordinated bond issue in June 2017 was initially recognised in the amount of USD 295 .8 million (RR 16 .9 billion) . A perpetual subordinated loan participation notes issue in September 2021 was initially recognised in the amount of USD 600 million (RR 43 .5 billion) . Both issues represented by the funds received from investors less issuance costs . Subsequent measurement of these instruments is consistent with the accounting policy for debt securities in issue . Interest expense on these instruments is calculated 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 F-23 F-24 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) perpetual subordinated debts 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 . Initially this portfolio was created from the Bank’s existing portfolio of high-grade bonds, consisting of Russian government bonds . The described change in accounting treatment of the securities managed under hold to collect model is effective starting from 1 January 2022. Refer to Note 7. If the Group had recognized these instruments 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 debts issued by third parties . The Group has taken into consideration that there are genuine contingent settlement provisions that could arise and as such has classified the investments in perpetual subordinated debts 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 judge- ments 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 borrower'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 unbundles 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 24) . 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 22) . The timing of recognition of the two income streams does not materially vary as the insurance coverage is accrued and charged on a monthly basis . Financial assets sales and securitisations . Group’s securitisation activities involve home equity loans and are predominantly transacted using SPEs. In a typical securitisation, the SPE purchases assets financed by proceeds received from the SPE’s issuance of debt certificates and other notes of indebtedness . These assets and liabilities are recorded on the balance sheet of the SPE and consolidated on the Group’s consolidated statement of financial position, unless the accounting requirements for sale were met. At 31 December 2022 the Group has not made a securitisation transaction that resulted in derecognition of transferred assets . The Group assessed that its secured loan portfolio meets the criteria for held to collect business model and determined that the past securitisation transactions have not resulted in derecognition of the assets and therefore are not inconsistent with the held to collect business model . The Group may have intention to sell home equity loans under securitisation, in this case the derecognition requirements should be applied . The derecognition test is performed in 2 steps: 1) Pass-through arrangement . All the following conditions have to be met to conclude that pass-through arrangements meet the criteria: • An entity has no obligation to pay amounts to the eventual recipients, unless it collects equivalent amounts from the original asset . Short-term advances by the entity to the eventual recipients with the right of full recovery of the amount lent plus accrued interest from the amounts eventually payable to the eventual recipients at market rates do not violate this condition . • An entity is prohibited by the transfer contract’s terms from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows. Investments in securities and repurchase receivables FV measurement. As of 31 December 2022 due to the absence of an active market of foreign currency OFZs and сorporate eurobonds, the fair value of these securities measured at FVOCI and FVTPL, for which market quotes were unavailable, was calculated by discounting cash flows, taking into account the transfer of expected coupons to receive in the flow. All coupons with maturity before 30 June 2025 were postponed to this date, as a basic forecast of the Ministry of Economic Development of Russia for maintaining sanctions and tightening them against Russia until 2025 . The discount rate is calculated on the basis of foreign exchange quotes on the OTC market, adjusted for the credit spread. These investments were reclassified from level 1 to level 3. Refer to Note 36. Tax legislation. Russian and Cypriot tax, currency and customs legislation are subject to varying interpretations . Refer to Note 32 . 4 Segment Analysis Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are reg- ularly 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 performance 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 As a result of a rapid change in macroeconomic environment, the management of the Group adopted new eco-system review approach of its busi- ness. Thus the management highlights 4 segments: consumer financial services, retail daily and lifestyle transaction services, SME financial ser- vices and other investments . Each segment comprises certain services and business lines, thanks to the interaction of which synergy is achieved and the efficiency of the Group's business as a whole is ensured. This impacted overall composition of the comparative information. Description of 4 main business segments: Consumer financial services - representing risk-taking services provided to individuals, including retail loans such as credit cards, cash loans, consumer loans, car loans, secured loans, as well as other associated services . Retail daily and lifestyle transaction services - representing transactional financial and daily lifestyle services provided to retail customers, includ- ing mobile app experience, current accounts, debit cards, savings and investments services, loyalty programs, co-branded offers, telecommu- nications and also daily lifestyle and travel services to individuals . Assets of the segment are represented by placements of the funds attracted in customer funds and investments in securities, treasury transactions, other financial and non-financial assets. SME financial services - representing financial services provided to SME customers and merchants. It includes customer current accounts, deposits, transactional and software services and loans to individual entrepreneurs and small to medium businesses . It also includes providing merchants and businesses the ability to process and acquire payments using online and offline channels. Assets of the segment are represented by placements of the funds attracted from customers into investments in securities, treasury transactions, other financial and non-financial assets. Other investments - representing investments in companies and equity instruments that fall outside of the scope of the other segments . The CODM made a decision to allocate such investments into a separate business segment . 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. • An entity has an obligation to remit any cash flows that it collects on behalf of the eventual recipients without material delay Factors that management used to identify the reportable segments (up to 3 months) . 2) Risk-reward assessment. If a transfer meets the pass-through requirements the transferor still needs to assess whether it has transferred suffi- cient risks and rewards associated with the asset to achieve derecognition . If, as a result of the assessment, majority of risks and associated rewards are deemed to be transferred, the asset is derecognized. Otherwise the sale is accounted for as a finance deal. Investments in securities and repurchase receivables classification. As a result of attaining systemically important status, management made a decision to create a portfolio of investments into debt securities managed under a “hold to collect” business model . These securities were accounted for amortised cost, as opposed to fair value, as they will be held until full maturity and will not be susceptible to market price fluctuations. 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 inter- nal reporting. The CODM evaluates performance of each segment based on profit before tax. F-25 F-26 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 4 Segment Analysis (Continued) Information about reportable segment assets and liabilities, profit or loss Segment reporting of the Group’s assets and liabilities as at 31 December 2022 is set out below: In millions of RR Reportable segment assets Consumer financial services 860,310 Retail daily and lifestyle trans- action services SME financial services 611,019 131,040 Other invest- ments 12,092 Elimina- tions Total (14,986) 1,599,475 Reportable segment liabilities 349,479 844,319 214,887 - (14,986) 1,393,699 Segment reporting of the Group’s assets and liabilities as at 31 December 2021 is set out below: In millions of RR Reportable segment assets Consumer financial services 714,440 Retail daily and lifestyle trans- action services SME financial services 504,252 94,921 Other invest- ments 9,607 Elimina- tions Total (5,475) 1,317,745 Reportable segment liabilities 290,833 714,364 141,932 - (5,475) 1,141,654 All jointly used assets, such as fixed assets, rights of use assets and intangible assets were allocated to the segments on the basis of de- tailed analysis of usage of those assets by segments . Segment reporting of the Group’s capital expenditures for the year ended 31 December 2022 is set out below: In millions of RR Intangible assets Tangible fixed assets and right- of-use assets Consumer financial services Retail daily and lifestyle transaction services 8,608 19,388 5,615 6,532 SME financial services 2,426 Total 16,649 2,018 27,938 Total capital expenditure 27,996 12,147 4,444 44,587 Segment reporting of the Group’s capital expenditures for the year ended 31 December 2021 is set out below: Segment reporting of the Group’s income and expenses for the year ended 31 December 2022 is set out below: In millions of RR External revenues Interest income Fee and commission income - Fee and commission income on cards' and current accounts' services - Fee for selling credit protection - Acquiring commission - MVNO and investments services - Other fees receivable Timing of fee and commission income recognition: - At point in time - Over time Total fee and commission income Insurance premiums earned Other operating income Total external revenues Revenues from other segments Interest income Total revenues from other segments TOTAL REVENUES Interest expense Credit loss allowance charge Fee and commission expense Insurance claims incurred Administrative and other operating expenses Other (losses)/ gains Segment result before acquisition expenses Customer acquisition expense SEGMENT RESULT Consumer financial services Retail daily and lifestyle trans- action services SME financial services Other invest- ments Elimina- tions Total 164,765 30,100 10,867 20 - 205,752 3,939 7,060 - - 876 9,427 2,448 11,875 33,793 1,363 211,796 218 218 212,014 (56,173) (63,842) (2,689) (10,454) (34,253) (490) 44,113 (13,156) 30,957 32,532 - 283 17,469 6,788 48,580 8,492 57,072 - 84 87,256 19,854 19,854 107,110 (28,351) (2,002) (21,136) - (43,239) (216) 24,792 - 30,787 - 557 51,686 4,450 56,136 - 161 67,164 6,131 6,131 73,295 (3,534) (1,658) (17,148) - (24,919) (12) - - - - - - - - - - 20 - - - - - - - - - - - (26,203) - - (26,203) (26,203) 26,203 - - - - - 20 - - - - - (9,019) 61,263 7,060 31,070 17,469 8,221 109,693 15,390 125,083 33,793 1,608 366,236 - - 366,236 (61,855) (67,502) (40,973) (10,454) (102,411) (9,737) 12,166 26,024 (8,999) (22,812) (10,646) (7,510) 18,514 - (8,999) - - - 73,304 (43,478) 29,826 Consumer financial services Retail daily and lifestyle transaction services In millions of RR Intangible assets Tangible fixed assets and right- of-use assets Total capital expenditure 4,379 5,256 9,635 SME financial services 1,085 Total 11,702 547 7,574 6,238 1,771 8,009 1,632 19,276 F-27 F-28 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 4 Segment Analysis (Continued) 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 Total Cash and Cash Equivalents 31 December 2022 31 December 2021 56,895 106,693 347,973 316,476 36,955 51,008 228,513 316,476 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 252,399 million as at 31 December 2022 (31 December 2021: RR 152,331 million) . The Group has a right to sell or repledge securities received under re- verse sale and repurchase agreements . The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 December 2022: In millions of RR Excellent Good Monitor Cash balances with the CBRF Placements with other banks and non-bank credit organiza- tions 106,693 - - 3,385 326,901 17,687 Total 110,078 326,901 17,687 Total cash and cash equivalents, excluding cash on hand 106,693 347,973 454,666 Segment reporting of the Group’s income and expenses for the year ended 31 December 2021 is set out below: In millions of RR External revenues Interest income Fee and commission income - Fee and commission income on cards' and current accounts' services - Fee for selling credit protection - Acquiring commission - MVNO and investments services - Other fees receivable Timing of fee and commission income recognition: - At point in time - Over time Total fee and commission income Insurance premiums earned Other operating income Total external revenues Revenues from other segments Interest income Total revenues from other segments TOTAL REVENUES Interest expense Credit loss allowance charge Fee and commission expense Insurance claims incurred Administrative and other operating expenses Other (losses)/ gains Segment result before acquisition expenses Customer acquisition expense SEGMENT RESULT Consumer financial services Retail daily and lifestyle trans- action services SME financial services Other invest- ments Elimina- tions Total 139,634 18,999 5,156 23 - 163,812 3,011 5,639 - - 594 6,838 2,406 9,244 23,063 884 172,825 134 134 172,959 (18,863) (21,602) (2,929) (4,964) (29,830) (1,475) 93,296 (19,612) 73,684 20,135 - 103 14,267 3,294 32,267 5,532 37,799 - 11 56,809 4,746 4,746 61,555 (17,841) (46) (18,679) - (19,021) 522 13,858 - 24,996 - 172 34,612 4,414 39,026 - 28 44,210 2,214 2,214 46,424 (1,644) (35) (17,171) - (10,440) 252 6,490 17,386 (19,520) (13,030) (4,310) 13,076 - - - - - - - - - - 23 - - 23 - - - - (158) 7,443 7,308 - 7,308 - - - - - - - - - - - (7,094) (7,094) (7,094) 7,094 - - - - - 37,004 5,639 25,099 14,267 4,060 73,717 12,352 86,069 23,063 923 273,867 - - 273,867 (31,254) (21,683) (38,779) (4,964) (59,449) 6,742 - - - 124,480 (43,442) 81,038 In the third quarter of 2022 the Group refined the cost allocation model for services (chat, calls and back office customer service), which makes the allocation of administrative expenses more precise across business lines for the year ended 31 December 2022 . Fee and commission income on cards’ and current accounts' services include SME services commission, SMS fee, interchange fee, foreign currency exchange transactions fee, fee for money transfers, cash withdrawal fee and replenishment fee . Interest income and interest expense from other segments of RR 26,203 million for the year ended 31 December 2022 (2021: RR 7,094 million) are calculated using the funds transfer pricing curve . F-29 F-30 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 5 Cash and Cash Equivalents (Continued) 7 Investments in Securities and Repurchase Receivables The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 December 2021: In millions of RR Excellent Good Monitor Total cash and cash equivalents, excluding cash on hand Cash balances with the CBRF Placements with other banks and non-bank credit organizations 51,008 - - 20,298 198,638 9,577 Total 71,306 198,638 9,577 The carrying amount of cash and cash equivalents at 31 December 2022 and 2021 also represents the Group's maximum exposure to credit risk on these assets . Refer to Note 30 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 . The ECL for these balances represents an immaterial amount, therefore the Group did not recognise any credit loss allowance for cash and cash equivalents . Except for reverse sale and repurchase agreements, amounts of cash and cash equivalents are not collateralised . As at 31 December 2022 the fair value of collateral under reverse sale and repurchase agreements was RR 254,683 million (31 December 2021: RR 154,255 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 30 . 6 Due from Other Banks The table below discloses the credit quality of due from banks balances based on credit risk grades: On 1 January 2022 the Group reclassified government bonds amounted to RR 122,805 million, previously accounted for under “Hold to collect and sell” business model, into “‘Hold to collect” business model and hence accounted for at AC, resulting in reversal of RR 14,867 million of negative revaluation reserve recognised through other comprehensive income. The Group managed the reclassified assets under “Hold to collect” business model and made no sale of these government bonds throughout 2021. The effect of reclassifications was as follows: In millions of RR 31 December 2022 1 January 2022 (Reclassified) 31 December 2021 Securities measured at amortised cost 121,283 116,242 - Securities measured at fair value through other comprehensive income Total investments in securities Repurchase receivables at amortised cost Repurchase receivables at fair value through other comprehensive income Total investments in securities and repurchase receivables 199,892 4,627 325,802 - - 104,989 8,136 229,367 6,351 74 207,175 8,136 215,311 - 5,826 325,802 235,792 221,137 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 2022 repurchase receivables were nil . As at 31 December 2021 the sale and repurchase agreements were short-term and matured in January 2022 . Refer to Note 13 for the related liabilities . Refer to Note 36 for the disclosure of the fair value of repurchase receivables . Securities reclassi- fied to repurchase receivables continue to be carried at fair value in accordance with accounting policies for these categories of assets. As a result of the geopolitical tenions described in Note 2, a market for a number of Eurobonds of corporate issuers was absent as of report- ing date . The Group assesses the likelihood of a return of funds on these assets as highly probable . 51,008 228,513 279,521 Securities measured at fair value through profit or loss In millions of RR 31 December 2022 31 December 2021 Placements with other banks with original maturities of more than three months As a result of the imposed sanctions against Russian financial system, receivable cash on redeemed bonds and related coupon payments has been postponed, thus the Group reclassified all these receivables to Other financial assets. Refer to Note 12 for more information. Good Monitor Total due from other banks 100 350 450 542 - 542 The carrying amount of due from other banks at 31 December 2022 and 2021 also represents the Group's maximum exposure to credit risk on these assets . Refer to Note 30 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 30 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 30 . F-31 F-32 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 7 Investments in Securities and Repurchase Receivables (Continued) 1) Investments in securities and repurchase receivables measured at amortised costs 2) 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 Russian government bonds Gross carrying amount Сredit loss allowance Total investments in securities measured at AC Repurchase receivables Gross carrying amount Сredit loss allowance Total investments in securities measured at AC Total investments in securities and repurchase receivables measured at AC 31 December 2022 1 January 2022 (Reclassified) 121,946 (663) 121,283 - - - 116,441 (199) 116,242 6,364 (13) 6,351 121,283 122,593 In millions of RR Investments in securities Corporate bonds Russian government bonds Municipal bonds Foreign government bonds Repurchase receivables Gross carrying amount Сredit loss allowance Total investments in securities and repurchase receivables measured at FVOCI 31 December 2022 1 January 2022 (Reclassified) 31 December 2021 80,559 106,918 7,811 4,604 - - 76,285 17,969 8,367 2,368 74 - 76,285 120,155 8,367 2,368 74 5,752 199,892 105,063 213,001 For the purpose of the credit risk analysis investments in securities and repurchase receivables measured at AC are included in Excellent level . Including credit loss allowance (2,132) (512) (724) For the purpose of ECL measurement investments in securities and repurchase receivables measured at AC are included in Stage 1 . The following table explains the changes in the credit loss allowance (including those pledged under repurchase agreements) and gross carrying amount for debt securities at AC for the year ended 31 December 2022: Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S 212 31 (35) 455 451 663 r o f L C E e m i t e f i l ( 2 e g a t S ) R C I 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 I S l a t o T l a t o T 212 122,805 - 122,805 31 (35) 455 6,629 (7,488) - 451 (859) 663 121,946 - - - - - 6,629 (7,488) - (859) 121,946 In millions of RR Russian government bonds At 31 December 2022 Movements with impact on credit loss allowance charge: Interest income accrued Interest received Other movements Total movements with impact on credit loss allowance charge At 31 December 2022 The table below contains an analysis of the credit risk exposure of investments in securities and repurchase receivables measured at FVOCI at 31 December 2022, for which an ECL allowance is recognised, based on credit risk grades: In millions of RR Russian government bonds - Excellent Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Corporate bonds - Excellent - Good - Monitor - Sub-standard - Doubtful 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) 109,575 109,575 (628) (2,029) 106,918 56,565 18,248 8,427 687 - 83,927 (997) (3,161) 79,769 - - - - - - 155 11 - 211 377 (119) 532 790 Total 109,575 109,575 (628) (2,029) 106,918 56,565 18,403 8,438 687 211 84,304 (1,116) (2,629) 80,559 F-33 F-34 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 7 Investments in Securities and Repurchase Receivables (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (Continued) The table below contains an analysis of the credit risk exposure of debt securities measured at FVOCI at 31 December 2021, for which an ECL allowance is recognised, based on credit risk grades: In millions of RR Municipal bonds - Excellent - Good - Monitor Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Foreign government bonds - Excellent - Sub-standard - Doubtful 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) 2,694 3,461 1,886 8,041 (90) (140) 7,811 2,214 1,917 - 4,131 (93) (46) 3,992 - - - - - - - - - 709 709 (205) 108 612 Total 2,694 3,461 1,886 8,041 (90) (140) 7,811 2,214 1,917 709 4,840 (298) 62 4,604 In millions of RR Russian government bonds - Excellent Total AC gross carrying amount Credit loss allowance Fair value adjustment from AC to FV Carrying value Corporate bonds - Excellent - Good - Monitor - Sub-standard 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 Foreign government bonds - Good - Monitor - Sub-standard 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) 140,678 140,678 (291) (14,480) 125,907 1,002 67,380 9,414 11 77,807 (333) (1,580) 75,894 7,304 1,443 8,747 (46) (334) 8,367 652 1,419 337 2,408 (39) (1) 2,368 - - - - - - - 465 - 465 (15) 15 465 - - - - - - - - - - - - - Total 140,678 140,678 (291) (14,480) 125,907 1,002 67,380 9,879 11 78,272 (348) (1,565) 76,359 7,304 1,443 8,747 (46) (334) 8,367 652 1,419 337 2,408 (39) (1) 2,368 There are no stage 3 investments in securities during the year and as at 31 December 2022 and 2021 . Refer to Note 30 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 accounting policies for these categories of assets . Refer to Note 13 for the related liabilities . F-35 F-36 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 7 Investments in Securities and Repurchase Receivables (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (Continued) The following table explains the changes in the credit loss allowance (including those pledged under repurchase agreements) and gross carrying amount for debt securities at FVOCI for the year ended 31 December 2022: 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 I S r o f 2 e g a t S 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 I S r o f 2 e g a t S l a t o T 291 (212) 79 425 30 - (1) 11 (12) 96 549 628 - - - - - - - - - - - - 291 (212) 140,678 (122,805) 79 17,873 425 30 - (1) 11 (12) 96 86,847 5,680 (12) (566) 2,312 (2,559) - 549 91,702 628 109,575 - - - - - - - - - - - - l a t o T 140,678 (122,805) 17,873 86,847 5,680 (12) (566) 2,312 (2,559) - 91,702 109,575 In millions of RR Russian government bonds At 31 December 2021 (before reclassification) Reclassification to AC At 1 January 2022 Movements with impact on credit loss allowance charge: New originated or purchased 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 allowance charge At 31 December 2022 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 I 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 I S l a t o T l a t o T 333 15 348 77,807 465 78,272 In millions of RR Corporate bonds At 31 December 2021 Movements with impact on credit loss allowance charge: New originated or purchased 205 - 205 25,541 - 25,541 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 allowance charge At 31 December 2022 Municipal bonds At 31 December 2021 Movements with impact on credit loss allowance charge: New originated or purchased Redemption during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allowance charge At 31 December 2022 (6) - (17) (46) 37 (39) 530 6 (2) (6) - 4 (3) 105 - (2) (23) (46) 41 (42) 635 (233) 1,231 (7,136) (9,487) 4,187 (4,062) (3,921) 233 (12) (300) - 29 (29) (9) - 1,219 (7,436) (9,487) 4,216 (4,091) (3,930) 664 104 768 6,120 (88) 6,032 997 119 1,116 83,927 377 84,304 46 3 (6) 6 (6) 47 44 90 - - - - - - - - 46 8,747 - 8,747 3 (6) 6 (6) 47 44 90 476 (1,167) 584 (599) - (706) 8,041 - - - - - - - 476 (1,167) 584 (599) - (706) 8,041 F-37 F-38 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                          31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 7 Investments in Securities and Repurchase Receivables (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (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 I S r o f 2 e g a t S 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 I S r o f 2 e g a t S l a t o T 39 2 (22) (4) (1) (1) 2 - 78 - - 22 (9) - - 8 - 184 39 2,408 2 4,913 - (13) (1) (1) 10 - 262 (762) 227 (2,044) (1,024) 60 (32) 385 - - 762 (37) - - 30 (12) (34) l a t o T 2,408 4,913 - 190 (2,044) (1,024) 90 (44) 351 54 205 259 1,723 709 2,432 In millions of RR Foreign government bonds At 31 December 2021 Movements with impact on credit loss allowance charge: New originated or purchased 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 allowance charge At 31 December 2022 93 205 298 4,131 709 4,840 The following table explains the changes in the credit loss allowance (including those pledged under repurchase agreements) and gross carrying amount for debt securities at FVOCI for the year ended 31 December 2021: Credit loss allowance Gross carrying amount ) L C E s h t n o m - 2 1 ( 1 e g a t S 255 30 - (3) 13 (14) 10 36 291 r o f L C E e m i t e f i l ( 2 e g a t S ) R C I 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 I S l a t o T l a t o T 255 125,422 - 125,422 30 - (3) 13 (14) 10 17,992 (124) (2,001) 7,334 (7,945) - 36 15,256 291 140,678 - - - - - - - - 17,992 (124) (2,001) 7,334 (7,945) - 15,256 140,678 334 14 348 92,939 620 93,559 100 - (12) (88) 15 (17) 1 (1) - - (3) - 1 (1) 4 1 100 - (15) (88) 16 (18) 5 14,216 (92) (5,119) (23,650) 4,665 (5,152) - - - (150) - 40 (45) - 14,216 (92) (5,269) (23,650) 4,705 (5,197) - - (15,132) (155) (15,287) In millions of RR Russian government bonds At 31 December 2020 Movements with impact on credit loss allowance charge: New originated or purchased Foreign exchange losses Disposal during the year Interest income accrued Interest received Other movements Total movements with impact on credit loss allowance charge At 31 December 2021 Corporate bonds At 31 December 2020 Movements with impact on credit loss allowance charge: New originated or purchased 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 allowance charge At 31 December 2021 333 15 348 77,807 465 78,272 F-39 F-40 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                          31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 7 Investments in Securities and Repurchase Receivables (Continued) Investments in securities and repurchase receivables measured at fair value through other comprehensive income 2) (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 I S r o f 2 e g a t S 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 I S r o f 2 e g a t S l a t o T 45 1 (3) 3 2 (2) 1 46 66 22 1 (7) (39) 1 (2) (3) (27) 39 - - - - - - - - - - - - - - - - - - 45 9,273 1 (3) 3 2 (2) 1 137 (552) (68) 590 (633) (526) 46 8,747 66 4,521 22 1 (7) (39) 1 (2) (3) 1,309 44 (926) (2,472) 95 (163) - (27) (2,113) 39 2,408 - - - - - - - - - - - - - - - - - - l a t o T 9,273 137 (552) (68) 590 (633) (526) 8,747 4,521 1,309 44 (926) (2,472) 95 (163) - (2,113) 2,408 In millions of RR Municipal bonds At 31 December 2020 Movements with impact on credit loss allowance charge: New originated or purchased Redemption during the year Disposal during the year Interest income accrued Interest received Total movements with impact on credit loss allowance charge At 31 December 2021 Foreign government bonds At 31 December 2020 Movements with impact on credit loss allowance charge: New originated or purchased 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 allowance charge At 31 December 2021 3) Securities measured at fair value through profit or loss The table below discloses investments in securities measured at FVTPL by classes: In millions of RR 31 December 2022 31 December 2021 Investments in securities Corporate bonds Corporate shares Total investments in securities and repurchase receivables measured at FVTPL 2,349 2,278 4,627 The table below discloses the movements in securities at FVTPL for the year ended 31 December 2022 and 2021: In millions of RR Carrying amount at 1 January Purchases Disposals Interest income accrued Interest received Foreign exchange loss Revaluation (loss)/gain through profit or loss Carrying amount at 31 December 2022 8,136 2,116 (1,158) 129 (136) (80) (4,380) 4,627 2,316 5,820 8,136 2021 4,265 562 (1,729) 169 (128) (153) 5,150 8,136 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 . Interest rate, maturity and geographical risk concentration analysis of investment in securities are disclosed in Note 30 . F-41 F-42 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                             31 December 2022 31 December 2021 • new originated or purchased category represents the gross carrying amounts and the related ECL of purchased loans and loans issued The credit loss allowance for loans and advances to customers recognised in the period is impacted by a variety of factors . The main move- ments in the tables presented below are described as follows: 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; • 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 . Changes to ECL measurement model assumptions and estimates for 2022 represent an increase in the amount of the provision as a result of the negative impact of the economic environment . Refer to Notes 2 and 3 for more information . 