Q&A regarding the creation of holding

Strategy

1) What was the strategic goal behind creating SAFMAR Financial investments?

We resolved to leverage on PJSC Europlan, a public company, to launch a holding company under the trade name SAFMAR Financial investments (SFI). SFI consolidates our leasing (Europlan), pension (SAFMAR Non-Governmental Pension Fund) and insurance (an interest in VSK held by SAFMAR Group) assets.

By doing that, we are launchingRussia’s first ever public financial holding company with a diversified business and a focus solely on the financial industry. The holding company will target industry leaders, bringing about a business model resilient to macroeconomic fluctuations, with a clear growth path and value creation strategy to benefit all investors and shareholders.

2) What are the advantages of a financial holding company?

Financial holding company offers a variety of advantages to investors, shareholders, and all stakeholders of the businesses involved:

1. Access to the Holding Company’s capital to a wide range of investors

2. Status of a publicly traded company, which makes a difference in terms of management quality and level of responsibility

a. All the companies within the holding company will gain an additional tool to enhance corporate governance, business process transparency, and robust risk management.

b. The public status is in line with the regulator’s policy and even outpaces the financial system's progress towards better management efficiency and transparency.

3. Development of existing businesses and platform for further diversification

a. Enhancing key business areas and seeking new financial products that match the market needs.

b. Seeking and implementing synergies among portfolio businesses.

c. Seeking and implementing opportunities for inorganic growth to achieve diversification and synergies.

4. Brand development and building impeccable reputation

a. Fostering the company’s reputation as a reliable partner and leader in the Russian financial industry.

b. Developing the proprietary brand, which embodies a link between different generations and solid foundation for further growth.

5. Development of national financial market

a. Building a unique structure in the national market to pave the way for full-scale development ofRussia's entire financial sector.

b. With limited supply in the national market, particularly in the financial sector, we offer a new appealing investment opportunity with a high upside, which will undoubtedly have a positive impact on the stock market.

c. Financial holding company is clearly one step ahead of today's market and helps lay a foundation going forward. Current investors will make the most of their interest in the holding company as the economy and capital markets recover.

Transaction terms

3) Who were the investors in the follow-on offering?

The demand mainly came from Russian and CIS investors, specifically banks, asset management companies, funds, investment houses, and around 1,200 individuals.

We are confident about the fundamental investment appeal of SAFMAR Financial investments and its constituent companies, with the listing on the Moscow Exchange helping to provide access for both Russian and international investors. The company’s shares have already proved appealing to the investor community.

4) Why did this transaction take place less than a year after Europlan’s IPO?

This transaction corresponds with a long-term strategy of SAFMAR Group aimed at the increase of shareholder value of assets by implementation of synergies between portfolio businesses. Europlan currently is, and will remain to be, a public company as part of a holding company that manages financial assets of SAFMAR Group..

5) Why was the consolidation of Europlan with NPF SAFMAR and VSK Insurance House structured as a new share issue rather than a merger/combination or otherwise?

We considered multiple possible choices for our strategic initiative to come into being and decided that in terms of timing and required corporate actions, issuing new shares was the most efficient way to contribute assets to Europlan.

6) What underlies the determination of conversion ratios in respect of shares in NPF SAFMAR and VSK Insurance House that were used as a payment for the new share issue of Europlan?

The Board of Directors of Europlan determined the share price of VSK and NPF SAFMAR with reference to the valuation prepared by an independent adviser (a Big Four company). The conversion ratios were calculated based on the price of Europlan's shares following the book building process.

7) Why was it Europlan that was chosen as the core company to combine the governance of the businesses?

Europlan is one of the best assets of SAFMAR Group, with its December 2015 IPO nearly 1.5x oversubscribed and its shares continuously growing in value. Since its IPO in December 2015, Europlan’s shares have added 27%. In November 2016, the capitalisation of Europlan exceeded RUB 17 bn for the first time in the 17 years of its history.

The company has been steady in solid high financial performance while maintaining a leadership standing in the Russian car leasing market and boasting a strong reputation among partners, investors, clients, and other stakeholders. Given that Europlan’s shares are already listed on the Moscow Exchange, it makes sense to leverage this company to launch SAFMAR Financial investments in response to the shareholders’ intention to make all non-banking financial assets public.

