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RBC PJSC and subsidiaries (RBC Group) Consolidated Financial Statements and Independent Auditor’s Report for 2016

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Page 1: RBC PJSC and subsidiaries (RBC Group)pics.v2.rbcholding.ru/rbcholding_pics/media/files/... · RBC GROUP . CONTENTS Page . STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION

RBC PJSC and subsidiaries (RBC Group)

Consolidated Financial Statements and Independent Auditor’s Report for 2016

Page 2: RBC PJSC and subsidiaries (RBC Group)pics.v2.rbcholding.ru/rbcholding_pics/media/files/... · RBC GROUP . CONTENTS Page . STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION

RBC GROUP

CONTENTS

Page

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 1

INDEPENDENT AUDITOR’S REPORT 2-5

Consolidated statement of profit or loss and other comprehensive income 6 Consolidated statement of financial position 7 Consolidated statement of cash flows 8

Consolidated statement of changes in equity 9-10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information 11 2. Basis of preparation 13 3. Significant accounting policies 14 4. Application of new and revised international financial reporting standards 28

5. Critical accounting judgements and key sources of estimation uncertainty 30 6. Segment reporting 30 7. Revenue 34 8. Cost of sales 34 9. Selling expenses 34 10. Administrative expenses 37

11. Other income and expenses 37 12. Finance income and expenses 38

13. Assests classified as held for sale 38 14. Property, plant and equipment 39 15. Intangible assets 40 16. Impairment of assets 47 17. Deferred tax assets and liabilities 49

18. Trade and other receivables 48 19. Cash and cash equivalents 48 20. Equity 49 21. Earnings per share 50 22. Loans and borrowings 51 23. Trade and other payables 52 24. Provisions 57

25. Financial risk management 58 26. Operating leases 59 27. Contingencies 59 28. Related party transactions 60

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RBC GROUP

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

Management is responsible for the preparation of the consolidated financial statements that present fairly the financial position of RBC PJSC (the “Company”) and its subsidiaries (the “Group”) as at 31

December 2016, and the results of its operations, cash flows and changes in equity for the year then ended, in compliance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for:

Properly selecting and applying accounting policies;

Presenting information, including accounting policies, in a manner that provides relevant, reliable,comparable and understandable information;

Providing additional disclosures when compliance with the specific requirements in IFRSs areinsufficient to ensure that users are able to understand the impact of particular transactions,other events and conditions on the Group’s consolidated financial position and financialperformance;

Making an assessment of the Group’s ability to continue as a going concern.

Management is also responsible for:

Designing, implementing and maintaining an effective and sound system of internal controls,throughout the Group;

Maintaining adequate accounting records that are sufficient to show and explain the Group’s

transactions and disclose with reasonable accuracy at any time the consolidated financial positionof the Group, and which enable them to ensure that the consolidated financial statements of theGroup comply with IFRS;

Maintaining statutory accounting records in compliance with the Russian legislation andaccounting standards;

Taking such steps as are reasonably available to them to safeguard the assets of the Group; and

Preventing and detecting fraud and other irregularities.

The consolidated financial statements of the Group for the year ended 31 December 2016 were approved by the Group’s management on 20 April 2017.

On behalf of the Management:

____________________________ ____________________________ N.P.Molibog I.A. Selivanov General Director of RBC PJSC Deputy General Director of Finance of

RBC PJSC

20 April 2017

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders and Board of Directors of RBC Public Joint Stock Company.

Opinion

We have audited the consolidated financial statements of RBC Public Joint Stock Company and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”).

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 are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA

Code”) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation, and we have fulfilled other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a

separate opinion on these matters.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

ZAO Deloitte & Touche CIS 5 Lesnaya Street Moscow, 125047,Russia

Tel: +7 (495) 787 06 00Fax: +7 (495) 787 06 01deloitte.ru

© ZAO Deloitte & Touche CIS. All rights reserved.

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Key audit matters Why the matter was determined to be a key audit matter

How the matter was addressed in the audit

Impairment of goodwill As at 31 December 2016, the carrying amount of goodwill was RUB 691 million. Considering the materiality of the goodwill

and the fact that the impairment analysis, conducted by the Group’s management (Notes 15 and 16 to the consolidated financial statements), involves significant assumptions and estimates for

each cash generating unit such as growth of revenue and expenses, discount rate and business growth rates, we determined goodwill testing for

impairment as a key audit

matter.

As part of audit procedures we:

determined that inputs used inthe impairment testing modelscorrespond to the budget and

forecast data approved bymanagement;

assessed validity of assumptionsused in management’s forecasts,based on current results, marketconditions and historical trends;

analyzed sensitivity of keyassumptions within the range ofpotential changes and comparedpotential future changes withavailable economic and industry

data; and

analyzed the disclosures for

completeness and compliancewith IAS 36 Impairment of Assets.

Recognition of revenue from barter transactions

involving advertising services

In accordance with IAS 18 Revenue and SIC 31 Revenue -

Barter Transactions Involving Advertising Services, the Group's management measures the fair value of advertising services in barter transactions based on the simplified calculation of actual price with

regard to several non-barter transactions which in

management’s opinion are similar to the selected barter transactions. Due to materiality of barter transactions amounts and the

need to apply judgements in order to identify comparable transactions when determining fair value of each barter transaction, we have included this matter in the key audit

matters (Note 5 (a) to the consolidated financial statements).

We have reviewed the completeness of the barter transactions register

provided by management, we have further assessed accuracy of the advertising services fair value with regard to barter transactions and the identification of comparable transactions.

Compliance with the going concern

assumption

In accordance with Note 2 (e) to the consolidated financial

statements as at 31 December 2016, the Group’s equity deficit was RUB 13,242 million and the total amount of outstanding

loans and borrowings was RUB 15,163 million.

The Group's ability to timely settle current liabilities and comply with debt covenants

depends on financial support from the owner.

Given the materiality for the purpose of these consolidated

Our procedures were focused on assessing the validity of assumptions

underlying the impairment testing models and analyzing availability of additional financing sources.

The scope of our work included:

Analysis of the management’sforecasts with regard to furtherdevelopment of the Group. Wehave considered and assessed themain assumptions used in

forecasts to assess theirreasonableness;

Analysis of the Group's

compliance with debt covenants

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Key audit matters Why the matter was determined to be a key audit matter

How the matter was addressed in the audit

financial statements and subjectivity of judgment on the going concern assumption applicability, we have included

this matter in the key audit matters.

as at the reporting date including independent recalculation of financial covenants;

Analysis of dependence onfinancing sources. As part of thisprocedure we have analyzed the

letter of financial support providedby the ultimate beneficiary of theGroup. The letter confirms theowner’s intention to provide, ifnecessary, additional financing toenable settling the current debtliabilities;

We have checked the informationdisclosed in the notes to the

consolidated financial statementsfor completeness and accuracy.

Other information

Management is responsible for the other information. The other information comprises the information included in the Annual report of the issuer, but does not include the consolidated financial statements and our auditor’s report thereon. The Annual report of the issuer is expected to be made available to

us after the date of this auditor's report.

Our opinion on the financial statements does not cover the other information and we do not express and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the audit or, otherwise appears to be materially misstated.

When we read the Annual report of the issuer, if we conclude that there is a material misstatement

therein, we are required to communicate the matter to those charged with governance.

Responsibilities of management and those charged with governance for the consolidated

financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s consolidated 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.

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The Entity: RBC PJSC and subsidiaries

Certificate of registration in the Unified State Register

№ 1057746899572 of 14.05.2005, issued by Moscow Interdistrict

Inspectorate of the Russian Ministry of Taxation

№ 46.

Primary State Registration Number: 1057746899572

Address: 117393, Moscow, Profsoyuznaya str. 78.

Audit Firm: ZAO “Deloitte & Touche CIS”

Certificate of state registration № 018.482, issued by the Moscow

Registration Chamber on 30.10.1992.

Primary State Registration Number: 1027700425444

Certificate of registration in the Unified State Register:

№ 77 004840299 of 13.11.2002, issued by Moscow Interdistrict

Inspectorate of the Russian Ministry of Taxation № 39.

Member of Self-regulated organization of auditors “Russian Union of auditors” (Association), ORNZ 11603080484.

5

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism 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,obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resultingfrom error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, orthe override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents 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 inour auditor’s report to the related disclosures in the consolidated financial statements or, if suchdisclosures 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 conditionsmay cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the consolidated financial information ofthe entities or business activities within the Group to express an opinion on the consolidatedfinancial statements. We are responsible for the direction, supervision and performance of theGroup 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 we communicate to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related

safeguards.

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, which constitute the key audit matters included herein.

Kaprizina Natalia Vladimirovna Engagement partner

20 April 2017

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All values in the consolidated financial statements shall be considered together with notes on pages 11-60 that form an integral part of the consolidated financial statements.

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

6

RBC GROUP

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016

Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

Notes RUB mln RUB mln USD* mln USD* mln

Revenue 7 5,582 5,086 92 83 Cost of sales 8 (2,632) (2,640) (43) (43)

Gross profit 2,950 2,446 49 40

Selling expenses 9 (1,530) (1,390) (25) (23) Administrative expenses 10 (915) (879) (16) (15) Other income 11 10 35 - 1 Other expenses 11 (44) (199) (1) (3)

Profit from operating activities 471 13 7 -

Finance income 12 43 22 1 - Finance expenses 12 (990) (896) (16) (15) Gain/(loss) on foreign exchange differences, net 2,964 (3,833) 49 (63)

Profit/(loss) before tax 2,488 (4,694) 41 (78)

Income tax expense 17 (385) (89) (6) (1)

Profit/(loss) for the period 2,103 (4,783) 35 (79)

Other comprehensive income for the year, net of income tax - - - -

Total comprehensive income/(loss) for the period 2,103 (4,783) 35 (79)

Profit/(loss) attributable to:

Owners of the parent Company 2,049 (4,917) 34 (81) Non-controlling interests 54 134 1 2

Profit/(loss) for the period 2,103 (4,783) 35 (79)

Total comprehensive income/(loss) for the period attributable to:

Owners of the parent Company 2,049 (4,917) 34 (81) Non-controlling interests 54 134 1 2

Total comprehensive income/(loss) for the period 2,103 (4,783) 35 (79)

Earnings/(loss) per share 21 5.84 (14.02) 0.10 (0.23)

The consolidated financial statements for the year ended 31 December 2016 were authorized for issue by management on 20 April 2017.

_____________________________ _____________________________ N.P.Molibog I. A. Selivanov General Director of RBC PJSC Deputy General Director of Finance of RBC PJSC

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All values in the consolidated financial statements shall be considered together with notes on pages 11-60 that form an integral part of the consolidated financial statements.

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

7

RBC GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

Notes RUB mln RUB mln USD* mln USD* mln

ASSETS Non-current assets Property, plant and equipment 14 257 315 4 5 Intangible assets 15 887 965 15 16 Goodwill 15 691 691 11 11 Deferred tax assets 17 216 309 3 5 Other non-current assets 27 32 - 1

Total non-current assets 2,078 2,312 33 38

Current assets Inventories 20 13 - - Other investments 10 10 - - Income tax receivable 5 7 - - Trade and other receivables 18 1,053 905 18 15 Cash and cash equivalents 19 678 522 12 9 Assets classified as held for sale 13 23 53 - 1

Total current assets 1,789 1,510 30 25

Total assets 3,867 3,822 63 63

EQUITY DEFICIT AND LIABILITIES Equity deficit Share capital 20 - - - - Share premium 20 3,569 3,571 59 59 Treasury shares (631) (631) (10) (10) Accumulated loss (16,934) (18,983) (279) (313)

Total equity deficit attributable to owners of the Company (13,996) (16,043) (230) (264)

Non-controlling interests 754 697 12 11

Total equity deficit (13,242) (15,346) (218) (253)

Non-current liabilities Loans and borrowings 22 13,848 16,331 228 269 Deferred tax liabilities 17 88 122 1 2

Total non-current liabilities 13,936 16,453 229 271

Current liabilities Loans and borrowings 22 1,315 1,159 22 20 Trade and other payables 23 1,327 1,219 22 20 Income tax payable 140 30 2 - Provisions 24 391 307 6 5

Total current liabilities 3,173 2,715 52 45

Total liabilities 17,109 19,168 281 316

Total equity and liabilities 3,867 3,822 63 63

_____________________________ _____________________________ N.P.Molibog I. A. Selivanov

General Director of RBC PJSC Deputy General Director of Finance of RBC PJSC

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All values in the consolidated financial statements shall be considered together with notes on pages 11-60 that form an integral part of the consolidated financial statements.