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers In millions of RR 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 731,602 (125,730) 605,872 583 606,455 680,152 (77,815) 602,337 3,971 606,308 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 38) . Gross carrying amount and credit loss allowance amount for loans and advances to customers at AC by classes at 31 December 2022 and 2021 are disclosed in the table below: In millions of RR Credit card loans Cash loans Secured loans Car loans POS loans Loans to IE and SME Total loans and advances to cus- tomers at AC 31 December 2021 31 December 2021 Gross carrying amount Credit loss allowance Carrying amount Gross carrying amount Credit loss allowance Carrying amount 399,196 (81,394) 317,802 (52,987) 280,907 280,907 121,267 75,607 79,177 47,893 8,462 (22,898) (3,597) (11,141) (4,913) (1,787) 98,369 72,010 68,036 42,980 6,675 (14,121) (1,986) (5,342) (2,605) (774) 112,174 70,057 72,540 57,743 8,916 112,174 70,057 72,540 57,743 8,916 731,602 (125,730) 605,872 (77,815) 602,337 602,337 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 withdrawal without commission . Secured loans represent loans secured with a real estate (home equity loans) or a car . As at 31 December 2022 home equity loans under securitisation amounted to RR 2,958 million (31 December 2021: RR 4,446 million) . Refer to Note 16 for details of the securitisation of home equity loans . Car loans represent loans for the purchase of a vehicle which is used as collateral under the loan . POS (“Point of sale”) loans represent loans to fund online and offline purchases through internet and offline shops for individual borrowers. 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 . F-43 F-44 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 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 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T In millions of RR Credit card loans At 31 December 2021 15,028 7,562 30,397 52,987 270,113 11,986 51,396 399 333,894 Movements with im- pact 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 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 original cash flows without derecognition At 31 December 2022 4,891 - - 4,891 75,273 - (3,742) 8,574 - 4,832 (14,680) 14,680 - - (7,259) (6,251) 32,931 19,421 (32,709) (8,828) 41,537 422 (1,115) (29) (722) 1,661 (1,622) (39) 4,623 18 2,298 6,939 - - - 138 75,411 - - - - - - - - 11,498 692 (983) 11,207 14,876 (1,677) (5,009) (71) 8,119 10,433 1,918 34,217 46,568 44,421 2,553 36,489 67 83,530 - - - - - - 6,659 6,659 (19,630) (19,630) (1,317) (1,317) - - - - - - 6,659 (19,630) (1,384) - - - 6,659 (19,630) (1,384) - 25,461 - 9,480 (3,873) 46,453 (3,873) 81,394 - 314,534 - 14,539 (3,873) 69,657 - (3,873) 466 399,196 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T In millions of RR Credit card loans At 31 December 2020 16,441 7,560 30,241 54,242 210,074 11,758 45,573 181 267,586 Movements with im- pact 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) 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 original cash flows without derecognition 5,889 - - 5,889 82,751 - (2,412) 6,542 - 4,130 (11,692) 11,692 - - (4,278) (6,649) 24,875 13,948 (22,163) (9,220) 31,383 426 (1,210) (21) (805) 1,813 (1,787) (26) 229 82,980 - - - - - - (1,038) 1,319 (5,707) (5,426) 9,330 (457) (6,313) (11) 2,549 (1,413) 2 19,147 17,736 60,039 228 25,044 218 85,529 - - - - - - - 4,920 4,920 (18,856) (18,856) (2,329) (2,329) - (2,726) (2,726) - - - - - - - 4,920 (18,856) (2,559) - - - 4,920 (18,856) (2,559) - (2,726) - (2,726) At 31 December 2021 15,028 7,562 30,397 52,987 270,113 11,986 51,396 399 333,894 F-45 F-46 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T In millions of RR Credit card loans 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) In millions of RR Credit card loans At 31 December 2021 4,575 2,990 6,556 14,121 109,540 6,392 9,441 922 126,295 Movements with im- pact 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 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 original cash flows without derecognition 2,917 - - 2,917 60,803 - (1,498) 4,653 - 3,155 (7,788) 7,788 - - (1,616) (2,548) 9,271 5,107 (6,979) (3,107) 10,086 77 (234) (5) (162) 872 (867) (5) 2,261 959 425 3,645 - - - 365 61,168 - - - - - - - - 409 (1,614) (285) (1,490) (57,828) (3,499) (171) (277) (61,775) 2,550 1,216 9,406 13,172 (10,920) 315 9,910 88 (607) - - - - - - - - 987 987 (4,000) (4,000) (564) (564) (818) (818) - - - - - - - - 987 (4,000) (590) - - - 987 (4,000) (590) (818) - (818) 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T At 31 December 2020 4,120 2,041 4,894 11,055 56,186 4,767 6,748 430 68,131 Movements with im- pact 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 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 original cash flows without derecognition 4,998 - - 4,998 100,712 - (1,018) 4,039 - 3,021 (7,276) 7,276 - - (1,562) (1,577) 5,673 2,534 (4,319) (1,950) 6,269 63 (285) (4) (226) 940 (936) (4) (338) 180 - (158) - - - 464 101,176 - - - - - - - - (1,688) (1,408) (800) (3,896) (36,703) (2,765) (309) 28 (39,749) 455 949 4,869 6,273 53,354 1,625 5,956 492 61,427 - - - - - - - - 628 628 (3,149) (3,149) (604) (604) (82) (82) - - - - - - - - 628 (3,149) (660) (82) - - - - 628 (3,149) (660) (82) At 31 December 2021 4,575 2,990 6,556 14,121 109,540 6,392 9,441 922 126,295 At 31 December 2022 7,125 4,206 11,567 22,898 98,620 6,707 14,930 1,010 121,267 F-47 F-48 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                        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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Secured Loans 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) In millions of RR Secured Loans At 31 December 2021 538 788 660 1,986 65,478 4,907 1,658 72,043 Movements with impact on credit loss allowance charge for the year: New originated or purchased 253 - - 253 26,679 - - 26,679 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 originated or pur- chased loans Total movements with impact on credit loss allow- ance charge for the year Movements with impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Modification of original cash flows (216) 2,247 - 2,031 (7,239) 7,239 - (57) (302) 938 579 (1,023) (756) 1,779 25 (124) (10) (109) 1,234 (1,211) (23) 276 471 62 809 - - - - - - - (50) (1,496) (262) (1,808) (20,092) (2,369) (510) (22,971) 231 796 728 1,755 (441) 2,903 1,246 3,708 - - - - - - 175 175 (403) (403) 84 84 - - - - - - 175 (403) 175 (403) 84 84 At 31 December 2022 769 1,584 1,244 3,597 65,037 7,810 2,760 75,607 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T At 31 December 2020 256 482 361 1,099 35,243 4,115 874 40,232 Movements with impact on credit loss allowance charge for the year: New originated or purchased 416 - - 416 46,878 - - 46,878 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 originated or pur- chased loans Total movements with impact on credit loss allow- ance charge for the year Movements with impact on credit loss allowance charge for the year: Unwinding of discount (for Stage 3) Write-offs Modification of original cash flows (90) 1,220 - 1,130 (4,569) 4,569 - (45) (217) 549 287 (677) (597) 1,274 14 (91) (1) (78) 1,300 (1,298) (2) (98) 130 9 41 - - - - - - - 85 (736) (90) (741) (12,697) (1,882) (320) (14,899) 282 306 467 1,055 30,235 792 952 31,979 - - - - - - 105 (206) 105 (206) (67) (67) - - - - - - 105 (206) 105 (206) (67) (67) At 31 December 2021 538 788 660 1,986 65,478 4,907 1,658 72,043 F-49 F-50 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T In millions of RR POS loans 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) In millions of RR POS loans At 31 December 2021 851 537 1,217 2,605 56,530 1,891 1,538 389 60,348 Movements with im- pact 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 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 original cash flows without derecognition 582 - - 582 37,955 - (211) 1,080 - 869 (2,838) 2,838 - - (262) (529) 2,454 1,663 (2,065) (783) 2,848 10 (35) (1) (26) 219 (219) 667 258 36 961 - - - - 150 38,105 - - - - - - - - (294) (567) (123) (984) (47,311) (2,060) (298) (132) (49,801) 492 207 2,366 3,065 (14,040) (224) 2,550 18 (11,696) - - - - - - - - 159 159 (789) (789) (39) (39) (88) (88) - - - - - - - - 159 (789) (41) (88) - - - - 159 (789) (41) (88) At 31 December 2022 1,343 744 2,826 4,913 42,490 1,667 3,329 407 47,893 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T At 31 December 2020 527 227 857 1,611 30,278 1,080 1,045 287 32,690 Movements with im- pact 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 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 original cash flows without derecognition 945 - - 945 56,356 - (137) 922 - 785 (2,888) 2,888 - - (174) (195) 1,175 806 (1,022) (314) 1,336 4 (20) - (16) 194 (194) 92 42 - 134 - - - - 113 56,469 - - - - - - - - (406) (439) (149) (994) (26,388) (1,569) (116) (11) (28,084) 324 310 1,026 1,660 26,252 811 1,220 102 28,385 - - - - - - - - 81 81 (522) (216) (522) (216) (9) (9) - - - - - - - - 81 (522) (277) (9) - - - - 81 (522) (277) (9) At 31 December 2021 851 537 1,217 2,605 56,530 1,891 1,538 389 60,348 F-51 F-52 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Car Loans At 31 December 2021 1,712 1,533 2,097 5,342 71,174 3,769 2,939 77,882 Movements with impact on credit loss allowance charge for the year: New originated or purchased 1,011 - - 1,011 30,102 - - 30,102 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 originated or pur- chased 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 Sales Modification of original cash flows without derecognition (736) 3,035 - 2,299 (5,714) 5,714 - (690) (1,153) 4,104 2,261 (3,452) (1,541) 4,993 52 (163) (8) (119) 722 (712) (10) 798 700 114 1,612 - - - - - - - 490 (1,122) (161) (793) (26,539) (1,444) (352) (28,335) 925 1,297 4,049 6,271 (4,881) 2,017 4,631 1,767 - - - - - - - - 358 358 (643) (643) (5) (5) (182) (182) - - - - - - - - 358 (643) (5) 358 (643) (5) (182) (182) At 31 December 2022 2,637 2,830 5,674 11,141 66,293 5,786 7,098 79,177 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Car Loans At 31 December 2020 664 558 922 2,144 30,716 2,012 1,263 33,991 Movements with impact on credit loss allowance charge for the year: New originated or purchased 1,812 - - 1,812 59,391 - - 59,391 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 originated or pur- chased 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 Sales Modification of original cash flows (385) 1,796 - 1,411 (3,703) 3,703 - (382) (375) 1,806 1,049 (1,740) (578) 2,318 19 (103) (3) (87) 622 (617) (5) (75) 136 - 61 - - - - - - - 59 (479) (187) (607) (14,112) (751) (196) (15,059) 1,048 975 1,616 3,639 40,458 1,757 2,117 44,332 - - - - - - - - 179 179 (354) (354) (1) (1) (265) (265) - - - - - - - - 179 (354) (1) 179 (354) (1) (265) (265) At 31 December 2021 1,712 1,533 2,097 5,342 71,174 3,769 2,939 77,882 F-53 F-54 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Loans to IE and SME At 31 December 2021 261 175 338 774 8,809 512 369 9,690 Movements with impact on credit loss allowance charge for the year: New originated or purchased 85 - - 85 2,769 - - 2,769 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 originated or pur- chased 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 (94) 556 - 462 (1,570) 1,570 - (89) (149) 801 563 (647) (202) 849 3 (10) (2) (9) 90 (88) (2) 166 33 7 206 - - - - - - - 68 (359) (50) (341) (3,033) (1,015) 4 (4,044) 139 71 756 966 (2,391) 265 851 (1,275) - - - - 193 193 (146) (146) - - - - 193 (146) 193 (146) At 31 December 2022 400 246 1,141 1,787 6,418 777 1,267 8,462 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p l a t o T In millions of RR Loans to IE and SME At 31 December 2020 335 291 123 749 2,440 323 136 2,899 Movements with impact on credit loss allowance charge for the year: New originated or purchased 158 - - 158 4,863 - - 4,863 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) Movements other than transfers and new originated or pur- chased 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 (47) 318 - 271 (765) 765 - (28) (13) 211 170 (215) (16) 231 - - - - 2 (2) - - - - (157) (421) (7) (585) 2,484 (558) (9) 1,917 (74) (116) 204 14 6,369 189 222 6,780 - - - - 36 (25) 36 (25) - - - - 36 (25) 36 (25) At 31 December 2021 261 175 338 774 8,809 512 369 9,690 In 2021 the Group implemented a new behavioural model for calculating probabilities of default for retail annuity loans (cash loans, secured loans, POS loans and car loans) . Refer to Note 3 for details . The credit loss allowance charge during the year ended 31 December 2022 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 5,660 million (2021: RR 4,510 million) recovery of amounts previously written-off as uncollectible, due to RR 3,902 million (2021: RR 3,991 million) recovery from the purchased loans in excess of their gross carrying amount, and due to RR 3,196 million charge of ECL for credit related commitments (2021: RR 203 million recovery of ECL for credit related commitments) . 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-55 F-56 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) Uncollectible assets are partly written-off against the related credit 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. The contractual amount outstanding of loans and advances to customers which were written off during the reporting period ended 31 De- cember 2022 and are still subject to enforcement activity is equal to RR 15,029 million (2021: RR 16,519 million) . The amount of the ECL for credit related commitments is accounted separately from ECL for credit card loans and is included in other finan- cial liabilities in the consolidated statement of financial position. During the year ended 31 December 2022 the Group sold credit-impaired loans to third parties (external debt collection agencies) by the means of transferring all subsequest risks and rewards without recource to the buyer, which resulted into derecognition of gross amount of RR 2,020 million (2021: RR 3,497 million) and credit loss allowance of RR 1,925 million (2021: RR 3,150 million). The difference between the carrying amount of these loans and the consideration received was recognised as losses in the amount of RR 41 million within credit loss allowance for loans and advances to customers and credit related commitments for the year ended 31 December 2022 (2021: losses in the amount of RR 80 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 millions of RR 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 2021 31 December 2021 1,796,428 1,407,747 852,636 842,696 732,081 762,806 512,612 462,394 1,193,358 585,054 7,740,065 723,075 631,398 612,737 596,141 442,534 480,082 1,089,388 337,574 6,320,676 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 represents the Group's maximum exposure to credit risk on these loans . In March 2022 the Group changed the approach of risk grades and the corresponding range of probabilities of default for measuring credit risk and grading credit card loans, as well as credit related commitments: • Excellent – non-overdue with PD < 5%; • Good – non-overdue with PD in the range of or equal to 5% and less than 25%; • Monitor – PD more or equal to 25%, or 1-30 days overdue . PD is calculated as behavioral PD or application PD if behavioral PD is not available . This triggered changes in the analysis of the credit risk exposure to be presented . Disclosures for comparative periods were amended accordingly . Loans and advances to customers at 31 December 2022 are disclosed as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) Purchased/ originated credit impaired In millions of RR Credit card loans - Excellent - Good - Monitor - Sub-standard - NPL 115,502 163,907 35,125 - - - 2,251 4,617 7,671 - Gross carrying amount 314,534 14,539 Credit loss allowance Carrying amount (25,461) 289,073 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 40,434 57,294 892 - - 98,620 (7,125) 91,495 44,532 18,685 1,820 - - 65,037 (769) 64,268 (9,480) 5,059 - 3,848 1,203 1,656 - 6,707 (4,206) 2,501 - 6,042 1,019 749 - 7,810 (1,584) 6,226 Total 115,502 166,158 39,742 18,265 59,529 399,196 (81,394) 317,802 40,434 61,142 2,095 3,112 14,484 121,267 - - - - 466 466 - 466 - - - - 1,010 1,010 - (22,898) 1,010 98,369 - - - - - - - - 44,532 24,727 2,839 749 2,760 75,607 (3,597) 72,010 - - - 10,594 59,063 69,657 (46,453) 23,204 - - - 1,456 13,474 14,930 (11,567) 3,363 - - - - 2,760 2,760 (1,244) 1,516 F-57 F-58 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) Loans and advances to customers at 31 December 2021 are disclosed as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) Purchased/ originated credit impaired Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Stage 3 (lifetime ECL for credit im-paired) Purchased/ originated credit impaired In millions of RR POS loans - Excellent - Good - Monitor - Sub-standard - NPL 19,349 23,009 132 - - - 982 300 385 - Gross carrying amount 42,490 1,667 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 (1,343) 41,147 42,970 21,947 1,376 - - 66,293 (2,637) 63,656 2,638 3,738 42 - - 6,418 (400) 6,018 (744) 923 - 3,608 1,014 1,164 - 5,786 (2,830) 2,956 - 505 91 181 - 777 (246) 531 - - - 48 3,281 3,329 (2,826) 503 - - - - 7,098 7,098 (5,674) 1,424 - - - - 1,267 1,267 (1,141) 126 - - - - 407 407 - 407 - - - - - - - - - - - - - - - - Total 19,349 23,991 432 433 3,688 47,893 (4,913) 42,980 42,970 25,555 2,390 1,164 7,098 79,177 (11,141) 68,036 2,638 4,243 133 181 1,267 8,462 (1,787) 6,675 In millions of RR Credit card loans - Excellent - Good - Monitor - Sub-standard - NPL 137,379 118,558 14,176 - - - 1,570 3,810 6,606 - Gross carrying amount 270,113 11,986 Credit loss allowance Carrying amount 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 (15,028) 255,085 74,885 34,094 561 - - 109,540 (4,575) 104,965 53,540 11,355 583 - - 65,478 (538) 64,940 (7,562) 4,424 - 3,512 1,134 1,746 - 6,392 (2,990) 3,402 - 3,685 668 554 - 4,907 (788) 4,119 - - - 8,847 42,549 51,396 (30,397) 20,999 - - - 1,167 8,274 9,441 (6,556) 2,885 - - - - 1,658 1,658 (660) 998 - - - - 399 399 - 399 - - - - 922 922 - 922 - - - - - - - - Total 137,379 120,128 17,986 15,453 42,948 333,894 (52,987) 280,907 74,885 37,606 1,695 2,913 9,196 126,295 (14,121) 112,174 53,540 15,040 1,251 554 1,658 72,043 (1,986) 70,057 F-59 F-60 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 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 im-paired) Purchased/ originated credit impaired 44,024 12,223 283 - - 56,530 (851) 55,679 53,275 17,290 609 - - 71,174 (1,712) 69,462 5,997 2,731 81 - - 8,809 (261) 8,548 - 1,105 310 476 - 1,891 (537) 1,354 - 2,115 703 951 - 3,769 (1,533) 2,236 - 265 87 160 - 512 (175) 337 - - - 28 1,510 1,538 (1,217) 321 - - - - 2,939 2,939 (2,097) 842 - - - - 369 369 (338) 31 - - - - 389 389 - 389 - - - - - - - - - - - - - - - - Total 44,024 13,328 593 504 1,899 60,348 (2,605) 57,743 53,275 19,405 1,312 951 2,939 77,882 (5,342) 72,540 5,997 2,996 168 160 369 9,690 (774) 8,916 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 30 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 2022 the gross carrying amount of the loans in courts was RR 52,649 million (2021: RR 39,066 million) . Description of collateral held for loans to individuals carried at amortised cost is as follows at 31 December 2022: In millions of RR Secured loans Car loans Total Loans collateralised by: - residential real estate - cars Total collateralised gross carrying amount (rep- resenting exposure to credit risk for each class of loans at AC) 63,277 10,505 73,782 - 54,943 54,943 63,277 65,448 128,725 Description of collateral held for loans to individuals carried at amortised cost is as follows at 31 December 2021: In millions of RR Secured loans Car loans Total Loans collateralised by: - residential real estate - cars Total collateralised gross carrying amount (rep- resenting exposure to credit risk for each class of loans at AC) 61,428 9,344 70,772 - 54,523 54,523 61,428 63,867 125,295 In the disclosure above the difference between collateralised gross carrying amounts and total gross carrying amount of the respective loans represents unsecured disclosures of RR 26,059 million (31 December 2021: RR 24,630 million) . Unsecured loans arise as a result of the fact that the borrowers have two months to register their cars as collateral for car loans as well as the application of a conservative discount in determining the carrying value of collateral for secured and car loans applied . 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 enhance- ments are less than the carrying value of the asset (“under-collateralised assets”) . The effect of collateral on credit impaired assets at 31 December 2022 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 2,641 1,394 7,211 2,618 119 5,704 65 1,566 The effect of collateral on credit impaired assets at 31 December 2021 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 1,625 843 4,381 1,355 33 2,096 11 929 F-61 F-62 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) 11 Tangible Fixed Assets, Intangible Assets and Right-of-use Assets The values of collateral considered in this disclosure are after a valuation haircut of 15% (2021: 15%) for residential real estate and 20% (2021: 20%) 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 2022 (2021: same). Refer to Note 36 for the disclosure of the fair value of loans and advances to customers . Interest rate, maturity and geographical risk con- centration analysis are disclosed in Note 30 . Information on related party balances is disclosed in Note 38 . 9 Guarantee Deposits with Payment Systems As of 31 December 2022, the balance of guarantee deposits decreased to RR 6 million due to the suspension of the Visa and Mastercard international payment systems in Russia (31 December 2021: RR 15,171 million) . All cards of the international payment systems Visa and MasterCard issued by the Bank will continue to operate as normal in Russia until expiry dates . Transactions with these cards are processed inside Russia in the National Payment Card System and are not affected by sanctions. 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 2021 31 December 2021 26,747 26,747 8,258 8,258 26,747 49,138 9,634 9,634 Brokerage receivables represent placements under reverse sale and repurchase agreements made by the Bank with central counterpar- ty 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 2022 the fair value of collateral of brokerage receivables was RR 27,250 million (31 December 2021: RR 46,721 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 pro- vide 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 2022 the fair value of collateral of brokerage payables was RR 9,483 million (31 December 2021: RR 11,123 million) . ECL measurement approach, interest rate, maturity and geographical risk concentration analysis are disclosed in Note 30 . Refer to Note 33 for the disclosure of the offsetting assets and liabilities. Refer to Note 36 for the disclosure of the fair value of brokerage receivables and brokerage payables . Tangible fixed assets Intangible assets In millions of RR Land Build- ing Equip- ment Lease- hold improve- ments Vehicles Total tangible fixed assets Capital ised Acquired Total intangi- ble assets Cost 31 December 2020 Additions Disposals 396 4,219 8,074 1,391 88 14,168 3,798 8,915 - - - - 5,783 187 1 5,971 4,311 (38) (399) (28) (465) - 7,391 (116) 12,713 11,702 (116) 31 December 2021 396 4,219 13,819 1,179 61 19,674 8,109 16,190 24,299 Additions Disposals 31 December 2022 Depreciation and amortisation 31 December 2020 Charge for the year (Note 25) Disposals 31 December 2021 Charge for the year (Note 25) Disposals 31 December 2022 Net book value - - - - 5,262 1,409 21 6,692 13,288 3,361 (2,698) (384) (39) (3,121) - (4,481) 16,649 (4,481) 396 4,219 16,383 2,204 43 23,245 21,397 15,070 36,467 - (176) (3,912) (694) (45) (4,827) (1,200) (4,431) (5,631) - - (42) (2,083) - 23 (47) 218 (8) 28 (2,180) (1,699) (1,902) (3,601) 269 - 2 2 - (218) (5,972) (523) (25) (6,738) (2,899) (6,331) (9,230) - - - (43) (1,985) (170) (14) (2,212) (3,548) (2,691) - 4 1 6 11 - 3,099 (6,239) 3,099 (261) (7,953) (692) (33) (8,939) (6,447) (5,923) (12,370) 31 December 2021 396 4,001 7,847 656 36 12,936 5,210 9,859 31 December 2022 396 3,958 8,430 1,512 10 14,306 14,950 9,147 15,069 24,097 Intangible assets additions in the amount of RR 13,288 million related to the capitalised the software developments by companies of the Group during the year ended 31 December 2022 (2021: RR 4,311 million) . Other intangible assets acquired during the year ended 31 December 2022 and 2021 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 contracts are typ- ically for fixed periods up to 12 years. The Group does not have extension or termination options of its lease agreements other than lease agreements of low value items . F-63 F-64 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                    31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 11 Tangible Fixed Assets, Intangible Assets and Right-of-use Assets (Continued) The right of use assets by class of underlying items is analysed as follows: In millions of RR Carrying amount at 31 December 2020 Additions Depreciation charge (Note 25) Carrying amount at 31 December 2021 Additions Depreciation charge (Note 25) Carrying amount at 31 December 2022 Office premises 1,140 497 (609) 1,028 21,246 (1,690) 20,584 In 2022, in accordance with the requirements of IFRS 16, the Group recognized right-of-use-asset amounted to RR 18,531 million and relat- ed lease liabilities amounted to RR 18,061 million as a result of the completion of the construction of a new office building, which the Group signed a lease agreement for . Expenses relating to leases of low-value assets and short-term leases in the amount of RR 2,026 million are included in administrative and other operating expenses (2021: RR 1,126 million). Refer to Note 25. Total cash outflow for long-term rental contract leases during the year ended 31 December 2022 was RR 659 million (2021: RR 820 million) . In millions of RR Restricted cash Gross carrying amount Provisions charged Total restricted cash 31 December 2022 10,985 (5,282) 5,703 At 31 December 2022, included in other financial assets are receivables and investments in associates (2021: same). As at 31 December 2022 and 2021 prepaid expenses consist of prepayments for marketing, IT support, plastic cards, rents, security, ATM-service and others . Precious metals represent balance of gold purchased by Bank for the purpose placing precious metals of individuals and legal entities in deposits, as well as make transfers on such accounts . The table below discloses the credit quality of other financial assets based on credit risk grades: In millions of RR - Excellent - Good - Monitor Total other financial assets 31 December 2022 31 December 2021 11,742 18,887 8,588 39,217 29,850 21,340 1,779 52,969 12 Other Financial and Non-financial Assets Refer to Note 30 for the description of the Group’s credit risk grading system . In millions of RR Other Financial Assets Settlement of operations with plastic cards Restricted cash Insurance's financial assets Other Total Other Financial Assets Other Non-Financial Assets Prepaid expenses Precious metals Insurance's non-financial assets Other Total Other Non-Financial Assets 31 December 2021 31 December 2021 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 30 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 30. 22,014 5,703 3,403 8,097 39,217 12,306 9,982 1,295 1,902 25,485 42,995 - 965 9,009 52,969 5,996 - 817 2,082 8,895 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 2021 31 December 2020 5,829 5,484 11,313 4,795 24 4,819 At 31 December 2022 collateral for swap contracts was RR 1,250 million and included in the сorrespondent accounts (31 December 2021: RR 5,829 million) . As at 31 December 2022 sale and repurchase agreements with debt securities at FVOCI are nil (31 December 2021: RR 5,484 million) . Refer Note 7 . 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 30 . Refer to Note 33 and 34 for information on the amounts included in due to banks received under sale and repurchase agreements and fair value of securities pledged . Settlement of operations with plastic cards represents settlements with payment systems and payment channels on operations 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 . Restricted cash represents balances on correspondent and settlement accounts for payments on matured coupons and bonds blocked in banks and non-banking organizations under sanctions . F-65 F-66 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 14 Customer Accounts 16 Other Borrowed Funds 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 2022 31 December 2021 660,537 116,218 194,876 207,054 13,147 4 150 544,561 110,277 146,548 140,287 3,403 647 - 1,191,986 945,723 Refer to Note 36 for the disclosure of the fair value of customer accounts . Interest rate, maturity and geographical risk concentration analy- sis of customer accounts amounts is disclosed in Note 30 . Information on related party balances is disclosed in Note 38 . 15 Debt Securities in Issue In millions of RR Date of maturity 31 December 2022 31 December 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 RR denominated bonds issued in September 2019 12 September 2029 RR denominated bonds issued in April 2019 RR denominated bonds issued in April 2017 RR denominated bonds issued in June 2016 Total debt securities in issue 21 March 2029 22 April 2022 24 June 2021 129 95 77 - - - - 301 122 91 73 10,176 10,105 1,113 836 21,680 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 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 . In 2022, the Group redeemed this issue before the maturity date . 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 . In 2022, the Group redeemed this issue before the maturity date . 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 . The Group redeemed all outstanding bonds of this issue at maturity . 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 concentration analysis of debt securities in issue are disclosed in Note 30 . On 5-6 July 2021 the Group completed the securitisation of home equity loans placed by mortgage agent TB- 1 . The placement included Class A and B bonds secured by a portfolio of home equity loans . Class A bonds are represented by senior tranche totaling RR 5,623 million and were placed with private and institutional investors with a coupon of 7 .9% . Class B bonds are represented by subordinated junior tranche totaling RR 878 million that was retained by the Bank . This junior tranche absorbs substantially all amount of credit risks related to the portfolio . As a result, the securitised home equity loans amounted to RR 5,638 million failed to meet derecognition criteria set out by IFRS 9 and hence continue to be recognised in the Group’s consolidated financial statement. As at 31 December 2022 the carrying value of borrowings through securitisation transaction amounted to RR 2,199 million (31 December 2021: RR 3,806 million) that are represented by Class A bonds . The carrying value of the securitised home equity loans amounted to RR 2,958 million (31 December 2021: RR 4,446 million). Refer to Note 8. The fair value of the securitised home equity loans does not differ ma- terially from the carrying value as at 31 December 2022 (31 December 2021: same) . The resulting net position amounted to RR 759 million (31 December 2021: RR 640 million) . 