Closed Joint Stock Company Kyivstar G

Private Joint Stock Company Kyivstar Consolidated Financial Statements in accordance with International Financial Reporting Standards and Independent Auditor's Report 31 December 2020

CONTENTS Independent Auditor’s Report ............................................................................................................................................... i Consolidated Balance Sheet (Consolidated Statement of Financial Position) ..................................................................... 3 Consolidated Statement of Financial Results (Consolidated Statement of Comprehensive Income) .................................. 6 Consolidated Statement of Cash Flows (indirect method) ................................................................................................... 8 Consolidated Statement of Shareholders’ Equity .............................................................................................................. 10 1. Corporate information .................................................................................................................................................... 13 2. Operating environment, risks, political and economic conditions in Ukraine ................................................................. 13 3. Basis of preparation ....................................................................................................................................................... 14 4. New or revised standards and interpretations ............................................................................................................... 15 5. Significant accounting policies ....................................................................................................................................... 18 6. Critical accounting judgements and key sources of estimation uncertainty ................................................................... 30 7. Related party disclosure ................................................................................................................................................ 32 8. Property, plant and equipment ....................................................................................................................................... 34 9. Right-of-use assets and lease liabilities ......................................................................................................................... 36 10. Intangible assets .......................................................................................................................................................... 37 11. Construction-in-progress ............................................................................................................................................. 40 12. Other non-current assets ............................................................................................................................................. 41 13. Trade and other receivables ........................................................................................................................................ 41 14. Cash and cash equivalents.......................................................................................................................................... 43 15. Assets arising from Contracts with Customers ............................................................................................................ 43 16. Statutory capital ........................................................................................................................................................... 44 17. Borrowings ................................................................................................................................................................... 45 18. Trade and other payables ............................................................................................................................................ 45 19. Taxes payable, other than income tax ......................................................................................................................... 46 20. Provisions .................................................................................................................................................................... 46 21. Other liabilities ............................................................................................................................................................. 47 22. Liabilities arising from Contracts with Customers ........................................................................................................ 47 23. Revenue ...................................................................................................................................................................... 48 24. Other operating income ............................................................................................................................................... 48 25. Operating expenses .................................................................................................................................................... 49 26. Finance income and expenses .................................................................................................................................... 49 27. Other income and expenses ........................................................................................................................................ 50 28. Income tax ................................................................................................................................................................... 50 29. Commitments and contingencies ................................................................................................................................. 52 30. Fair value of financial instruments ............................................................................................................................... 52 31. Financial instruments and risk management ............................................................................................................... 53 32. Reconciliation of liabilities arising from financing activities .......................................................................................... 55 33. Management of Capital ............................................................................................................................................... 56 34. Events after the reporting period ................................................................................................................................. 56 35. Supplementary notes (non-IFRS disclosures) ............................................................................................................. 57

LLC AF "PricewaterhouseCoopers (Audit)" 75 Zhylyanska str., Kyiv, 01032, Ukraine T: +380 44 354 0404, Fax:+380 44 354 0790, www.pwc.com/ua

Independent Auditor’s Report To the Shareholders and Management Board of Private Joint Stock Company “Kyivstar”

Report on the audit of the consolidated financial statements

Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Private Joint Stock Company “Kyivstar” (the “Company”) and its subsidiaries (together - the “Group”) as at 31 December 2020, and the Group’s consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply, in all material respects, with financial reporting requirements of the Law on Accounting and Financial Reporting in Ukraine.

Our auditor’s report is consistent with our additional report to the Audit Committee dated 9 April 2021.

