Sistema PublicFinancial : Sustainability Report 2022

GRI 2-22

Dear colleagues and partners,

In the new geopolitical situation that emerged in 2022, Sistema continued to develop sustainability practices and remained committed to the provisions of the UN Global Compact, considering them as the basis for responsible business conduct. The Group's assets preserved their key production, social and environmental projects - we continued to fulfil our mission, creating strong, efficient and sustainable businesses.

In October 2022, Sistema presented its first ESG strategy that had been previously approved by the Corporation's Board of Directors. The medium-term strategy is aimed at improving the sustainability of Sistema's investment portfolio.

The document complements the ESG management system and elaborates the provisions of Sistema's Sustainability Policy. The strategy draws on many years of experience in this area and consolidates a comprehensive approach to responsible business conduct. In mid-2022, Sistema adopted the Terms of Reference of the Strategy and Sustainability Committee

of the Board of Directors, which provided for the committee's leading role in setting the Corporation's ESG agenda. Overall, the main outcome of the last three years was the integration of ESG principles into all stages of the investment process, from the exclusion of "toxic" industries and the assessment of assets to be acquired to the monetisation of investments.

In 2022, Sistema's key portfolio companies continued

to improve their sustainability management systems in line with the principles set by the Corporation and relevant ESG practices. The Corporation's agricultural asset approved its Sustainability Strategy 2030, in which it paid special attention to the use of sustainable agricultural technologies. The telecommunications asset revised the priorities

of its ESG initiatives, shifting its focus to social support for employees and customers; the fintech arm joined

the ESG Banking project group of the Association of Russian Banks to develop a legal framework for promoting

the principles of responsible banking in the national market; meanwhile, the Corporation's pharmaceutical asset joined the Social Charter of Russian Business of the Russian Union of Industrialists and Entrepreneurs.

Sistema Charitable Foundation, the main operator

of Sistema Group's social investments, scaled up its programmes to develop human capital and create a favourable environment for doing business. The foundation signed a partnership

agreement with the NGO ECA to work towards UN Sustainable Development Goals and spread awareness about environmentally friendly behaviours and lifestyles.

Sistema Charitable Foundation's social, career guidance

and environmental projects are part of the overall sustainability strategy of the Corporation and its portfolio assets. Therefore, the foundation's projects are systematic social investments of the Group's companies, an effective way to build long-term relations between business, society and regions.

In the reporting year, Sistema Group invested over RUB 187bn in the Russian economy. The funds were used to improve the efficiency of Sistema's businesses in various sectors

of the economy and to implement investment projects aimed at upgrading and increasing the capabilities of production assets. The Group's direct social investments

in 2020-2022 totalled approximately RUB 5bn, with RUB 2.6bn spent on environmental protection.

Sistema attaches great importance to climate change.

We actively study international experience and try to implement innovative approaches that will help us achieve carbon neutrality, including the development of hydrogen energy

and wooden house-building.

In 2022, the effectiveness of our sustainability management system was confirmed by independent Russian assessment systems in terms of openness, responsibility and sustainability. Sistema was named among the three leaders

in the ESG ranking of Russian public financial companies

by the National Rating Agency, along with the country's largest banks. In addition, Sistema was again assigned an A rating in RAEX's ESG ranking of Russian companies, which indicates a consistently high level of sustainability of the Corporation's corporate governance and operations. The Corporation also improved its ESG rating from Sustainalytics, showing the best result among Russian companies.

Thanks to a proper sustainability management system, Sistema remains a stable business that is resilient to risks in the current economic environment. This would not

be possible without our shareholders, employees, partners and all stakeholders who support our mission and make an invaluable contribution to achieving the strategic goals of the Corporation.

We believe that only through joint efforts can create a sustainable future economy for our country.

1993

Sistema Joint Stock Financial Corporation was established. In 1993-1995, Sistema actively consolidated assets in the key sectors of the Russian economy, including telecommunications, electronics, tourism, retail, construction and real estate.

1997

Sistema was the first Russian private company to introduce independent directors. Since then, the Corporation's Board of Directors has had at least three independent directors.

