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Russian Federation Investor presentation Russian Government Debt Market
December 2018

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Disclaimer
This Presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the solicitation of an offer to buy or acquire, securities of the Russian Federation in any jurisdiction or an inducement to enter into investment activity. No part of this Presentation, nor the fact of its distribution, should form the basis of, or be relied upon, in connection with any contract or commitment or investment decision whatsoever.
The materials contained in this Presentation have been prepared solely for the use in this Presentation. Information included herein which is identified as being derived from a third-party source is included herein on the authority of such third-party source, and information included herein which is identified as being derived from a publication of the Russian Federation or one of its agencies or instrumentalities is included herein on the authority of such publication as an official public document of the Russian Federation. All other information herein is included as an official public statement made on the authority of the Minister of Finance of the Russian Federation.
This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration of licensing within such jurisdiction.
The information contained in this Presentation does not constitute a public offer under any applicable legislation, or an offer to sell or solicitation of an offer to buy any securities.
Some of the information in this Presentation may constitute projections or other forward-looking statements. Such forward- looking statements are based on numerous assumptions. These statements are not guarantees of future performance and involve risks, uncertainties and other important factors that can not be predicted with certainty. Accordingly, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. These forward-looking statements speak only as at the date of this presentation and are subject to change without notice. There is no intention to update these statements

3. I. Russia’s Government Domestic Debt Market
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I. Russia’s Government Domestic Debt Market

4. Government domestic debt market
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Government domestic debt market
Government securities market is one of the main segments of Russia’s total domestic debt market.
Supported by strong government balance sheet.
Adopted best international practices for technical features in recent years.
Continues to develop based on continued investor dialogue. 4

5. OFZ market development
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OFZ market development
Since 2008 the OFZ market has grown by an average of 20% per year (RUB 5.5 trln. over 10 years)
Total volume of outstanding OFZs is around RUB 7,7 trln
The OFZ market represents a significant part of the total local debt market
OFZs, corporate bonds and regional bonds markets volumes
OFZs, corporate bonds and regional bonds markets shares
RUB, bn.
As of December 1, 2018
Source: Cbonds, Ministry of Finance
As of December 1, 2018
Source: Cbonds, Ministry of Finance 5

6. Domestic Government Bond Issuance*
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Domestic Government Bond Issuance*
Gross domestic government bond issuance is expected to increase from 2018 to 2021.
Source: Ministry of Finance
* According to the Federal Budget Law 6

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OFZs investor base
Russian banks are anchor investors in the OFZ market. They buy government bonds to comply with the liquidity requirements set by Bank of Russia.
OFZ domestic investor base continues to diversify with growing share of non-government pension funds and insurance companies and declining bank’s share.
As of April 1, 2018
Source: Bank of Russia. 7

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OFZs investor base
Non-residents now hold 25,0% of the outstanding OFZs.
As of November 1, 2018
Source: Bank of Russia, Ministry of Finance of the Russian Federation. 8

9. Domestic Borrowing Policy
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Domestic Borrowing Policy

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Public debt policy
Public debt management is carried out in accordance with "Public Debt Management Policy of the Russian Federation" for 3 years. It is approved by the Ministry of Finance of the Russian Federation.
Objectives of debt policy in :
Funding the federal budget deficit by means of issuance in the domestic and international capital markets on favourable terms
Developing alternative sources of borrowing (including a debut RMB OFZ issue)
Ensuring an optimal balance between yield and duration
Diversification of the debt instruments:
2015 debut issues of inflation-linked OFZ and floating rate OFZs (linked to local interbank rates)
In 2017 Ministry issued special government bonds for retail investors
Considering Renminbi denominated OFZ
Establishing market government benchmarks to facilitate Russian corporate issuance
Enhancing the system of monitoring of the corporate sector’s external borrowings and the mechanism of granting state guarantees 10

11. Government debt dynamics
Priority to borrow in the domestic market
Debt to GDP projected not to exceed 17% of GDP through
% GDP
trln. Roubles
12,9%
13,0%
13,2%
10,6%
10,4%
9,6%
9,0%
8,3%
9,0%
7,2%
6,5%
Source: Ministry of Finance of the Russian Federation
* As of 1 December 2018
** According to the Federal Budget Law for 11

12. Government debt structure
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Government debt structure
Most government debt is in the form of marketable securities, allowing for more flexibility in public debt management
Most outstanding government debt is denominated in national currency
Government debt structure by type of liabilities
Government debt structure by currency
As of December 1, As of December 1, 2018
Source: Ministry of Finance Source: Ministry of Finance

13. Current domestic debt structure
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Current domestic debt structure
Benchmark bonds (large amount, fixed coupon, bullet repayment bonds) form the largest (65,3%) share of domestic debt
Short-term and medium-term OFZs represent the most significant share of the outstanding portfolio
Floating coupon bonds (FRNs) first issued in December 2014 represent 25,2% of the domestic government debt (including bonds transferred to member banks of the Deposit Insurance Agency (DIA) on condition that OFZ coupon payments are to be paid back to the budget through the DIA). Share of floating coupon bonds net of ones mentioned above – 15,2%)
Structure of domestic government debt by type of bonds
OFZ portfolio structure by maturity
As of December 1, As of December 1, 2018
Source: Ministry of Finance Source: Ministry of Finance