What we have audited

The Group’s consolidated financial statements comprise:

• the consolidated balance sheet (consolidated statement of financial position) as at 31 December 2020; • the consolidated statement of financial results (consolidated statement of comprehensive income) for the

year then ended; • the consolidated statement of cash flows (indirect method) for the year then ended; • the consolidated statement of shareholder`s equity for the year then ended; and • the notes to the consolidated financial statements, which include significant accounting policies and other

explanatory information.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the ethical requirements of the Law on Audit of Financial Statements and Auditing that are relevant to our audit of the consolidated financial statements in Ukraine. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

To the best of our knowledge and belief, we declare that we have not provided non-audit services that are prohibited under Article 6 part 4 of the Law on Audit of Financial Statements and Auditing.

http://www.pwc.com/ua

2

Emphasis of Matter In accordance with the legislation in force as at the date of this audit report, the IFRS financial statements of the Group should be prepared in a single electronic format (iXBRL). As described in Note 3 to the consolidated financial statements, as of the date of this audit report management of the Group has not yet prepared the iXBRL reporting package due to the circumstances described in this note and plans to prepare and submit the package during 2021. Our opinion is not modified with regard to this matter.

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.

Key audit matter How our audit addressed the key audit matter

Revenue recognition - occurrence of revenue transactions

Refer to Notes 5, 23 to the consolidated financial statements The total revenues of the Group amount to UAH 25,041 million and are made up of a high volume of relatively small transactions in combination with multiple pricing plans. There are different complex billing and other operating support systems in the revenue process that result in an increased risk around the occurrence of the revenue recorded. The magnitude as well as the increased risk requires substantial audit attention and effort with respect to the controls and substantive test procedures to be performed over occurrence of revenue. Therefore, we consider this a key audit matter.

Our audit approach included testing of controls and performing substantive procedures, covering amongst others:

- Understanding and testing the IT environment in which billing and other relevant support systems reside, including the change management and restricted access procedures in place.

- Testing the design and operational effectiveness of the revenue and receivables cycle related controls.

- Performing tests on the existence of the pre-paid revenue by tracing sampled individual events to the mediation system

- Testing of material manual journal entries made in the general ledger and IFRS module with respect to revenue.

- Performing tests on the accuracy of pre-paid revenue transactions based on the individual events selected on a sample basis.

- Performed cash to revenue reconciliation for significant revenue streams.

- Obtained external confirmation letters from selected corporate customers and interconnect partners.

3

Other information including the consolidated management report and the report of management Management is responsible for the other information. The other information comprises the consolidated management report, prepared in accordance with article 11 of the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" and the report of management, prepared in accordance with the articles 40 and 40-1 of the Law of Ukraine “On Securities and the Stock Market” and in accordance with chapter 4 of the Section III and Section VII of Annex 38 to the Regulation “On Disclosure of Information by Issuers of Securities No. 2826” (but does not include the consolidated financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report, and the Annual information of the issuer of securities (except for the report of management), which is expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information, including the consolidated management report and the report of management.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

Based on the work undertaken in the course of our audit, in our opinion, the information given in the consolidated management report and the report of management for the financial year for which the consolidated financial statements are prepared is consistent with the consolidated financial statements.

In addition, in light of the knowledge and understanding of the entity and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in a) the consolidated management report and b) the report of management that we obtained prior to the date of this auditor’s report. We have nothing to report in this regard.

When we read the Annual information of the issuer of securities not yet received, 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 IFRS and financial reporting requirements of the Law on Accounting and Financial Reporting in Ukraine, and for such internal control as management determines is necessary to enable the preparation of the 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 financial reporting process.

4

Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures 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 accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

5

Report on other legal and regulatory requirements

Appointment

We were first appointed as auditors of the Group for the year ended 2014. Our appointment has been renewed annually by the Supervisory board or by Shareholders resolution representing a total period of uninterrupted engagement appointment of seven years. Our appointment for the year ended 31 December 2019 was approved by Shareholders resolution on 20 January 2021.

The key audit partner on the audit resulting in this independent auditor’s report is Julia Paranich.