17 Subordinated Debt In millions of RR Perpetual subordinated loan notes issued in September 2021 Perpetual subordinated loan notes issued in June 2017 Total subordinated debt 31 December 2022 31 December 2021 30,817 15,096 45,913 41,504 18,153 59,657 On 20 September 2021 the Group issued perpetual subordinated loan participation notes with a nominal value of USD 600 million (RR 43,536 million) with zero premium . The Group has a right to repay the notes at its discretion starting from 20 December 2026 and they are repayable in case of certain events other than liquidation . The notes bear a fixed interest rate of 6 .00% p .a . payable quarterly starting from 20 December 2021 . On 15 June 2017 the Group issued perpetual subordinated loan participation notes with a nominal value of USD 300 million (RR 17,109 million) with zero premium . The Group has a right to repay the notes at its discretion starting from 15 September 2027 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 . During the year ended 31 December 2022 the Group repurchased 150,794 subordinated perpetual bonds (TCS-perp) at market price for RR 4,827 million . The net gains from repurchase of subordinated bonds in the amount of RR 4,564 million are recognised in the consolidated statement of profit or loss and other comprehensive income . During the year ended 31 December 2021 the Group repurchased 48,970 subordinated perpetual bonds (TCS-perp) at market price for RR 3,710 million . The net losses from repurchase of subordinated bonds in the amount of RR 101 million are recognised in the consolidated statement of profit or loss and other comprehensive income . All perpetual subordinated loan participation notes have no stated maturity, and 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 30 . Refer to Note 36 for the disclosure of the fair value of financial instruments . F-67 F-68 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 18 Insurance Provisions In millions of RR Insurance Provisions Provision for unearned premiums Loss provisions Total Insurance Provisions 31 December 2021 31 December 2021 10,290 5,554 15,844 7,281 3,084 10,365 Movements in provision for unearned premiums for the year ended 31 December 2022 and 2021 are as follows: 2021 2021 Gross provi- sion Reinsurer’s share of pro- vision Provision net of reinsur- ance Gross provi- sion Reinsurer’s share of pro- vision Provision net of reinsur- ance 7,281 3,009 - (11) - 851 7,270 3,009 3,907 3,374 851 - (11) - - 3,896 3,374 - 10,290 840 11,130 7,281 (11) 7,270 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 pre- miums as at 31 December Movements in loss provisions for the year ended 31 December 2022 and 2021 are as follows: In millions of RR Note OCP and IBNR URP Provision for claims handling expenses Total loss provisions Loss provisions as at 31 December 2020 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 Loss provisions as at 31 December 2021 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 written off 24 24 24 24 1,767 4,475 (190) (3,594) - - 2,458 9,701 9 (7,178) - - - Loss provisions as at 31 December 2022 4,990 - - - - - - - - - - - - 264 264 393 - (47) - 728 (448) 626 - (214) - 957 (1,069) - 300 2,160 4,475 (237) (3,594) 728 (448) 3,084 9,701 (205) (7,178) 957 (1,069) 264 5,554 19 Other Financial and Non-financial Liabilities In millions of RR Other financial liabilities Settlement of operations with plastic cards Trade payables Credit related commitments (Note 32) Loyalty programs Other Total other financial liabilities Other non-financial liabilities Lease liabilities Accrued administrative expenses Taxes payable other than income tax Other Total other non-financial liabilities 31 December 2022 31 December 2021 64,760 18,896 6,530 3,353 2,690 96,229 21,268 4,014 2,653 313 28,248 48,879 11,866 3,334 2,802 2,421 69,302 1,052 3,573 3,167 307 8,099 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. Movements in the credit loss allowance for credit related commitments were as follows for the year ended 31 December 2022: In millions of RR At 31 December 2021 Movements with impact on provi- sion for credit related commitments charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to 12-months ECL (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 recovery to profit or loss for the year At 31 December 2022 Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Gross committed amount 3,318 16 3,334 1,745 (33) (62) 973 570 3,193 6,511 - 4 (28) - 27 3 19 1,745 (29) (90) 973 597 3,196 6,530 F-69 F-70 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                  31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 19 Other Financial and Non-financial Liabilities (Continued) 20 Share Capital, Share Premium and Treasury Shares Movements in the credit loss allowance for credit related commitments were as follows for the year ended 31 December 2021: In millions of RR At 31 December 2020 Movements with impact on provi- sion for credit related commitments charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) - to 12-months ECL (from Stage 2 to Stage 1) Movements other than transfers and new originated or purchased loans Total charge to profit or loss for the year At 31 December 2021 Stage 1 (12-months ECL) Stage 2 (lifetime ECL for SICR) Gross committed amount 3,513 24 3,537 1,331 (96) 12 (1,442) (195) 3,318 - (5) (28) 25 (8) 16 1,331 (101) (16) (1,417) (203) 3,334 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 and Stage 2 due to undrawn limits experiencing significant increases (or decreases) of credit risk 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; In millions of RR except for the number of shares Number of authorised shares Number of outstanding shares Ordinary shares Share premium Treasury shares Total At 1 January 2021 210,034,648 199,305,492 230 26,998 (3,238) 23,990 Increase of number of authorised shares GDRs buy-back GDRs and shares transferred under MLTIP 14,184,030 - - - - - - - - - - - - - (1,877) (1,877) 2,548 2,548 At 31 December 2021 224,218,678 199,305,492 230 26,998 (2,567) 24,661 GDRs and shares transferred under MLTIP - - At 31 December 2022 224,218,678 199,305,492 - 230 - 682 682 26,998 (1,885) 25,343 In November 2021 the Company’s shareholders approved a resolution to increase authorised share capital to USD 8,968,747 .12 by the creation of 14,184,030 new shares of nominal value USD 0 .04 each . As at 31 December 2022 the total number of authorised shares is 224,218,678 shares (31 December 2021: same) with a par value of USD 0 .04 per share . At 31 December 2022 the total number of outstanding shares is 199,305,492 shares (31 December 2021: same) with a par value of USD 0 .04 per share (31 December 2021: same) . At 31 December 2022 and 2021 treasury shares represent GDRs of the Group repurchased from the market for the purposes permitted by Cyprus law including contribution to MLTIP . Refer to Note 38 . At 31 December 2022 the total number of treasury shares is 602,975 (31 December 2021: 1,237,583) . • movements other than transfers and new originated or purchased loans category represents all other movements of ECL for loan com- mitments in particular related to changes in gross carrying amounts of associated loans, ECL model assumptions and other . During the year ended 31 December 2022 no GDRs were repurchased by the Group (2021: the Group repurchased 425,017 GDRs at market price for RR 1,877 million) . There are no movements in Stage 3, as in case of becoming credit-impaired, undrawn limits will be blocked . Interest rate, maturity and geographical risk concentration analysis of other financial liabilities is disclosed in Note 30. Refer to Note 36 for disclosure of fair value of other financial liabilities. Refer to Note 32 for analysis of loan commitments by credit risk grades. During the year ended 31 December 2022 the Group transferred 634,608 GDRs (2021: 2,200,813 GDRs), representing 0 .32% (2021: 1 .10%) of the issued shares, upon vesting under the MLTIP . This resulted in a transfer of RR 682 million (2021: RR 2,548 million) out of treasury shares to retained earnings . 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 diluted earnings per share the Group considered the dilutive effect of share options granted under MLTIP. F-71 F-72 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 20 Share Capital, Share Premium and Treasury Shares (Continued) 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) Information on dividends is disclosed in Note 28 . Reconciliation of the number of shares used for basic and diluted EPS: 2022 21,024 2021 63,471 198,703 197,239 205,010 105.81 102.55 201,569 321.80 314.88 In thousands Note 2022 2021 Weighted average number of ordinary shares in issue used for basic earnings per ordinary share calculation Number of shares attributable for MLTIP 38 Number of shares that would have been issued at fair value Weighted average number of ordinary shares in issue used for diluted earnings per ordinary share calculation 198,703 197,239 7,046 (739) 7,019 (2,689) 205,010 201,569 21 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 Car loans Secured loans POS loans Loans to IE and SME Placements with other banks and non-bank credit organizations Debt securities and repurchase receivables at FVOCI Brokerage operations Debt securities and repurchase receivables at AC 2022 2021 115,998 18,802 11,157 10,158 8,387 4,048 17,438 7,232 5,754 6,629 98,585 17,550 7,987 7,737 7,666 2,631 695 12,710 8,059 - Total interest income calculated using the effective interest rate method 205,603 163,620 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 Subordinated debt Due to banks RR denominated bonds Other borrowed funds 149 192 205,752 163,812 26,254 20,977 3,054 151 3,784 1,234 1,067 251 16,392 5,217 1,317 51 2,692 671 1,879 211 Total interest expense calculated using the effective interest rate method 56,772 28,430 Other similar expense Lease liabilities Total interest expense Expenses on deposit insurance programme Net interest income 1,007 57,779 4,076 80 28,510 2,744 143,897 132,558 F-73 F-74 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                             31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 22 Fee and Commission Income and Expense In millions of RR Fee and commission income Acquiring commission Foreign currency exchange transactions fee SME services commission Brokerage fee Fee for money transfers Fee for selling credit protection SMS fee Subscription fee Interchange fee Income from MVNO services Cash withdrawal fee Replenishment fee Marketing services fee Other fees receivable 2022 2021 31,070 22,647 14,933 12,702 9,509 7,060 6,667 5,664 4,773 4,767 1,631 1,103 438 2,119 25,099 6,717 10,546 11,369 7,123 5,639 5,157 1,982 6,052 2,898 1,155 254 604 1,474 Total fee and commission income 125,083 86,069 Fee and commission income represents the following main types: • Acquiring commission represents commission for processing card payments from online and offline points of sale; • Foreign currency exchange transactions fee represents a commission for foreign exchange transactions of the Group's customers; • SME services commission represents commission for services to individual entrepreneurs and small to medium businesses; • Brokerage fee includes trading fee and brokerage account service fee; • Fee for money transfers represents commission for money transfers to the bank’s account through various payment channels and services; • Fee for selling credit protection represents fee which the Bank receives for selling voluntary credit insurance to borrowers of the Group; • SMS fee represents fee for messages sent to the customers for notification and transaction’s authentication; • Subscription fee is a payment from a client who has subscribed to receive a discount on card service, more cashback, more income from savings and account balance, special loyalty programs from partners; • Interchange fee represents a fee charged to merchants for every credit or debit card transaction; • 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. Refer to Note 40 that describes the types of revenues recognized on a point in time basis and on the over time basis . In millions of RR Fee and commission expense Payment systems Service fees Banking and other fees Costs of MVNO services Payment channels 2022 2021 28,830 28,028 4,383 3,672 3,102 986 3,437 3,863 1,922 1,529 Total fee and commission expense 40,973 38,779 Payment systems fees represent fees for Mir (National payment card system), MasterCard, Visa and other payment systems’ services . Service fees represent fees for statement printing, mailing service, SMS services and others . Costs of MVNO services represent expenses for the traffic, telecommunications service and roaming. Payment channels represent fees paid to third parties through whom borrowers make loan repayments . 23 Customer Acquisition Expense In millions of RR Marketing and advertising Staff costs Cards issuing expenses Partnership expenses Credit bureaux Telecommunication expenses Other acquisition 2022 23,998 11,445 3,439 2,515 964 553 564 2021 26,286 10,695 2,140 1,818 1,641 478 384 Total customer acquisition expenses 43,478 43,442 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 2,443 million for the year ended 31 December 2022 (2021: RR 2,124 million) . F-75 F-76 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 24 Insurance Premiums Earned and Claims Incurred 25 Administrative and Other Operating Expenses In millions of RR Insurance premiums earned Insurance premiums on insurance, co-insurance and reinsurance operations 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 2022 2021 35,951 (3,009) 851 26,437 (3,374) - 33,793 23,063 (7,178) (2,470) (1,069) 263 (3,594) (924) (448) 2 (10,454) (4,964) The Insurance company provides the 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 med- ical and health insurance. In accordance with the terms of individual insurance contracts, the policyholder and beneficiary is an individual who has entered into an insurance contract . In accordance with the terms of the collective insurance contract, the insurer is the Bank that has concluded the collective insurance contract with the Insurance Company, the beneficiary is the insured individual. 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 25. In millions of RR Staff costs Amortization of intangible assets IT and software support Depreciation of fixed assets Short-term and low-value lease Depreciation of right-of-use assets Professional services Write-off of fixed and intangible assets Office maintenance and office supplies Collection expenses Communication services Security expenses Other administrative expenses Note 2022 2021 69,335 45,304 11 11 11 6,239 4,904 2,212 2,026 1,690 1,454 1,059 748 604 481 307 4,744 3,601 2,319 2,180 1,126 609 1,524 68 610 454 471 224 970 Total administrative and other operating expenses 95,803 59,460 The total fees charged by the Company's statutory auditor for the statutory audit of the annual consolidated and separate financial state- ments of the Company for the year ended 31 December 2022 amounted to RR 6 .4 million (2021: RR 7 .5 mln) . The total fees charged by the Company's statutory auditor for the year ended 31 December 2022 for other assurance services amounted to nil (2021: RR 3 .4 million), for tax advisory and compliance services amounted to RR 0 .1 million (2021: RR 1 .5 million) and for other non-assurance services amounted to RR 0 .3 million (2021: RR 0 .1 million) . 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 program - Key employees retention plan - Warrant compensation Total 2022 11,391 11,391 2021 7,505 7,505 7,731 5,740 106 - 248 25 7,837 6,013 The average number of employees employed by the Group during the reporting year, including those who are working under civil contracts, was 64,857 (2021: 43,787) . F-77 F-78 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 26 Other Operating Income In millions of RR Subrogation fee Reimbursement fee Other Total other operating income 27 Income Taxes Income tax expense comprises the following: In millions of RR Current tax Deferred tax Total income tax expense 2022 672 52 884 1,608 2021 318 49 556 923 2022 2021 15,006 11,437 (5,982) 9,024 6,233 17,670 The income tax rate applicable to the majority of the Group’s income is 20% (2021: 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% (2021: 12 .5%) . A reconciliation between the expected and the actual taxation charge is provided below . In millions of RR Profit before tax Theoretical tax expense at statutory rate of 20% (2021: 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 - Non-taxable income 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 2022 29,826 5,965 2021 81,038 16,208 3,547 190 - - (676) (2) 2,481 (11) 62 (461) (606) (3) Income tax expenses for the year 9,024 17,670 Differences between IFRS and taxation regulations in Russia and other countries give rise to temporary differences between 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% (2021: 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, accordingly, 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 taxation authority. The deferred tax assets effect of the movements in temporary differences for the year ended 31 December 2022 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 Deferred tax assets 31 December 2021 (Charged)/credited to profit or loss 31 December 2022 - - - - - - - - - - - - 6,187 (914) (3,942) (313) (4,656) (1,347) 2,758 4,246 21 (27) (165) 1,946 6,187 (914) (3,942) (313) (4,656) (1,347) 2,758 4,246 21 (27) (165) 1,946 The deferred tax liabilities effect of the movements in temporary differences for the year ended 31 December 2022 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 Deferred tax liabilities 31 December 2021 (Charged)/ credited to profit or loss Credited to OCI 31 December 2022 (185) (764) (153) (389) 1,858 (1,093) (38) 206 (73) 3 (1,183) (49) (1,860) 185 764 153 389 325 1,093 31 (206) 73 (3) 1,183 49 4,036 - - - - (2,183) - - - - - - - (2,183) - - - - - - (7) - - - - - (7) F-79 F-80 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW          31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 27 Income Taxes (Continued) 28 Dividends The deferred tax assets effect of the movements in temporary differences for the year ended 31 December 2021 is detailed below: There were no movements in dividends during the year ended 31 December 2022 . 31 December 2020 (Charged)/credited to profit or loss 31 December 2021 The movements in dividends during the year ended 31 December 2021 were as follows: 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 Deferred tax assets 3,673 (506) (186) (200) (1,450) (34) 521 231 (53) (58) (991) 947 (3,673) 506 186 200 1,450 34 (521) (231) 53 58 991 (947) - - - - - - - - - - - - The deferred tax liabilities effect of the movements in temporary differences for the year ended 31 December 2021 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 Deferred tax liabilities 31 December 2020 (Charged)/ credited to profit or loss Credited to OCI 31 December 2021 (123) - - (45) (23) - (144) - - - - (333) (62) (764) (153) (344) (1,878) (1,093) 106 206 (73) 3 (1,183) (5,286) - - - - 3,759 - - - - - - 3,759 (185) (764) (153) (389) 1,858 (1,093) (38) 206 (73) 3 (1,183) (1,860) 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) 2022 304 - - - 304 - 2021 656 3,559 (3,628) (283) 304 0.24 On 10 March 2021 the Board of directors declared an interim dividend of USD 0 .24 (RR 17 .82) per share/per GDR with a total amount allocated for dividend payment of around USD 47 .8 million (RR 3,552 million) . On 11 March 2021 the Group announced suspension of dividend payments for the remainder of 2021 and 2022 to keep the funds inside the Group to provide for organic and/or inorganic growth opportunities . Dividends payable at 31 December 2021 related to treasury shares acquired under MLTIP amounting to RR 304 million are included in other non-financial liabilities. 29 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 2020 Cash flows from repayments Cash flows from proceeds Foreign exchange adjustments Other non-cash movements At 31 December 2021 Cash flows from repayments Foreign exchange adjustments Other non-cash movements At 31 December 2022 Debt securities in issue Perpetual subor- dinated debts Lease liabilities 23,910 (2,247) - - 17 21,680 (21,098) - (281) 301 20,755 (7,745) 45,362 999 286 59,657 (4,427) (4,912) (4,405) 45,913 1,340 (820) - - 532 1,052 (659) - 20,875 21,268 Total 46,005 (10,812) 45,362 999 835 82,389 (26,184) (4,912) 16,189 67,482 F-81 F-82 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 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 manage- ment 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 expo- sure to risk stays within these limits . The operational and legal risk management 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 coun- terparties 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 cli- ents, 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 finan- cial 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 32) . The Bank has 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 . Сredit cards are issued with a limit of up to RR 700 thousand, with monthly debt repayment. For cash loans, minimum requirements are listed below: • The requested loan term is from 3 to 36 months; • Cash loan volume does not exceed RR 5 million . 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: • The requested loan secured with a car amount does not exceed RR 7 million, 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 does not exceed RR 15 million, 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 encum- brances . For car loans minimum requirements are listed below: • The requested loan term is from 1 to 5 years; • Car loan volume does not exceed RR 3 million; • 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 million and loan term to 6 months; • Credit line under government contract: loan volumes up to RR 10 million, loan term - until the end of the contract, maximum 12 months; • Gap financing: a short-term overdrafts to close cash gaps up to RR 10 million, loan term up to 45 days; • Investment credit line secured by real estate: loan volumes up to RR 15 million and loan term to 5 years . The requirement 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 appli- cant 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; b) if the borrower had lost his/her source of income, then borrower account might be blocked till verification of his/her new employment; if borrower’s loan debt burden in other banks is substantially bigger than at the time of loan origination or the credit quality of the c) borrower decreases significantly then the borrower’s limit for credit might be reduced accordingly. When customers experience serious difficulties with their current debt servicing, they 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: a) the client’s account balance was fixed, accrual of interest stopped; b) information about the client is considered to be up to date; c) the client denied restructuring program; d) term of limitation of court actions has not expired; e) court process is economically justified. F-83 F-84 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) When loans become unrecoverable or not economically viable to pursue further collection efforts, the Collection Department 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. In 2022 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 Russian authorized credit rating agency ACRA in case these financial instruments have risk grades estimated by national rating agencies (using ACRA ratings and in case of their absence – Expert RA or National RA ratings adjusting them to ACRA’s categories using a reconciliation table) . In 2021 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 reconciliation table) . The Group applies risk grades and the corresponding range of probabilities of default (PD): Master scale credit risk grade Excellent Good Monitor Sub-standard Doubtful Corresponding interval PD < 0 .1% with PD range of or equal to 0 .1% and less than 2 .5% PD in the range of or equal to 2 .5% and less 12 .5% PD in the range of or equal to 12 .5% and less 18 .5% PD in the range of or equal to 18 .5% and less 30% 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 For measuring credit risk and grading loans and advances to customers, credit related commitments and those financial instruments 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 For credit cards: non-overdue with PD in the range of or equal to 5% and less than 25%; for other types of loans: all other non-overdue loans For credit cards: PD more or equal to 25%, or 1-30 days overdue; for other types of loans: 1-30 days overdue 31-90 days overdue or restructured loans 0-90 days overdue 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-weight- ed 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 difference 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 POS loans lifetime period is equal to 24 months, cash loans to 36 months, secured loans to 72 months, car loans to 48 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 instrument. 12-month ECL – the portion of lifetime ECLs that represent the ECLs resulting from default events on a financial instrument that are possi- ble 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-look- ing information . F-85 F-86 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) 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 recognition. ECL for POCI financial assets is always measured on a lifetime basis (Stage 3), so at the reporting date, the Group only recognises the cumu- lative 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; Default and credit-impaired assets – assets for which a default event has occurred . • for all other financial assets except FVTPL: assessment based on external ratings. 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 monitor- ing the triggers stated below . The criteria used to identify SICR are monitored and reviewed periodically for appropriateness 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 back- stop 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 esti- mated 18 months ago or as of the date of initial recognition (if it occurred less than 18 months ago) by 3 times and 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 • if number of overdue payments for the last 6 due dates exceeds 2, or if PD exceeds 50% . 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 periods, depending on whether or not the credit risk of the borrower has increased significantly since initial recognition. This approach can be summarized 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 as 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 . The Group performs an assessment on a portfolio basis for the retail loans . This approach incorporates aggregating the portfolio into homo- geneous 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 . where: – probability of default in moment (can’t be higher than 100%); – exposure at default in moment ; – loss given default in moment ; – adjustment to PD and LGD depending on macroeconomic factors; – 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 . The EADs are determined based on the expected payment profile, on an individual basis. For revolving products, the EAD is predicted 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 borrower-specific behavioural characteristics . For other products EAD is equal to current exposure as there is no credit limit to utilize . F-87 F-88 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) 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 charac- teristics 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 de- fault 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 cards and POS loans LGDs are calculated on portfolio basis based on recovery statistics of defaulted loans over the period of 48 months, for cash loans - 30 months, and for loans to SME - 12 months . For secured loans and car loans and 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 described 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. 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 cal- culated 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 described 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 national rating agencies - ACRA and in case of rating’s absence – Expert RA or National RA (2021: by international rating agencies - Fitch and in case of rating’s absence - Moody’s or Standard & Poor’s) . Forward-looking information incorporated in the ECL models. The calculation of ECLs incorporates forward-looking information . In 2021 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 under- stand the way how changes in these variables historically impacted default rates. Three different scenarios are used: base, optimistic and pessimistic . As at 31 December 2021 the scenarios are weighted accordingly with base scenario having the 92 .7% weight, optimistic scenario having the 0 .1% weight and pessimistic scenario having the 7 .2% weight . In 2022, given the high degree of uncertainty associated with the current geopolitical situation, the model with macro scenarios became in- applicable . The Group assessed the impact of the economic environment on the applicable estimates used in calculating ECLs . In determin- ing the amount of impairment, the Group uses forward looking information based on forecasts and data received in the previous economic crisis, which results in a direct adjustment to the probability of default . As with any forecast, however, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected . Backtesting – the Group regularly reviews its methodology and assumptions to reduce any difference between the estimates 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) inter- est rate, both of which are exposed to general and specific market movements. The priority goal of market risk management 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: At 31 December 2022 At 31 December 2021 Non-de- rivative monetary financial assets Non-de- rivative monetary financial liabilities Derivatives Net posi- tion Non-de- rivative monetary financial assets Non-de- rivative monetary financial liabilities In millions of RR Deriva- tives Net posi- tion RR USD CNY Euro Gold HKD GBP Others Total 1,323,136 (1,165,857) (5,435) 151,844 1,002,784 (835,131) (23,351) 144,302 124,156 (129,783) 6,401 774 206,008 (228,623) 29,227 6,612 31,620 (20,656) 23,124 (25,141) 4,478 3,158 272 1,984 (4,478) (3,118) (964) (2,503) - (8) - - - (155) 10,964 368 (366) (2,025) 55,093 (53,866) - 40 (692) (674) - 11 2,368 3,698 - (9) (2,360) (3,844) - (3) - - - - 2 1,224 - 2 8 (146) 1,511,928 (1,352,500) 803 160,231 1,270,330 (1,124,199) 5,873 152,004 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 . F-89 F-90 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) 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% (2021: by 20%) USD weakening by 20% (2021: by 20%) CNY strengthening by 20% (2021: by 20%) СNY weakening by 20% (2021: by 20%) Euro strengthening by 20% (2021: by 20%) Euro weakening by 20% (2021: by 20%) HKD strengthening by 20% (2021: by 20%) HKD weakening by 20% (2021: by 20%) GBP strengthening by 20% (2021: by 20%) GBP weakening by 20% (2021: by 20%) At 31 December 2022 At 31 December 2021 Impact on profit for the year Impact on total equity Impact on profit for the year Impact on total equity 108 (108) 1,529 (1,529) (282) 282 6 (6) (97) 97 108 (108) 1,529 (1,529) (282) 282 6 (6) (97) 97 1,322 (1,322) 0 .3 (0 .3) 245 (245) 0 .3 (0 .3) 1 (1) 1,322 (1,322) 0 .3 (0 .3) 245 (245) 0 .3 (0 .3) 1 (1) 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 unex- pected movements arise . Management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken . 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 significantly 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 (2021: 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 2022 Total financial assets 646,309 224,438 126,055 268,368 247,778 1,512,948 Total financial liabilities (815,666) (323,365) (89,646) (80,534) (43,506) (1,352,717) Net interest sensitivity gap at 31 December 2022 31 December 2021 (169,357) (98,927) 36,409 187,834 204,272 160,231 Total financial assets 504,182 215,387 128,403 245,696 182,625 1,276,293 Total financial liabilities (610,067) (238,762) (119,402) (102,641) (53,417) (1,124,289) Net interest sensitivity gap at 31 December 2021 (105,885) (23,375) 9,001 143,055 129,208 152,004 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 implies assessment of impact on net interest income of a shift in interest rates by 200 basis points . At 31 December 2022, if interest rates at that date had been 200 basis points lower/higher (31 December 2021: 200 basis points), with all other variables held constant, profit for the year would have been RR 3,205 million (31 December 2021: RR 3,040 million) lower/higher, equity would have been RR 3,205 million (31 December 2021: RR 3,040 million) lower/higher . The Group monitors interest rates for its financial instruments. The table below summarizes interest rates for the years 2022 and 2021 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 At 31 December 2022 At 31 December 2021 RR USD EURO GPB Other RR USD EURO GPB Other Cash and cash equivalents Loans and advances to customers Due from banks Investments in securities Repurchase receivables 1 .0 28 .2 2 .0 5 .8 - 0 .0 - - 5 .4 - -0 .1 1 .7 - 2 .9 - Brokerage receivables 23 .9 21 .1 21 .9 Liabilities Due to banks Customer accounts Other borrowed funds Debt securities in issue Brokerage payables Subordinated debt 12 .1 5 .8 7 .9 0 .0 0 .0 0 .9 - - 22 .5 21 .2 - 8 .2 - 0 .5 - - - - - - - - - - - 0 .0 - - 3 .3 - - - 0 .1 0 .0 - - - - - - - - 0 .0 28 .9 0 .0 6 .9 5 .9 0 .0 - - 2 .3 0 .0 0 .0 1 .7 - 1 .3 0 15 .2 15 .0 15 .2 4 .8 2 .7 8 .6 4 .9 0 .0 0 .3 - - 15 .2 15 .4 - 8 .2 - 0 .1 - - - - 0 .0 0 .0 - - - 0 - - - - - - - - 0 .0 0 .0 - - - - - - - - The sign “-” in the table above means that the Group does not have the respective assets or liabilities in the corresponding currency . F-91 F-92 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) The geographical concentration of the Group’s financial assets and liabilities at 31 December 2021 is set out below: Geographical risk concentrations. The geographical concentration of the Group’s financial assets and liabilities at 31 December 2022 is set out below: In millions of RR Financial assets Russia OECD Other Non-OECD Listed Total In millions of RR Financial assets Russia OECD Other Non-OECD Listed Total Cash and cash equivalents 473,552 3,466 34,543 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 Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities 1,690 450 605,872 1,020 - - - - - - 583 - 307,253 13,209 5,340 26,747 - 39,145 - 6 - - - 72 1,455,729 16,681 40,538 2,060 1,191,986 - 2,199 217 8,258 - 5,554 96,201 - - - - - - - - - - - - - - - - - - - 28 28 - - - - - - - - - - - - - 301 - - - 45,913 - - 511,561 1,690 450 606,455 1,020 325,802 26,747 6 39,217 1,512,948 2,060 1,191,986 301 2,199 217 8,258 45,913 5,554 96,229 46,214 1,352,717 400,898 Total financial liabilities 1,306,475 Credit related commitments (Note 31) 400,898 Cash and cash equivalents 295,864 20,612 Mandatory cash balances with the CBRF Due from other banks Loans and advances to customers Financial derivatives Investments in securities Repurchase receivables Brokerage receivables 8,589 542 602,337 5,963 209,477 5,826 49,138 - - - - - - - Guarantee deposits with payment systems 1,399 13,772 - - - 3,971 - 5,834 - - - 25 Other financial assets Total financial assets Financial liabilities Due to banks Customer accounts Debt securities in issue Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities 52,944 - 1,232,079 34,384 9,830 11,313 945,723 - 3,806 90 9,634 - 3,084 69,170 - - - - - - - - 67 67 - - - - - - - - - 65 65 - - - - - - - - - - - - - - 316,476 8,589 542 606,308 5,963 215,311 5,826 49,138 15,171 52,969 1,276,293 11,313 945,723 21,680 21,680 - - - 59,657 - - 3,806 90 9,634 59,657 3,084 69,302 81,337 1,124,289 307,806 Total financial liabilities 1,042,820 Credit related commitments (Note 31) 307,806 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 counterparties actually outstanding to/from offshore com- panies 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 2022 and 2021 . 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, retail 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 securities. The Group keeps all available cash in diversified portfolios of liquid instruments such as a correspondent account with CBRF and overnight placements in high-rated commercial banks, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements . The available cash at all times exceeds all accrued financing costs falling due within half a year plus two months of regular operating costs. F-93 F-94 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) The maturity analysis of financial liabilities at 31 December 2021 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 balance sheet liquidity ratios against regulatory requirements . The liquidity analysis takes into account the covenant requirements and ability of the Group to waive any potential breaches 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 2022 and 2021. 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 issu- ance 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 2022 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 undiscounted cash flows differ from the amount included in the consolidated statement of financial position because the consolidated 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 2022 is as follows: In millions of RR Liabilities Due to banks Customer accounts Debt securities in issue Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Lease liabilities 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 5,600 - - 3,993 1,720 11,313 545,363 117,367 100,511 114,368 73,213 950,822 153 - 51 9,634 365 350 66,683 64 292 - 198 - 698 724 - 92 - 1,495 940 31,608 34,488 - 249 - - 334 - 3,806 6,602 - 3,806 7,434 9,634 1,075 18,908 39,707 60,753 724 - 146 - 587 - 275 - 699 3,084 - 66,683 109 686 - 307,806 In millions of RR Liabilities Due to banks Customer accounts Debt securities in issue Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities Lease liabilities 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 810 - - - 1,250 2,060 753,881 177,987 100,626 85,832 77,387 1,195,713 - - 53 8,258 302 825 91,000 127 - - - - 579 1,492 1,606 352 - - - 49 - 301 2,199 103 - - - 6,397 - 301 2,199 6,602 8,258 772 1,923 43,109 46,685 1,492 1,564 784 - 889 1,435 1,721 - 856 624 5,554 96,229 32,890 35,874 - 400,898 Credit related commitments (Note 32) 307,806 Total potential future payments for financial obligations 936,069 119,371 104,200 139,405 157,464 1,456,509 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. Expo- sure 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 interbank 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 . Credit related commitments (Note 31) 400,898 Total potential future payments for financial obligations 1,256,154 182,016 105,287 94,403 162,513 1,800,373 F-95 F-96 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                        Mandatory cash balances with the CBRF Due from other banks Loans and advances to cus- tomers Financial derivatives Investments in securities Brokerage receivables Guarantee deposits with pay- ment systems 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 31 December 2022 is present- ed 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 494,434 17,127 - - - 1,027 - 156 - 131 - 139 - 237 450 - - - 511,561 1,690 450 83,847 97,928 102,608 112,147 181,607 28,318 606,455 61 202,142 26,747 1 - - - 1 - - - 1 81 - - - 1 71 959 - 1,020 63,583 60,077 325,802 - 2 6,867 - - - 26,747 6 39,217 Other financial assets 32,073 125 Total financial assets 840,332 115,337 102,821 112,358 253,705 88,395 1,512,948 Liabilities Due to banks 810 - - - 1,250 Customer accounts 724,102 110,046 92,656 98,110 167,072 Debt securities in issue Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions - - 194 8,258 - 825 Other financial liabilities 91,000 - - - - - - - - 301 2,199 23 - - - - - 880 1,492 1,606 880 1,760 42,393 1,492 1,564 889 1,435 856 624 Total financial liabilities 825,189 114,024 96,592 104,717 212,195 - - - - - - - - - - 2,060 1,191,986 301 2,199 217 8,258 45,913 5,554 96,229 1,352,717 Net liquidity gap at 31 December 2022 Cumulative liquidity gap at 31 December 2022 15,143 1,313 6,229 7,641 41,510 88,395 160,231 15,143 16,456 22,685 30,326 71,836 160,231 - Provision for unearned premiums in the amount of RR 10,290 million (2021: RR 7,281 million) is not included in the insurance provisions stated above . Refer to Note 18 . The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 31 December 2021 is present- ed 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 In millions of RR Assets Cash and cash equivalents 309,364 7,112 Mandatory cash balances with the CBRF Due from other banks 4,794 - 901 - - 673 - - 780 - From 1 to 5 years - 1,441 542 More than 5 years - - - Total 316,476 8,589 542 Loans and advances to customers 79,485 95,910 100,446 109,658 190,672 30,137 606,308 Financial derivatives Investments in securities Repurchase receivables Brokerage receivables Guarantee deposits with payment systems Other financial assets 111 209,491 5,826 49,138 1,989 51,883 4,052 1,800 - 5,963 - - - - - - - - - - 5,820 215,311 - 754 - 5,826 49,138 15,171 52,969 2,400 2,513 2,744 53 31 37 4,771 965 Total financial assets 712,081 106,376 103,663 117,271 200,191 36,711 1,276,293 Liabilities Due to banks 5,600 - - 3,993 1,720 Customer accounts 527,741 99,159 74,102 85,933 158,788 - - 11,313 945,723 Debt securities in issue Other borrowed funds Financial derivatives Brokerage payables Subordinated debt Insurance provisions Other financial liabilities - - 59 9,634 872 1,113 873 7,263 11,559 21,680 - - - - - - - - - - 31 - - 1,046 1,046 19,798 37,767 350 66,683 724 825 724 787 587 698 699 309 3,806 3,806 - - - - - 90 9,634 59,657 3,084 69,302 Total financial liabilities 610,067 102,626 77,772 111,882 206,577 15,365 1,124,289 Net liquidity gap at 31 December 2021 Cumulative liquidity gap at 31 December 2021 102,014 3,750 25,891 5,389 (6,386) 21,346 152,004 102,014 105,764 131,655 137,044 130,658 152,004 - Provision for unearned premiums in the amount of RR 7,281 million is not included in the insurance provisions stated above . Refer to Note 18 . As at 31 December 2022 all the investments in debt securities are classified within demand and less than one month as they can easily be sold through REPO operations and provide immediate liquidity to the Group. All current accounts of individuals are classified using outflow curve (2021: same) . The allocation of deposits of individuals considers the statistics of autoprolongations and top-ups of longer deposits with the funds from short- er 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 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 30 Financial and Insurance Risk Management (Continued) Effect of changes in the key assumptions as at 31 December 2022: 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 factors 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 accounts 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 occurrence of an insurance event and the uncertainty of the amount and time of occurrence of the loss associated with it . In millions of RR except for the number of claims The average cost of insurance claims The average number of claims Change in assump- tions Effect on insur- ance 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 – 10% + 10% – 10% + 10% (500) 500 (500) 500 27 (27) 27 (27) 473 (473) 473 (473) 422 (422) 422 (422) The insurance risk management process covers all stages, from the stage of development of insurance rates to the settlement of losses . Effect of changes in the key assumptions as at 31 December 2021: In millions of RR except for the number of claims Change in assumptions Effect on insur- ance 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 – 10% + 10% – 10% + 10% (256) 256 (256) 256 1 (1) 1 (1) 255 (255) 255 (255) 204 (204) 204 (204) 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 expected 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 contract by analysing, 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 portfo- lio – it insures a large number of small risks, which, in particular, is achieved through the remote provision of insurance services almost throughout the Russian Federation . The Insurance 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 insurance 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. F-99 F-100 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 31 Management of Capital The Group’s objectives when managing capital are (i) for the Bank to comply with the capital requirements set by the Central Bank of the Rus- sian 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 2022 was RR 205,776 million (31 Decem- ber 2021: RR 176,091 million) . In October 2021 the Bank was added to the Bank of Russia’s list of 13 systemically important banking institutions due to a recognition of the Bank’s growing presence in the financial market and expanding customer base of its ecosystem. As a result, from 1 January 2022 the Bank is obliged to comply with the additional capital adequacy buffers +1% to the minimum required statutory equity capital adequacy ratio (N1.0). 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 . In accordance with information provided internally to key management personnel, the amount of regulatory capital of the Bank calculated in accordance with the methodology set by CBRF as at 31 December 2022 was RR 208,776 million, and the equity capital adequacy ratio (N1 .0) was 16 .62% (31 December 2021: RR 206,955 million and 15 .27%) . Minimum required statutory equity capital adequacy ratio (N1 .0) was 9% as at 31 December 2022 (31 December 2021: 8%) . 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 Translation reserve 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 2022 31 December 2021 230 26,998 (1,885) 2,731 180,729 (3,214) 243 (24,097) (56) 181,679 45,913 227,592 227,592 927,170 386,928 32,072 230 26,998 (2,567) 4,745 159,491 (13,131) - (15,069) 325 161,022 59,657 220,679 220,679 794,241 261,813 32,484 Total risk weighted assets (RWA) 1,346,170 1,088,538 Common equity Tier 1 capital adequacy ratio (CET1 /Total RWA), % 13.50% 14.79% In millions of RR 31 December 2022 31 December 2021 Tier 1 capital adequacy ratio (Tier 1 capital /Total RWA), % Total capital adequacy ratio (Total capital /Total RWA), % 16.91% 16.91% 20.27% 20.27% In 2022 due to the suspension of the international rating agency Fitch, the Group applies risk assessments established by the Russian rating agency ACRA to assess credit risk and classify financial instruments according to the level of credit risk (Note 30). The Group assessed that the effect of the transition is immaterial for both reporting period and comparative information. The Group and the Bank have complied with all externally imposed capital requirements throughout the years ended 31 December 2022 and 2021 . The Insurance Company has com- plied with all capital requirements set by the legislation of the Russian Federation throughout the years ended 31 December 2022 and 2021 . 32 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 manage- ment and the formal documentation supporting the tax positions may be challenged by the tax authorities . 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 Organization for Eco- nomic Cooperation and Development (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 assumption 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-corporate 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, management 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 . As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group . While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that 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 2022 and 2021 no material tax risks were identified. F-101 F-102 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 32 Contingencies and Commitments (Continued) 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 2,668 million at 31 December 2022 and relate primarily to leases of assets which are of low value (31 December 2021: RR 1,906 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 2022 and 2021 . 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 authorisations 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 commitments generally have a greater degree of credit risk than shorter- term commitments . Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obligation . 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 Unused limits on SME 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 2022 31 December 2021 392,204 15,224 (6,530) 400,898 2 - 2 295,233 15,907 (3,334) 307,806 137 (1) 136 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 accordance with credit card service conditions the Group has a right to refuse the issuance, activation, reissuing or unblocking of a credit card, and is providing a credit card limit at its own discretion and without explaining its reasons . . F-103 The following table contains an analysis of credit related commitments by credit quality at 31 December 2022 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) 357,170 46,735 3,004 406,909 (6,511) 400,398 - 152 367 519 (19) 500 - - - - - - Total 357,170 46,887 3,371 407,428 (6,530) 400,898 The following table contains an analysis of credit related commitments by credit quality at 31 December 2021 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) 286,378 23,505 882 310,765 (3,318) 307,447 - 91 284 375 (16) 359 - - - - - - Total 286,378 23,596 1,166 311,140 (3,334) 307,806 In March 2022 the Group changed the approach of risk grades and the corresponding range of probabilities of default for measuring credit risk and grading credit card loans, as well as credit related commitments (refer to Note 8) . This triggered changes in the analysis of the credit risk exposure to be presented . Disclosures for comparative periods were amended accordingly . 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 commitments is close to zero . Credit related commitments are denominated in RR . F-104 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 32 Contingencies and Commitments (Continued) 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 2022 31 December 2021 Stage 1 (12-months ECL) Stage 1 (12-months ECL) 2 - 2 - 2 80 57 137 (1) 136 Mandatory cash balances with the CBRF of RR 1,690 million as at 31 December 2022 (31 December 2021: RR 8,589 million) represent mandatory reserve deposits which are not available to finance the Bank's day to day operations. 33 Offsetting Financial Assets and Financial Liabilities Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 December 2022: Gross amounts before offsetting Net amount after offsetting in the con- solidated statement of financial position Amounts subject to master net- ting and similar arrangements not set off in the consolidated statement of financial position Net amount of expo- sure Financial instruments Cash collateral 252,399 26,747 937 252,399 254,683 26,747 27,250 - - 937 - 2,060 280,083 280,083 281,933 2,060 1,250 8,258 2,199 1,250 8,258 2,199 937 9,483 2,958 11,707 11,707 13,378 - - - - - - - - 313 - - 313 In millions of RR ASSETS Reverse repurchase agreements Brokerage receivables Financial derivatives Total assets subject to offset- ting, master netting and similar arrangement LIABILITIES Correspondent accounts and overnight placements of other banks Brokerage payables Other borrowed funds Total liabilities subject to offset- ting, master netting and similar arrangement . F-105 Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 December 2021: Gross amounts before off- setting Net amount after offsetting in the con- solidated statement of financial position Amounts subject to master netting and similar arrangements not set off in the consolidated statement of financial position Net amount of expo- sure Financial instruments Cash collateral 152,331 49,138 5,820 152,331 154,255 49,138 5,820 46,721 - - - 5,829 - 2,417 - 207,289 207,289 200,976 5,829 2,417 5,829 5,484 9,634 3,806 5,829 5,820 5,484 9,634 3,806 5,826 11,123 4,446 24,753 24,753 27,215 - - - - - 9 - - - 9 In millions of RR ASSETS Reverse repurchase agreements Brokerage receivables Financial derivatives Total assets subject to offset- ting, master netting and similar arrangement LIABILITIES Correspondent accounts and overnight placements of other banks Sale and repurchase agreements with other banks Brokerage payables Other borrowed funds Total liabilities subject to offset- ting, master netting and similar arrangement As at 31 December 2022 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 (2021: same). The disclosure does not apply to loans and advanc- es to customers and related customer deposits . 34 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: In millions of RR Debt securities at FVOCI pledged under repurchase agreements Notes 13 Total 31 December 2022 31 December 2021 Carrying amount of the assets Carrying amount of the associat- ed liabilities Carrying amount of the assets Carrying amount of the associat- ed liabilities - - - - 5,826 5,826 5,484 5,484 F-106 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                                        31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 34 Transfers of Financial Assets (Continued) 36 Fair Value of Financial Instruments 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 2022 31 December 2021 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  252,399 254,683 152,331 154,255 26,747 27,250 49,138 46,721 279,146 281,933 201,469 200,976 Notes 5 10 In millions of RR Cash and cash equivalents Brokerage receivables Total 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 . 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 payable on settlement (-) - EUR receivable on settlement (+) - EUR payable on settlement (-) - Other currencies receivable on settlement (+) Fair value of foreign exchange forwards and swaps 31 December 2022 31 December 2021 Contracts with positive fair value Contracts with negative fair value Contracts with positive fair value Contracts with negative fair value 6,455 - (5,435) - - - 1,020 (31) (23) - (8) - (155) (217) 29,288 12 (23,341) - 4 - (42) (31) (10) (7) - - 5,963 (90) 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 measure- ments are valuations not based on observable market data (that is, unobservable inputs) . (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 ASSETS AT FAIR VALUE 31 December 2022 31 December 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Investments in securities 89,267 113,455 1,797 204,519 211,375 3,936 Repurchase receivables Loans and advances to customers Financial derivatives Total assets recurring fair value measurements LIABILITIES AT FAIR VALUE Financial derivatives Total liabilities recurring fair value measurements - - - - - - - 5,826 583 583 - - 1,020 - 1,020 5,963 - 5,963 - - 215,311 5,826 3,971 3,971 - - 89,267 114,475 2,380 206,122 217,201 9,899 3,971 231,071 - - 217 217 - - 217 217 - - 90 90 - - 90 90 Investments in securities categorised in level 2 are represented by liquid debt securities classified in “Good” credit risk grade. F-107 F-108 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                                31 DECEMBER 2022 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 measurements at 31 December 2022 are as follows: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE - Selection of an indicative paired bid and ask Cbonds quotes when comparing preliminary pairs of quotes on exchange trading floors, then comparing with the quotes from OTC market participants; - Indicative quotes from the Cbonds price center; Investments in securities 113,455 - Observable quotes for comparable securities 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* . Discounted cash flows adjusted for counter- party credit risk Russian rouble curve . USD Dollar Swaps Curve . EUR Swaps Curve . CDS quotes assessment of counterparty credit risk or reference entities . Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 Liabilities AT FAIR VALUE 1,020 114,475 Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 217 217 Discounted cash flows adjusted for counter- party credit risk Russian rouble curve . USD Dollar Swaps Curve . EUR Swaps Curve . CDS quotes assessment of counterparty credit risk or reference entities . * NSD Valuation Center is a fair value measurement service for bonds and other financial instruments, accredited by the CBRF. The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2021 are as follows: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE Investments in securities 3,936 Observable quotes for comparable securities 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 5,963 Discounted cash flows adjusted for counter- party credit risk Total recurring fair value measurements at level 2 9,899 Liabilities AT FAIR VALUE Foreign exchange swaps and forwards Total recurring fair value measurements at level 2 90 90 Discounted cash flows adjusted for counter- party credit risk Russian rouble curve . USD Dollar Swaps Curve . EUR Swaps Curve . CDS quotes assessment of counterparty credit risk or reference entities . Russian rouble curve . USD Dollar Swaps Curve . EUR Swaps Curve . CDS quotes assessment of counterparty credit risk or reference entities . * NSD Valuation Center is a fair value measurement service for bonds and other financial instruments, accredited by the CBRF. Changes in the valuation techniques for level 2 recurring fair value measurements during the year ended 31 December 2022 are described in the table above (2021: no changes) . 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 insignifi- cant for level 2 derivatives . F-109 F-110 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 36 Fair Value of Financial Instruments (Continued) The valuation technique, inputs used in the fair value measurement for level 3 measurements and related sensitivity to reasonably possible changes in those inputs are as follows at 31 December 2022: In millions of RR Fair value Valuation technique Inputs used Assets AT FAIR VALUE Investments in securities 921 Discounted cash flows Coupon payment schedule, with the transfer of expected coupons to receive in the flow. All coupons with maturity before 30 June 2025 were postponed to this date . The discount rate is calculated on the basis of foreign exchange quotes on the OTC market, adjusted for the credit spread . Foreign exchange swaps and forwards 876 Discounted cash flows adjusted for counter- party credit risk Market capitalization and profitability ratios of similar publicly traded companies Total recurring fair value measurements at level 3 2,380 The valuation technique, inputs used in the fair value measurement for level 3 measurements and related sensitivity to reasonably possible changes in those inputs are as follows at 31 December 2021: In millions of RR Fair value Valuation technique Inputs used Loans and advances to customers 3,971 Discounted cash flows Share price as per the most recent sale purchase transaction Total recurring fair value measurements at level 3 3,971 Changes of the fair value measurements at Level 3 for the year ended 31 December 2022 and 2021 are as follows: In millions of RR Fair value as at 31 December 2020 - Level 3 Other interest income Net losses from foreign exchange translation Net gains from revaluation of convertible loan Fair value as at 31 December 2021 - Level 3 Other interest income Net losses from foreign exchange translation Net losses from revaluation of convertible loan Fair value as at 31 December 2022 - Level 3 Loans and advances to customers 1,892 23 (317) 2,373 3,971 20 (603) (2,805) 583 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: 31 December 2022 31 December 2021 In millions of RR Level 1 Level 2 Level 3 FINANCIAL ASSETS CARRIED AT AMORTISED COST Cash and cash equivalents Carrying value Level 1 Level 2 Level 3 Carrying value - Cash on hand 56,895 - - 56,895 36,955 - - 36,955 Investments in securities 102,718 - - Cash balances with the CBRF (other than mandatory reserve deposits) - Placements with other banks and non-bank credit organi- zations 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 receivable Restricted cash Insurance's financial assets Other receivables Total financial assets carried at amortised cost - 106,693 - 106,693 - 51,008 - 51,008 - 347,973 - 347,973 - 228,513 - 228,513 - - 1,690 450 - - - 1,690 450 121,283 - - - - - - - - 606,577 605,872 - 26,747 6 - 6 26,747 22,014 - 22,014 - 5,703 3,403 8,097 - - 5,703 3,403 8,097 - - - - - - - - - - 8,589 542 - - - - 8,589 542 - - 602,864 602,337 - 15,171 15,171 49,138 - 49,138 42,995 - 965 9,009 - - - - 42,995 - 965 9,009 159,613 517,067 612,286 1,306,826 36,955 390,759 618,035 1,045,222 F-111 F-112 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 36 Fair Value of Financial Instruments (Continued) 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 2022 31 December 2021 In millions of RR Level 1 Level 2 Level 3 FINANCIAL LIABILITIES CARRIED AT AMORTISED COST 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 domestic market 304 Other borrowed funds Borrowings through securitisa- tion transaction 4,722 Subordinated debt 2,060 8,258 660,537 116,218 175,360 207,054 14,857 4 150 - - - - - - - - - - - - Carrying value 2,060 8,258 660,537 116,218 194,876 207,054 13,147 4 150 Level 1 Level 2 Level 3 - - - - - - - - - 11,313 9,634 544,561 110,277 149,813 140,287 3,434 647 - - - - - - - - - - Carrying value 11,313 9,634 544,561 110,277 146,548 140,287 3,403 647 - 301 21,794 - 2,199 3,723 - - - Perpetual subordinated debts - 12,770 15,096 45,913 59,365 Other financial liabilities Settlement of operations with plastic cards Trade payables Credit related commitments Loyalty programs Other financial liabilities Total financial liabilities carried at amortised cost - - - - - 64,760 18,896 - 3,353 2,690 - - - - - 64,760 18,896 6,530 3,353 2,690 - - - - - 48,879 11,866 - 2,802 2,421 5,026 1,286,967 15,096 1,346,946 84,882 1,035,934 - 1,121,115 - 21,680 - - - - - - - 3,806 59,657 48,879 11,866 3,334 2,802 2,421 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 2022 and 2021 the fair value of the debt securities in issue and subordinated debt has been calculated based on quoted prices from the Moscow Exchange, St . Petersburg Exchange and Global Exchange Market, where the Group’s debt securities are listed and traded . Weighted average discount rates used in determining fair value as of 31 December 2022 and 2021 are disclosed below: In % p.a. Assets Cash and cash equivalents Due from other banks Investments in securities Repurchase receivables Loans and advances to customers Brokerage receivables Liabilities Due to banks Customer accounts Debt securities in issue Other borrowed funds Brokerage payables Subordinated debt Lease liabilities 31 December 2022 31 December 2021 1 .0 2 .0 8 .6 - 28 .2 22 .9 12 .1 3 .6 0 .0 7 .9 21 .8 12 .9 10 .4 0 .0 2 .4 5 .6 4 .3 28 .9 15 .1 4 .8 2 .7 9 .1 8 .6 15 .4 5 .9 9 .5 F-113 F-114 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                    31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 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 2022: 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 organizations 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 - Restricted cash - Insurance's financial assets - Other receivables TOTAL FINANCIAL ASSETS 56,895 106,693 347,973 1,690 450 605,872 - 6 - - - - - 583 1,020 - - - - - - - - - 56,895 106,693 347,973 1,690 450 606,455 1,020 6 121,283 4,627 199,892 325,802 26,747 22,014 5,703 3,403 8,097 - - - - - - - - - - 26,747 22,014 5,703 3,403 8,097 1,306,826 6,230 199,892 1,512,948 AC FVTPL FVOCI Total - Cash balances with the CBRF (other than mandatory reserve deposits) - Placements with other banks and non-bank credit organizations 228,513 The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2021: In millions of RR Cash and cash equivalents - Cash on hand 