14. Yield and duration of OFZ portfolio 2013 – 2018 YTD
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Yield and duration of OFZ portfolio 2013 – 2018 YTD
4,55
As of December 12, 2018
Source: Ministry of Finance of the Russian Federation. 14

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Inflation-linked OFZ

16. Main targets of inflation-linked OFZ issuing
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Main targets of inflation-linked OFZ issuing
Demonstrate increased confidence in the authorities’ inflation targeting policy
Offer investors hedge against inflation
Diversify funding sources by attracting long term institutional investors
Extend maturities and duration of government debt portfolio
Lower price volatility compared to standard OFZ
Build liquid benchmark curve for corporate issuers

17. Inflation-linked OFZ characteristics
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Inflation-linked OFZ characteristics
Structure of the inflation-linked OFZ - the Canadian model
Par amount (on issue date – RUB 1000) is indexed daily to CPI with a 3 month lag
Floor of a nominal amount on maturity date – RUB 1000
CPI – Russian CPI cumulative month-on-month*
Fixed coupon rate
Indexed nominal on the definite date is used for accrued interest calculation
Taxation is similar to standard OFZs, indexed principal is subject to taxation
* Source: Federal State Statistics Service of the Russian Federation (Rosstat) 17

18. Inflation-linked OFZs
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Inflation-linked OFZs
Inflation-linked segment of OFZ market is presented by two outstanding issues RMFS, 52002RMFS
Local real-money funds were the anchor investors. Their shares in the primary placement: 52001RMFS - 33%, 52002RMFS - 75%
For convenience to trade inflation-linked issues mature together with fixed-rate benchmarks
* without indexation
52001RMFS
(RU000A0JVMH1)
52002RMFS
(RU000A0ZYZ26)
First issue date
July 17, 2015
March 21, 2018
Maturity date
August 16, 2023
February 2, 2028
Years to maturity since the first issue date, years 8 10
Corresponding fixed-rate OFZs
26215RMFS
(RU000A0JU4L3)
26212RMFS
(RU000A0JTK38)
Coupon rate, % p.a.
2,50%
Announced Issue, RUB bn. nominal*
150,0
Amount Outstanding, RUB bn. nominal*
20,0
Initial issuance amount, RUB bn. nominal*
75,0
Bid/Cover Ratio
2,6
6,9 18

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New CPI indicator
Inflation-linked OFZ have become market indicator of the future inflation expectations
As of December 12, 2018
Target CPI of the Bank of Russia
Implied CPI calculated based on the Inflation-linked OFZ yield compared to corresponding fixed-rate OFZs yield

20. Competitive Advantages of the Russian Debt Market
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Competitive Advantages of the Russian Debt Market

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Low debt burden
Russia’s low level of public debt is one of its main competitive advantages
Calculations of Russia’s debt ratios are conservative as they include explicit guarantees in the calculation of outstanding debt
Debt/GDP ratio, 2017
Source: Thomson Reuters, Ministry of Finance 16

22. Russian sovereign rating
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Russian sovereign rating 17

23. Interaction with market participants and information disclosure
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Interaction with market participants and information disclosure
Information disclosure:
“Public Debt Management Policy of the Russian Federation” for the following year and 3 year budget planning period is published on MinFin official website
Information on volume and breakdown of public debt, government issuance plans, parameters of government bonds, auction results (MinFin official website)
Disclosure of non-residents’ investments in OFZs (Bank of Russia official website)
Quarterly group meetings and regular one-on-one meetings with key participants of the government bond market 18

24. II. Russia’s Government External Debt Market
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II. Russia’s Government External Debt Market

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2018 March Eurobond issue
On 21st March, 2018 Minfin of Russia placed one new 11- («Russia-2029») and one tap 29-year («Russia-2047») Eurobond issues sized U.S.$ 1,5 bn. and 2,5 bn. with coupons at 4,375% and 5,25% respectively
The order books for the tap and new issue exceeded USD 7,5 billion from over investors, an impressive improvement over the highly successful September 2017 transaction
Listing – Irish Stock Exchange / Law – English law / Format – RegS/144A

26. Liability Management Operation
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Liability Management Operation
In March 2018 Minfin of Russia completed the exchange of Legacy eurobonds for new eurobonds transaction. The deal was launched on March 7th by concurrent announcement of the tender offer for “legacy” bonds due in 2030 and offering “new money” bonds due in 2029 and additional tranche to existing bonds due in
Final Auction participation has hit $7.7 billion of original notional ($3.6 billion after amortisation), allowing clearing price to be set at $536 (112.84%), six notches below the opening price of $539.
Achieved results
Exchanged US$5.79bn or ca.39,6% of outstanding principal amount of the notes
Issued a total of US$3.2bn in new 2029 and additional tranche to existing notes, improving the liquidity of the secondary market and pushing back the redemption schedule
Reduced the total amount of foreign debt payments in for US$1.35bn 22

27. 2018 December Eurobond issue
Tapping the market in the second half of the year resulted in the first since euro-denominated benchmark-sized issue. The placement of new 7-year («Russia-2025») Eurobond issue sized EUR 1 bln with 2.875% coupon was complete on December 4th 2018
The primary goal of the exercise was to build a sustainable euro-yields benchmark for Russian corporate issuers and diversify Russian Federation external debt profile and investor base
Listing – Euronext Dublin (ISE)/ Law – English law / Format – RegS/144A

28. THANK YOU FOR YOUR ATTENTION!
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THANK YOU FOR YOUR ATTENTION!
Q&A