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

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RBC GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

OPERATING ACTIVITIES Profit/(loss) for the period 2,103 (4,783) 35 (79)

Adjustments for: Income tax expense 385 89 6 1 Depreciation and amortization 394 404 7 7 Gain/(loss) on exchange differences, net (2,964) 3,833 (49) 63 Loss on disposal of subsidiaries 1 21 - - Change in provisions other than provision for income tax 47 32 1 1

Loss on impairment of assets held for sale 8 80 - 1 Loss/(gain) on disposal of property, plant and equipment and intangible assets 9 (12) - -

Gain from trade and other payables write-off (9) (22) - (1) Allowance for doubtful accounts 2 45 - 1 Interest expense 979 877 16 15 Interest income (43) (22) (1) - Other non-cash adjustments - (2) - -

Operating profit before changes in working capital 912 540 15 9

(Increase)/decrease in trade and other receivables (138) 50 (2) 1

Increase in trade and other payables 103 48 1 1 (Increase) in assets held for sale (27) (77) (1) (1) (Increase)/decrease in inventory (7) 6 - -

Cash flows generated by operating activities, before income tax and interest 843 567 13 10

Income tax paid (179) (80) (3) (1) Interest paid (583) (1,139) (9) (19)

Cash flows from/(used in) operating activities 81 (652) 1 (10)

INVESTING ACTIVITIES Purchase of property, plan and equipment and intangible assets (271) (283) (4) (4)

Proceeds from disposal of property, plant and equipment and intangible assets 1 26 - -

Proceeds from disposal of assets held for sale 49 62 1 1 Interest received 42 11 1 - Payments for purchase of subsidiaries, net of cash acquired/disposed - (11) - -

Proceeds from disposal of subsidiaries, net of cash disposed - 4 - -

Cash used in investing activities (179) (191) (2) (3)

FINANCING ACTIVITIES Contributions by a shareholder - 852 - 14 Proceeds from loans and borrowings 302 902 4 15 Repayment of loans and borrowings (19) (679) - (12)

Cash flows from financing activities 283 1,075 4 17

Net increase in cash and cash equivalents 185 232 3 4

Cash and cash equivalents at the beginning

of period 522 214 9 4 Effect of changes in foreign exchange rates against Ruble (29) 76 - 1

Cash and cash equivalents at the end of period 678 522 12 9

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All values in the consolidated financial statements shall be considered together with notes on pages 11-60 that form an integral part of the consolidated financial statements.

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

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RBC GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

Attributable to the owners of the Company Non-

RUB mln

Share

capital

Share

premium

Treasury

shares

Translation

reserve

Accumula-

ted deficit Total

controlling

interests

Total

equity

Balance at 1 January 2015 - 3,281 (631) 7 (14,066) (11,409) (4) (11,413)

Loss for the period - - - - (4,917) (4,917) 134 (4,783)

Total comprehensive loss

for the period - - - - (4,917) (4,917) 134 (4,783)

Other comprehensive loss

Exchange differences on

translating foreign

operations - - - (7) - (7) - (7)

Disposal of entities - - - - - - 5 5

Total other

comprehensive loss - - - (7) - (7) 5 (2)

Transactions with owners

recorded directly in

equity

Transactions with equity of

subsidiaries - 290 - - - 290 562 852

Total transactions with

owners - 290 - - - 290 562 852

Balance at

31 December 2015 - 3,571 (631) - (18,983) (16,043) 697 (15,346)

Balance at 1 January 2016 - 3,571 (631) - (18,983) (16,043) 697 (15,346)

Profit for the period - - - - 2,049 2,049 54 2,103

Total comprehensive

income for the period - - - - 2,049 2,049 54 2,103

Transactions with owners

recorded directly in

equity

Sale of non-controlling interest - (2) - - - (2) 3 1

Total transactions with

owners - (2) - - - (2) 3 1

Balance at 31 December 2016 - 3,569 (631) - (16,934) (13,996) 754 (13,242)

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All values in the consolidated financial statements shall be considered together with notes on pages 11-60 that form an integral part of the consolidated financial statements.

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

10

RBC GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

Attributable to the owners of the Company Non-

USD* mln

Share

capital

Share

premium

Treasury

shares

Translation

reserve

Accumula-

ted deficit Total

controlling

interests

Total

equity

Balance at 1 January 2015 - 54 (10) - (232) (188) - (188)

Loss for the period - - - - (81) (81) 2 (79)

Total comprehensive loss

for the period - - - - (81) (81) 2 (79)

Other comprehensive loss

Exchange differences on

translating foreign

operations - - - - - - - -

Disposal of entities - - - - - - - -

Total other comprehensive

loss - - - - - - - -

Transactions with owners

recorded directly in

equity

Transactions with equity of subsidiaries - 5 - - - 5 9 14

Total transactions with owners - 5 - - - 5 9 14

Balance at

31 December 2015 - 59 (10) - (313) (264) 11 (253)

Balance at 1 January 2016 - 59 (10) - (313) (264) 11 (253)

Profit for the period - - - - 34 34 1 35

Total comprehensive

income for the period - - - - 34 34 1 35

Transactions with owners

recorded directly in

equity Sale of non-controlling

interest - - - - - - - -

Total transactions with owners - - - - - - - -

Balance at

31 December 2016 - 59 (10) - (279) (230) 12 (218)

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

11

1. GENERAL INFORMATION

(a) Organization and operations

RBC PJSC (“the Company”) and its subsidiaries (together referred to as “the Group”) comprisecompanies registered in accordance with the Civil Code of the Russian Federation, and companiesregistered and operating abroad.

RBC PJSC was established in May 2005 as a closed joint-stock company. It was reorganized to anopen joint-stock company in 2010. In August 2014, the Company changed its name to RBC PJSC.The shares of the Company are traded in the Russian Federation on the Moscow Stock ExchangePJSC.

The registered office of the Company is located at: 117393, Russian Federation, Moscow,Profsoyuznaya Street, 78.

The Group’s principal activities are advertising, provision of information services, operation of

a business TV channel, printing publications, Internet hosting services and domain registration.These services and products are sold in the Russian Federation and abroad.

As at 31 December 2016 and 2015, Onexim Group was the controlling shareholder of theCompany whose ultimate beneficiary is Mikhail D. Prokhorov.

(b) Operating environment

Emerging markets such as Russia are subject to different risks than more developed markets,

including economic, political and social, and legal and legislative risks. Laws and regulationsaffecting businesses in Russia may change rapidly and may be subject to arbitraryinterpretations. The future economic direction of Russia is heavily influenced by the fiscal andmonetary policies adopted by the government, together with developments in the legal,regulatory, and political environment.

Because Russia produces and exports large volumes of oil and gas, Russian economy isparticularly sensitive to the prices of oil and gas on the world market.

Starting from 2014, sanctions have been imposed in several packages by the U.S. and the E.U.on certain Russian officials, businessmen and companies. This led to reduced access of theRussian businesses to international capital markets.

The impact of further economic and political developments on future operations and financialposition of the Group might be significant.

(c) Significant subsidiaries

Ownership / voting interest

Country of incorporation 31 December

2016 31 December

2015

RBC-TV JSC Russian Federation 20% 20% RBC-TV Novosibirsk LLC Russian Federation 20% 20% BusinessPress LLC Russian Federation 20% 20% BusinessPress SPb LLC Russian Federation 20% 20% RBC Online LLC Russian Federation 20% 20% RosBusinessConsulting CJSC Russian Federation 100% 100% Ad Line LLC Russian Federation 100% 100% Loveplanet LLC Russian Federation 100% 100% Global Media Solutions LLC Russian Federation 100% 100% Cnews LLC Russian Federation 100% 100% RU-CENTER JSC Russian Federation 100% 100% SpaceWeb LLC Russian Federation 100% 100% Registrator R-01 JSC Russian Federation 100% 100% Konkord LLC Russian Federation 100% 100% Hosting-Centr LLC Russian Federation 100% 100% Halverston Holdings Limited British Virgin Islands 100% 100% Pintoleza Holdings Limited Cyprus 100% 100%

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

12

Subsidiaries where the Company holds a share less than 51% are included in the Group based on control criteria defined in IFRS 10 Consolidated Financial Statements (IFRS 10).

Subsidiaries with significant non-controlling interest

As at 31 December 2016 and 2015, the carrying amount of non-controlling interest in subsidiaries

with material non-controlling interest of the Group (prior to elimination of intra-Group transactions) was as follows:

Effective ownership of non-

controlling Carrying amount of non-

controlling interest Carrying amount of non-

controlling interest

interest 2016

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

BusinessPress LLC 80.463% (137) (188) (2) (3) RBC-TV JSC 80.463% 470 464 8 8 BusinessPress SPb LLC 80.463% (5) (5) - -

RBC Online LLC 80.463% 432 432 7 7

Total 760 703 13 12

Summarized below is the financial information on the Group’s subsidiaries with material non-

controlling interest (prior to elimination of intra-group transactions):

Net assets BusinessPress

LLC RBC-TV JSC BusinessPress

SPb LLC RBC Online LLC

RUB mln 31 December 2016 (170) 585 (7) 1,796 31 December 2015 (233) 576 (6) 1,797

USD* mln 31 December 2016 (3) 10 - 30 31 December 2015 (4) 9 - 30

Profit/(loss) BusinessPress

LLC RBC-TV JSC BusinessPress

SPb LLC RBC Online LLC

RUB mln For 2016 63 3 (1) - For 2015 (45) (1,987) - 738

USD* mln For 2016 (1) - - - For 2015 (1) (33) - 12

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

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2. BASIS OF PREPARATION

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

(b) Basis of measurement

The consolidated financial statements are prepared on the historical cost basis except for financial instruments at fair value through profit and loss that are accounted for at fair value.

The fair value is defined as an amount that would be received to sell an asset or paid to transfer

a liability in a transaction between market participants at the measurement date regardless of whether that price is directly observable or estimated using another valuation technique. When

measuring an asset or liability at their fair value, the Group considers their characteristics that market participants would take into account. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that

are within the scope of International Accounting Standard (“IAS”) 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are

described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for similar assets orliabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are

observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

(c) Functional and presentation currencies

The national currency of the Russian Federation is the Russian rouble (“RUB”), which is the Group’s functional currency of the majority of the Group’s entities and the presentation currency of consolidated financial statements. Besides the Russian Ruble, the functional currency of the

Group’s subsidiaries located in Kazakhstan is the Kazakh Tenge. All amounts in RUB have been rounded to the nearest million, unless otherwise indicated.

(d) Convenience translation

In addition to the consolidated financial statements presented in RUB, financial information in US Dollars (“USD”) has been presented for the convenience of the users of these consolidated

financial statements.

All amounts in these consolidated financial statements, including comparative information, have been translated from RUB to USD at the exchange rate of the Central Bank of Russia at 31 December 2016 of RUB 60,6569 to USD 1.

(e) Going concern assumption

These consolidated financial statements have been prepared on a going concern basis, which assumes the Group will continue to be able to operate for the foreseeable future, and there is no intention to liquidate or significantly decrease the operations of the Group and, as a result, liabilities will be settled and assets will be realized in the ordinary course of business.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

14

As at 31 December 2016, the Group had negative net assets of RUB 13,242 mln/USD* 218 mln (as at 31 December 2015: RUB 15,346 mln/USD* 253 mln). The Group’s working capital deficit amounted to RUB 1,384 mln/USD* 22 mln as at 31 December 2016 (as at 31 December 2015: RUB 1,205 mln/USD* 20 mln). The Group’s profit for 2016 comprised RUB 2,103 mln/USD* 35 mln (loss for 2015 was RUB 4,783 mln/USD* 79 mln) which was mainly caused by the effect from revaluation of currency balances: profit in 2016 was RUB 2,964 mln/USD* 49 mln (loss for 2015

was RUB 3,833 mln/USD* 63 mln).

At the date of the approval of these consolidated financial statements, several measures have been undertaken in order to improve the working capital deficit and the negative net assets:

Starting from 2014, the Group has been implementing a number of cost reductionmeasures. According to preliminary results for the first quarter of 2017 the Group’s sellingexpenses decreased approximately by 25% compared to the same period of 2016.

In the first quarter of 2017, as a result of changes in tariffs the revenue from hosting and

domain name registration services increased approximately a 5% compared to the sameperiod of 2016.