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 - Insurance's financial assets - Other receivables TOTAL FINANCIAL ASSETS AC FVTPL FVOCI Total 36,955 51,008 8,589 542 602,337 - 15,171 - - 49,138 42,995 965 9,009 - - - - - 3,971 5,963 - - - - - - - - - 36,955 51,008 228,513 8,589 542 606,308 5,963 15,171 8,136 207,175 215,311 - - - - - 5,826 - - - - 5,826 49,138 42,995 965 9,009 1,045,222 18,070 213,001 1,276,293 As of 31 December 2022 and 2021 all of the Group’s financial liabilities except derivatives were carried at amortised cost. F-115 F-116 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                        31 DECEMBER 2022 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 considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form . The outstanding balances with related parties were as follows: 31 December 2022 31 December 2021 Key management personnel Associates, joint ventures and other related parties Key management personnel Associates, joint ventures and other related parties In millions of RR ASSETS Cash and cash equivalents Loans and advances to customers (average interest rate: 1 .7-3 .9% p .a . (31 December 2021: 1 .7-11 .9% p .a .)): - Gross carrying amount - Credit loss allowance Other financial assets TOTAL ASSETS LIABILITIES Customer accounts, including brokerage accounts (average interest rate: 5 .4-6 .8% p .a . (31 Decem- ber 2021: 1 .8-11% p .a .)) Other non-financial liabilities TOTAL LIABILITIES EQUITY Share-based payment reserve - Management long-term incentive program TOTAL EQUITY 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 (losses)/gains from financial assets at FVTPL 2022 2021 Key management personnel Associates, joint ventures and other re- lated parties Key management personnel Associates, joint ventures and other re- lated parties 40 - (126) - - 48 15 - (720) (2,861) 37 - (103) - - 186 23 - 229 2,373 (158) - 186 - - Administrative and other operating expenses (9,568) - (7,337) 849 884 (35) - 849 9,289 100 9,389 2,431 2,431 - - - 106 292 4 - 4 - - 380 413 (33) - 380 7,716 1,741 9,457 4,225 4,225 3,971 3,971 - - 3,971 166 - 166 - - Key management compensation is presented below: In millions of RR Short-term benefits: - Salaries - Short-term bonuses - Social tax Long-term benefits: - Management long-term incentive program - Key employees retention plan Total 2022 2021 1,334 1,017 323 6,882 12 9,568 1,203 1,245 316 4,545 28 7,337 Management long-term incentive program. On 31 March 2016 the Group introduced a MLTIP as both a long-term incentive and a retention tool for the management of the Group . Total number of GDRs attributable to the management is 21,533 thousand as at 31 December 2022 (31 December 2021: 17,241 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, each year during 2016-2022, is determined on the basis of market quotes of GDRs as at those dates . Weighted-average fair value of the awards in 2022 was USD 3 .2 per 1 GDR (2021: USD 87 per 1 GDR) . In 2022, the grants introduced during 2016-2020 have been fully vested . Each grant provided in 2021 and 2022 is vested over 5 years . The delivery dates as of which the GDRs are allowed to be sold by the participants correspond to the vesting dates, each subsequent 31 August until 2026 for 2021 grants and each subsequent 31 May until 2027 for 2022 grants . F-117 F-118 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                            31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 38 Related Party Transactions (Continued) The following table discloses the changes in the numbers of GDRs attributable to the MLTIP: In thousands At 31 December 2020 Granted Vested Forfeited At 31 December 2021 Granted Vested Forfeited At 31 December 2022 Number of GDRs attributable to the MLTIP 7,276 1,950 (2,201) (6) 7,019 4,293 (1,733) (2,533) 7,046 39 Events after the End of the Reporting Period On 1 January 2022 the Group reclassified RR 122,805 million of government bonds, previously accounted under “Hold to collect and sell” On 25 February 2023, the Bank became subject to an asset freeze in the EU under the Council Implementing Regulation (EU) No 2023/429, implementing Council Regulation (EU) No 269/2014 (the "EC Regulation 269"). As a result, the Bank’s ability to make payments under its Eurobonds issued in 2017 and 2021 through the usual channels was undermined by the assets freeze restrictions . In this regard, the Bank cancelled interest payments for the one upcoming coupon period under its Eurobonds to avoid discrimination of all bondholders and to fo- cus on finding a practical and lawful solution to remedy this situation by the time of the next coupon payment. The Bank has sufficient funds for this purpose and will resume payments under the relevant Eurobonds as soon as it becomes legally attainable . The Company and its controlled subsidiary undertakings (other than the Bank and any controlled subsidiary undertakings of the Bank) are not subject to an asset freeze pursuant to EC Regulation 269 or to other EU sanctions . Management of the Group is assessing its impact on the business . 40 Significant Accounting Policies Basis of preparation. These consolidated 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 consolidated financial statements have been prepared under the historical cost convention, as modified by the initial recogni- tion 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 as- sessing 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 majority 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 (acquisition 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 propor- tionate 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 arrangements, but excludes acquisition related costs such as advi- sory, legal, valuation and similar professional services . Transaction costs incurred for issuing equity instruments are deducted from equity; transac- tion 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; unrealised 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 reason 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 transactions 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 carry- ing 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 ac- companying 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 reduce 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 com- prehensive income is recognised 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 payments on behalf of the associate . Otherwise the Group continue to recognise further losses if it has commitments to fund the associate’s operations . 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 substance 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 . F-119 F-120 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) 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 previous- ly 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 partic- ipants 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 weighted average price of a trading day (WAP) . WAP calculation takes into account transactions made during main and ad- ditional trading session (for securities admitted to additional trading session may differ from the weighted average price of the main trading session). 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 consideration 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 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 meas- urements 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 instrument. 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 principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of related items in the consolidated statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or secured that are integral to the effective interest rate such as origination fees. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates . Such premiums or discounts are amortised over the whole expected life of the instrument . The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate . For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. All other financial instru- ments 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 observa- ble current market transactions in the same instrument 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 meas- ured 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 (“regu- lar 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 transac- tion 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 financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measurement 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. 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 under- takes 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 collect- ed, how risks are assessed and managed, how the assets’ performance is assessed and how managers are compensated . F-121 F-122 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Based on the analysis performed the Group included the following financial instruments in the business model “hold to collect 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 customers, guarantee deposits with payment sys- tems, brokerage receivables and other financial assets. Debt securities are analysed individually, based on the purpose of the acquisition . Currently, the Group possesses “hold to collect con- tractual cash flows” and “hold to collect contractual cash flows and sell” and “other” business models for its debt securities portfolio. The Group included 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 repre- sent solely payments of principal and interest (the SPPI test) . Financial assets with embedded derivatives 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 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 Group considers 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 – modifi- cation” . 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 con- tracts . 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 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 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 30 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 measured as a lifetime ECL. Refer to Note 30 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 30 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 commitment compo- nent, 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 judgements 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 related to repayments of writ- ten-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 qualify- ing 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, significant 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 exten- sion 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 derecognises the origi- nal 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 . 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 sub- stantially 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 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 through a credit loss allow- ance. 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 . Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for finan- cial 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 obligation speci- fied in the contract is discharged, cancelled or expires). F-123 F-124 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) 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 discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered . If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up meth- od, 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 convertible 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 . 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 operations and hence are not considered as part of cash and cash equivalents for the purposes of the consolidated statement of cash flows. 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 . Certain bank deposits are subject to the “bail-in” legislation that permits or requires a national resolving authority to impose 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 invest- ments 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 represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting mismatch. Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated using the effective interest method and recog- nised 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 des- ignate 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 accounting 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 follow- ing 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 30 provides informa- tion 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 . 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 commitments 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 perform a con- tractual 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 performance 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 com- pensation 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 ef- fectively 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 consolidated 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 receiv- ables . 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 category in the consol- idated 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 . F-125 F-126 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) 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 receivable . Amounts of guarantee deposits with payment systems are carried at amortised cost . 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 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 Tangible fixed assets. Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment, where required. operating leases; Costs of minor repairs and day-to-day maintenance are expensed when incurred . Costs of replacing major parts or components of premises and equipment items are capitalised, and the replaced part is retired . At the end of each reporting period management assesses whether there is any indication of impairment of tangible fixed assets. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year . An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell . Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year (within other operating income or expenses) . Depreciation. Depreciation of each item of tangible fixed assets is calculated using the straight-line method to allocate its cost to its residual value over its estimated useful life as follows: Building Equipment Vehicles Useful lives in years 99 3 to 10 5 to 7 Leasehold improvements Shorter of their useful economic life and the term of the underlying lease Others (safes, fireproof cabinets) 20 The residual value of an asset is an estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its useful life . The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period . Intangible assets. Intangible assets are stated at cost less accumulated amortization . The Group’s intangible assets other than insurance license have definite useful life and include capitalised acquired computer software and internally developed software. Development costs that are directly associated with identifiable and unique software controlled by the Group are recorded as intangible assets if the inflow of incremental economic benefits exceeding costs is probable. Capitalised costs include staff costs of the software development team and an appropriate portion of relevant overheads . Computer software licenses acquired are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. All other costs associated with computer software, e .g . its maintenance, are expensed when incurred . Capitalised computer software is amortised on a straight line basis over expected useful lives of 1 to 10 years . At each reporting date management assesses whether there is any indication of impairment of intangible assets with an indefinite useful life. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use . The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss. An impairment loss recog- nised 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. Intangible assets including goodwill with indefinite useful life are tested annually for impairment. • 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 commence- ment 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 exer- cised . The lease payments are discounted using the interest rate implicit in the lease . If that rate cannot be determined, the lessee’s incre- mental 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 income. 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 counterparty 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 as gains/losses from repurchase of debt securities in issue . 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 (losses)/gains from derivatives revaluation. The Group does not apply hedge accounting. F-127 F-128 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) 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 cur- rent and prior periods. Taxable profits or losses are based on estimates if the consolidated financial statements 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 balance sheet 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 transac- tion 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 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 and liabilities are net- ted 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 subsidi- aries, 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 . Liabil- ities 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 recognised 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 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 con- sideration received is included in equity . The value of GDRs transferred out of treasury shares for the purposes of the long-term incentive program for management of the Group are determined based on the weighted average cost . 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 separate 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 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 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 in- terest 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 represented 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 re- maining 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 assessed 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 rendered, 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. Varia- ble 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 execu- tion of the underlying transaction . The amount of fee or commission received or receivable represents the transaction price for the services F-129 F-130 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) identified as distinct performance obligations. Such income includes acquiring commission, 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 as- sessed 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 reim- bursement 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 consolidated statement of profit or loss and other comprehensive income of these consolidated financial statements are accounted within Insurance premiums earned and Insurance claims incurred lines . • Premiums written. Premiums (hereafter – “premiums” or “insurance premiums”) under insurance contracts are recorded 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 compensation is paid 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 contracts do not relieve the Group from its obligations to the policyholders under insurance contract . Amounts due from reinsurers are measured consistently with the amounts associated with the direct insurance contracts and in accordance with the terms of each reinsurance contract . Rein- surance 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 reinsurance 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 assets carried at am- ortised cost. The impairment loss is also calculated following the same method used for the financial assets carried at amortised cost. • 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) separately for each insurance product . Acquisition costs include remuneration to agents for concluding agreements with corporate clients and individu- als 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 up- dated. 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 histori- cal 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 insurance 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 insur- ance, the Group sets up its URP . Foreign currency translation and operations. The functional currency of the Company and most of its significant subsidiaries 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 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 (losses)/gains 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 2022 the rate of exchange used for translating foreign currency balances was USD 1 = RR 70 .3375 (31 December 2021: USD 1 = RR 74 .2926), and the average rate of exchange was USD 1 = RR 68 .5494 for the year ended 31 December 2022 (2021: USD 1 = RR 73 .6541) . 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 real- ise 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 . F-131 F-132 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 40 Significant Accounting Policies (Continued) Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to owners of the Company by the weight- ed 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, except for the requirement of the employee to stay in service which is reflected through the amortization schedule. The liability is measured, initially and at the end of each re- porting 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 March 2022 the management of the Group refined the approach to the presentation of provisions on other assets . The management concluded it was appropriate to reclassify these provisions from Administrative and other operating expenses to the separate line Other provisions charged in the consolidated statement of profit or loss and other comprehensive income. The effect of changes described above on the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2021 is as follows: In millions of RR Administrative and other operating expenses Other provisions (charge)/recovery and impairment (loss)/reversal As originally presented Reclassification As reclassified (59,449) - (11) 11 (59,460) 11 41 Adoption of New or Revised Standards and Interpretations Adoption of IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021, the effective date was subsequently moved to 1 January 2023 by amendments to IFRS 17, as indicated below). The Group has adopted IFRS 17 with a date of transition of 1 January 2022 . 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 plans to apply this standard: • non-life insurance contracts issued by it, including inward reinsurance contracts (hereinafter referred to as “insurance contracts”); • to reinsurance contracts held by it (hereinafter referred to as “reinsurance contracts”); The Group has assessed the impact of the new standard on its financial statements, in particular, but not limited to: • an analysis of insurance and reinsurance contracts was carried out for the presence of embedded components, as well as their classifi- cation and segmentation; • an analysis of current business processes and an assessment of the impact of the requirements of the new standard on existing systems and business processes; • a methodology for valuation of insurance and reinsurance contracts was developed, which includes the assessment of cash flows, the determination of the discount rate and other actuarial assumptions, the calculation of the risk adjustment for non-financial risk, the approach to allocating expenses associated with the implementation of insurance contracts, the approach to choosing an accounting model, as well as choosing transition method; • developing of accounting policy for insurance and reinsurance contracts; • assesment of the effect of transition to IFRS 17. Below are selected key decisions taken by the Group in relation to the new accounting policies . The Group uses a premium distribution approach for contracts with a coverage period of one year or less, or where the Group reasonably expects that the application of such a simplification will result in an estimate of the liability for the remaining coverage under that group of contracts that will not differ materially from the results of applying the general model. The Group has made the decision to transition to the requirements of IFRS 17 using a full retrospective approach to the transition to insur- ance and reinsurance contracts in force at the date of transition. The modified hindsight approach was used in the calculations only in those cases where a full hindsight approach was not practicable . The Group has estimated the impact of the changes described above on equity as at 1 January 2022, which is approximately RR 200 million . The impact of the initial application of IFRS 17 on the Group's equity has been assessed based on key new accounting policies, judgments and estimates that have been adopted to date. The final assessment of the impact of the initial application of IFRS 17 as at 1 January 2022 may change after the date these financial statements are approved. The following amended standard became effective from 1 January 2022, but did not have any material impact on the Group: • 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). 42 New Accounting Pronouncements Certain new amendments have been issued that are mandatory for the annual periods beginning on or after 1 January 2023, which the Group has not early adopted: Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommissioning obligations . F-133 F-134 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Consolidated Financial Statements (Continued) 42 New Accounting Pronouncements (Continued) The following other new pronouncements are not expected to have any material impact on the Group when adopted: • IFRS 14, Regulatory Deferral Accounts (issued on 30 January 2014 and effective for annual periods beginning on or after 1 January 2016)* . 31 DECEMBER 2022 TCS Group Holding PLC International Financial Reporting Standards Separate Financial Statements and Independent Auditor’s Report Contents Board of Directors and other officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-137 • Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-138 beginning on or after 1 January 2022)* . • Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effec- tive for annual periods beginning on or after 1 January 2023)* . • Non-current Liabilities with Covenants – Amendments to IAS 1 (issued on 31 October 2022 and effective for annual periods beginning on or after 1 January 2024) . • Lease Liability in a Sale and Leaseback Amendments to IFRS 16 – Amendments to IFRS 16 (issued on 22 September 2022 and effective for annual periods beginning on or after 1 January 2024) . The amendments apply to sale and leaseback transactions where the transfer of the asset qualifies as a ‘sale’ under IFRS 15 and the lease payments include variable lease payments that do not depend on an index or rate . * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union . Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-146 SEPARATE FINANCIAL STATEMENTS Separate Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-152 Separate Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-153 Separate Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-154 Separate Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-155 NOTES TO THE SEPARATE FINANCIAL STATEMENTS 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-156 2 Operating Environment of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-157 3 Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-157 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-166 5 Adoption of New or Revised Standards and Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-167 6 New Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-167 7 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-168 8 Loans and Advances to Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-168 9 Investments in Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-170 10 Other Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-171 11 Other Financial and Non-financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-171 12 Share Capital, Share Premium and Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-171 13 Interest income and expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-172 14 Administrative and Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-172 15 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-173 16 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-174 17 Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-174 18 Contingencies and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-179 19 Fair Value of Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-179 20 Presentation of Financial Instruments by Measurement Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-182 21 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-183 22 Events after the End of the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-185 F-135 F-136 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Board of directors and other officers Board of Directors Except where stated all directors served throughout 2022 and through to the date of these separate financial statements. Director Role Retirement Appointment Sergey Arsenyev Independent Non-Executive Director Constantinos Economides Chairman of the Board, Executive director - - Margarita Hadjitofi Independent non-executive director February 2023 Maria Pavlou Executive director February 2023 Mary Trimithiotou Executive director Daniel Wolfe Independent Non-Executive Director Martin Robert Cocker Independent non-executive director Ashley Dunster Independent non-executive director Pavel Fedorov Maria Gordon Group CEO, Executive director Independent non-executive director Nicholas Huber Independent non-executive director Oliver Hughes Nitin Saigal Group CEO, Executive director Independent non-executive director - - March 2022 March 2022 April 2022 April 2022 March 2022 April 2022 March 2022 September 2022 - - - - April 2022 - - - - - - - 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 2023 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 Management Report The Board of directors presents its report together with the audited separate financial statements of TCS Group Holding PLC (the “Com- pany”) for the year ended 31 December 2022 . 6 . The Bank is operating with ample liquidity and capital buffers above regulatory minimums and expects to continue meeting all applicable requirements comfortably . Principal activities and nature of operations of the Company 1 . The principal activities of the Company are holding of invest- ments in subsidiary companies operating in the Russian Feder- ation and offering call center services to customers and poten- tial 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 Microfinance company “T-Finance”, LLC “Phoenix” and others (the Company and its subsidiaries collectively the “Group”) . Refer to Note 1 2 . The Bank specialises in consumer finance, retail banking for individuals, individual entrepreneurs (“IE”), small and medi- um enterprises (“SME”), acquiring and payments services 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 . As at 31 December 2022 in accordance with IFRS 10 definition of control the Company has no ultimate controlling party . Review of developments, position and performance of the Group’s business 3 . During 2022 the Company continued the development 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 Group and, indirectly, its customers . 7 . The key offerings of JSC “Tinkoff Insurance” are personal 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 . 