1998

The Corporation's representatives took part in the development of the Code of Business Ethics of the Chamber of Commerce

and Industry of the Russian Federation.

2002

Sistema signed the UN Global Compact and started implementing global principles

of sustainable development and corporate social responsibility (CSR).

2022

• Sistema's Board of Directors assigned
  the Strategy and Sustainability Committee a leading role in defining the Corporation's ESG agenda.
• Sistema presented its first ESG strategy.
• Sistema's agricultural asset presented its ESG strategy.
• Sistema's telecommunications asset created the ESG centre. Russia's first multi-storeyeco-friendly houses made of CLT panels were built.

2023

Sistema became the only Russian company among the leaders

of the influential international ranking by Sustainalytics.

Sistema Charitable Foundation launched a scholarship programme and industry internships for young people across Russia as part of its nation-wide educational project "Lift to the Future".

2003

• Sistema's Board of Directors set up the International Advisory Council for the first time in Russia.
• Sistema participated in the development of the Charter of Corporate Business
  Ethics of the Russian Union
  of Industrialists and Entrepreneurs.
• Sistema set up the Investor Relations
  Department.

2004

• Sistema Charitable Foundation was established.
• Sistema approved its Code of Ethics and Code of Corporate Conduct.

2005

• Sistema had the biggest-everIPO by a Russian company at the time.
• Sistema established a joint recruitment centre, enabling companies to minimise their recruiting costs.
• Expert RA, Russia's largest national rating agency, awarded Sistema a national corporate governance rating of A.

2021

• Sistema became one of the founders of the National ESG Alliance.
• The educational platform "Lift to the Future" and the charitable project "Generation M" were recognised as UN SDG Good Practices.
• The National Rating Agency included
  Sistema among the three leaders of the first ESG ranking of public financial companies in Russia.
• Sistema's telecommunications and timber assets presented their own ESG strategies.
• Sistema established the Hydrogen Energy Centre in partnership with the Russian Academy of Sciences.

2006

• Sistema was included for the first time in the Forbes Global 2000 ranking
  of the world's leading public companies.
• Sistema established the Science and Innovation Function to stimulate R&D and create a full-fledged VC investment arm.
• With Sistema's assistance, the Higher School of Management and Innovation was established at the Lomonosov Moscow State University.

2008

• Introduction of a matrix system
  for managing the Corporation's assets, with three business units responsible for different sectors: telecommunications, consumer sector, and industry and high technology.
• The Corporation adopted its first CSR policy.

2009

The Corporation was included by BCG among the 100 New Global Challengers, leading companies from rapidly emerging economies.

2010

Sistema participated in the response to forest fires in Russia, including the construction

of housing and social infrastructure for fire victims in the Nizhny Novgorod region.

2011

The Corporation launched its flagship social initiative "Lift to the Future", a nation-wideeducational project.

2012

Sistema's Board of Directors approved a new organisational structure, with all of the Corporation's assets allocated to different investment portfolios.

2021

Sistema's Board of Directors approved the Human Rights Policy

and the Environmental Policy for the first time.

2013

Sistema and the Russian Museum signed an agreement on long-term cooperation until 2023, providing for the financing

of joint cultural and educational projects. The previous agreement was signed

in 2003.

2014

• Sistema Charitable Foundation established the corporate Volunteer
  Centre uniting volunteers from Sistema's assets.
• The telecommunications asset launched its flagship charity project "Generation M".

2015

Sistema set its investment record

by acquiring a number of new assets, started to create vertically integrated groups in timber industry and agriculture, and established VC funds to invest in high- tech startups.

2020

• Sistema became one of the leaders among Russian companies following the voluntary disclosure of information on climate change impact using the CDP's methodology.
• Sistema was included by RAEX- Europe in its ESG ranking of Russian companies, where the Corporation holds leading positions.
• Sistema was recognised
  by Rospatent as the first well-knownbrand in the investment market
  of the Russian Federation.

2016

Sistema became for the first time one of the leaders of two sustainable development indices ("Responsibility and Transparency" and "Sustainable Development Vector") prepared by the Russian Union of Industrialists

and Entrepreneurs.

2017

The Corporation joined the UN Global Compact Network Russia and the Social Charter of Russian Business.