In addition, ONEXIM Group assured the Group’s managements that it is able to provide financial support to the extent required to settle liabilities payable during the next 12 months.

3. SIGNIFICANT ACCOUNTING POLICIES

The applicable accounting policies used by the Group in the preparation of the consolidatedfinancial statements for the year ended 31 December 2016 are set out in Notes 3(a) to 3(u).Such policies have been applied consistently throughout the reporting period.

(a) Basis of consolidation

a. Acquisition of non-controlling interests

Acquisitions of non-controlling interests without the loss of control by the Group are accounted for within equity and as the result no goodwill arises on such transactions. Adjustments to non-

controlling interests are measured at a proportionate share of the net assets of the subsidiary.

b. Subsidiaries

The consolidated financial statements incorporate the financial statements of the Group and entities controlled by the Group (its subsidiaries).

Control is achieved where the Group:

has power over the investee;

has exposure or rights to variable returns from its involvement with the investee;

can exercise its powers over the investee to influence income of the investee.

The Company reassesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control listed above.

The Company controls an entity without the majority of voting rights if existing voting rights give the possibility to direct the relevant activities of the entity unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights are

sufficient for control, including:

the size of the Company’s holding of voting rights relative to the size and dispersion ofholdings of other vote holders;

potential voting rights held by the Company, other vote holders or other parties;

any additional facts and circumstances that indicate that the Company has, or does nothave, the current ability to direct the relevant activities at the time that decisions need to bemade, including voting patterns at previous shareholders’ meetings.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

15

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. The accounting policies of subsidiaries have been changed to align them with the policies adopted by the Group. Total comprehensive income attributable to non-controlling interests is allocated to non-controlling interests on a pro rata basis even if this results in a deficit balance.

c. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

d. Loss of control

Upon loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interest and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss for the period. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the

date that control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (b) Foreign currencies

a. Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group’s entities at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities

denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date when the fair value was determined. Foreign

currency differences arising in translation are recognized in profit or loss, except for differences arising on the translation of available-for-sale equity instruments which are recognized in other comprehensive income. b. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to RUB at the exchange rate at the reporting date. The income and expenses of foreign operations are translated to RUB at exchange rates at the dates of the transactions. Foreign currency differences resulting from translation of foreign operations are recognized directly in other comprehensive income. Since the Group’s transition to IFRS, such differences have been recognized in the foreign currency translation reserve. When a foreign subsidiary is

disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the

statement of other comprehensive income. Foreign exchange gains and losses arising from a receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized in other comprehensive income, and are presented within equity in foreign currency translation reserve.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

16

(c) Financial assets

a. Non-derivative financial assets

Non-derivative financial assets comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents.

The Group initially recognizes loans, receivables and deposits on the date of their issue / occurrence. Initial recognition of all other financial assets (including assets designated as instruments measured at fair value through profit or loss) are recognized on the date of the transaction, in which the Group becomes party to the contractual provisions of the instrument.

Cash comprises cash on hand, cash on bank settlement accounts and call deposits. Cash equivalents are short-term highly liquid investments that are readily convertible into cash, the date of their payment occurring not more than three months from the date of acquisition and the

value of which is subject to insignificant changes. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another party. Any participation in a transferred financial asset that is created or retained by the Group is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial positions when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group classifies non-derivative financial assets into the following categories: financial assets

at fair value through profit or loss, held-to-maturity financial assets, loans and receivables.

b. Held-to-maturity investments

If the Group has an intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortized cost using the effective interest method, less any accumulated impairment losses.

c. Financial assets at fair value through profit or loss

An instrument is classified as fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale

decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

d. Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost calculated using the effective interest method, less impairment losses.

Loans and receivables comprise trade and other receivables (Note 18).

e. Financial receivables and payables offsets

For each counterparty, financial receivables and financial payables may be offset where the Group has a legal right under a contract to offset such amounts and intends either to settle them on a net basis or to realize the assets and settle the liabilities simultaneously.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

17

(d) Financial liabilities and equity instruments

a. Classification as debt or equity

Debt and equity instruments issued by Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions

of a financial liability and an equity instrument.

b. Equity instrument

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity

instruments is recognised and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

c. Financial liabilities at fair value through profit or loss (“FVTPL”)

Financial liabilities at FVTPL comprise of financial liabilities, classified at initial recognition as at

FVTPL. A financial liability is classified as a financial liability at FVTPL at the moment of initial recognition when financial liability is a part of instrument, that comprise one or more embedded derivatives and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Net profit (loss) from financial liabilities at FVTPL

include interest payable on such financial liabilities and is presented in financial income / expenses.

d. Other financial liabilities

Other financial liabilities (including loans and trade and other accounts payable) are subsequently accounted for at amortized cost using the effective interest rate for long-term financial liabilities.

e. Derivatives

The Group holds derivative financial instruments – options and warrants that were issued in the process of restructuring debts and are accounted for as part of the Group’s debt. Derivative financial instruments are measured at fair value at the date of agreement conclusion; the

corresponding expenses associated with the contract are recognized immediately in profit and loss. Derivative financial instruments are subsequently revalued at fair value at the end of each reporting period, with the changes recognized immediately in profit and loss.

(e) Share capital

a. Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

b. Acquisition of treasury shares

At repurchase of the Company’s own shares recognized in equity, the amount of the consideration paid, which includes directly attributable transaction costs, is deducted directly in equity net of any tax effects. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. The amount received from subsequent treasury shares sale or reissuance is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

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c. Dividends Dividends are recognized in the period in which they were declared. (f) Property, plant and equipment

a. Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures directly attributable to acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly

attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased

software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are

accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are recognized on a net basis in “Other income” or “Other expense”, respectively, within profit or loss. b. Subsequent expenditures

The cost of replacing a component of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the item of property, plant and equipment is reduced by the residual value of the replaced component. The costs of the day-to-day servicing of property, plant and equipment are

recognized in profit or loss as incurred.

c. Depreciation Depreciation is recognized in the statement of profit or loss and other comprehensive income on a straight-line basis over the estimated useful life of each component of an item of property, plant and equipment.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term, in which case the leased assets are depreciated over their useful lives. Land is not depreciated. The estimated useful lives for each type of property, plant and equipment are shown below:

TV equipment from 5 to 7 years;

Computer equipment from 2 to 7 years;

Office equipment from 2 to 5 years;

Other assets from 5 to 7 years;

Vehicles from 3 to 10 years.

A useful life is assigned to each item of property, plant and equipment within the groups depending on the expected period of use of the item. Depreciation methods, useful lives and residual values are reviewed at each reporting date and revised if appropriate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

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(g) Intangible assets

a. Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint ventures.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately

in profit or loss as a bargain purchase gain.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are fully recognized in profit or loss.

b. Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the associates and joint ventures.

c. Web-sites

Costs related to the development of web-sites are capitalized if the site is ready for use (i.e. it is ready to generate revenue from sales).

Expenditure to maintain and improve the design, content and appearance of a web-site is

expensed as incurred.

d. Software

Acquired software is stated at cost less accumulated amortization and any accumulated impairment losses. Costs related to the development of software are capitalized if the Group expects to sell the software at a price above its cost or use it in its operations.

e. Capitalized software development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Development activities involve creating a plan or design for the implementation of new or upgrade of existing software or websites.

An internally-generated intangible asset arising from development (or from the development

phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for useor sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete thedevelopment and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset during itsdevelopment.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Capitalized expenditure on internally generated intangible assets includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use. Borrowing costs related to the development of qualifying assets are recognized as a part of the cost of the qualifying assets.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. f. Trademarks Trademarks acquired by the Group in connection with the acquisition of new subsidiaries are

initially recognized at fair value. Subsequent to initial recognition are reported at cost less accumulated amortization and impairment losses. Trademarks acquired separately are stated at

cost less accumulated amortization and impairment losses. g. Brands

Brands acquired by the Group in connection with the acquisition of new subsidiaries are stated at fair value and subsequently at residual value less accumulated amortization and impairment losses. h. Cable network connections Cable network connections are measured at the fair value of the consideration paid (including the

fair value of non-monetary components, if stipulated by the agreement and may be measured reliably), less accumulated amortization and impairment losses. i. Customer base Customer base acquired by the Group in connection with the acquisition of new subsidiaries are

stated at fair value and subsequently at residual value less accumulated amortization and

impairment losses. j. Other intangible assets Other intangible assets include licenses, audio and video advertisements and programs. Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at

cost less accumulated amortization and accumulated impairment losses. k. Subsequent expenditures Subsequent expenditures are capitalized only when they increase the future economic benefits from the use of the asset. All other expenditures are recognized in profit or loss as incurred.

l. Amortization

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill. The estimated useful lives are as follows: Trademarks from 2 to 20 years;

Software from 1 to 3 years;

Websites from 1 to 3 years;

Brands from 12 to 15 years;

Customer base from 1 to 10 years;

Cable network connections from 3 to 15 years;

Other (licences, content) from 1 to 5 years.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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A useful life is assigned to each item of property, plant and equipment within the groups depending on the expected period of use of the item. For intangible assets, the estimated useful lives and amortization methods are reviewed and adjusted, if necessary, at the end of each reporting period.

(h) Impairment of assets

a. Financial assets

Financial assets except for those at fair value through profit or loss, are assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more loss events had a negative effect on the cash flows of that asset.

Objective evidence that financial assets (including equity securities) are impaired can include

default or delinquency by a debtor, restructuring of the debt amount due to unavailability of other alternatives, indications that a debtor or issuer will enter bankruptcy, deterioration of the payment status of borrowers or issuers, adverse economic conditions or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or

prolonged decline in its fair value below its cost is objective evidence of an impairment.

b. Loans and receivables and held-to-maturity investments

The Group considers evidence of impairment for loans and receivables and held-to-maturity investments at both a specific asset and a group of assets. All individually significant loans and receivables and held-to-maturity investments are assessed for specific impairment indicators.

Receivables are assessed for impairment individually. Objective evidence of receivables impairment is cumulative fulfillment of both criteria: receivables passed due over 180 calendar days or receivables, irrespective of aging, regarding to which legal proceedings are started and receivables which are assessed as impaired based on management professional judgment. The impairment of receivables might be calculated in total or in part.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the

difference between its carrying amount, and the present value of the estimated future cash flows discounted at effective interest rate. Impairment losses are recognized in profit or loss. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

c. Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, their recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash generating unit (“CGU”) is the higher of its value in

use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets or CGUs. Goodwill acquired in a business combination is allocated to CGUs that are expected to benefit from the synergies of the combination.

An impairment loss is recognised when the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (or group of CGUs) on a pro rata basis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

22

An impairment loss in respect of goodwill cannot be reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. The impairment loss is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or

amortization, if no impairment loss had been recognized. (i) Non-current assets held for sale

Non-current assets and disposal groups consisting of assets and liabilities are classified as held for sale if their carrying amount is expected to be recovered principally through a sale transaction or through distribution to shareholders, rather than through continuing use.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of

the asset’s (group’s) carrying amount and its (their) fair value less costs to sell. Any impairment losses related to disposal groups are allocated against goodwill and then proportionally against all assets and liabilities, except inventory, financial assets, deferred tax assets, and payments to employees, measured according to Group accounting policies. Impairment losses, resulting from

the initial classification of assets and disposal groups as held for sale and profit and losses resulting from subsequent revaluation, if any, are recognized in profit or loss for the period. Such gains should not exceed total amount of impairment losses. Intangible assets and fixed assets are not amortized since the date of reclassification to a held for sale group or distribution to shareholders. Additionally, investments accounted for using the equity method, are no longer reflected using this method since the date of reclassification to the

held for sale group or distribution to shareholders. (j) Employee benefits

a. Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided by the employee. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(k) Provisions

a. Tax provision The Group provides for tax risks including late-payment interest and penalties when it is probable that an outflow of economic benefits will be required according to the effective laws and regulations. Such provisions are maintained, and updated if necessary, for the period over which

the respective tax positions remain subject to review by the tax authorities.

b. Other provisions A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

23

(l) Revenue

Revenue is recognized at the fair value of consideration, received or expected to be received, as a result of sales transactions less VAT, returns, discounts and rebates.

Revenue from advertising services placed on the Internet is recognized at the moment of

placement. Revenue from advertising services placed on TV is recognized at the moment of demonstration.

Revenue from hosting services is recognized when the group fulfills its obligations under the service agreement. Revenue from the registration and prolongation of domain names is recognized at the moment of domain registration (prolongation).