LLC AF “PricewaterhouseCoopers (Audit)” Julia Paranich Registration number in the Register of Auditors and Auditing Entities 0152

Registration number in the Register of Auditors and Auditing Entities 101809

Kyiv, Ukraine

9 April 2021

Private Joint Stock Company Kyivstar Consolidated Balance Sheet (Consolidated Statement of Financial Position) (in thousands of Hryvnia)

3 The accompanying notes form an integral part of the consolidated financial statements

Codes Date (year, month, date) 2020 12 31

Company Private Joint Stock Company "Kyivstar" EDRPOU 21673832 Territory Kyiv, Shevchenkivskyi district KOATUU 8038900000 Organisational and legal form of economic activity Joint Stock Company KOPFG 230 Type of economic activity Activities in the field of wireless telecommunications KVED 61.20 Average number of employees 3,698 Address, telephone 03113, Kyiv, Degtyarivska street, 53, tel.: 247-39-49 Measurement unit: thousands of Hryvnia, no decimal point (except for Section IV of the Statement of Financial Results (Statement of Comprehensive Income) (Form 2) where amounts are stated in Ukrainian hryvnias with kopecks) Prepared (tick the necessary box): according to National Regulations (Standards) of Accounting in Ukraine according to International Financial Reporting Standards Х

Consolidated Balance Sheet (Consolidated Statement of Financial Position)

as at 31 December 2020 Form 1 DKUD code 1801001

ASSETS Line code Notes

At the beginning of the reporting

period

At the end of the reporting

period

1 2 3 4 5 I. Non-current assets

Intangible assets

1000 10 8 162 427 8 260 891 historical cost 1001 13 306 477 14 355 215 amortisation 1002 (5 144 050) (6 094 324) Construction-in-progress 1005 11 596 471 930 046 Property, plant and equipment 1010 8 12 094 876 13 859 465 historical cost 1011 27 245 338 31 010 330 depreciation 1012 (15 150 462) (17 150 865) Investment property 1015 - - Long-term biological assets 1020 - - Long-term financial investments: accounted for according to the equity method

1030 - -

other financial investments 1035 - - Long-term accounts receivable 1040 - - Deferred tax assets 1045 28 403 184 358 996 Other non-current assets 1090 12, 15 1 136 870 1 251 405 Total Section I 1095 22 393 828 24 660 803



ASSETS Line code Notes


period


period

1 2 3 4 5 II. Current assets

Inventories 1100 66 181 51 485 production stock 1101 50 867 46 183 goods for resale 1104 15 314 5 302 Current biological assets 1110 - -

Accounts receivable for goods works and services 1125 13 718 654 663 670 Accounts receivable on settlements:

on advances issued

1130 13 69 589 87 980 with the budget 1135 13 54 824 74 203 including corporate profit tax prepaid 1136 - 377

Accounts receivable for settlements on accrued income 1140 13 4 999 1 610 Other current accounts receivable 1155 - - Current financial investments 1160 - - Cash and cash equivalents 1165 14 1 056 593 1 339 380 Deferred expenses 1170 15 98 043 123 898 Other current assets 1190 408 477 Total Section II 1195 2 069 291 2 342 703

III. Non-current assets held for sale and disposal groups 1200 597 353 BALANCE 1300 24 463 716 27 003 859

LIABILITIES Line code Notes


period


period

1 2 3 4 5

I. Equity Registered (share) capital

1400 16 887 119 654 763

Revaluation reserve 1405 - (107) Additional capital 1410 258 294 258 294 Share premium 1411 102 338 102 338 Reserve capital 1415 132 933 132 933 Retained earnings (accumulated deficit) 1420 12 778 642 10 362 394 Unpaid capital 1425 - - Withdrawn capital 1430 (370 398) - Total Section I 1495 13 686 590 11 408 277

II. Long-term liabilities and provisions Deferred tax liabilities

1500 - -

Retirement benefit liabilities 1505 23 312 26 994 Long-term bank borrowings 1510 17 - 3 870 638 Other long-term liabilities 1515 21, 22 2 286 801 2 934 811 Long-term provisions 1520 20 213 552 180 173 including employee benefits 1521 4 598 - Special-purpose financing 1525 - - Total Section II 1595 2 523 665 7 012 616