2018

• The Corporation introduced
  a system of managing partners to search for new projects.
• More than 1m people became participants in Sistema Charitable Foundation's social programmes.

2019

• A separate sustainable development function was established.
• A medium-term roadmap for introducing sustainability principles into investment activities was developed.

2020

• Sistema spent about RUB 1bn on COVID-19 relief in Russia and established a support centre for doctors fighting the pandemic.
• Sistema's Board of Directors approved the first Sustainability Policy and a new version
  of the Corporate Governance Code.
• Sistema's Board of Directors for the first time included ESG factors in the updated investment criteria as part of the Corporation's revised strategy.
• Sistema raised its first sustainability improvement loan from a Russian bank for RUB 10bn with an option to link the interest rate to sustainability performance.

Sistema today

GRI 2-1

Sistema PJSFC (hereinafter, "Sistema" or the "Corporation"), founded in 1993, is one of the largest private investors in Russia's economy.

The company's assets are represented across more than 20 high-potential sectors of the Russian economy and service some 150m customers.

The Corporation is one of the top 20 largest Russian companies, operating all across Russia and in more than 25 other countries.

The Corporation's shares are traded on the Moscow Exchange and global depositary receipts on the London Stock Exchange.

Sistema's investment portfolio includes Russian companies in telecommunications, timber processing, agriculture, private healthcare, residential property development, e-commerce and other industries.

Performance in 2022

Generated and distributed direct economic value, RUB bn

1

including online participants.

Investment portfolio

62.2%

Timber industry

Largest vertically integrated forestry holding in Russia

48.8%

Residential property development

One of the Russia's largest

public development and construction companies

31.8%

E-commerce

Leading multi-category online sales platform in Russia

49.7%

Telecommunications

Leading public telecommunications operator in Russia and CIS

91%

Power grid services

One of Russia's largest power grid companies

Public assets

Key non-public assets

Other consolidated assets

100%

Hospitality

95.5%

Private healthcare

Russia's largest national healthcare chain

89.7%

Agriculture

Major agriculture holding and one of Russia's largest land owners

72.2%

Pharmaceuticals

Leading Russian pharmaceutical producer

100%

Commercial property management

Оne of the largest real estate owners in Moscow

100%

High technology

GRI 2-6

Since 2008, Russia has maintained a list of systemically important enterprises that may receive support during a crisis to ensure their uninterrupted operations.

A systemically important enterprise is an enterprise whose goods or services are crucial for the functioning of the related territory or industry or the region's social and economic systems.

30%+

of Sistema's assets

are systemically important enterprises

RUB 75bn of cash collections in 2022

RUB 32.3bn in 2022 revenue

1

2

In terms of revenue.

The data includes the ten hotels acquired in March 2023.

Key events of 2022 in the area of sustainability

January

The telecommunications asset deployed Russia's largest dedicated industrial LTE network for a Russian coal mining group.

The hospitality asset launched a project to create a multi-purpose natural resort as part

of the Baikal Harbour special economic zone on the eastern coast of Lake Baikal. The project is aimed at developing tourism on Lake Baikal and enhancing the region's attractiveness as one of Russia's key destinations for local and foreign tourists.

The healthcare asset's lab obtained an ISO 15189:2012 certificate evidencing compliance with high laboratory quality management standards.

The timber asset's enterprise successfully passed CE certification for its CLT panels.

The CE certificate was obtained after a field audit performed by employees of HolzForschung Austria, the largest Austrian wood research and testing institute.

February

The pharmaceutical asset completed renovation of the section of its Kurgan plant that produces syrups and suspensions, increasing its production capacity threefold, to 6m vials per year.

Sistema Charitable Foundation signed an agreement with Worldskills Russia to cooperate in preparing, organising and conducting joint work to develop new competences and train employees.

March

The telecommunications asset established an ESG Centre to implement the corporate ESG strategy, replicate best ESG practices and manage a portfolio of commercial projects addressing social and economic problems.

Sistema Charitable Foundation closed a partnership agreement with the NGO ECA to work towards UN Sustainable Development Goals and spread awareness about environmentally friendly behaviours and lifestyles.