Revenue from advertising in printed matters is recognized at the moment the printed matter is published. Revenue from sales of printed matter is recognized at the moment of shipment to the

customer and is adjusted by the amount of actual returns of the printed matter. Revenue from subscriptions is recognized in proportion to services provided.

Revenue from non-cash transactions, including the exchange of advertising services which are not

similar, is recognized as the fair value of advertising services provided by the Group which is measured by comparison with the similar market transactions paid in cash.

Where the Group is not a principal but an agent, revenue is recognized as the amount of commission fee received.

(m) Other expenses. Lease payments

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease.

(n) Financial income and expenses

Financial income comprises interest income on funds invested, changes in the fair value of

financial assets at fair value through profit or loss and foreign currency gains. Interest income is recognized as it accrued in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.

Financial expenses comprise interest expense on borrowings, the unwinding of the discount on provisions, foreign currency losses, changes in the fair value of financial assets at fair value

through profit or loss and impairment losses recognized on financial assets. Borrowing costs are recognized in the statement of comprehensive income using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

(o) Income tax expense

Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss

except for income tax arising in a business combination or transactions recognized directly in equity or other comprehensive income.

The tax currently payable is based on taxable profit for the reporting period using tax rates enacted or substantially enacted as at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax also includes any tax liabilities arising from the declaration

of dividends.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

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Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. When calculating deferred income taxes, the following is not accounted for: Temporary differences arising on initial recognition of assets or liabilities in a transaction

which is not a business combination and affects neither accounting nor taxable profit or loss;

Temporary differences related to investments in subsidiaries and joint ventures where it is probable that the temporary difference will not reverse in the foreseeable future;

Temporary differences that arise from the initial recognition of goodwill.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred taxes are levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle current

tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

In accordance with the tax regulations of the Russian Federation, tax losses and current tax assets of the Group’s companies may not be offset against taxable profits and current tax liabilities of the other companies of the Group. Also, the tax base is determined separately for

each of the Group’s principal activities. Taxable income and expenses related to different activities may not be offset. A deferred tax asset is recognized to the extent that it is probable that taxable profit will be available sufficient to utilize the temporary difference. The amount of a deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(p) Earnings/(loss) per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic

earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to

ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares. (q) Segment reporting

An operating segment is a component of the Group that engages in business activities from which

it earns revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Group’s other segments. The Board of Directors (chief operating decision maker) regularly makes an assessment of operating results and makes decisions about resources to be allocated to the segment and assess the segment’s performance. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly assets of the Group, head

office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill. (r) Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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25

a. Intangible assets

The fair values of certain intangible assets acquired in business combinations were estimated as follows:

Trademarks, brands and customer bases

The fair value of trademarks and brands acquired in a business combination is based on the discounted estimated royalty payments, and the fair value of customer bases was determined using the income approach. Payments of such amounts have been avoided as a result of the trademark or the brand being owned (the “relief-from-royalty” method).

Software and websites

The fair values of software and websites acquired in a business combination were determined

through the cost approach, based on the actual expenditure the Group would have incurred to recreate such software and websites.

Other intangible assets

The fair values of licenses were determined using the cost approach, except for the fair value of the license of TRK MKS CJSC acquired in a business combination in 2008 which was valued using the market approach.

b. Property, plant and equipment

The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. Market value is the amount for which property could be exchanged on the acquisition date between willing and knowledgeable parties in an arms-length transaction.

c. Investments in equity and debt securities

The fair value of financial assets held at fair value through profit or loss, available-for-sale

investments and held-to-maturity investments is determined on the basis of generally accepted pricing models based on discounted cash flow analysis. The fair value of financial liabilities at amortized cost was determined based on quoted market prices for disclosure purposes only.

d. Non-derivative financial instruments

The fair value of non-derivative financial liabilities, which is determined for disclosure purposes only, is calculated either on their quoted market price, if available, or based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

e. Derivatives financial instruments

The fair value of options and warrants is estimated by applying the Black-Scholes option pricing

model.

(s) Comparative information

In 2016, the Group changed its approach to presentation of information on loans and borrowings in Note 22 and Note 25 (c) in order to ensure better data comparability. These changes in the

Notes will make presentation of disclosed information more accurate. According to applicable requirements of international standards the comparative information was revised as if this approach has been used since 1 January 2015.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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a. Loans and borrowings (Note 22) After revision, as at 31 December 2015, long-term liabilities of RUB 102 mln/USD* 1.68 mln were recorded as currency loans with 7% rate per annum. Previously this amount was recorded as long-term liabilities with 6% rate per annum.

b. Liquidity risk (Note 25 (c)) After revision, as at 31 December 2015, long-term liabilities of RUB 102 mln/USD* 1.68 mln were recorded as loans and borrowings with maturity more than one year but not more than five years. Previously this amount was recorded as long-term loans and borrowings with maturity more than five years.

4. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS (a) New standards and interpretations adopted in the current period

The Group has adopted the following new and revised standards and interpretations, prepared by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee and effective for financial years beginning on 1 January 2016. Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the

Consolidation Exception;

Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations;

Amendments to IAS 1 Disclosure Initiative;

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation;

Amendments to IAS 27 Equity Method in Separate Financial Statements;

Annual Improvements to IFRSs 2012-2014 Cycle.

The application of these amendments did not have a material impact on the Group’s financial

position and financial performance. (b) New and revised IFRSs in issue but not yet effective

At the date of authorization of these consolidated financial statements, the following new standards and interpretations were issued, but not yet effective:

Standards and interpretations

Effective for annual periods beginning on or

after

IFRS 16 Leases 1 January 2019 IFRS 9 Financial instruments 1 January 2018 IFRS 15 Revenue from Contracts with Customers. 1 January 2018 Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions. 1 January 2018

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 Amendments to IAS 7 Disclosure Initiative 1 January 2017

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Effective date will be determined

later.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

27

IFRS 15 Revenue from Contracts with Customers

IFRS 15 issued in May 2014 establishes a single comprehensive model for entities to use in

accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current

revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the

related Interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of

promised goods or services to customers in an amount that reflects the consideration to which

the entity expects to be entitled in exchange for those goods or services. Specifically, the

Standard introduces a 5-step approach to revenue recognition:

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contracts;

Recognise revenue when (or as) the entity satisfies a performance obligation.

Under IFRS 15, an entity recognises revenue when or as a performance obligation is satisfied, i.e.

when ‘control’ of the goods or services underlying the particular performance obligation is

transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal

with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.

The Company`s management anticipates that the application of IFRS 15 in the future may have a

significant impact on the amounts and disclosures presented in the Group’s consolidated financial

statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS

15 until a detailed review has been completed by the Group.

IFRS 16 Leases

IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations when it becomes effective.

IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others.

Furthermore, the classification of cash flows will also be affected as operating lease payments

under IAS 17 are presented as operating cash flows; whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion, which will be presented as financing and operating cash flows respectively. In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or as a finance lease.

The management of the Group does not anticipate that the application of IFRS 16 in the future may have a significant impact on the amount of assets and liabilities due to recognition of all leases for contracts where the Group is a lessee. However, it is impossible to measure the impact of IFRS 16 application reliably without a detailed analysis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The amendments clarify the following:

1. Decreases below cost in the carrying amount of a fixed-rate debt instrument measured atfair value for which the tax base remains at cost give rise to a deductible temporary

difference, irrespective of whether the debt instrument’s holder expects to recover thecarrying amount of the debt instrument by sale or by use, or whether it is probable that theissuer will pay all the contractual cash flows;

2. When an entity assesses whether taxable profits will be available against which it can utilisea deductible temporary difference, and the tax law restricts the utilisation of losses todeduction against income of a specific type (e.g. capital losses can only be set off againstcapital gains), an entity assesses a deductible temporary difference in combination with

other deductible temporary differences of that type, but separately from other types ofdeductible temporary differences;

3. The estimate of probable future taxable profit may include the recovery of some of anentity’s assets for more than their carrying amount if there is sufficient evidence that it isprobable that the entity will achieve this; and

4. In evaluating whether sufficient future taxable profits are available, an entity should

compare the deductible temporary differences with future taxable profits excluding taxdeductions resulting from the reversal of those deductible temporary differences.

The amendments apply retrospectively to annual periods beginning on or after 1 January 2017 with earlier application permitted.

The Company’s management anticipates that the application of IAS 12 in the future may have a

significant impact on the amounts and disclosures presented in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IAS 12 until a detailed review has been completed.

Amendments to IAS 7 Disclosure Initiative

The amendments require an entity to provide disclosures that enable users of financial

statements to evaluate changes in liabilities arising from financing activities.

The amendments apply prospectively for annual periods beginning on or after 1 January 2017 with earlier application permitted.

The Group’s management anticipates that the application of IAS 7 in the future may have a

significant impact on the amounts and disclosures presented in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IAS 7 Financial Instruments until a detailed review has been completed.

The impact of adoption of other abovementioned standards and interpretations in the preparation of the consolidated financial statements in the future reporting periods is currently being assessed by the Group’s management.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of the consolidated financial statements in conformity with IFRS requires management to make professional judgments, assumptions and estimates that affect the way the accounting policies are applied and the reported amounts of assets, liabilities, income and

expenses. Actual results may differ from these estimates. Assumptions and estimates made on their basis are reviewed regularly for the necessity of their revision. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

(a) Critical judgments in applying accounting policies

The following critical judgment was made in the process of applying the Group’s accounting policies and which has a significant effect on the amounts recognized in the consolidated financial statements:

Recognition of revenue from non-cash transactions – Revenue from non-cash transactions including the exchange of non-similar advertising services is recognized at the fair value of the advertising services, provided by the Group. In measuring the fair value of rendered advertising services, the Group uses certain assumptions. (b) Key sources of estimation uncertainty

The following are the key assumptions and sources of estimation uncertainty made by

management at the end of the reporting period which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Useful lives of property, plant and equipment and intangible assets – The expected useful

lives of property, plant and equipment and intangible assets are revised at the end of each reporting year. The estimation of the useful life of each item of property, plant and equipment and intangible asset is a management judgment which is made based on experience of judgments over other similar items. When determining the useful life of a particular asset, the management

considers its expected use, actual conditions of its operation, as well technical, functional, and planned obsolescence. A change to any of the abovementioned conditions or estimations may adjust amortization and depreciation rates in future periods (Note 14 Property, plant and equipment and Note 15 Intangible Assets). Impairment of property, plant and equipment and intangible assets – At the end of each financial reporting period the Group evaluates the existence of any impairment indicators to the

carrying value of property, plant and equipment and other long-lived assets, what requires judgment. If impairment indicators are identified, the Group’s management performs an impairment test for such assets. The forecasting cash flows for the purpose of impairment testing require certain judgments and assumptions regarding factors such as estimated income from new projects, inflation rates, discount rates etc. Furthermore, judgment is required to define the cash-generating units to which items are allocated (Note 16 Impairment of assets). Impairment of goodwill – Determining whether goodwill is impaired requires judgment both in

defining the cash-generating units to which goodwill has been allocated and also in determining the value in use of such cash generating units. The value in use calculation requires the Group’s management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Fair value of assets acquired and liabilities assumed – The Group measures the identifiable assets acquired and liabilities assumed in business combinations at fair value, which requires significant judgments regarding identification of the assets acquired and liabilities assumed at the

acquisition date, and also certain assumptions in the process of measuring their fair values. Usually, the Group’s management hires an independent qualified appraiser for the determination of such fair values.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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Allowance for doubtful accounts receivable – The Group makes allowances for doubtful receivables for the potential losses arising from the inability of customers to make required payments. Allowances against trade receivables are formed based on the judgment of the Group’s management regarding the recoverability of each individual receivable. In the case that a debtors financial position worsens, actual write-offs can exceed the estimated provision (Note 18 Trade and other receivables).

Classification of commission charges as expenses/revenue decrease - According to IAS 18 Revenue, revenue generated from a transaction is usually subject to agreement between an entity and a customer or a user of an asset. It is measured at a fair value of consideration received or receivable and adjusted for any trade or wholesale discounts provided by the entity. Therefore, any consideration for volume rebates should be recognized as a reduction in revenue rather than selling expenses.

Fair value of derivative financial instruments – The fair value of derivative financial liabilities which are not traded in the active market are determined using Black-Scholes valuation model,

the key assumptions of which are volatility, discount rate, etc. (Note 22 Loans and borrowings).