LIABILITIES Line code Notes


period


period

1 2 3 4 5 IІІ. Current liabilities and provisions

Short-term bank borrowings

1600 17 - 140 416 Current accounts payable on settlements:

for long-term liabilities 1610 - - for goods works services 1615 18 1 148 712 1 442 750 with the budget 1620 19 945 802 1 033 642 including liability on corporate profit tax 1621 28 618 819 653 515 for insurance 1625 - - on payroll 1630 7 127 9 508 on advances received 1635 22 692 723 744 678 with shareholders 1640 16 3 484 063 3 096 916

Current provisions 1660 20 105 929 100 321 Deferred income 1665 22 650 784 727 845 Other current liabilities 1690 21 1 218 321 1 286 890 Total Section IІІ 1695 8 253 461 8 582 966 IV. Liabilities associated with non-current assets held for sale

and disposal groups

1700 - - BALANCE 1900 24 463 716 27 003 859

Signed and authorised for release on behalf of Group’s management on 9 April 2021: President Oleksandr Komarov

Chief Accountant Olena Ksenich

Private Joint Stock Company Kyivstar Consolidated Statement of Financial Results (Consolidated Statement of Comprehensive Income) (in thousands of Hryvnia)


Codes Company Private Joint Stock Company "Kyivstar" Date (year month date) 2020 12 31

(name) EDRPOU 21673832

Consolidated Statement of Financial Results (Consolidated Statement of Comprehensive Income)

for the year ended 31 December 2020

Form 2 DKUD code 1801003

І. Financial results

Item Line code Notes

For the reporting

period

For the similar period of the

prior year 1 2 3 4 5

Net revenue from sales of goods works and services 2000 23 25 041 947 22 274 923 Cost of sales of goods works and services 2050 25 (8 506 957) (7 753 253) Gross: Profit 2090 16 534 990 14 521 670 Loss 2095 - - Other operating income 2120 24 195 547 130 852 Administrative expenses 2130 25 (1 686 913) (1 423 025) Selling expenses 2150 25 (1 967 636) (1 956 401) Other operating expenses 2180 25 (65 795) (605 173) Financial results from operating activities: Profit 2190 13 010 193 10 667 923 Loss 2195 - - Income from participation in equity 2200 - - Other financial income 2220 26 50 022 332 973 Other income 2240 27 49 733 28 056 Financial expenses 2250 26 (429 826) (344 745) Losses from participation in equity 2255 - - Other expenses 2270 27 (111 887) (71 949) Financial results before taxation: Profit 2290 12 568 235 10 612 258 Loss 2295 - - Income tax expense 2300 28 (2 246 182) (1 674 104) Profit (loss) from discontinued operations after tax 2305 - - Net financial result: Profit 2350 10 322 053 8 938 154 Loss 2355 - -

Private Joint Stock Company Kyivstar Consolidated Statement of Financial Results (Consolidated Statement of Comprehensive Income) (in thousands of Hryvnia)


II. Comprehensive income


For the reporting

period



(Upward) downward revaluation of non-current assets 2400 - - (Upward) downward revaluation of financial instruments 2405 (107) - Accumulated exchange differences 2410 - - Share of other comprehensive income of associates and joint ventures 2415 - -

Other comprehensive income 2445 - - Other comprehensive income before tax 2450 (107) - Income tax arising on other comprehensive income 2455 - - Other comprehensive income after tax 2460 (107) - Comprehensive income (total of lines 2350 2355 and 2460) 2465 10 321 946 8 938 154

IIІ. Elements of operating expenses


For the reporting

period



Material expenses 2500 25 161 294 111 271 Payroll 2505 25 1 709 248 1 419 434 Social payments 2510 25 312 569 244 057 Depreciation/amortisation 2515 25 3 979 062 3 160 134 Other operating expenses 2520 25 6 065 128 6 802 956 Total 2550 12 227 301 11 737 852

IV. Calculation of shares profitability


For the reporting

period



Average annual number of ordinary shares 2600 - - Average annual number of ordinary shares adjusted 2605 - - Net profit (loss) per share 2610 - - Net profit (loss) per share adjusted 2615 - - Dividends per share 2650 - -

Note: Section IV. Calculation of shares profitability is not completed as shares of the Company are not sold or purchased on stock exchanges. Detailed information is presented in note 16.