8 . In terms of financial performance the profit of the Company for the year ended 31 December 2022 was RR 597 million (2021: profit RR 4,743 million). The decreased profit is driven mostly the negative revaluation of financial assets at FVTPL. At 31 Decem- ber 2022 the total assets of the Company decreased by 58 .5% to RR 516,077 million (2021: total assets increased by 159% to RR 1,243,701 million) and the net assets were RR 507,085 million (2021: RR 1,243,333 million) . Such a sharp decline in assets was driven by the escalating geopolitical tension in the region that affected the economic and operating environment of the Companies’ subsidiaries and led to an increase in volatility in financial markets. These factors led to the negative revaluation of the investments in subsidiaries . Environmental matters 9 . As the Group is an online-only financial institution, the man- agement of the Company believes that none of the Group’s business relationships, products or services are likely to have any significant actual or potential environmental impacts and does not believe its operations are exposed to any material environmental risks . Still the Company management provides its strategic vision and supervise the Climate Strategy by driving of the relevant initiatives and allocating the necessary resources . 4 . The Group operates a flexible business model. Its virtual network 10 . Addressing climate change is a major element in the Compa- enables it to quickly and easily increase business or slow down customer acquisition depending 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, afford it a geographic reach across Russia resulting in a highly diversified portfolio. ny’s sustainability strategy that is integrated into key business practices, policies, processes, and initiatives that ensure the long-term sustainability of the Company business . In 2021 the Group became a signatory to the UN Principles for Respon- sible Banking and has joined the Science Based Targets Initiative (SBTI) . In order to realise its SBTI plans and Net Zero commitments, the Company has established an internal transformation team to support the relevant developments and initiatives . 5 . In October 2021 the Bank was added to the Bank of Russia’s list of 13 systemically important banking institutions due to a recog- nition of the Bank’s growing presence in the financial market and expanding customer base of its ecosystem . As a result, the Bank is obliged to comply with the additional capital adequacy buffers, as well as advanced risk management requirements . The Bank is operating with ample liquidity and capital buffers above regula- tory minimums and intends to continue comfortably meeting all applicable requirements comfortably . 11 . The Group is implementing a climate risk assessment process that covers both physical and transitional risks . The assess- ment is made based on the country and sectoral context of their likelihood and consequences . 12 . As of 31 December 2022 the Company considered RCP8 .5 IPPC AR5 scenario as the current and most likely scenario for mid-term (until 2040) physical climate change . F-137 F-138 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Management Report (Continued) 13 . The management of the Group is planning climate stress test- ing to assess the mid- and long-term impact of climate risks on its financial portfolio. Human resources 14 . 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 transparency are actively pro- moted 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, on- line 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 . 15 . Clear performance evaluation processes and fair compensa- tion 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 Perfor- mance Indicators as well as to provide feedback which can be used for their career development and to determine incentive compensation . 16 . Prior to its IPO in 2013, the Company set up share-based management long term incentive plans as retention and moti- vational tools for key and senior managers . In March 2016, the Company announced a consolidated management long-term incentive and retention plan (MLTIP) . Since then the Company has announced an expansion of MLTIP during the next 6 years . 17 . The MLTIP programs are designed to grow the Company's value by aligning more closely managers’ interests with those of shareholders . The Company believes that participation in its share capital is an effective motivation and retention tool. The MLTIP programs embrace a growing number of managers, for two main reasons: firstly, internal promotions as some employ- ees were promoted to key managerial positions in line with the growth of the Company; and, secondly, as part of its expansion and transformation into a financial marketplace, 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 . The total size of the unvested pool of the expanded MLTIP programs was 3 .4% of the Company’s share capital as at 31 December 2022 (2021: 3 .6%) . Non-Financial Information and Diversity Statement 18 . The Company’s policies and other information that provide an understanding of the development, performance, position and impact of the Company’s activities in the areas of environmen- tal, social and employee matters, respect for human rights, anti-corruption and bribery matters can be found in the Com- pany’s most recently published Non-Financial Information and Diversity Statement (Sustainability Report) . The Company will publish its Sustainability Report for the year ended 2022, if it forms part of an integrated annual report on the Company’s website, www .tcsgh .com .cy by 30 April 2023, but in any case no later than 30 June 2023 . Future developments 24 . The Company's strategic objective is to grow its custom- er base profitably by building the most comprehensive, engaging, innovative, and sustainable financial and lifestyle ecosystem in the world . ultimate beneficiary owner of Interros, became a minority shareholder with a total shareholding of 35 .08% (2021: Mr Oleg Tinkov with a shareholding of 35 .08%) . 29 . As at 31 December 2022 and 2021 in accordance with IFRS 10 definition of control the Company has no ultimate con- trolling party . Principal risks and uncertainties Results Treasury shares 19 . The Company’s business and financial results are impacted by uncertainties and volatilities in the Russian economic environment which can be impacted by global factors and/ or by national factors as disclosed in Note 2 to the separate financial statements. 20 . The Company’s subsidiaries and the Company on its own are subject to a number of principal risks which might adverse- ly impact its performance . The principal activities 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 risk comprises market risks (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk . 21 . The Board has put in place arrangements to identify, evaluate and manage the principal risks and uncertainties 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 sen- ior 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 those limits . The operational 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 activities . These risks as well as other risks and uncertainties, which affect the Company and how these are managed, are presented in Notes 17 and 18 of the separate financial statements. 22 . Analysis of impact of the current geopolitical situation in the region on the Company is disclosed in Note 2 of the separate financial statements. Contingencies 23 . The Company’s contingencies are disclosed in Note 18 to the separate financial statements. 25 . The Company’s results for the year are set out on page 2 of the 30 . At 31 December 2022 the Company held 602,975 (2021: separate financial statements. Information on distribution of profits is presented in Note 16. 1,237,583) of its own GDRs, equivalent to approximately RR 1,885 million (2021: RR 2,567 million) and which represent 0 .3% (2021: 0 .6%) of the issued shares . Any important events for the Company that have occurred after the end of the financial year 26 . Since February 2022 the economic situation in the Rus- sian Federation has been and is still affected by escalated military and political conflict and the associated international sanctions against a number of Russian institutions, compa- nies, banks and individuals . On 25 February 2023, the Bank became subject to an asset freeze in the EU under the Council Implementing Regulation (EU) No 2023/429, implementing Council Regulation (EU) No 269/2014 (the "EC Regulation 269"). The Company and its controlled subsidiary under- takings (other than the Bank and any controlled subsidiary undertakings of the Bank) are not subject to an asset freeze pursuant to EC Regulation 269 or to other EU sanctions . Management of the Company is assessing its impact on the business . 27 . At the beginning of 2021 the Company underwent a major restructuring of its shareholder structure . On 7 January 2021 all issued 69,914,043 class B shares (35 .08% of the total num- ber of issued shares) held by The Rigi Trust and The Bernina Trust were converted to class A shares, and on the same date 100% of 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). The number of GDRs in issue was not affected by the conversion . Then the shares held by the two trusts were transferred to The New Rigi Trust . After the conversion the Trust’s voting rights dropped to approximately 35 .08% . 28 . On 28 April 2022 The New Rigi Trust, a major shareholder of the Company, disposed of its entire interest in the Company . Interros, a leading Russian investment group with a diverse portfolio of assets including in banking, has acquired an inter- est in the Group, and consequently now holds approximately 35 .08% of the outstanding shares in the Company . The deal was approved by the Central Bank of the Russian Federation . As a result of the aforementioned deal Mr Vladimir Potanin, 31 . Treasury shares are GDRs of TCS Group Holding PLC and in- clude those that are held by a special purpose trust which has been specifically created for the long-term incentive program for the MLTIP (see Note 21 for further information) . 32 . During 2022 no GDRs were repurchased by the Company (2021: 425,017 GDRs were repurchased at market price for RR 1,877 million) . 33 . During 2022 the Company transferred 634,608 GDRs (2021: 2,200,813 GDRs), representing 0 .32% (2021: 1 .10%) of the issued shares, upon vesting under the MLTIP . This resulted in a transfer of RR 682 million (2021: RR 2,548 million) out of treasury shares to retained earnings . Research and development activities 34 . The Company has not undertaken any significant research and development activities during the year ended 31 December 2022 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 35 . The members of the Board of directors as of 31 December 2022 and at the date of this report are presented above . All served throughout the year ended 31 December 2022 and through to the date of these separate financial statements, except where stated above . 36 . There were significant changes in the structure and assign- ment of responsibilities of the Board of directors . The new list of the Board of directors is presented above . Branches 37 . The Company did not operate through any branches during the year . F-139 F-140 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Management Report (Continued) Independent auditor 38 . The Independent auditor, Kiteserve Limited, which was appointed at the 2022 Annual General Meeting (AGM) of shareholders in Limassol in November 2022, has expressed its willingness to remain in office. A resolution giving authority to the Board of direc- tors to fix its remuneration will be proposed at the 2023 AGM. Copies of the Articles of Association of the Company adopted on 19 November 2021, the terms of reference of the Committees, and other corporate governance related as well as investor relations related materials can be found at the Company’s main website www .tcsgh . com .cy, on the Company’s page on the London Stock Exchange web- site (www .londonstockexchange .com/exchange/prices-and-mar- kets/stocks/summary) and at the official site of the Department of Registrar of Companies, Cyprus (http://www .mcit .gov .cy) . The Articles of Association of the Company provide for the retire- ment by rotation of a number of directors at each Annual General Meeting (AGM) . At the AGM on 22 November 2022 one director, Margarita Hadjitofi retired by rotation and she was duly re-elected to the Board until February 2023, when she resigned from the Com- pany . Two other directors, whose initial appointment was made by the Board, also retired then and were duly reelected to the Board: Mr Daniel Wolfe and Mr Sergey Arsenyev . The Board of directors Committees of the Board of directors Going concern 39 . The Directors have access to all information necessary to ex- ercise their duties . The Directors continue to adopt the going concern basis in preparing the separate financial statements based on the fact that, after making enquiries and following a review of the Company’s business plan and budget for 2023- 2024, including cash flows and funding facilities, the Directors consider that the Company has adequate resources to con- tinue in operation for the foreseeable future . This assessment was made based on the information available 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 24th 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 corporate govern- ance regime to the extent it applies to foreign issuers of GDRs listed on the London Stock Exchange . The Company has not adopted cor- porate 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 . 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 management’s performance . The Board also sets the Company’s values 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, making process, adopted in 2013 . The authorities of the members of the Board are specified by the Ar- ticles of Association of the Company and by law . The current Board of directors is comprised of two executive directors including the chairman, and two independent non-executive directors . The changes in the composition of the Board during the year The long- est 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 2022 are listed at the Board of directors and other officers. The Company has established four Committees of the Board . Spe- cific responsibilities have been delegated to those committees as described below . The Board is required to undertake a formal and rigorous review annu- ally of its own performance, that of its committees and of its individual directors . That review was recently initiated, in-house, in relation to 2022, looking at overall performance . All directors were invited to pro- vide feedback on the Board’s, the committees’ and individual director’s performance . Analysis of the resultant feedback will be discussed at a meeting of the Board of directors scheduled for early 2023 . All shares are ordinary shares, each ranking pari passu for all pur- poses and in all respects with all other existing shares . The Board has not appointed a senior independent director . As of the year ended 2022 there were three independent non-executive directors, of whom at least one must retire each year . The Company’s Home State, for EU regulatory purposes, 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 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 .tcsgh .com .cy . 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 two executive . From 7 January 2021 there has been no maximum number of directors . ditor 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, constitu- tion and terms of reference to ensure it is operating at maxi- mum effectiveness and to recommend any changes it considers necessary for Board approval . The Audit Committee operates a structured framework around the extensive work it carries out on specific, non-financial statements related areas within its terms of reference . 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 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 Remuneration 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 Remu- neration 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 2022 on an ongoing review of the operation of the Group’s MLTIP which launched in 2016 and in considering additional awards to existing and new participants for this and subsequent years . It also with the assistance of external consultants carried out an in-depth review of chief executive officer level compensation packages. Under its terms of reference the Remuneration Committee is required at least once each year to review its own performance, constitution and terms of reference to ensure it is operating at max- imum effectiveness and to recommend any changes it considers necessary for Board approval . The Company has established four Committees of the Board of directors: the Audit Committee, the Remuneration Committee, the Strategy Committee and the Risk and Emerging Risk (Sustainability) Committee . Their terms of reference are summarized below . The Audit Committee and the Remuneration Committees were formed in October 2013, whereas the other two were formed in 2021 . 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 additional committees . Committees-current composition The Audit Committee comprises two independent non-executive directors; a chair is appointed on a meeting by meeting basis . The Remuneration Committee comprises two independent non- executive directors, and is chaired by Mr Daniel Wolfe . The Risk and Emerging Risk (Sustainability) Committee currently has no members . The Strategy Committee comprises its chair Mr .Sergey Arsenyev, one other independent non-executive director and one executive director . All the chairs are (or will be) independent . The current terms of reference of all Committees are available to the public and can be found on the Company’s website . A short summary of them is set out below . Role of the Audit Committee Role of the Risk and Emerging Risk (Sustainability) 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 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 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 effectiveness of the Company’s internal financial controls, risk management systems, internal audit func- tion, the independence and qualifications of the independent au- The primary purpose and responsibility of the Sustainability Committee is to oversee management and advise the Board of the Company on matters required to enable the Group to (a) operate on a sustainable basis for the benefit of current and future genera- tions; (b) embed sustainable practices and adopt best industry practices across the full range of the Group’s businesses; (c) to enhance the Company’s reputation as a good corporate citizen; (d) drive sustainable growth by maintaining and enhancing the Group’s economic, environmental, human, technological and social capital in the long term; and (e) the effective management of the Group’s sustainability-related risks . F-141 F-142 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Management Report (Continued) In this context sustainable and sustainability encompass the following elements (which are all of equal importance): social, environmental and governance, including climate change; health and safety; security and cybersecurity; diversity and inclusion; responsible lending and sustainable finance; relationships with employees; relationships with communities and other stakeholders; and ethical, elements affecting, or relevant to, the Group’s business or operations . Under its terms of reference the Sustainability Committee is required at least once each year to review its own performance, constitution and terms of reference to ensure it is operating at max- imum effectiveness and to recommend any changes it considers necessary for Board approval . Role of the Strategy Committee The primary purpose and responsibility of the Strategy Committee is (i) to assess the strategic development plans, business plans, major financing and investment proposals and other material issues that affect the development of the Group; (ii) define top-pri- ority areas, strategic targets and major principles of strategic development of the Group and its sustainable development; and (iii) to provide fresh perspectives on strategy and economic trends, act as a sounding board for new ideas, to look at big picture, long range trends, disruptive new technologies and their potential to be or become opportunities or threats to the Group . Under its terms of reference the Strategy Committee is required at least once each year to review its own performance, constitution and terms of reference to ensure it is operating at maximum effec- tiveness and to recommend any changes it considers necessary for Board approval . Appointment, retirement, rotation and removal of directors The directors of the Company are appointed by the general meeting of shareholders with the sanction of an ordinary resolution . Such an appointment may be made to fill a vacancy or as an additional director . But no director may be appointed unless nominated by the Board of directors or a committee duly authorised 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 additional director and every such director shall hold office only until the next following annual general meeting and shall not be taken into account in deter- mining 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 . Direc- tors 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 accordance with the Articles of Association . The Board has delegated to the Audit Committee the responsibility 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 . The office of director shall be vacated if the director: Internal Controls and Risk Management • becomes bankrupt or makes any arrangement or composition with his creditors generally; or • becomes prohibited from being a director by reason of any court order made under Section 180 (disqualification from hold- ing 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. 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 Policies, procedures and controls exist around financial reporting. Management is responsible for executing and assessing the effec- tiveness of these controls . Financial reporting process The Board of Directors is responsible for the preparation of the separate financial statements 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, 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 statements, 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 . Management is responsible for setting the principles in relation to risk management . The risk management organization is divided between Policy Making Bodies and Policy Implementation Bodies . Policy Making Bodies are responsible for establishing risk manage- ment policies and procedures, including the establishment of limits . The main Policy Making Bodies are the Board of directors, the Management Board, the Finance Committee, the Credit Committee and the Business Development Committee . The policy implementation level of the Group’s risk management organization consists of the Finance Department, the Risk Man- agement Department, the Collections Department and the Internal Control Service . In addition the Company 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 characteristics 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 liquidity forecast reports and information on intra-day cash flows. Diversity policy The Company is committed to offering equal opportunity to all current and prospective employees, such that no applicant or em- ployee 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 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 administra- tive, management and supervisory bodies, including the Board of directors of the Company . F-143 F-144 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Management Report (Continued) The composition and diversity information of the Board of directors of the Group for the year ended and as at 31 December 2022 is set out below: Name Sergey Arsenyev Age 51 Male Male/Female Educational/professional background Constantinos Economides 47 Male Margarita Hadjitofi (retired in February 2023) 42 Female Chartered Institute for Securities and Investment, London; European Business School, BA European Business Administration, experience in banking ICAEW, MSc in Management Sciences, experience in ‘Big Four’ profes- sional services firms Lawyer, LLB (Law), Bachelor of Commerce (Business and Finance) Western Sydney University, LLM (Law) University of Sydney, Sustaina- bility Leadership and Corporate Maria Pavlou (retired in February 2023) Mary Trimithiotou Daniel Wolfe 41 44 57 Responsibility at London Business School Female Lawyer, MA Modern History, Law at BPP Law School Female Male ICPAC, FCCA, Licensed insolvency practitioner, experience in ‘Big Four’ professional services firms JD Columbia University School of Law, Dartmouth College BA, USA, experience in investment management Further details of the corporate governance regime of the Company can be found on the website: https://tinkoff-group.com/corporate-governance/tcs-group-holding-plc/. By Order of the Board Constantinos Economides Chairman of the Board Limassol 13 April 2023 F-145 F-146 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEWIndependent Auditor’s Report To the Members of TCS Group Holding PLC Report on the Audit of the Separate Financial Statements Our opinion In our opinion, the accompanying separate financial statements of parent company TCS Group Holding PLC (the “Company”) give a true and fair view of the financial position of the Company as at 31 December 2022, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap . 113 . What we have audited We have audited the separate financial statements which are presented in pages 1 to 40 and comprise: • • • • • the separate statement of financial position as at 31 December 2022; the separate statement of profit or loss and other comprehensive income for the year then ended; the separate statement of changes in equity for the year then ended; the separate statement of cash flows for the year then ended; and the notes to the separate financial statements, which include a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the separate financial statements is International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap . 113 . Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) . Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Separate Financial Statements section of our report . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the Company throughout the period of our appointment in accordance with the International Ethics Stand- ards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the separate financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Kiteserve Limited, Correspondence Address: 6, Karaiskakis Street, City House, 3rd floor, CY-3032, Limassol, Cyprus Kiteserve Limited is a private company registered in Cyprus (Reg . No . 435188) . A list of the company's directors including for individuals the present name and surname, as well as any previous names and for legal entities the corporate name, is kept by the Secretary of the company at its registered office at 31 Gladstonos Street, CY-1095 Nicosia, and appears on the company's web site . Our audit approach Overview As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the separate financial statements. In particular, we considered where the Board of Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain . As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud . Materiality • Overall materiality: Russian Roubles (“RR”) 10 000 million, which represents approximately 2% of total equity . Key audit matters We have identified the following key audit matter: • Valuation of investments in subsidiaries . We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the separate financial state- ments as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which the Company operates . Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the separate financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the separate financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the separate financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the separate financial statements as a whole. Overall group materiality RR 10 000 million How we determined it Approximately 2% of total equity . Rationale for the materiality benchmark applied The Company is a holding company with limited operations . It elects to measure its investments in subsidiaries at fair value . Therefore, we chose total equity as the bench- mark because, in our view, it is the benchmark against which the performance of the Company is most commonly measured by users . We chose 2%, which in our experience is an acceptable quantitative materiality threshold for this benchmark . We agreed with the Audit Committee that we would report to them misstatements identified during our audit above RR 500 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons . Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters . (1) (2) Key Audit Matter How our audit addressed the Key Audit Matter Auditor’s Responsibilities for the Audit of the Separate Financial Statements We assessed the reasonableness of the valuation technique applied by Man- agement in estimating the total fair value of the investments in subsidiaries . We tested the accuracy of the inputs used in the valuation, with the main input being the market quote of the GDRs of the Company, as well as the ap- propriateness of the market from which these quotes were derived . We also assessed the sensitivity of the valuation to the key inputs used . We also reviewed the appropriateness of the disclosures included in the separate financial statements in respect of this valuation. Based on the evidence obtained we found the valuation technique and inputs used to be appropriate and the outputs to be reasonable . Valuation of investments in subsidiaries We focused on this area because Management makes judgements in determining the fair value of investments in subsidiaries . The estimated fair value of investments in subsidiaries rec- ognises that the majority of the value of TCS Group Holding PLC resides in its main operating subsidiaries: JSC “Tinkoff Bank”, JSC “Tinkoff Insurance” and LLC “Phoenix”. In estimating the total fair value of the subsidiaries, the primary input is the market quote of the Company’s GDRs which are traded on the Moscow Stock Exchange . Other inputs include the estimated fair value of the assets and liabilities held by the Company other than its investments in the subsidiaries . Note 3, Significant Accounting Policies, Note 4, Critical Accounting Estimates and Judgements in Applying Account- ing Policies, Note 9, Investments in Equity Securities, and Note 19, Fair Value of Financial Instruments, included in the separate financial statements, provide detailed information on the valuation of investments in subsidiaries . Reporting on other information The Board of Directors is responsible for the other information . The other information comprises the information included in the Manage- ment Report, including the Corporate Governance Statement, which we obtained prior to the date of this auditor’s report, and the Compa- ny’s complete Annual Report and Non-Financial Information and Diversity Statement (Sustainability Report), which is expected to be made available to us after that date. Other information does not include the separate financial statements and our auditor’s report thereon. Our opinion on the separate financial statements does not cover the other information and we do not and will not express any form of assur- ance conclusion thereon . In connection with our audit of the separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated . If, based on the work we have performed, on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact . We have nothing to report in this regard . When we read the Company’s complete Annual Report and Non-Financial Information and Diversity Statement (Sustainability Report), if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and if not corrected, we will bring the matter to the attention of the members of the Company at the Company's Annual General Meeting and we will take such other action as may be required . Responsibilities of the Board of Directors and those charged with governance for the Separate Financial Statements The Board of Directors is responsible for the preparation of the separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards 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 statements, 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 . Those charged with governance are responsible for overseeing the Company’s financial reporting process. Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists . Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit . We also: • Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion . The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control . • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors . • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evi- dence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern . If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report . However, future events or conditions may cause the Company to cease to continue as a going concern . • Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our inde- pendence, and where applicable, actions taken to eliminate threats or safeguards applied . From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. Report on Other Legal Requirements Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: • • • • • In our opinion, based on the work undertaken in the course of our audit, the management report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information given is consistent with the separate financial statements. In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the management report. We have nothing to report in this respect. In our opinion, based on the work undertaken in the course of our audit, the information included in the corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113, and which is included as a specific section of the management report, have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and is consistent with the separate financial statements. In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113 . In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap . 113 . We have nothing to report in this respect . (3) (4) Other Matters This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 69 of the Auditors Law of 2017 and for no other purpose . We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to . The separate financial statements of TCS Group Holding PLC for the year ended 31 December 2021, were audited by another auditor who expressed an unmodified opinion on those statements on 29 March 2022. We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2022 with an unmodified opinion. The engagement partner on the audit resulting in this independent auditor’s report is Olga Menelaou .The engagement partner on the audit resulting in this independent auditor’s report is Olga Menelaou . Olga Menelaou Certified Public Accountant and Registered Auditor for and on behalf of Kiteserve Limited Certified Public Accountants and Registered Auditors 13 April 2023 Separate Statement of Financial Position In millions of RR ASSETS Cash and cash equivalents Loans and advances Investments in equity securities Other financial assets Other non-financial assets TOTAL ASSETS 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 Note 31 December 2022 31 December 2021 7 8 9 10 11 11 12 12 12 2,943 1,459 509,825 1,850 - 516,077 8,880 112 8,992 230 26,998 (1,885) 2,731 (3,756) 482,767 507,085 516,077 492 6,784 1,236,283 102 40 1,243,701 65 303 368 230 26,998 (2,567) 4,745 (4,353) 1,218,280 1,243,333 1,243,701 Approved for issue and signed on behalf of the Board of directors on 12 April 2023 . Constantinos Economides Director Mary Trimithiotou Director The notes № 1-22 are an integral part of these Separate Financial Statements. (5) F-152         31 DECEMBER 2022 Separate Statement of Profit or Loss and Other Comprehensive Income Separate Statement of Changes in Equity In millions of RR Interest income calculated using the effective interest rate method Other similar income Interest expense calculated using the effective interest rate method Net interest income Credit loss allowance Net interest income/(expense) after сredit loss allowance Dividend income Net losses from derivatives revaluation Net losses from foreign exchange translation Net gains/(losses) from operations with foreign currencies Net (losses)/gains from financial assets at FVTPL Share of result of associates Losses on initial recognition of loans at rates below market Administrative and other operating expenses Other operating income Profit before tax Income tax expense Profit for the year Items that may be reclassified to profit or loss Net (losses)/gains arising during the year on investments in equity securities at fair value through other comprehensive income Other comprehensive (losses)/income for the year, net of tax Total comprehensive (loss)/income for the year The notes № 1-22 are an integral part of these Separate Financial Statements. Note 13 13 13 8 9 19 14 15 2022 199 20 (2) 217 - 217 3,268 - (328) 61 (1,928) (265) - (449) 188 764 (167) 597 2021 104 22 - 126 (408) (282) 3,637 (23) (226) (47) 2,373 392 (628) (482) 231 4,945 (202) 4,743 (735,083) (735,083) (734,486) 757,914 757,914 762,657 In millions of RR Note Balance at 31 Decem- ber 2020 Share capital Share premium Revaluation reserve Share-based payment Accumulated (losses)/ income Treasury shares Total 230 26,998 460,346 1,548 (5,556) (3,238) 480,328 Profit for the year - - - Other comprehensive income: Investments in equity securities at FVOCI Total comprehensive income for the year GDRs buy-back Share-based payment reserve Dividends Balance at 31 Decem- ber 2021 Profit for the year Other comprehensive loss: Investments in equity securities at FVOCI Total comprehensive (loss)/income for the period Share-based payment reserve 12 Balance at 31 Decem- ber 2022 - - - - - - - - - - 757,914 757,914 - 20 - 12 12 16 - - - - 4,743 - 4,743 - 4,743 - - 757,914 762,657 12 (1,877) (1,865) 3,197 - 2,548 5,765 - (3,552) - (3,552) 230 26,998 1,218,280 4,745 (4,353) (2,567) 1,243,333 - - - - - - - - - (735,083) (735,083) - - - 597 - 597 - - (735,083) 597 - (734,486) (430) (2,014) - 682 (1,762) 230 26,998 482,767 2,731 (3,756) (1,885) 507,085 The notes № 1-22 are an integral part of these Separate Financial Statements. F-153 F-154 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW       31 DECEMBER 2022 Separate Statement of Cash Flows In millions of RR Cash flows from/(used in) operating activities Interest income calculated using the effective interest rate method received Administrative and other operating expenses paid Income tax paid Cash paid from operations with financial derivatives Other operating income received Cash flows used in operating activities before changes in operating assets and liabilities Changes in operating assets and liabilities Net decrease in loans and deposit placement with related parties Net cash from operating activities Cash flows from/(used in) investing activities Dividend received from subsidiaries Acquisition of investments in equity securities at FVOCI Proceeds from investments in equity securities at FVOCI Net cash from investing activities Cash flows used in financing activities Dividends paid GDRs buy-back 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 The notes № 1-22 are an integral part of these Separate Financial Statements. Notes to the Separate Financial Statements Note 2022 2021 1 Introduction 20 (672) (2) - 135 (519) 1,276 757 3,475 (1,528) - 1,947 - - - (253) 2,451 492 2,943 107 (453) (5) (17) 280 (88) 1,927 1,839 3,455 (367) 550 3,638 (3,609) (1,877) (5,486) (276) (285) 777 492 16 12 7 7 These separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) for the year ended 31 December 2022 for TCS Group Holding PLC (the “Company”), and in ac- cordance 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 2022 . These are available at the Company’s registered office address at 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol 3036, Cyprus or at the Company’s website at www .tcsgh .com .cy . 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: Constantinos Economides, Mary Trimithiotou, Daniel Wolfe (from 1 April 2022) and Sergey Arsenyev (from 9 September 2022) . The Company Secretary is Caelion Secretarial Limited, 25 Spyrou Araouzou, 25 Berengaria, 5th floor, Limassol 3036, Cyprus. At 31 December 2022 the share capital of the Company is comprised of ordinary shares (31 December 2021: same) . Each ordinary share has a nominal value of USD 0 .04 per share and carries one vote . As at 31 December 2022 the number of issued ordinary shares is 199,305,492 (31 December 2021: same) . Refer to Note 11 for further information on the share capital . On 25 October 2013 the Company completed an initial public offering of its 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 shares in the form of GDRs. On 28 October 2019 the Company’s GDRs started trading also on the Moscow Exchange . As at 31 December 2022 and 2021 in accordance with IFRS 10 definition of control the Company has no ultimate controlling party. On 28 April 2022 The New Rigi Trust, a major shareholder of the Company, disposed of its entire interest in the Company . Interros, a leading Russian investment group with a diverse portfolio of assets including in banking, has acquired an interest in the Group, and consequently now holds approximately 35 .08% of the outstanding shares in the Company . The deal was approved by the Central Bank of the Russian Federation . As a result of the aforementioned deal Mr Vladimir Potanin, ultimate beneficiary owner of Interros, became a minority shareholder with a total shareholding of 35.08% (2021: Mr Oleg Tinkov with a shareholding of 35.08%). The free float of the Company amounts to approximately 64.92% of the Company’s issued share capital and Guaranty Nominees Limited is the company that holds the ordinary shares of the Company for which GDRs are issued under a deposit agreement made between the Company and JPMorgan Chase Bank NA signed in October 2013 . The Company owns 100% of shares and has 100% of the voting rights (directly or indirectly) of the following material subsidiaries at 31 December 2022: JSC “Tinkoff Bank” (“the Bank”), JSC “Tinkoff Insurance” (“the Insurance Company”), LLC "Microfinance company “Т-Finans”, LLC “Phoenix” (2021: same). 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”) on 8 December 2006 . This license was re-issued on 11 April 2022 due to changes in requirements related to certain banking operations . The Insurance Company operates under an insurance license No . 0191 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 withdrawal of a license of a bank or a CBRF-imposed moratorium on payments. Primary activities of significant subsidiaries of the Company are presented below. JSC “Tinkoff Bank” (the “Bank”) provides on-line retail financial services in Russia, such as retail loans (credit cards, cash loans, consumer loans, car loans, secured loans), deposits and savings, retail debit cards, investment services, SME services, acquiring and payments, other lifestyles and travel services to individuals . JSC “Tinkoff Insurance” (the “Insurance Company”) provides insurance services such as accident, property, travellers, financial risks and auto insurance . F-155 F-156 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW       31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 1 Introduction(Continued) The subsidiary LLC “Microfinance company “Т-Finans” provides micro-finance services to clients. The subsidiary LLC “Phoenix” is a debt collection agency . Registered address and place of business. The Company’s registered address is 25 Spyrou Araouzou, Berengaria 25, 5th floor, Limassol, 3036, Cyprus, and place of business is Office 301B, Interlink Hermes Plaza, Ayiou Athanasiou Avenue 46, Limassol 4102 Cyprus . Presentation currency. These separate financial statements are presented in millions of Russian Rubles (RR). 2 Operating Environment of the Group Russian Federation. The Company’s main subsidiaries all operate mainly within the Russian Federation . In February 2022, the eco- nomic situation in Russia was negatively affected by the geopolitical tension in the region, as well as expanded international sanctions against certain Russian companies, citizens and institutions . By the Company's management view this economic environment results in volatility in the fair value of investments, however this vola- tility is not visible in the Company's surrounding activities . The Company has ample liquidity to carry on business and still can receive dividends from subsidiaries . Subsequent to the reporting date, the Bank was sanctioned as further disclosed in Note 22 . 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 lncome Тах Law for supporting its income tax return, 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 valuation of subsidiaries at fair value, 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 par- ticipants at the measurement date . The best evidence of fair value is the quoted 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 Company: (a) manages the group of financial assets and financial liabilities on the basis of the entity’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the entity’s documented risk management or investment strategy; (b) it provides information on that basis about the group of assets and liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities is substantially the same. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration 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 (un- adjusted) 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 meas- urements 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 19 . Associates. Associates are entities over which the Company has significant influence (directly or indirectly), but not control, generally ac- companying 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 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 compre- hensive 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 substance 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 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 Company had directly disposed of the related assets or liabilities . This may mean that amounts previously recognised in other comprehen- sive 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 previous- ly recognised in other comprehensive income are reclassified to profit or loss, where appropriate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. 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 principal 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 separate state- ment of financial position. F-157 F-158 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or secured that are integral to the effective interest rate such as origination fees. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount, which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates . Such premiums or discounts are amortised over the whole expected life of the instrument . The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. For assets that are purchased or originated credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments. Financial instruments – initial recognition. Financial instruments at FVTPL are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs that are incremental and directly attributable to the acquisition or the issue of the financial asset or financial liability. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument 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 instru- ments 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 (“reg- ular 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 recognition, which is considered to be the transac- tion 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 measurement 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 Compa- ny 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. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities 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 contrac- tual cash flows” since the Company manages these financial instruments solely to collect contractual cash flows: cash and cash equiva- lents, 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 rep- resent solely payments of principal and interest (the SPPI test) . Financial assets with embedded derivatives 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 considers 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 – modifi- cation” . 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. 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 . 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 financial 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 applies a “three stage” model for impairment in accordance with IFRS 9, based on changes in credit quality since initial recognition: 1 . A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 months ECL”) . 2 . If the Company identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“lifetime ECL”) . Refer to Note 17 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 17 for a description of how the Company defines credit-impaired assets and default. Note 17 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 ef- forts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractual- ly due, however, there is no reasonable expectation of recovery . F-159 F-160 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) 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 ownership, but not retaining control . Control is retained if the coun- terparty 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, significant change in interest rate, change in the cur- rency 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 Company derecognises 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 recogni- tion for subsequent impairment calculation purposes, including determining whether a SICR has occurred . 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 originally 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 substan- tially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss. Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for finan- cial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities). 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. Otherwise 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 . Deriv- atives 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 . 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 commence- ment 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 . Financial liabilities – derecognition. Financial liabilities are derecognised when they are extinguished (i .e . when the obligation speci- fied in the contract is discharged, cancelled or expires). Right-of-use assets are measured at cost comprising the following: 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 extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered . If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up meth- od, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners . Cash and cash equivalents. Cash and cash equivalents include deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less . Cash and cash equivalents are carried at AC because: (i) they are held for col- lection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL. • • • • 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 recognised 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. 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 . F-161 F-162 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting mismatch. Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated using the effective interest method and recognised in profit or loss. An impairment allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All other changes in the carrying value are recognised in OCI except for 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 significantly 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 ef- fectively 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 receiva- bles . 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 FVOCI . The Company’s policy is to designate equity investments (including In- vesments 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 entities) 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 involve- ment 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 con- trol entities and as an additional contribution to or distribution from the subsidiary transferring 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 considera- tion 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 inter- est method . Income taxes. Income taxes have been provided for in the separate financial statements in accordance with Cyprus legislation 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 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 trans- action 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 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 tem- porary 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 subsidi- aries 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 undistributed 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 reporting period . Lia- bilities 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 Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resourc- es 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 recognised as a prepayment . Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds and debited against share premium . Share premium. Share premium is the difference between the fair value of the consideration receivable for the issue of shares and the nominal value of the shares . The share premium account can only be resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital . Treasury shares. Where the Company purchases the Company’s equity instruments, the consideration paid, including any directly attributable incremental external costs, net of income taxes, is deducted from equity attributable to the owners of the Company until the equity instruments are reissued, disposed of or cancelled . Where such shares are subsequently disposed of or reissued, any consideration F-163 F-164 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 3 Significant Accounting Policies (Continued) 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 Company 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 22. The separate 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 . Management considers the Revaluation Reserve to be a distributable reserve . Dividend distribution to the Company's shareholders is recognised as a liability in the Company's separate financial statements in the year in which the dividends are appropriately authorised and are no longer at the discretion of the Company. More specifically, interim dividends are recognised as a liability in the period in which these are authorised by the Board of directors and in the case of final dividends, these are recognised in the period in which these are approved by the Company's shareholders . Interest income and expense recognition. Interest income and expense are recorded for all debt instruments, other than those at FVTPL, on an accrual basis using the effective interest method. This method defers, as part of interest income or expense, all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a financial liability. Commitment fees received by the Company to originate loans at market interest rates are integral to the effective interest rate if it is probable that the Company will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination. The Company does not designate loan commitments as financial liabilities at FVTPL. For financial assets that are originated or purchased credit-impaired, the effective interest rate is the rate that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial recognition (normally represented 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. 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 Company’s progress towards complete satisfaction of that performance obligation . All other expenses are generally recorded on an accrual basis by reference to completion of the specific transaction assessed 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 . sian 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 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/(losses) from operations with foreign currencies . At 31 December 2022 the rate of exchange used for translating foreign currency balances was USD 1 = RR 70 .3375 (31 December 2021: USD 1 = RR 74 .2926), and the average rate of exchange was USD 1 = RR 68 .5494 for the year ended 31 December 2022 (2021: USD 1 = RR 73 .6541) . Offsetting. Financial assets and liabilities are offset and the net amount reported in the separate 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 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. 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies The Company makes estimates and assumptions that affect the amounts recognised in the separate financial statements and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances . Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies . Judgements that have the most significant effect on the amounts recognised in the separate financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Investments in subsidiaries. The estimated fair value of investments in subsidiaries recognises that the majority of the value of the Company resides in its main operating subsidiaries . Thus in estimating the fair value of the subsidiaries the primary input is the market quote of the Company’s GDRs which are traded on the Moscow Stock Exchanges (2021: 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 . Re- fer to Note 19. As a result of the geopolitical tension described in Note 2, quoted prices of GDRs issued by the Company have significant- ly decreased during 2022 year . Subsequently, trading of GDRs initially placed on the London Stock Exchange had been suspended . As such, the London Stock Exchange ceased to be a source of market quotes due to a lack of trading volumes necessary to form fair value estimation . For the purposes of fair value estimation of investments in equity securities the Moscow Stock Exchange quotes were used, following the principal of IFRS 13 of most advantageous market in the absence of a principal market . 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 classi- fied 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 contrac- tual 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 . 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 Rus- 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 F-165 F-166 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued) 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 21 . 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 18 . 5 Adoption of New or Revised Standards and Interpretations The following amended standard became effective from 1 January 2022, but did not have any material impact on the Company: • 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). 6 New Accounting Pronouncements Certain new amendments have been issued that are mandatory for the annual periods beginning on or after 1 January 2023, which the Company has not early adopted: Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommissioning obligations . The following other new pronouncements are not expected to have any material impact on the Group when adopted: • IFRS 14, Regulatory Deferral Accounts (issued on 30 January 2014 and effective for annual periods beginning on or after 1 January 2016)* . • 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)* . • Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effec- tive for annual periods beginning on or after 1 January 2023)* . • Non-current Liabilities with Covenants – Amendments to IAS 1 (issued on 31 October 2022 and effective for annual periods beginning on or after 1 January 2024) . • Lease Liability in a Sale and Leaseback Amendments to IFRS 16 – Amendments to IFRS 16 (issued on 22 September 2022 and effective for an- nual periods beginning on or after 1 January 2024) . The amendments apply to sale and leaseback transactions where the transfer of the asset qualifies as a ‘sale’ under IFRS 15 and the lease payments include variable lease payments that do not depend on an index or rate. * Denotes standards, interpretations and amendments which have not yet been endorsed by the European Union . 7 Cash and Cash Equivalents The table below discloses the credit quality of cash and cash equivalents balances based on credit risk grades at 31 December 2022 and 2021 . The gross carrying amount of cash and cash equivalents at 31 December 2022 and 2021 below also represents the Company's maxi- mum exposure to credit risk on these assets: In millions of RR Placements with other banks with original maturities of less than three months Excellent: Placements with UK Bank (A+ rated) Sub-standard: Placements with European bank (B- rated) Total cash and cash equivalents 31 December 2022 31 December 2021 168 2,775 2,943 353 139 492 Refer to Note 17 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 balances 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 17 for the ECL measurement approach . Interest rate, maturity and geographical risk concentration analysis of cash and cash equivalents is disclosed in Note 17 . Refer to Note 19 for the disclosure of the fair value of cash and cash equivalents . 8 Loans and Advances to Customers In millions of RR Loans and advances to subsidiary at AC Gross carrying amount Less credit loss allowance Total Loans and advances at FVTPL Deposit placements with subsidiary Bank Total loans and deposit placements 31 December 2022 31 December 2021 - - - 1,459 - 1,459 1,944 (408) 1,536 3,971 1,277 6,784 In 2021 the Company made non-equity contributions to its subsidiaries . These contributions are recoverable on demand of the Company, but were expected to be recovered within 5 years . Due to the changes throughout the reporting period in geopolitical environment of the subsidiaries described in Note 2, Company changed its expected maturity period and overall accounting treatment . As a result, these contributions were reclassified to other assets. This reclassification did not have an effect on Company’s financial results . At 31 December 2021 the deposit placements with subsidiary Bank are represented by three deposits: deposit placement in USD with a nominal value of RR 118 million at 0 .90% per annum maturing on 10 August 2022, deposit placement in EUR with a nominal value of RR 6 million at 0 .30% per annum maturing on 4 August 2022, deposit placement in RR with a nominal value of RR 1,153 million at 5 .10% per annum maturing on 24 December 2022 . Loans and advances at FVTPL represent a loan that does not meet SPPI requirement in EUR with a nominal value of RR 1,459 million at 3 .4% per annum maturing 14 December 2032 (31 December 2021: RR 3,971 million at 1 .7% per annum maturing on 31 August 2025) . F-167 F-168 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 8 Loans and Advances to Customers (Continued) 9 Investments in Equity Securities For the purpose of ECL measurement deposit placements with subsidiary Bank balances are included in Stage 1 . The ECL for these balanc- es represents an immaterial amount, therefore the Company did not create any credit loss allowance for deposit placements with subsidiary Bank . Refer to Note 17 for the ECL measurement approach . As at 31 December 2022 for the purpose of credit risk measurement loans and advances are included in “Monitor” credit risk grade based on credit risk grade master scale (31 December 2021: same) . Refer to Note 17 for the description of the credit risk grading system . Refer to Note 19 for the disclosure of the fair value of loans and advances . Interest rate, maturity and geographical risk concentration analy- sis are disclosed in Note 17 . Information on related party balances is disclosed in Note 21 . 