Recoverability of the deferred tax assets – Deferred tax assets, arising from deductible temporary differences, are recognized only to the extent that it can be reasonably expected that taxable profits will be available to utilize such assets. In determining future amounts of taxable profits and carrying values of deferred tax assets, and the probability that those assets can be utilized in future, the management makes judgment and estimates based on the expected performance of the Group which are considered to be reasonable under the circumstances. In

case deferred tax assets expected to be realized in the future is reduced due to certain events, this reduction is recognized in the statement of comprehensive income (Note 17 Deferred tax assets and liabilities).

Contingencies – The Group exercises significant judgment in measuring and recognizing

provisions against exposure to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgment is necessary in assessing the

likelihood that a pending claim will be successful, or that a liability will arise, and to quantify the possible amount of the final settlement.

Besides, the Group pays various taxes levied in the Russian Federation. Significant judgment is

required in determining the Company’s provision for income tax and other taxes. The Group recognizes liabilities for anticipated tax disputes based on probability estimates of tax liabilities. Due to uncertainty inherent in the estimation process, actual costs may differ from the original estimate.

6. SEGMENT REPORTING

Business segments

The Group presents the following reportable segments based on the level of disaggregation atwhich the Management Committee (chief operating decision maker) assesses the operating

results of the Group in respect of revenue sources.

The Group’s reporting segments and operations included in the reporting segments are asfollows:

Segment “B2C information and services” – provision of information services, support service,services for placing advertisement to clients at the Group’s key content platforms – in theInternet, on TV and in printed media. The segment includes the following projects of the Group:

Project “RBC 360” (portal www.rbc.ru, TV channel “RBC”, newspaper “RBC” and magazine“RBC”);

Theme projects of the Group (“RBC Real Estate” (realty.rbc.ru), Autonews (autonews.ru),“RBC Style” (style.rbc.ru), “RBC Sport” (sport.rbc.ru).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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Segment “B2B information and services” – provision of services based on the paid access to information portals and business conferences held by the Group companies. The segment includes the following projects of the Group:

“RBC Research” (marketing.rbc.ru);

“RBC Conferences” (bc.rbc.ru);

QuoteTerminal (qt.rbc.ru);

Public.ru.

Segment “B2B infrastructure” – provision of hosting and domain registration services. The segment includes brands and key operation companies of RU-CENTER Group: RU-CENTER INTERNATIONAL LIMITED, “Registrator R-01” CJSC, “Reggy” LLC, “Hosting Center” LLC, “SpaceWeb” LLC.

Segment “Inspiration from RBC” – provision of management services for business events

aimed at promoting principles of open business operations. This direction received development due to the “RBC” brand recognition. The segment includes the following projects: business “RBC Award” and award in marketing “EFFIE RUSSIA”.

Segment “Other” (non-core assets) – provision of entertainment services based on the development of online technologies in the Internet as well as other projects of the Group.

The segment includes such projects as Loveplanet.ru dating site and IT-edition Cnews.ru.

Segment “Corporate” – corporate headquarters expenses.

Revenue and expenses per segments relate only to transactions with external counterparties. Sales between segments are not analyzed by the chief operating decision maker and are not included in the segment reporting disclosure.

Accounting principles of the reportable segments are consistent with the Group accounting policies described in Note 3. Segment income is income earned in the segment exclusive of

depreciation and distribution of finance income and expenses, income tax, share in the profit of associates and joint ventures. Segment income is used by the chief operating decision maker for the purposes of resource allocation and evaluation of segment results.

Geographical information in respect to revenue is not analyzed by the Group’s management.

In 2016 and 2015, sales to any individual customer did not represent more than 10% of the Group’s revenue.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

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Year ended 31 December 2016

B2C

information and services

B2B

information and services

B2B infrastructure

Inspiration from RBC Corporate

Other

(non-core assets) Total

RUB mln

Revenue 2,989 127 2,065 20 - 381 5,582 Cost of sales (1,041) (74) (1,007) (31) (22) (96) (2,271)

Gross profit 1,948 53 1,058 (11) (22) 285 3,311

Selling expenses (1,266) (29) (86) (14) - (135) (1,530)

Administrative expenses (121) (14) (40) - (688) (19) (882)

Other operating income associated with the continuing operations 1 (1) 7 - 3 - 10

Other operating expenses associated with the continuing operations (6) - (5) - (24) 1 (34)

EBITDA (management accounts) 556 9 934 (25) (731) 132 875

Adjustments

Loss on disposal of subsidiaries (1)

Loss on disposal of property, plant and equipment and intangible assets (9)

Depreciation and amortization expenses (394)

Profit from operating activities 471

Finance income 43

Finance expenses (990)

Gain on foreign exchange differences, net 2,964

Profit before tax 2,488

Year ended 31 December 2015

RUB mln

B2C

information

and services

B2B

information

and services

B2B

infrastructure

Inspiration

from RBC Corporate

Other

(non-core

assets) Total

Revenue 2,787 155 1,789 18 - 337 5,086

Cost of sales (1,024) (105) (1,013) (27) (22) (88) (2,279)

Gross profit 1,763 50 776 (9) (22) 249 2,807

Selling expenses (1,142) (34) (83) (12) (1) (118) (1,390)

Administrative expenses (122) (20) (41) (1) (632) (20) (836)

Other operating income associated with the continuing operations 1 - 2 (1) 20 - 22

Other operating expenses associated with the continuing operations (7) - (2) - (141) (27) (177)

EBITDA (management accounts) 493 (4) 652 (23) (776) 84 426

Adjustments

Loss on disposal of subsidiaries (21)

Gain on disposal of property, plant and equipment and intangible assets 12 Depreciation and amortization expenses (404)

Profit from operating activities 13

Finance income 22 Finance expenses (896)

Loss on foreign exchange differences, net (3,833)

Loss before tax (4,694)

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

33

Year ended 31 December 2016 USD* mln

B2C

information and services

B2B

information and services

B2B infrastructure

Inspiration from RBC Corporate

Other

(non-core assets) Total

Revenue 49 2 34 - - 7 92

Cost of sales (17) (1) (17) - - (2) (37)

Gross profit 32 1 17 - - 5 55

Selling expenses (21) (1) (1) - - (2) (25)

Administrative expenses (2) - (1) - (12) - (15)

Other operating income associated with the continuing operations - - - - - - -

Other operating expenses associated with the continuing operations - - - - (1) - (1)

EBITDA (management accounts) 9 - 15 - (13) 3 14

Adjustments

Loss on disposal of subsidiaries -

Gain on disposal of property, plant and equipment and intangible assets -

Depreciation and amortization expenses (7)

Profit from operating activities 7

Finance income 1

Finance expenses (16)

Gain on foreign exchange differences, net 49

Profit before tax 41

Year ended 31 December 2015

USD* mln

B2C

information

and services

B2B

information

and services

B2B

infrastructure

Inspiration

from RBC Corporate

Other

(non-core

assets) Total

Revenue 46 2 29 - - 6 83

Cost of sales (17) (2) (17) - - (1) (37)

Gross profit 29 - 12 - - 5 46

Selling expenses (19) (1) (1) - - (2) (23) Administrative expenses (2) - (1) - (11) - (14)

Other operating income associated with the continuing operations - - - - 1 - 1

Other operating expenses associated with the continuing operations - - - - (2) (1) (3)

EBITDA (management accounts) 8 (1) 10 - (12) 2 7

Adjustments

Gain on disposal of subsidiaries -

Gain on disposal of property, plant and equipment and intangible assets -

Depreciation and amortization expenses (7)

Profit from operating activities -

Finance income -

Finance expenses (15)

Loss on foreign exchange differences, net (63)

Loss before tax (78)

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

34

7. REVENUE

Revenue disclosure by types corresponds to the Group’s reportable segments and is presented inNote 6.

8. COST OF SALES

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Payroll expenses, including social

contributions (1,219) (1,231) (20) (20) Production costs (810) (823) (13) (14) Depreciation and amortization (361) (361) (6) (6) Content expenses (125) (148) (2) (2) Expenses to clients and customers (88) (48) (2) (1) IT expenses (23) (19) - - Business trip and entertainment expenses (6) (10) - -

(2,632) (2,640) (43) (43)

9. SELLING EXPENSES

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Advertising expenses (599) (595) (10) (10) Payroll expenses and compensation of selling staff (520) (463) (8) (7)

Agent and commission fees (337) (255) (5) (4) Travel and entertainment expenses (42) (42) (1) (1) Expenses on sale, storage and distribution of printed matters (32) (34) (1) (1)

Other selling expenses - (1) - -

(1,530) (1,390) (25) (23)

10. ADMINISTRATIVE EXPENSES

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Payroll expenses, including social contributions (619) (566) (11) (9)

Rent, utility and maintenance expenses (154) (170) (2) (3)

Consulting and legal expenses (40) (37) (1) (1) Depreciation and amortization (33) (43) (1) (1) HR department expenses (22) (11) - -

Other administrative expenses (47) (52) (1) (1)

(915) (879) (16) (15)

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

35

11. OTHER INCOME AND EXPENSES

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Other income Gain from trade and other payables write-off 9 22 - 1

Gain on disposal of intangible assets - 13 - -

Other operating income 1 - - -

10 35 - 1

Other expenses Taxes other than income tax, fines and penalties (19) (36) (1) -

Loss on disposal of intangible assets (8) - - - Bank charges (5) (5) - - Increase in allowance for doubtful accounts (2) (45) - (1)

Loss on disposal of subsidiaries (1) (21) - - Loss on disposal of property, plant and equipment (1) (1) - -

Other operating expenses (8) (91) - (2)

(44) (199) (1) (3)

12. FINANCIAL INCOME AND EXPENSES

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Finance income Interest income 43 22 1 -

43 22 1 -

Finance costs Interest expense (979) (877) (16) (15) Loss on revaluation of derivatives - (1) - - Other finance expenses (11) (18) - -

(990) (896) (16) (15)

13. ASSETS CLASSIFIED AS HELD FOR SALE

Assets held for sale

As at 31 December 2016 and 2015, assets included in “Assets classified as held for sale” line areproperty rights for residential buildings in Moscow and the Moscow region amounting toRUB 23 mln/USD* 0.4 mln and RUB 53 mln/USD* 0.9 mln. These assets were obtained by theGroup in exchange for advertising services rendered. The Group believes that these assets arelikely to be sold within the next twelve months and, accordingly, has reclassified the property

rights from other non-current assets to assets held for sale.

At the reporting date, the Group has performed impairment testing in respect of these assets. Forsome property items, the testing identified that the carrying amount exceeded the fair value lesscost of sale. As a result of the testing, assets classified as held for sale were impaired in theamount of RUB 8 mln/USD* 0.13 mln/ (2015: RUB 80 mln/USD* 1.32 mln).