Signed and authorised for release on behalf Group’s management on 9 April 2021:

President Oleksandr Komarov


Private Joint Stock Company Kyivstar Consolidated Statement of Cash Flows (indirect method) (in thousands of Hryvnia)


Codes Company Private Joint Stock Company "Kyivstar" Date (year month date) 2020 12 31

(name) EDRPOU 21673832

Consolidated Statement of Cash Flows (indirect method) for the year ended 31 December 2020

Form 3 DKUD code 1801004


For the reporting

period



І. Cash flows from operating activities Profit (loss) from ordinary activities before taxation 3000 12 568 235 10 612 258 Adjustments for: depreciation of non-current assets 3505 25 3 979 062 3 160 134 increase (decrease) in provisions 3510 20 (38 282) (28 560) non-realised foreign exchange differences 3515 (124 947) 571 094 loss (income) from other non-operating and non-cash transactions 3520 (60 325) (384 413) Profit (loss) from participation in equity 3521 20 625 - Changes in assets measured at fair value and gain (loss) on initial recognition 3522 - - Gain (loss) from disposal of non-current assets held for sale and disposal groups 3523 244 (486) Gain (loss) from disposal of financial investments 3524 - - Impairment (reversal of impairment) of non-current assets 3526 32 670 49 944 Financial expenses 3540 427 797 332 152 Decrease (increase) in current assets 3550 - 16 378 Decrease (increase) in inventories 3551 14 696 (4 272) Decrease (increase) in accounts receivable for goods works and services 3553 87 292 161 814 Decrease (increase) in other current accounts receivable 3554 (37 007) (14 278) Decrease (increase) in contract assets 3556 (214 101) (604) Decrease (increase) in other current assets 3557 (221) - Increase (decrease) in current liabilities 3560 - 89 458 Increase (decrease) in current accounts payable for goods works and services 3561 227 376 (405 280) Increase (decrease) in current accounts payable for settlements with the budget 3562 55 858 86 395 Increase (decrease) in current accounts payable for settlements on insurance 3563 - - Increase (decrease) in current accounts payable for settlements on payroll 3564 27 924 (14 565) Increase (decrease) in contract liabilities 3566 77 061 100 421 Increase (decrease) in other current liabilities 3567 24 968 (141 416) Cash flows from operating activities 3570 17 068 925 14 186 174 Income tax paid 3580 (2 167 165) (1 674 104) Interest paid 3585 32 (397 372) (335 078) Cash flows from operating activities net 3195 14 504 388 12 176 992

Private Joint Stock Company Kyivstar Consolidated Statement of Cash Flows (indirect method) (in thousands of Hryvnia)



For the reporting

period



II. Cash flows from investing activities Receipts from sale of: financial investments 3200

- - non-current assets 3205 31 450 76 429 Receipts from: interest received 3215 26 55 159 316 492 dividends received 3220 - - Receipts from derivatives 3225 - - Receipts from interest-free loans 3230 - - Other receipts 3250 - - Purchases of: financial investments 3255 (92 775) - non-current assets 3260 (4 949 697) (3 785 393) Payments on derivatives 3270 - - Expenditure for loan issue 3275 - - Other payments 3290 - - Cash flows from investing activities net 3295 (4 955 863) (3 392 472) III. Cash flows from financing activities Receipts from: Equity 3300

- - Loans received 3305 32 3 988 013 - Other receipts 3340 - - Expenditure for: Repurchase of own shares 3345

- -

Loans repayment 3350 - Payment of dividends 3355 32 (12 987 406) (12 233 420) Interest paid - - Other payments 3390 32 (390 592) (291 195) Cash flows from financing activities net 3395 (9 389 985) (12 524 615) Cash flows for the reporting period net 3400 158 540 (3 740 095) Cash at the beginning of the year 3405 14 1 056 593 5 360 713 Effect of exchange rates on cash balances 3410 124 247 (564 025) Cash at the end of the year 3415 14 1 339 380 1 056 593