April

The telecommunications asset launched the MONTE (Monitoring Events) service on the company's NB-IoT network, the first offering of its kind in Russia for enabling remote monitoring of subscriber devices over narrow-band Internet of Things connectivity.

The high-techasset unveiled a digital transport management platform enabling smart traffic management in urban environments.

The pharmaceutical asset's plant in the Moscow region received a GMP (good manufacturing practices) certificate from the Eurasian Economic Union.

May

The pharmaceutical asset joined the Social Charter of Russian Business of the RSPP.

June

Sistema signed cooperation agreements with the governments of the Astrakhan region and the republics of Altay and Bashkortostan.

The Moscow Government and Sistema signed a Memorandum of Cooperation in the field of innovation and VC financing.

The residential property development asset signed an agreement with DOM.RF to pilot a project where housing will be evaluated for compliance with the national environmental safety standard

GOST R.

July

The pharmaceutical asset launched Alfaxim, the first Russian drug with rifaximin as the active pharmaceutical ingredient; it is used for the treatment of gastrointestinal infections.

The timber asset and the National Council for Corporate Volunteering signed a cooperation agreement.

August

The property development asset entered into a partnership agreement with the Novosibirsk region's Athletics Federation, under which the company supported the large-scale Raevich Siberian Running Festival (Novosibirsk Half Marathon) and launched a joint advertising campaign and a series of sporting events.

September

The fintech direction of the telecommunications asset joined the ESG Banking project group of the Association of Russian Banks.

October

Sistema presented its ESG strategy approved by the Board of Directors.

November

The telecommunications asset completed a new stage of 4G network construction in settlements and tourist sites of Kabardino-Balkaria, which doubled the internet speed on the slopes of Mount Elbrus, in the tourist village of Terskol and on the picturesque motorway leading to the region

of Elbrus.

December

The telecommunications asset announced the deployment of a dedicated industrial LTE network for one of the world's largest nickel and palladium producers.

The telecommunications asset jointly with Rostelecom built three base stations in the Krasnodar region.

Events after the reporting date

January

The telecommunications asset under an agreement with the Ministry of Housing, Energy, Digitalisation and Communications of the Zabaykalsky region provided ten remote villages with a total population of almost 6,000 with mobile internet in 2022.

Seventy-five schoolchildren and students from 36 regions of Russia received a Sistema Charitable Foundation scholarship based on the results of the first scholarship competition held by the foundation.

February

Sistema and the government of the Tambov region signed a cooperation agreement.

The telecommunications asset together with its subsidiary bank launched a contactless payment service via the Pay Tag payment sticker, which will be available to holders

of Mir cards issued by Russian banks.

The biotech asset developed a new type of targeted therapy - Forced Protein Association, which enables effective treatment of cancer and atherosclerosis.

Business model

in the form of dividends / distribution of profits from the sale (full or partial) or IPO/SPO of assets

Activity

Strategic focus

Growing USD 1 bn+ businesses USA

Generation of value in existing assets, including through the adoption

Human capital

• Building management teams in portfolio companies
• Engagement, training and professional development of employees
• Health and well-being of employees
• Investments in education and human resource development for various industries

Average headcount, FTEs (GRI 2-7)

Share of female workers across

Sistema Group, % (GRI 405-1)

Average ratio of entry-level wage to statutory living wage (GRI 202-1)

139,524 173,551

45.0 45.0

2.1 1.8

of advanced technologies and digital solutions

Stronger focus on investments in technology

Realisation of unique investment opportunities in traditional industries in Russia

Continuous improvement

of the corporate governance system

Social and reputation capital

• Development in important social fields
• Stakeholder engagement
• Investments in communities, charity and volunteering

Number of consumers, m

Number of agreements signed with local administrations

Number of individual charity beneficiaries

150+ 150+

17 14

85,000+ 500,000+1

Reinvestment

Allocation of capital

Production capital

Intellectual capital

Search for investment opportunities

Growth of equity value

Monetisation

Consideration for ESG factors at every investing stage

Key ESG aspects

Accessibility and quality

Smart environment

Well-being

1

Including online participants.