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

36

14. PROPERTY, PLANT AND EQUIPMENT

RUB mln TV equipment

Computer

equipment

Office

equipment

Other assets

Vehicles

Construction

in progress

Total

Cost

1 January 2016 240

516

101

28

55

4

944 Reclassification between groups 4

-

-

-

-

(4)

-

Additions 2

48

4

1

7

-

62

Disposals (25)

(28)

(10)

(7)

(8)

-

(78)

31 December 2016 221

536

95

22

54

-

928

Accumulated depreciation

1 January 2016 (148)

(372)

(54)

(19)

(36)

-

(629)

Accruals (26)

(74)

(7)

(3)

(6)

-

(116) Disposals 25

28

10

4

7

-

74

31 December 2016 (149)

(418)

(51)

(18)

(35)

-

(671)

Net book value

1 January 2016 92

144

47

9

19

4

315

31 December 2016 72

118

44

4

19

-

257

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

37

RUB mln TV equipment

Computer

equipment

Office

equipment Other assets Vehicles

Construction

in progress Total

Cost

At 1 January 2015 317 574 106 33 66 2 1,098

Reclassification between groups - 2 - - - (2) -

Additions 11 45 1 - 2 5 64

Derecognized upon disposal of subsidiaries - (4) (1) (4) - - (9)

Disposals (88) (101) (5) (1) (13) (1) (209)

At 31 December 2015 240 516 101 28 55 4 944

Accumulated depreciation

At 1 January 2015 (206) (390) (53) (23) (44) - (716)

Reclassification between groups (2) (3) 3 2 - - -

Accruals (28) (82) (9) (4) (6) - (129)

Written-off upon disposal of subsidiaries - 4 - 3 - - 7

Disposals 88 99 5 3 14 - 209

At 31 December 2015 (148) (372) (54) (19) (36) - (629)

Net book value

At 1 January 2015 111 184 53 10 22 2 382

At 31 December 2015 92 144 47 9 19 4 315

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

38

USD* mln TV equipment

Computer

equipment

Office

equipment

Other assets

Vehicles

Construction

in progress

Total

Cost

At 1 January 2016 4

8

2

-

1

-

15

Reclassification between groups -

-

-

-

-

-

-

Additions -

1

-

-

-

-

1

Disposals -

-

-

-

-

-

-

At 31 December 2016 4

9

2

-

1

-

16

Accumulated depreciation

At 1 January 2016 (2)

(6)

(1)

-

(1)

-

(10)

Accruals (1)

(1)

-

-

-

-

(2)

Disposals -

-

-

-

-

-

-

At 31 December 2016 (3)

(7)

(1)

-

(1)

-

(12)

Net book value

At 1 January 2016 2

2

1

-

-

-

5

At 31 December 2016 1

2

1

-

-

-

4

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

39

USD* mln TV equipment

Computer

equipment

Office

equipment Other assets Vehicles

Construction

in progress Total

Cost

At 1 January 2015 5 9 2 - 1 - 17

Reclassification between groups - - - - - - -

Additions - 1 - - - - 1

Derecognized upon disposal of subsidiaries - - - - - - -

Disposals (1) (2) - - - - (3)

At 31 December 2015 4 8 2 - 1 - 15

Accumulated depreciation

At 1 January 2015 (3) (6) (1) - (1) - (11)

Reclassification between groups - - - - - - -

Accruals - (1) - - - - (1)

Written-off upon disposal of subsidiaries - - - - - - -

Disposals 1 1 - - - - 2

At 31 December 2015 (2) (6) (1) - (1) - (10)

Net book value

At 1 January 2015 2 3 1 - - - 6

At 31 December 2015 2 2 1 - - - 5

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

40

15. INTANGIBLE ASSETS

RUB mln Trademarks

Software

Web-sites

Brands

Customer

base

Cable

network

connection

Goodwill

Prepayments

Other

Total

Cost

At 1 January 2016 149

288

879

411

495

354

1,718

80

263

4,637 Reclassification between groups 2

6

(4)

-

(1)

-

-

(1)

(2)

-

Additions -

192

5

-

-

-

-

7

3

207

Disposals (137)

(55)

(688)

(286)

-

-

-

(1)

(39)

(1,206)

At 31 December 2016 14

431

192

125

494

354

1,718

85

225

3,638

Accumulated amortisation

and impairment

At 1 January 2016 (144)

(196)

(765)

(346)

(252)

(61)

(1,027)

-

(190)

(2,981) Reclassification between groups -

-

(1)

-

-

-

-

-

1

-

Accruals (2)

(89)

(69)

(16)

(55)

(21)

-

-

(26)

(278)

Disposals 137

54

682

286

-

-

-

-

40

1,199

At 31 December 2016 (9)

(231)

(153)

(76)

(307)

(82)

(1,027)

-

(175)

(2,060)

Net book value

At 1 January 2016 5

92

114

65

243

293

691

80

73

1,656

At 31 December 2016 5

200

39

49

187

272

691

85

50

1,578

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

41

RUB mln Trademarks Software Web-sites Brands Customer

base

Cable

network connection Goodwill Prepayments Other Total

Cost

At 1 January 2015 150 237 878 411 495 354 1,718 35 236 4,514

Additions - 37 12 - - - - 45 68 162

Disposals (1) - (24) - - - - - (41) (66)

Disposal of fully amortized assets - 14 13 - - - - - - 27

At 31 December 2015 149 288 879 411 495 354 1,718 80 263 4,637

Accumulated amortisation and impairment

At 1 January 2015 (141) (131) (673) (330) (196) (40) (1,027) - (202) (2,740)

Accruals (3) (51) (99) (16) (56) (21) - - (29) (275)

Disposals - - 20 - - - - - 41 61

Disposal of fully amortized assets - (14) (13) - - - - - - (27)

At 31 December 2015 (144) (196) (765) (346) (252) (61) (1,027) - (190) (2,981)

Net book value

At 1 January 2015 9 106 205 81 299 314 691 35 34 1,774

At 31 December 2015 5 92 114 65 243 293 691 80 73 1,656

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

42

USD* mln Trademarks

Software

Web-sites

Brands

Customer base

Cable

network connection

Goodwill

Prepayments

Other

Total

Cost

At 1 January 2016 2

5

15

7

8

6

28

1

4

76

Reclassification between groups - - - - - - - - - -

Additions -

4

-

-

-

-

-

-

-

4

Disposals (2)

(1)

(11)

(5)

-

-

-

-

(1)

(20)

At 31 December 2016 0

8

4

2

8

6

28

1

3

60

Accumulated amortisation and impairment

At 1 January 2016 (2)

(3)

(13)

(6)

(4)

(1)

(17)

-

(3)

(49)

Reclassification between groups -

-

-

-

-

-

-

-

-

-

Accruals -

(2)

(1)

-

(1)

-

-

-

(1)

(5)

Disposals 2

1

11

5

-

-

-

-

1

20

At 31 December 2016 -

(4)

(3)

(1)

(5)

(1)

(17)

-

(3)

(34)

Net book value

At 1 January 2016 -

2

2

1

4

5

11

1

1

27

At 31 December 2016 -

4

1

1

3

5

11

1

-

26

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

43

USD* mln Trademarks

Software

Web-sites

Brands

Customer base

Cable

network connection

Goodwill

Prepayments

Other

Total

Cost

At 1 January 2015 2

4

15

7

8

6

28

-

4

74

Additions -

1

-

-

-

-

-

1

1

3

Disposals -

-

-

-

-

-

-

-

(1)

(1)

Disposal of fully amortized assets -

-

-

-

-

-

-

-

-

-

At 31 December 2015 2

5

15

7

8

6

28

1

4

76

Accumulated amortisation and impairment

At 1 January 2016 (2)

(2)

(11)

(6)

(3)

(1)

(17)

-

(3)

(45)

Accruals -

(1)

(2)

-

(1)

-

-

-

-

(4)

Disposals - - - - - - - - - -

Disposal of fully amortized assets -

-

-

-

-

-

-

-

-

-

At 31 December 2015 (2)

(3)

(13)

(6)

(4)

(1)

(17)

-

(3)

(49)

Net book value

At 1 January 2015 -

2

4

1

5

5

11

-

1

29

At 31 December 2015 -

2

2

1

4

5

11

1

1

27

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

44

(a) Goodwill

RUB mln RU-CENTER Public Library Hosting Total

At 31 December 2015 461 17 213 691

At 31 December 2016 461 17 213 691

USD* mln

At 31 December 2015 8 - 3 11

At 31 December 2016 8 - 3 11

(b) Impairment testing and recognized impairment losses

As of 31 December 2016 and 2015, all intangible assets were tested for impairment as part of the cash generated units to which they relate. In 2016 and 2015, no goodwill or other intangible assets were impaired.

(c) Assets with indefinite useful lives

The Group holds an asset with indefinite useful life with a carrying amount (net of impairment loss) of RUB 18 mln/USD* 0.3 mln. This asset represents a perpetual broadcasting license in Novosibirsk; the Group’s management does not expect future economic benefits from this asset to cease.

16. IMPAIRMENT OF ASSETS

For the purpose of the impairment testing of goodwill and non-current assets, the following cash

generating units (“CGUs”) were identified: Media business, Hosting and domain namesregistration business. Assets of the Consumer Internet services segment, which attract

advertising revenue for the Group from third parties, were considered immaterial and noimpairment testing was performed for them.

For the purpose of impairment testing, goodwill was allocated to the Hosting and domain namesregistration business CGU. This CGU includes the respective Group entities whose acquisitionresulted in goodwill recognition and which represent the lowest level within the Group at which

goodwill is monitored for decision-making purposes.

For the purpose of impairment testing, all other non-financial assets of the Group were allocatedto the CGUs set out above. The key assumptions used represent the management’s assessmentof future trends in the business and are based on both external and internal sources. For the

purposes of impairment testing, the recoverable amount of each CGU was assumed to be equal toits value in use (discounted cash flow).

The recoverable amount of all CGUs was calculated as being their value in use based on future

discounted cash flows taken from the five-year business plan for 2017-2021 which has beenapproved by the Group’s management, discount rates of 26% (for Media Business CGU) and 27%

(for Hosting and domain names registration CGU), and terminal growth rates of 2% and 2.5%,respectively. The discount rate used was based on an average industry weighted average cost ofcapital. The results of the impairment testing and assumptions used were as follows.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

45

1. Media Business This CGU comprises companies representing B2C information and services and B2B information and services segments. B2C segment includes subsidiaries engaged in provision of business and specialized information in the Internet, publishing and distribution of RBC Daily newspaper and RBC magazine in the RF, as well as broadcasting on RBC-TV in Russia and abroad. B2B segment

comprises companies providing services involving paid access to information portals and business conferences held by the Group companies (Note 6). The CGU includes a broadcasting license with an indefinite useful life of RUB 18 mln/USD* 0.3 mln (Note 15 (c)). For the purposes of impairment testing the Group used the following key assumptions: Annual revenue is projected to increase by 7% in 2017, 5% in 2018, 5% in 2019, 5%

in 2020; and 6% in 2021;

Annual expenses are projected to increase by 3% annually from 2017 to 2021.

As at the end of 2016, the impairment testing showed an excess of the recoverable amount of CGU over the book value. The sensitivity analysis and discounted cash flow analysis of CGU Media Business identified that an increase of two percentage points in the discount rate does not result in impairment of the CGU as at 31 December 2016. The recoverable amount of this CGU would equal its carrying amount under the following changes

in annual key assumptions for 2017-2021: An increase in annual business expenses by 1%; or

A decrease in annual business revenue by 1%.

2. Hosting and domain names registration business

This CGU includes subsidiaries involved in the provision of web hosting services in Russia. The CGU and, accordingly, the reportable B2B infrastructure segment contains goodwill of RUB 674

mln/USD* 11 mln. For the purposes of impairment testing the Group used the following key assumptions:

Annual revenue is projected to increase by 1% in 2017, 2% in 2018, 2% in 2019, 3% in 2020, and 1% in 2021;

Annual expenses are projected to increase by 2% in 2017 and by 3% annually from 2018 to 2021.

As a result of the impairment test, the recoverable amount of the CGU was found to exceed its carrying amount. The sensitivity analysis and discounted cash flow analysis of CGU Hosting and domain name registration services identified that an increase of 13 percentage points in the discount rate does not result in impairment of the CGU as at 31 December 2016.

The recoverable amount of this CGU would equal its carrying amount under the following changes in annual key assumptions for 2017-2021:

An increase in annual business expenses by 9.7%; or

A decrease in annual business revenue by 6.5%.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

46

17. DEFERRED TAX ASSETS AND LIABILITIES

(a) Income tax

Year ended Year ended

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Current income tax expenses (289) (111) (5) (2)

Deferred income tax (expense) / benefit (59) 52 (1) 1

Income tax provision (37) (30) - -

(385) (89) (6) (1)

The applicable income tax rate for the Company and its Russian subsidiaries is 20% (2015: 20%). Foreign subsidiaries accrue and pay income tax at a rate in accordance with the legislative

requirements of their tax jurisdictions. For entities located in Cyprus, the applicable tax rate is 12.5% (2015: 12.5%). In 2016, income received by the companies in the British Virgin Islands was not subject to income tax (similar to 2015).