Private Joint Stock Company Kyivstar Consolidated Statement of Shareholders' Equity (in thousands of Hryvnia)


Codes Date (year month date) 2020 12 31

Company Private Joint Stock Company "Kyivstar"____________________________________ EDRPOU 21673832 (name)

Consolidated Statement of Shareholders’ Equity

for the year ended 31 December 2020 Form 4 DKUD code 1801005

Item Line code

Registered (share) capital

Revaluation reserve

Additional capital

Reserve capital

Retained earnings

(accumulated deficit)

Unpaid capital

Withdrawn capital Total

1 2 3 4 5 6 7 8 9 10 Balance at the beginning of the year 4000 887 119 - 258 294 132 933 12 778 642 - (370 398) 13 686 590 Adjustments: Change in accounting policies 4005

- - - - - - - - Correction of errors 4010 - - - - - - - - Other changes 4090 - - - - - - - - Balance at the beginning of the year adjusted

4095 887 119 - 258 294 132 933 12 778 642 - (370 398) 13 686 590

Net profit (loss) for the reporting period

4100 - - - - 10 322 053 - - 10 322 053

Other comprehensive income for the reporting period

4110 - (107) - - - - - (107)

Profit distribution: Payments to the owners (dividends) 4200 - - - - (12 600 259) - - (12 600 259) Allocation to the registered capital 4205 - - - - - - - -



Item Line code


Revaluation reserve

Additional capital

Reserve capital

Retained earnings (accumulated

deficit) Unpaid capital


1 2 3 4 5 6 7 8 9 10 Allocation to the reserve capital 4210 - - - - - - - - Contributions by owners: Capital contributions

4240 - - - - - - - -

Repayment of unpaid capital 4245 - - - - - - - - Withdrawal of capital: Repurchase of shares

4260 - - - - - - - -

Sale of treasury shares 4265 - - - - - - - - Cancellation of treasury shares 4270 (232 356) - - - (138 042) - 370 398 - Withdrawal of the share in equity 4275 - - - - - - - - Other changes in equity 4290 - - - - - - - - Changes in equity total 4295 (232 356) (107) - - (2 416 248) - 370 398 (2 278 313) Balance at the end of the year 4300 654 763 (107) 258 294 132 933 10 362 394 - - 11 408 277





Consolidated Statement of Shareholders’ Equity for the year ended 31 December 2019

Item Line code


Revaluation reserve

Additional capital

Reserve capital

Retained earnings (accumulated

deficit) Unpaid capital


1 2 3 4 5 6 7 8 9 10 Balance at the beginning of the year 4000 887 119 - 258 294 132 933 15 827 367 - (370 398) 16 735 315 Adjustments: Change in accounting policies 4005 - - - - - - - - Correction of errors 4010 - - - - - - - - Other changes 4090 - - - - - - - - Balance at the beginning of the year adjusted

4095 887 119 - 258 294 132 933 15 827 367 - (370 398) 16 735 315

Net profit (loss) for the reporting period 4100 - - - - 8 938 154 - - 8 938 154

Other comprehensive income for the reporting period

4110 - - - - - - - -

Profit distribution: Payments to the owners (dividends) 4200 - - - - (11 986 879) - - (11 986 879) Allocation to the registered capital 4205 - - - - - - - - Allocation to the reserve capital 4210 - - - - - - - - Contributions by owners: Capital contributions

4240 - - - - - - - -

Repayment of unpaid capital 4245 - - - - - - - - Withdrawal of capital: Repurchase of shares

4260 - - - - - - - -

Sale of treasury shares 4265 - - - - - - - - Cancellation of treasury shares 4270 - - - - - - - - Withdrawal of the share in equity 4275 - - - - - - - - Other changes in equity 4290 - - - - - - - - Changes in equity total 4295 - - - - (3 048 725) - - (3 048 725) Balance at the end of the year 4300 887 119 - 258 294 132 933 12 778 642 - (370 398) 13 686 590