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 I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p s h t n o m - 2 1 ( 1 e g a t S ) L C E l a t o T L C E e m i t e f i l ( ) R C I S r o f 2 e g a t S L C E e m i t e f i l ( - m i t i d e r c r o f 3 e g a t S ) d e r i a p / d e s a h c r u P d e t a n i g i r o - m i t i d e r c d e r i a p l a t o T In millions of RR Loans and advances to subsidiary at AC At 31 December 2020 - - - - - - - - 68,131 Movements with im- pact on credit loss allowance charge for the year: New originated or purchased Transfers: - to lifetime (from Stage 1 to Stage 2) Movements other than transfers and new origi- nated or purchased loans Total movements with impact on credit loss al-lowance charge for the year At 31 December 2021 407 - - 407 1,939 - - 1,939 101,176 - - (407) 407 - - - 1 408 408 - - - - - (1,939) 1,939 1 - 5 408 - 1,944 408 - 1,944 - - - - In millions of RR Investments in subsidiaries including: - Investments in financial institutions - Investments in non-financial institutions Total investments in equity securities 31 December 2022 31 December 2021 459,188 50,637 509,825 1,194,465 41,818 1,236,283 As at 31 December 2022 investments in financial institutions include investments in share capital of JSC “Tinkoff Bank”, JSC “Tinkoff Insurance” and LLC "Microfinance company “Т-Finans” and other subsidiaries (2021: same). As at 31 December 2022 investments in non-financial institutions include investments in share capital of LLC “Phoenix” and other subsidiar- ies (2021: same) . 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 . As at 31 December 2022 the Company owns 100 .00% of the shares of the Insurance Company and controls it (2021: the Company owns 98 .06%, the Bank owns 1 .94%) . Investments in subsidiaries are stated at fair value at the end of each reporting period (Notes 3, 4 and 19) . The movements in investments in subsidiaries for the period ended 31 December 2022 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 2022 1,236,283 10,387 (735,083) (1,762) 509,825 2021 472,221 383 757,914 5,765 1,236,283 5 (39,749) The movements in investments in subsidiaries for the period ended 31 December 2021 are as follows: 1,944 61,427 1,944 126,295 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 F-169 F-170 In 2022 the Company received dividend income from JSC “Tinkoff Insurance” in the amount of RR 3,268 million (2021: nil) Interest rate, maturity and geographical risk concentration analysis of investment in equity securities are disclosed in Note 17 . Refer to Note 19 for the disclosure of the fair value of investments in equity securities . TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                    31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 10 Other Financial Assets In millions of RR Other requirement on the subsidiary: Gross carrying amount Provisions charged Other financial assets Total Other Financial Assets 11 Other Financial and Non-financial Liabilities In millions of RR Other Financial Liabilities Settlement of obligations by a subsidiary Accrued audit and accountancy fees Total Other Financial Liabilities Other Non-financial Liabilities Dividends payable under GDRs repurchased for MLTIP purposes Total Other Non-financial Liabilities 8,852 28 8,880 112 112 - 65 65 303 303 Interest rate, maturity and geographical risk concentration analysis of other financial liabilities are disclosed in Note 17. Refer to Note 19 for disclosure of fair value of other financial liabilities. 12 Share Capital, Share Premium and Treasury Shares In millions of RR Number of authorised shares Number of outstanding shares Ordinary shares Share premi- um Treasury shares Total At 31 December 2020 210,034,648 199,305,492 230 26,998 (3,238) 23,990 Increase of number of authorised shares GDRs buy-back GDRs and shares transferred under MLTIP 14,184,030 - - - - - - - - (1,877) (1,877) 2,548 2,548 At 31 December 2021 224,218,678 199,305,492 230 26,998 (2,567) 24,661 GDRs and shares transferred under MLTIP - - - - 682 682 At 31 December 2022 224,218,678 199,305,492 230 26,998 (1,885) 25,343 In November 2021 the Company’s shareholders approved a resolution to increase authorised share capital to USD 8,968,747 .12 by the creation of 14,184,030 new shares of nominal value USD 0 .04 each . As at 31 December 2022 the total number of authorised shares is 224,218,678 shares (31 December 2021: same) with a par value of USD 0 .04 per share . At 31 December 2022 the total number of outstanding shares is 199,305,492 shares (31 December 2021: same) with a par value of USD 0 .04 per share (31 December 2021: same) . 31 December 2022 31 December 2021 At 31 December 2022 and 2021 treasury shares represent GDRs of the Group repurchased from the market for the purposes permitted by Cyprus law including contribution to MLTIP . Refer to Note 21 . 2,134 (408) 124 1,850 - - 102 102 At 31 December 2022 the total number of treasury shares is 602,975 (31 December 2021: 1,237,583) . During the year ended 31 December 2022 no GDRs were repurchased by the Group (2021: the Company repurchased 425,017 GDRs at market price for RR 1,877 million) . During the year ended 31 December 2022 the Group transferred 634,608 GDRs (2021: 2,200,813 GDRs), representing 0 .32% (2021: 1 .10%) of the issued shares, upon vesting under the MLTIP . This resulted in a transfer of RR 682 million (2021: RR 2,548 million) out of treasury shares to retained earnings . 31 December 2022 31 December 2021 13 Interest income and expense In millions of RR 2022 2021 Interest income calculated using the effective interest rate method Loans and deposit placement including: Deposit placements with subsidiary Bank Other interest income 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 Other interest expense Total Interest expense calculated using the effective interest rate method Net interest income 14 Administrative and Other Operating Expenses In millions of RR Legal and consulting fees Staff costs Taxes other than income tax Audit and accountancy fees Other administrative expenses and depreciation Total administrative and other operating expenses 9 190 199 20 219 2 2 217 2022 283 123 23 6 14 449 100 4 104 22 126 - - 126 2021 260 152 23 38 9 482 F-171 F-172 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW 31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 14 Administrative and Other Operating Expenses (Continued) 16 Dividends The total fees charged by the Company's statutory auditor for the statutory audit of the annual consolidated and separate financial state- ments of the Company for the year ended 31 December 2022 amounted to RR 6 .4 million (2021: RR 7 .5 mln) . The total fees charged by the Company's statutory auditor for the year ended 31 December 2022 for other assurance services amounted to nil (2021: RR 3 .4 million), for tax advisory services amounted to RR 0 .1 million (2021: RR 1 .5 million) and for other non-assurance services amounted to RR 0 .3 million (2021: RR 0 .1 million) . Included in staff costs are statutory social contributions to the non-budget funds: In millions of RR Statutory social contribution to the non-budget funds 2022 18 2021 28 At 31 December 2022 there are 14 employees employed by the Company (31 December 2021: 41) . The average number of employees em- ployed by the Company during the reporting year was 19 (2021: 46) . 15 Income Taxes Income tax expense comprises the following: In millions of RR Overseas tax withheld at source Corporation tax Income tax expense for the year 2022 2021 165 2 167 202 - 202 There were no movements in dividends during the year ended 31 December 2022 . The movements in dividends during the year ended 31 December 2021 were 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 during the year (in USD) Dividends per share paid during the year (in USD) 2022 304 - - (192) 112 - - 2021 656 3,552 (3,621) (283) 304 0.24 0.24 On 10 March 2021 the Board of directors declared an interim dividend of USD 0 .24 (RR 17 .82) per share/per GDR with a total amount allo- cated for dividend payment of around USD 47 .8 million (RR 3,552 million) . On 11 March 2021 the Company announced suspension of dividend payments for the remainder of 2021 and 2022 to keep the funds inside the Company to provide for organic and/or inorganic growth opportunities . Dividends payable at 31 December 2021 related to treasury shares acquired under MLTIP amounting to RR 304 million are included in other non-financial liabilities. The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows: 17 Financial Risk Management In millions of RR Profit before income tax Theoretical tax charge at statutory rate of 12 .5% (2021: 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 Income tax expense for the year 2022 764 96 39 (133) 165 167 2021 4,945 618 (9) (609) 202 202 Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc .) are exempt from Cyprus income tax . At 31 December 2022 and 2021 the Company had no tax losses carried forward . During 2022 and 2021 there were no temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases . The risk management function within the Company is carried out in respect of financial risks (credit, market, currency, liquidity 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 operational 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 finan- cial position . The credit risk is controlled by management of the Company, by approving limits on the level of credit risk by borrowers . 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 Corresponding interval PD < 0 .1% with PD range of or equal to 0 .1% and less than 2 .5% PD in the range of or equal to 2 .5% and less 12 .5% PD in the range of or equal to 12 .5% and less 18 .5% PD in the range of or equal to 18 .5% and less 30% F-173 F-174 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 17 Financial Risk Management 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 For measuring credit risk and grading those financial instruments which do not have risk grades estimated by external international 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 12-month ECL – the portion of lifetime ECLs that represent the ECLs resulting from default events on a financial instrument that are possi- ble within 12 months after the reporting date that are limited by the remaining contractual life of the financial instrument. Credit Conversion Factor (CCF) – a coefficient that shows that the probability of conversion of an off-balance sheet amount to exposure on the statement of financial position within a defined period. It can be calculated for a 12-month or lifetime period. Based on the analysis performed, the Company considers that 12-month and lifetime CCFs are the same . Default and credit-impaired assets – assets for which a default event has occurred . The default definition stated above should be applied to all types of financial assets of the Company. An instrument is 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 mon- itoring the triggers stated below . The criteria used to identify SICR are monitored and reviewed periodically for appropriateness 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 Each master scale credit risk grade is assigned a specific degree of creditworthiness: General principle of techniques applied • 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 For financial assets, ECLs are generally measured based on the risk of default over one of two different time periods, 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 The rating models are regularly reviewed by the Credit Risk Department, backtested on actual default data and updated if necessary . initial recognition, the loss allowance is based on 12-month ECLs; Expected credit loss (ECL) measurement – definitions and description of estimation techniques. ECL 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 de- fault occurring in a given time period used as weights) . ECL measurement is based on the following components used by the Company: Default occurs when a financial asset is 90 days past due. Probability of Default (PD) – an estimate of the likelihood of default to occur over a given time period . Exposure at Default (EAD) – an estimate of exposure at a future default date, taking into account expected changes in exposure after the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities . Loss Given Default (LGD) – an estimate of the loss arising on default as a percentage of the EAD. It is based on the differ- ence between the contractual cash flows due and those that the Company would expect to receive. Discount Rate – a rate to discount an expected loss to its present value at the reporting date. The discount rate represents the effective interest rate (EIR) for the financial instrument or an approximation thereof. Lifetime period – the maximum period over which ECL should be measured. For financial instruments held by the Company the lifetime period is equal to contractual maturity of the respective financial instruments. Lifetime ECL – losses that result from all possible default events over the remaining lifetime period of the financial instrument. • Stage 2 – if since the date, which was assumed to be the date of initial recognition has 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 . The Company carries out the following approach for ECL measurement: • For financial instruments which have external ratings – assessment based on external ratings; • For financial instruments which do not have external ratings – assessment based on discounted cash flow technique. Principles of assessment based on external ratings – the principles of ECL calculations based on external ratings are the same as for their assessment on a portfolio basis . Credit risk parameters (PD and LGD) are taken from the default and recovery statistics published by international rating agencies (Fitch and in case of their absence – Moody’s or Standard & Poor’s) . Market risk. The Company takes on exposure to market risks . Market risks arise from open positions in (a) currency, (b) interest rate and (c) equity products, all of which are exposed to general and specific market movements. Management sets limits on the value of risk that may be accepted, which are monitored on a daily basis . However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Currency risk. In respect of currency risk, the management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily . F-175 F-176 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 17 Financial Risk Management (Continued) Geographical risk concentrations. The geographical concentration of the Company’s financial assets and liabilities at 31 December 2022 is set out below: In millions of RR Financial assets Cash and cash equivalents Loans and advances Investments in equity securities Other financial assets Total financial assets Financial liabilities Other financial liabilities Total financial liabilities Russian Federation OECD Other Non-OECD Total 2,943 1,459 509,825 1,850 168 - - - 2,775 1,459 1,724 124 168 6,082 516,077 - - - - 8,880 8,880 - - 508,101 1,726 509,827 8,880 8,880 Net separate statement of financial position 500,947 168 6,082 507,197 The geographical concentration of the Company’s financial assets and liabilities at 31 December 2021 is set out below: In millions of RR Financial assets Cash and cash equivalents 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 - 2,813 1,236,283 - 353 - - - Total 492 6,784 139 3,971 - 1,236,283 102 102 1,239,096 353 4,212 1,243,661 - - - - 65 65 65 65 Net separate statement of financial position 1,239,096 353 4,147 1,243,596 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 risk concentrations. Most financial assets of the Company are concentrated into Bank and its subsidiaries. Liquidity risk. Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Liabilities at 31 December 2022 by their remaining contractual maturity are described below . The amounts disclosed below are the con- tractual undiscounted cash flows. Such undiscounted cash flows may differ from the amount included 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 . Total potential future payments for financial obligations at 31 December 2022 equal to RR 8,880 million matured not earlier than one year. Total potential future payments for financial obligations at 31 December 2021 equal to RR 65 million matured not later than six months. Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years More than 5 years No stated maturity In millions of RR Assets Cash and cash equivalents 2,943 - - 1,726 4,669 28 28 - - - 124 124 - - 4,641 124 - - - - - - - - Total 2,943 1,459 - - - 1,459 - - - - - - - 509,825 509,825 - 1,850 1,459 509,825 516,077 8,852 8,852 - - - - 8,880 8,880 (8,852) 1,459 509,825 507,197 4,641 4,765 4,765 (4,087) (2,628) 507,197 - Demand and less than 1 month From 1 to 6 months From 6 to 12 months From 1 to 5 years No stated maturity Total 492 6,784 492 - - - 492 - - 492 - - - 102 102 65 65 37 - - 1,277 5,507 - - - - - - 1,236,283 1,236,283 - 102 1,277 5,507 1,236,283 1,243,661 - - - - - - 65 65 1,277 5,507 1,236,283 1,243,596 492 529 1,806 7,313 1,243,596 - Loans and advances Investments in equity securities Other financial assets Total financial assets Liabilities Other financial liabilities Total financial liabilities Net liquidity gap at 31 December 2022 Cumulative liquidity gap at 31 December 2022 In millions of RR Assets Cash and cash equivalents Loans and deposit placements with related parties Investments in equity securities Other financial assets Total financial assets Liabilities Other financial liabilities Total financial liabilities Net liquidity gap at 31 December 2021 Cumulative liquidity gap at 31 December 2021 Russian Federation OECD Other Non-OECD The expected maturity analysis of financial assets and liabilities based on the contractual discounted cash flows at 31 December 2021 is as follows: F-177 F-178 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                                                                    31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 18 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 estimates 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 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 Company. 19 Fair Value of Financial Instruments Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measure- ments are valuations not based on observable market data (that is, unobservable inputs) . (a) Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the separate statement of financial position at the end of each reporting period . The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows: The description of valuation techniques and the description of the inputs used in the fair value measurement for level 2 measurements at 31 December 2021 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 estimat- ing 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 liabili- ties held by the Company other than its investment in the subsidiaries Market quote of USD 84 .32 for 1 share at 31 December 2021; Market interest rates Investments in subsidiaries 1,236,283 Total recurring fair value measurements at level 2 1,236,283 There were no changes in the valuation techniques for level 2 recurring fair value measurements during the years ended 31 December 2022 and 2021 . At 31 December 2022 if market quote of GDR of the Company at that date had been 65% higher/lower (2021: 70% higher/lower), with all other variables held constant, the fair value of the investments in equity securities would have been RR 328,381 million higher/lower (2021: RR 868,537 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 2022 are as follows: In millions of RR ASSETS AT FAIR VALUE Loans and advances at FVTPL Investments in subsidiaries Total assets recurring fair value measurements 31 December 2022 31 December 2021 In millions of RR Fair value Valuation technique Inputs used Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total ASSETS AT FAIR VALUE - - - 1,459 1,459 - - 3,971 3,971 509,825 - 509,825 - 1,236,283 - 1,236,283 - 509,825 1,459 511,284 - 1,236,283 3,971 1,240,254 Loans and advances at FVTPL 1,459 Total recurring fair value measurements at level 3 1,459 Revaluation of the convertible loan based on the company's share price as per the most recent sale purchase transac- tions with shares Share price as per the most recent sale pur- chase transaction Investments in subsidiaries are stated at fair value based on market valuation (2021: 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 2022 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 estimat- ing the fair value of the subsidiaries the primary input is the market quote of the Company’s GDRs which are traded on the 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 36 .15 for 1 share at 31 December 2022; Market interest rates Investments in subsidiaries 509,825 Total recurring fair value measurements at level 2 509,825 The description of valuation techniques and the description of the inputs used in the fair value measurement for level 3 measurements at 31 December 2022 are as follows: In millions of RR Fair value Valuation technique Inputs used ASSETS AT FAIR VALUE Loans and advances at FVTPL 3,971 Total recurring fair value measurements at level 3 3,971 Revaluation of the convertible loan based on the company's share price as per the most recent sale purchase transac- tions with shares Share price as per the most recent sale pur- chase transaction F-179 F-180 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                          31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 19 Fair Value of Financial Instruments (Continued) Changes of the fair value measurements at Level 3 for the year ended 31 December 2022 and 2021 are as follows: In millions of RR 1 January 2021 Other interest income Net losses from foreign exchange translation Net gains from revaluation of convertible loan 31 December 2021 Other interest income Net losses from foreign exchange translation Net gains from revaluation of convertible loan 31 December 2022 Loans and advances at FVTPL 1,892 23 (317) 2,373 3,971 20 (604) (1,928) 1,459 As at 31 December 2022, if the share price had been 10% lower/higher, fair value of loans and advances to related parties at FVTPL would have been RR 146 million lower/higher (2021: RR 293 million) . 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: 31 December 2022 31 December 2021 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 equivalents Excellent: Placements with UK Bank (A+ rated) Sub-standard: Placements with European bank (B- rated) Loans and advances to customers Deposit placements with subsidiary Bank Loans and advances to subsid- iary at AC Other financial assets Total financial assets carried at amortised cost - - - - - - - FINANCIAL LIABILITIES CARRIED AT AMORTISED COST Other financial liabilities Total financial liabilities carried at amortised cost - - 8,880 8,880 168 2,775 - - 168 2,775 - 606,577 605,872 - - 1,850 4,793 - - - - - - - - 1,850 4,793 8,880 8,880 - - - - - - - - - 353 139 - - 353 139 - 602,864 602,337 1,277 1,277 - - 102 - 102 594 2,813 3,407 65 65 - - 65 65 Weighted average discount rates used in determining fair value as of 31 December 2022 and 2021 depend on currency: In % p.a. Assets Loans and deposit placements - Loans and advances at FVTPL - Loans and advances to subsidiary at AC - Deposit placements with subsidiary Bank 31 December 2022 31 December 2021 3 .4 - - 1 .7 9 .8 4 .9 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 . 20 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 2022: In millions of RR Cash and cash equivalents Loans and advances Investments in equity securities Other financial assets TOTAL FINANCIAL ASSETS In millions of RR Cash and cash equivalents Loans and deposit placements Investment in equity securities Other financial assets TOTAL FINANCIAL ASSETS AC FVTPL FVOCI 2,943 - - 1,850 4,793 - 1,459 - - 509,825 509,825 - 1,850 1,459 509,825 516,077 Total 2,943 1,459 FVTPL FVOCI AC 492 - 2,813 3,971 Total 492 6,784 - 102 - - 1,236,283 1,236,283 - 102 3,407 3,971 1,236,283 1,243,661 - - - - The following table provides a reconciliation of classes of financial assets with these measurement categories as of 31 December 2021: 1,536 1,536 As of 31 December 2022 and 2021 all of the Company’s financial liabilities were carried at amortised cost. F-181 F-182 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                                          31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 21 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 considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form . The outstanding balances with related parties were as follows: In millions of RR ASSETS Investments in equity securities Loans and advances to related parties (contractual interest rate 2022: 0%; 2021: from 0 .3% to 4 .5%) Other financial assets TOTAL ASSETS LIABILITIES Other financial liabilities Other non financial liabilities TOTAL LIABILITIES 31 December 2022 31 December 2021 Associates and other related parties Subsidiary Associates and other related parties Subsidiary 509,825 - 1,778 511,603 8,852 - 8,852 - - - - - 112 112 1,236,283 - 2,813 77 1,239,173 - - - 3,971 - 3,971 - 303 303 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 Credit loss allowance Net gains/(losses) from foreign exchange translation Net gains/(losses) from financial assets at FVTPL Dividend income Losses on initial recognition of loans at rates below market Other comprehensive (losses)/income: Revaluation of investments in subsidiaries 31 December 2022 31 December 2021 Associates and other related parties Subsidiary Associates and other related parties Subsidiary 199 - - 20 - 3,268 - (735,083) - 17 - (591) (2,425) - - - 104 - (408) 130 - 3,637 (628) 757,914 22 - - (294) 2,373 - - - In 2022 the total remuneration of Directors listed in the Board of directors and other officers amounted to RR 40.0 million (2021: RR 60.0 million). Management long-term incentive program . On 31 March 2016 the Group introduced a MLTIP as both a long-term incentive and a retention tool for the management of the Group . Total number of GDRs attributable to the management is 21,533 thousand as at 31 December 2022 (2021: 17,241 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, each year during 2016-2022, is determined on the basis of market quotes of GDRs as at those dates . Weighted-average fair value of the awards in 2022 was USD 3 .2 per 1 GDR (2021: USD 87 per 1 GDR) . In 2022, the grants introduced during 2016-2020 have been fully vested . Each grant provided in 2021 and 2022 is vested over 5 years . The delivery dates as of which the GDRs are allowed to be sold by the partic- ipants correspond to the vesting dates, each subsequent 31 August until 2026 for 2021 grants and each subsequent 31 May until 2027 for 2022 grants . The following table discloses the changes in the numbers of GDRs attributable to the MLTIP: In millions of RR At 31 December 2020 Granted Vested Forfeited At 31 December 2021 Granted Vested Forfeited At 31 December 2022 Number of GDRs attributable to the MLTIP 7,276 1,950 (2,201) (6) 7,019 4,293 (1,733) (2,533) 7,046 F-183 F-184 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW                    31 DECEMBER 2022 Notes to the Separate Financial Statements (Continued) 22 Events after the End of the Reporting Period On 25 February 2023, the subsidiary of the Company, JSC Tinkoff Bank (the Bank) became subject to an asset freeze in the EU under the Council Implementing Regulation (EU) No 2023/429, implementing Council Regulation (EU) No 269/2014 (the "EC Regulation 269"). The Company and its controlled subsidiary undertakings (other than the Bank and any controlled subsidiary undertakings of the Bank) are not subject to an asset freeze pursuant to EC Regulation 269 or to other EU sanctions . As a result of the event described in the first paragraph, the operations of the Company and its Russia-based investments could be impacted by the freezing of bank accounts, restrictions on capital movements outside the Russian Federation which could impact the ability of the Company’s investments to make payments to the Company or to make payments between bank accounts of the Company in the Russian Federation and abroad, the impairment of assets, the fair value losses of financial and non-financial assets; and the expected credit losses on financial assets. Due to the sanctions imposed in relation to the Bank, some payment orders have been put on hold by the servicing bank . Also the Company’s payable to the Bank, with maturity from 1 to 5 years as at the reporting date, can be repaid by the Company only when it becomes legally permissible to do so . The situation is still evolving and further sanctions and limitations on business activity of companies operating in the region, as well as consequences on the Russian economy in general, may arise but the full nature and possible effects of these are unknown. It is not possible for management to predict with any degree of certainty the impact of this uncertainty on the future operations of the Company and its sub- sidiaries and estimate their financial effect. The management is currently assessing the impact of the aforesaid sanctions to the Company’s and the broader group’s operations, finan- cial position, and performance, including the impact to the existing MLTIP scheme and other intra-group transactions and balances . The Board of Directors continues to adopt the going concern basis in preparing these financial statements as the Company has no sig- nificant external liabilities and is able to control its discretionary spending. The Board of Directors is closely monitoring the situation and obtains legal advice in this respect and is ready to act depending on the developments . The event did not exist in the reporting period and is therefore not reflected in the recognition and measurement of the assets and liabilities in the financial statements as at 31 December 2022 as it is considered as a non-adjusting event. There were no other material events after the reporting date, which have a bearing on the understanding of the financial statements. 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 . Company Secretary Caelion Secretarial Limited (registered number HE351260) 4th floor Berengaria 25 Spyrou Araouzou 25 Limassol 3036 Cyprus More up to date information can be found at the TCS Group Holding corporate website at www .tcsgh .com .cy Telephone: +357 2504 0404 Fax: +357 2504 0415 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/jpmorggn 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 . 11526 Athens Greece Auditors Kiteserve Limited City House, 6 Karaiskakis Street CY-3032 Limassol Cyprus TCS Group Holding PLC (registered number HE l07963) 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 25050668 administration@tcsgh .com .cy Investor Relations ir@tcsgh .com .cy stakeholderengagement@tcsgh .com .cy PR pr@tcsgh .com .cy F-185 G-1 TCS GROUP HOLDING PLCANNUAL REPORT 2022STRATEGIC REVIEWFINANCIALSDIRECTOR'S REVIEW

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