(b) Reconciliation of theoretical to actual income tax (expense) / benefit:

Year ended 31 December 2016

Year ended 31 December 2015

RUB mln % RUB mln %

Profit / (loss) before tax 2,488 100% (4,694) 100%

Theoretical income tax (expense) / benefit at the rate of 20% (498) -20% 939 -20%

Effect of income taxed at a lower rate 187 8% (556) 11%

Other permanent differences (64) -3% 59 -1% Income tax provision (37) -1% (30) 0% Refund / (increase) of deferred tax asset recognized as nonrefundable 27 1% (501) 10%

Total income tax expense from continuing operations (385) -15% (89) 0%

Year ended 31 December 2016

Year ended 31 December 2015

USD* mln % USD* mln %

Profit / (loss) before tax 41 100% (78) 100%

Theoretical income tax (expense) / benefit at the rate of 20% (8) -20% 15 -20%

Effect of income taxed at a lower rate 3 8% (9) 11%

Other permanent differences (1) -3% 1 -1% Income tax provision (1) -1% - 0% Refund / (increase) of deferred tax asset recognized as nonrefundable 1 1% (8) 10%

Total income tax expense from continuing operations (6) -15% (1) 0%

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

47

(c) Recognized deferred tax assets and liabilities

RUB mln 1 January

2016

Recognized in profit or loss

Acquisition / disposal of subsidiaries

31 December 2016

Property, plant and equipment (3)

1

-

(2) Intangible assets (124)

22

-

(102)

Investments, trade and other accounts receivable and payable 102

19

-

121

Borrowings (15)

(4)

-

(19) Tax losses carried forward 227

(97)

-

130

Deferred tax assets/(liabilities),

net 187

(59)

-

128

USD* mln 1 January

2016

Recognized in profit or loss

Acquisition/ disposal of subsidiaries

31 December 2016

Property, plant and equipment - - - -

Intangible assets (2)

-

-

(2) Investments, trade and other accounts receivable and payable 2

-

-

2

Borrowings - - - - Tax losses carried forward 3

(1)

-

2

Deferred tax assets/(liabilities),

net 3

(1)

-

2

RUB mln 1 January

2015

Recognized in profit or loss

Acquisition / disposal of subsidiaries

31 December 2015

Property, plant and equipment (6)

3

-

(3) Intangible assets (125)

-

1

(124)

Investments, trade and other accounts receivable and payable (69)

170

1

102

Borrowings (8)

(7)

-

(15) Tax losses carried forward 358

(114)

(17)

227

Deferred tax assets/(liabilities),

net 150

52

(15)

187

USD* mln 1 January

2015

Recognized in profit or loss

Acquisition/ disposal of subsidiaries

31 December 2015

Property, plant and equipment -

-

-

- Intangible assets (2)

-

-

(2)

Investments, trade and other accounts receivable and payable (1)

3

-

2

Borrowings - - - - Tax losses carried forward 5

(2)

-

3

Deferred tax assets/(liabilities),

net 2

1

-

3

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

48

(d) Unrecognized deductible temporary differences, unused tax losses and unused tax credits

Year ended Year ended

31 December 31 December 31 December 31 December 2016 2015 2016 2015

RUB mln RUB mln USD* mln USD* mln

Tax losses carried forward 4,071 4,258 67 70

Total 4,071 4,258 67 70

18. TRADE AND OTHER RECEIVABLES

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Financial assets Trade receivables 888 813 15 13 Other receivables 40 45 1 1 Allowance for doubtful accounts (56) (110) (1) (2)

Total financial assets 872 748 15 12

Non-financial assets Other prepayments 93 60 2 1 VAT receivable 85 94 1 2 Other taxes receivable 2 2 - - Prepaid expenses 1 1 - -

Total non-financial assets 181 157 3 3

Total accounts receivable 1,053 905 18 15

The changes in the allowance for doubtful accounts for the year comprise:

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Balance at 1 January (110) (131) (2) (2)

Increase in allowance for doubtful debts (1) (43) - (1)

Accounts receivable written off against the allowance 55 64 1 1

Balance at 31 December (56) (110) (1) (2)

19. CASH AND CASH EQUIVALENTS

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln RUB mln USD* mln USD* mln

Bank balances and petty cash 126 131 2 2 Bank deposits 552 391 10 7

Cash and cash equivalents 678 522 12 9

As at 31 December 2016, the Group had RUB-denominated deposits with Unicredit Bank JSC in the amount of RUB 484.3 mln/USD* 7.98 mln at the interest rates of 7.1–9.3% per annum, and

foreign currency-denominated deposits of RUB 67.4 mln/USD* 1.11 mln at the interest rates of 0.1–0.3% per annum. The maturity dates of these deposits are not later than 12 January 2017. The Group also has a foreign currency-denominated deposit of RUB 38.3 mln/USD* 0.63 mln at the interest rate of 0.1% per annum. The maturity date of this deposit is not later than 18 April 2017.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

49

As at 31 December 2015, the Group had RUB-denominated deposits with Unicredit Bank JSC in the amount of RUB 373 mln/USD* 6.15 mln at the interest rates of 8–9.8% per annum, RUB-denominated deposits with Raiffeisen bank of RUB 5 mln/USD* 0.08 mln at the interest rates of 8–9.8% per annum and deposits with Sberbank of Russia of RUB 13 mln/USD* 0.21 mln. The maturity dates of these deposits are not later than 31 January 2016.

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 25(f).

20. EQUITY (a) Share capital and share premium

Ordinary shares

Ordinary shares

Number of shares unless otherwise stated 31 December

2016 31 December

2015

Authorized shares 365,631,010 365,631,010 Par value RUB 0.0006 RUB 0.0006 Issued at the beginning of the year, paid in full 365,631,010 365,631,010

Issued at the end of the year, paid in full 365,631,010 365,631,010

As at 31 December 2016, the share capital of RBC PJSC comprised 365,631,010 ordinary shares. The holders of the ordinary shares are entitled to receive declared dividends and are entitled to one vote per share at the Company’s shareholders meetings. As at 31 December 2016, as a result of the additional share issuance the share capital and share

premium are presented as follows:

31 December

2016 31 December

2015 31 December

2016 31 December

2015

RUB mln RUB mln USD* mln USD* mln

Share capital - - - - Share premium 3,569 3,571 59 59

(b) Dividends

In accordance with the Russian legislation, the Company’s distributable earnings are limited to the amount of accumulated retained earnings as recorded in the Company’s statutory financial statements prepared in accordance with Russian Accounting Standards.

As at 31 December 2016 and 2015, the Group had accumulated losses and therefore no dividends were declared.

(c) Treasury shares

As at 31 December 2016 and 2015, the Group held 14,976,590 treasury shares.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

50

21. EARNINGS PER SHARE

The calculation of basic earnings per share as at 31 December 2016 was based on the earningsfor 2016 and the weighted average number of ordinary shares outstanding during 2016 of350,654 thousand units (2015: 350,654 thousand units). Basic earnings per share werecalculated as:

Shares, units

Year ended 31 December

2016

Year ended 31 December

2015

Shares issued at 1 January 365,631,010 365,631,010 Treasury shares (14,976,590) (14,976,590)

Weighted average number of shares for the reporting period 350,654,420 350,654,420

Year ended 31 December

2016

Year ended 31 December

2015

RUB mln RUB mln

Earnings/(Loss) for the period attributable to the owners of the Company 2,049 (4,917)

Earnings/(Loss) for the period from continuing operations attributable to the Company shareholders 2,049 (4,917)

Weighted average number of shares 350,654,420 350,654,420

Basic earnings/(loss) per share from continuing operations, RUB 5.84 (14.02)

Total basic earnings/(loss) per share, RUB 5.84 (14.02)

Year ended 31 December

2016

Year ended 31 December

2015 USD* mln USD* mln

Earnings/(Loss) for the period attributable to the owners of the Company 34 (81)

Earnings/(Loss) for the period from continuing operations attributable to the Company shareholders 34 (81)

Weighted average number of shares 350,654,420 350,654,420

Basic earnings/(loss) per share from continuing operations, USD* 0.10 (0.23)

Total basic earnings/(loss) per share, USD* 0.10 (0.23)

As at 31 December 2016 and 2015, the Company had no potentially dilutive ordinary shares.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

51

22. LOANS AND BORROWINGS As at 31 December 2016 and 2015, the loans and borrowings of the Group were as follows: Carrying value

Nominal

interest

31 December

2016

31 December

2015

31 December

2016

31 December

2015

Currency rate Maturity RUB mln RUB mln USD* mln USD* mln

Non-current

liabilities

Loans

Loans at 7% USD 7% 2020 7,394 8,890 122 147

Loans at 6% USD 6% 2022 6,379 7,367 105 121

Unsecured bonds

Bonds (issue B-4) RUB 6% 2018 75 74 1 1

Total non-current

liabilities

13,848 16,331 228 269

Current liabilities

Loans at 7% USD 7% 2017 79 95 1 2

Bonds (issue B-4) RUB 7% 2017 1 5 - -

Other loans USD 10% 2017 1,235 1,059 21 18

Total current

liabilities

1,315 1,159 22 20

As at 31 December 2016, the Group received other loans of RUB 1,235 mln/USD* 21 mln (31 December 2015: RUB 1,059 mln/USD* 18 mln) denominated in USD from related parties. In 2016, the Group also received a new loan of RUB 301.8 mln/USD* 5 mln from a related party and paid back the loan and interests of RUB 26.7 mln/USD* 0.4 mln.

The USD-denominated loans and RUB-denominated bonds were issued by the Group as part of a debt restructuring process in 2010, in which the Group reached an agreement with its creditors to

exchange all of its outstanding debt for loans of RUB 6,337 mln/USD* 104 mln, bonds of RUB 191 mln/USD* 3.15 mln and options/warrants granted to the loan and bond holders as described below. As part of the RBC-TV JSC debt restructuring, the Group’s subsidiary pledged the rights to its trademarks and brand name in the estimated amount of RUB 46 mln/USD* 0.76 mln to E.M.I.S.

Finance B.V. along with pledged shares in certain companies of the Group.

The loans are subject to certain covenants that impose restrictions in respect of certain transactions and financial ratios, including those related to debt and profitability. As at 31 December 2016, the Group was in compliance with all covenants.

In 2016, unsecured bonds were repaid in the amount of USD 8.8 mln which is equivalent to RUB 569 mln.

In the future, the Group plans to repay its liabilities through the results of its operating activities. Derivative financial liabilities

In 2010, as part of the debt restructuring process, the Group agreed to grant call warrants to its loan participation note holders and option to its bond holders, vesting in 2015 and 2018 respectively. In accordance with the terms of the warrant and option agreements, the Group is obliged to pay the options and warrants holders the difference between the average share price of over the 120 days preceding the exercise date and the fixed price of USD 1.96 per warrant/option.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

52

The number of options granted and outstanding was as follows:

Exercise date

31 December 2016

31 December 2015

Warrants W-2 6 May 2018

18,579,709

18,579,709

Options W-2 2 June 2018

246,403

246,403

Warrants/options are to be cash settled and are classified as a financial liability in the accompanying consolidated statement of financial position. The fair value of the warrants/options was determined using the Black-Scholes valuation model and amounted to RUB 0 mln/USD* 0 mln as at 31 December 2016 and 2015, respectively. Warrants/options maturing on 6 May 2015 and 2 June 2015 expired without being excercised.

23. TRADE AND OTHER PAYABLES

31 December 2016

31 December 2015

31 December 2016

31 December 2015

RUB mln

RUB mln

USD* mln

USD* mln

Financial liabilities Trade payables 462

439

8

7 Other payables and accrued

provision for expenses 44

29

1

-

Total financial liabilities 506

468

9

7

Non-financial liabilities Advances received 483

479

8

8

VAT payable 254

202

3

3 Other taxes payables 41

32

1

1

Other accounts payable 43

38

1

1

Total non-financial liabilities 821

751

13

13

Total accounts payable 1,327

1,219

22

20

The Group’s exposure to currency and liquidity risk related to trade and other payables is

disclosed in Note 25 (e) and (c).

24. PROVISIONS As at 31 December 2016 and 2015, the Group provisions were as follows:

31 December

2016

31 December 2015

31 December 2016

31 December 2015

RUB mln

RUB mln

USD* mln

USD* mln

Provision for employee bonuses 193

147

3

3

Tax provision 102

75

2

1 Provision for unused vacation 82

64

1

1

Other provisions 14 21 - -

391

307

6

5

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

53

The changes in provisions as of 31 December 2016 and 2015 were as follows:

RUB mln Provision for

bonuses

Provision for unused

vacations Other

provisions Tax provision

1 January 2016 147 64 21 75 Additional provisions recognised 192 18 14 57 Recovery and use of provision (146) - (21) (30)

31 December 2016 193 82 14 102

1 January 2015 133 63 15 47 Additional provisions recognised 147 1 19 50 Recovery and use of provision (133) - (13) (22)

31 December 2015 147 64 21 75

USD* mln Provision for

bonuses

Provision for unused

vacations Other

provisions Tax provision

1 January 2016 3 1 - 1 Additional provisions recognised 3 1 - 1 Recovery and use of provision (3) - - (1)

31 December 2016 3 2 - 1

1 January 2015 2 1 - 1 Additional provisions recognised 3 - - - Recovery and use of provision (2) - - -

31 December 2015 3 1 - 1

25. FINANCIAL RISK MANAGEMENT

(a) General information

The Group has exposure to the following risks through its use of financial instruments:

Credit risk;

Liquidity risk;

Market risk.