8) Are you satisfied with the market valuation? What market capitalisation did you expect? 

The valuation resulted from the book building process. The offering price range was determined based on the quoted market price of Europlan's shares. SAFMAR Financial investments is very satisfied with the book building outcome as market capitalisation hit the projected level of around RUB 80bn.

9) Why was the additional share issue of Europlan paid for by shares in VSK Insurance House and NPF SAFMAR?

Given the structuring of the process to launch the SAFMAR Financial investments holding company, a new share issue by Europlan paid for by shares in VSK Insurance House and NPF SAFMAR was the best way to achieve our goal effectively in terms of timing and required corporate actions.

10) What underlies the pricing of shares in VSK Insurance House and NPF SAFMAR?

The valuation report was prepared by an independent adviser (a Big Four company). Based on the report, the Board of Directors of Europlan determined the share price of VSK Insurance House and NPF SAFMAR as follows:

- with respect to ordinary shares in NPF SAFMAR – RUB 220,100.00 (two hundred and twenty thousand and 00/100 Russian Roubles) per share;

- with respect to ordinary shares in VSK Insurance House – RUB 887.50 (eight hundred and eighty seven and 50/100 Russian Roubles) per share;

No shareholders exercised their pre-emptive right to acquire additional shares.

Outlook

11) When will the process to establish the holding company reach its completion? What will the business of SAFMAR Financial investments look like after all the internal reorganisation processes are over?

We intend to finalise the business structuring exercise until the end of 2017. SAFMAR Financial investments will be at the top of the organisation structure, with its capital comprising a majority stake held by SAFMAR Group plus free float. In turn, SAFMAR Financial investments will be a holding company combining Europlan, NPF SAFMAR and the Group’s interest in VSK Insurance House.

12) What investment tools will SAFMAR Financial investments be focusing on?

The holding company will be mainly investing in financial assets. We are willing to acquire new assets as opportunities arise that meet our investment criteria.

13) What is the dividend policy of the holding company?

We expect that SAFMAR Financial investments will be adding value through both the growing business of its portfolio companies and dividends paid by portfolio companies to the holding company. We contemplate that dividend payouts will come from excess capital accrued by portfolio companies in the course of their operations.

14) What synergies do you expect to gain from three businesses: NPF, car leasing and insurance?

We believe that significant synergy opportunities exist in terms of both cross sales and client acquisitions (between car leasing and insurance, between NPF and insurance) and cost synergies (from client base pooling, back office optimisation, etc.). Currently, we are conducting an in-depth analysis of possible synergies, which is set to translate into a detailed implementation programme.

15) What mechanisms will be provided to protect the rights of minority shareholders?

A robust and transparent corporate governance framework is a top priority for the company’s management and its majority shareholder. We guarantee full protection of minority shareholder rights by maintaining all-round transparency of SAFMAR Financial investments and its portfolio companies (including regular management presentations and investor meetings, disclosure of audited financial statements etc.)

16) What sources do you expect to rely on to finance new acquisitions?

We intend to partially accumulate the dividend flow within SAFMAR Financial investments so as to finance prospective acquisitions going forward. In addition, we do not rule out debt or new equity offerings. In this regard, any and all corporate actions will only be possible in strict compliance with the rights of existing minority shareholders.

17) How will the exercise of bringing together business governance affect Europlan’s operations, strategy, employees, clients and partners?

As far as Europlan’s core operations and current business processes are concerned, the formation of the holding company and subsequent consolidation of shares under its umbrella will not affect Europlan’s business and will only serve to enhance the cooperation opportunities within SAFMAR Group. Europlan will remain focused on car leasing operations, maintaining its leadership in the segment. Europlan’s general business approach, management and strong team of 1,600+ employees will persist. The concentration of shares within Europlan’s legal framework will help enhance its capacity to honour its obligations to stakeholders such as clients, partners, creditors and investors.

18) How did Europlan respond to the creation of SAFMAR Financial investments?

Europlan’s management welcomed bringing together the governance of the businesses. By consolidating shares within one holding company that combines lucrative and mature businesses with multi-billion reserves ready to invest in debt instruments, the company will strengthen its capacity to maintain leadership in the car leasing industry and grow its business.