This note contains information on the Group’s exposure to each of the above risks, along with the Group’s objectives, policies and processes for measuring and managing the risks, and details of

the Group’s capital management policies. Further quantitative disclosures are included throughout

the consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies have been established to identify and analyze the risks

faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to the limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

54

(b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises principally from the Group’s receivables from its customers. a. Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each

customer. The demographics of the Group’s customer base, including the default risk of the industry and country, in which customers operate, has less of an influence on credit risk. There are no customers from which the Group derives more than 10% of its revenue. The Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes a review of customers’ financial statements and background

of customers’ management. Customers that fail to meet the Group’s benchmark creditworthiness

may transact with the Group only on a prepayment basis. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. This allowance relates to individually significant exposures. The Group does not have a collective loss component of impairment established for groups of similar assets in respect of losses that have been incurred but not yet identified. The Group does not require collateral in respect of trade receivables. b. Guarantees The Group’s policy is to provide financial guarantees only to its subsidiaries. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Carrying value Carrying value

31 December

2016 31 December

2015 31 December

2016 31 December

2015

RUB mln

RUB mln

USD* mln

USD* mln

Current financial assets

Trade receivables 864

736

15

12 Cash and cash equivalents 678

522

12

9

Other receivables 8

12

-

- Other investments held to maturity 10 10 - - Non-current financial assets

Other investments -

1

-

- Letter of credit 27 31 - 1

Total financial assets 1,587

1,312

27

22

Impairment losses As at the reporting date, the allowance for trade receivables impairment grouped by their ages was as follows:

31 December

2016

31 December 2015

31 December 2016

31 December 2015

RUB mln

RUB mln

USD* mln

USD* mln

Accounts not past due - - - - Accounts overdue up to 180 days -

(2)

-

-

Accounts overdue from 180 to 365 days (1) (8) - -

Accounts overdue by over one year (21)

(65)

-

(1)

(22)

(75)

-

(1)

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

55

Changes in the allowance for doubtful trade receivables is shown in the table below:

31 December

2016

31 December 2015

31 December 2016

31 December 2015

RUB mln

RUB mln

USD* mln

USD* mln

Balance at 1 January 75

112

1

2

Change in the allowance for doubtful trade receivables (53)

(37)

(1)

(1)

Balance at 31 December 22

75

-

1

The allowance for impairment of trade receivables is used to account for impairment losses unless the Group is certain that an amount cannot be recovered and recognizes a write-off of the

corresponding asset.

(c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

A summary of quantitative data regarding the Group’s exposure to liquidity risk is disclosed in the liabilities maturity analysis table, which shows the remaining contractual maturities of the liabilities. The following are the contractual maturities of the Group’s financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

31 December 2016 Average interest rate 0-12 Over

RUB mln Contractual Effective months 1-5 years 5 years Total

Trade and other payables (except for advances received) -

-

506

-

-

506

Loans and borrowings 6-7%

6-7%

80

7,449

6,487

14,016 Other loans 10% 10% 1,235 - - 1,235

Total non-derivative

financial liabilities

1,821

7,449

6,487

15,757

31 December 2016 Average interest rate 0-12 Over

USD* mln Contractual Effective months 1-5 years 5 years Total

Trade and other payables (except for advances received) -

-

9

-

-

9

Loans and borrowings 6-7%

6-7%

1

123

107

231 Other loans 10%

10%

21

-

-

21

Total non-derivative

financial liabilities

31

123

107

261

31 December 2015 Average interest rate 0-12 Over

RUB mln Contractual Effective months 1-5 years 5 years Total

Trade and other payables (except for advances received) -

-

468

-

-

468

Loans and borrowings 6-7%

6-7%

100

8,935

7,468

16,503 Other loans 10%

10%

1,059

-

-

1,059

Total non-derivative

financial liabilities

1,627

8,935

7,468

18,030

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RBC GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

56

31 December 2015 Average interest rate 0-12 Over

USD* mln Contractual Effective months 1-5 years 5 years Total

Trade and other payables (except for advances received) - - 7 - - 7

Loans and borrowings 6-7% 6-7% 2 147 123 272 Other loans 10% 10% 18 - - 18

Total non-derivative financial liabilities 27 147 123 297

(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and share prices will affect the Group’s income or the value of its financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group does not buy or sell derivatives.

(e) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily being the Russian Ruble.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies

at spot rates when it is necessary to address short-term imbalances.

Exposure to currency risk

Below is the information about the Group’s exposure to foreign currency risk defined based on the

notional amounts of financial instruments:

Denominated at 31 December 2016

RUB mln USD EUR

Financial assets Trade receivables 27 8 Cash and cash equivalents 74 13

Total financial assets 101 21

Financial liabilities Accounts payable (17) (2) Loans and borrowings (13,852) -

Total financial liabilities (13,869) (2)

Denominated at 31 December 2016

USD* mln USD EUR

Financial assets Trade receivables - - Cash and cash equivalents 1 -

Total financial assets 1 -

Financial liabilities Accounts payable - - Loans and borrowings (228) -

Total financial liabilities (228) -

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

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Denominated at 31 December

2015

RUB mln USD

EUR

Financial assets

Trade receivables 22

12 Cash and cash equivalents 25

35

Total financial assets 47

47

Financial liabilities Accounts payable -

(5)

Loans and borrowings (16,352)

-

Total financial liabilities (16,352)

(5)

Denominated at 31 December

2015

USD* mln USD

EUR

Financial assets

Trade receivables -

- Cash and cash equivalents -

1

Total financial assets -

1

Financial liabilities Accounts payable -

-

Loans and borrowings (270)

-

Total financial liabilities (270)

-

The following exchange rates were applicable during the year:

Average rate Rate at 31 December

2016 2015 2016 2015

RUB for 1 USD 67.0348

60.9549

60.6569

72.8827

(f) Interest rate risk

Changes in interest rates impact primarily loans and borrowings by changing either their fair

value (fixed rate debt) or their future cash flows (variable rate debt). There is no formal policy established by the Group’s management in order to determine how much of the Group’s exposure to fixed or variable rates should be. However, at the time of raising new loans or borrowings the management uses its judgment to decide whether a fixed or variable rate would be more favorable to the Group over the expected period until maturity.

At the reporting date the carrying value of the Group’s interest-bearing financial instruments was:

Carrying value Carrying value

31 December

2016

31 December 2015

31 December

2016

31 December 2015

RUB mln

RUB mln

USD* mln

USD* mln

Fixed rate financial instruments Financial liabilities (15,163) (17,490) (250) (289)

There are no financial liabilities with variable rates.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidated financial statements (see Note 2(d)).

58

(g) Sensitivity analysis

The table below shows the potential impact of RUB/USD exchange rate increase/decrease by 20%. Management believes the 20% sensitivity rate reflects reasonably possible change in foreign exchange rates. Currency risk sensitivity

31 December 2016 +20% -20%

RUB mln Profit/(loss)

Profit/(loss)

Current financial assets

Accounts receivable 7

(7) Cash and cash equivalents 17

(17)

Impact on financial assets before tax 24

(24)

Income tax (20%) (5)

5

Impact on financial assets after tax 19

(19)

Current financial liabilities

Accounts payable (4)

4 Loans and borrowings (2,770)

2,770

Impact on financial liabilities before tax (2,774)

2,774

Income tax (20%) 555

(555)

Impact on financial liabilities after tax (2,219)

2,219

Total (decrease)/increase (2,200)

2,200

Currency risk sensitivity

31 December 2016 +20% -20%

USD* mln Profit/(loss)

Profit/(loss)

Current financial assets

Accounts receivable -

- Cash and cash equivalents -

-

Impact on financial assets before tax -

-

Income tax (20%) -

-

Impact on financial assets after tax -

-

Accounts payable -

-

Loans and borrowings (46)

46

Impact on financial liabilities before tax (46)

46

Income tax (20%) 9

(9)

Impact on financial liabilities after tax (37)

37

Total (decrease)/increase (37)

37

(h) Fair value

The fair value of financial assets and liabilities of the Group as at 31 December 2016 and 2015

related to Level 1 of the fair value hierarchy is applicable only for bonds (Note 22). The carrying amount of the bonds at 31 December 2016 comprised RUB 76 mln/USD* 1.25 mln, with a fair value of RUB 66 mln/USD* 1.1 mln. The carrying amount of the bonds at 31 December 2015 comprised RUB 79 mln/USD* 1.3 mln, with a fair value of RUB 76.5 mln/USD* 1.26 mln.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

59

(i) Capital management

The Board of Directors monitors the return on equity, which the Group defines as profit after tax divided by shareholders’ equity.

2016 2015 2016 2015 RUB mln RUB mln USD* mln USD* mln

Income/(loss) for the period 2,103 (4,783) 35 (79)

Equity (13,996) (16,043) (230) (264)

Share capital - - - - Share premium 3,569 3,571 59 59 Treasury shares (631) (631) (10) (10) Accumulated loss (16,934) (18,983) (279) (313)

Return on equity N/A N/A N/A N/A

26. OPERATING LEASES

The Group leases a number of offices and facilities under operating leases. Contacted amountspayable under non-cancellable operating lease rentals are due as follows:

2016 2015 2016 2015 RUB mln RUB mln USD* mln USD* mln

Less than 1 year 89 73 1 1 1 to 5 years 86 67 1 1 Over 5 years 148 163 2 2

323 303 4 4

During the reporting year RUB 229 mln/USD* 3.8 mln (2015: RUB 249 mln/USD* 4.1 mln) was recognized as operating leases expense.

27. CONTINGENCIES

(a) Taxation

Laws and regulations affecting business in the Russian Federation continue to change rapidly. Management’s interpretation of such legislation as applied to the activity of the Group may be challenged by the relevant regional and federal authorities.

Recent events suggest that the tax authorities are taking a more assertive position in their interpretation of the legislation and assessments and as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. Fiscal periods

generally remain open to tax audit by the authorities in respect of taxes for three calendar years proceeding the year of tax audit. Under certain circumstances reviews may cover longer periods.

Management believes that it has provided adequately for tax liabilities based on its interpretations of tax legislation. However, the relevant authorities may have differing interpretations, and the effects on the financial statements could be significant.

Generally, in accordance with Russian tax legislation, tax returns remain open and subject to inspection for a period of three years following the tax year. As at 31 December 2016, tax returns of the Company in Russia for the preceding three fiscal years are open for further review. The

Group management assesses that if a particular tax treatment based on management’s judgment in respect of the Group’s business activities was to be challenged by the tax authorities, the exposure to additional taxes, penalties and interest will not exceed 0.2% of the Group’s revenue for the three reporting periods.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

*All USD amounts are presented solely for user convenience's sake and do not form a part of the consolidatedfinancial statements (see Note 2(d)).

60

In 2015, amendments were introduced into the Russian tax legislation in respect of taxation of profit of controlled foreign companies. According to these changes, undistributed profits of the Group foreign subsidiaries, qualifying as controlled foreign companies, should be included in the income tax base of the controlling entities in particular cases.

(b) Litigation

During the reporting year the Group’s entities were involved in various claims and legal proceedings (both as plaintiff and defendant) arising in the normal course of business. Management does not believe that at the date of authorizing the consolidated financial statements for issue any pending litigations or claims will give rise to a material impact on the Group’s operating results or financial position.

28. RELATED PARTY TRANSACTIONS

For the purposes of these consolidated financial statements, parties are considered to be relatedif one party has the ability to control the other party, is under common control, or can exercisesignificant 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 therelationship, not merely the legal form. Key management personnel and close family membersare also considered to be related parties.

(a) Transactions with key management personnel and close family members

Compensation of key management personnel consists of remuneration paid to directors, general

directors and executive directors for their services. Compensation consists of annual remuneration and a performance bonus depending on operating results of the Group.

Total compensation of the key management amounted to RUB 153 mln/USD* 2.5 mln for the year ended 31 December 2016 (RUB 109 mln/USD* 1.8 mln for the year ended 31 December

2015) represented by both base salary and bonuses, and is included in administrative expenses within the consolidated statement of profit and loss and other comprehensive income.

(b) Transactions with associates and joint ventures

The Group has no transactions with associates and joint ventures.

(c) Transactions with other related parties

The Group has no material transactions with related parties except for settlements on loans (Note 22).