Signed and authorised for release on behalf of Group’s management on 9 April 2021:

President Oleksandr Komarov


Private Joint Stock Company Kyivstar Notes to the Consolidated Financial Statements - 31 December 2020

13

1. Corporate information

Private Joint Stock Company Kyivstar (hereinafter referred to as “Kyivstar” or the “Company”) was established and registered on 3 September 1997 under the laws of Ukraine. The Company is involved in the design construction and operating of a dedicated cellular telecommunication network and provides a wide range of mobile communication and home internet services in Ukraine.

The Company’s registered legal address is at 53 Degtyarivska St. Kyiv 03113 Ukraine. The Company’s head office is located at the registered legal address and the principal place of the Company's business is its registered legal address.

The Company has Main office in Kyiv.

As at 31 December 2020 and 2019 the Company’s direct shareholders and their respective declared interests were as follows:

2020 2019 Interest Number of shares Interest Number of shares

VEON Holdings B.V. (Netherlands) 99.995% 13 094 562 73.804% 13 094 562 VEON Ltd. (Bermuda) 0.005% 700 0.004% 700 Treasury shares - - 26.192% 4 647 127

100.000% 13 095 262 100.000% 17 742 389

On 2 December 2019 the Company’s shareholders approved a resolution to cancel 4 647 127 of the Company’s Treasury shares. The process was completed on 3 November 2020 for details please refer to Note 16.

As at 31 December 2020 and 31 December 2019 the Company had two wholly owned subsidiaries – Subsidiary Company “Staravto” and Limited Liability Company “StarMoney”.

The Company has prepared consolidated financial statements in accordance with IFRS for the Company and its subsidiaries (the 'Group'). In these consolidated financial statements subsidiary undertakings – which are those companies in which the Group directly or indirectly has an interest of more than half of the voting rights or otherwise has power to exercise control over the operations – have been fully consolidated.

Users of these consolidated financial statements should read them together with the Company's separate financial statements as at and for the year ended 31 December 2019 in order to obtain full information on the financial position results of operations and changes in financial position of the Company.

The Company’s ultimate parent is VEON Ltd. (Bermuda) a company headquartered in Amsterdam the Netherlands.

The services other than the mandatory audit that LLC Audit firm “PricewaterhouseCoopers (Audit)” have provided to the Company and its subsidiaries in the period from 1 January 2020 to 31 December 2020 are:

• audit of the special purpose consolidated financial statements (“reporting package”) prepared in accordance with the corporate reporting standards of the VEON Group which are based on International Financial Reporting Standards (“IFRS”);

• specified procedures over the Group’s internal controls according to Sarbanes–Oxley Act acting in United States of America.

2. Operating environment risks political and economic conditions in Ukraine In the beginning of 2020 the novel coronavirus (COVID-19) began quickly spreading globally causing the World Health Organization to declare a pandemic in March 2020. The measures taken by many countries to contain the spreading of COVID-19 have resulted in significant disruptions to operations for many businesses and significantly affected global financial markets. The impact of COVID-19 will largely depend on the duration and extent of effects of the pandemic on the global and Ukrainian economy.

The Group may face the effects of COVID-19 as a result of its negative impact on the global economy and major financial markets. The significance of the effect of COVID-19 on the Group’s business largely depends on the duration and the incidence of the pandemic effects on the world and the Ukrainian economy. Currently COVID-19 outbreak has a minor impact on the Group`s operation most of the impact comes from decrease in roaming revenue from outbound roaming traffic for the whole Europe USA and Russia and reduction of sales in retail stores.


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2. Operating environment risks political and economic conditions in Ukraine (continued) The macroeconomic situation during the first months of 2020 facilitated stability of the financial system in Ukraine. During 2020 consumer inflation in Ukraine was 5% (compared to 4.1% in 2019). However internal and external factors that began to impact the Ukrainian economy in the second half of 2019 and significantly strengthened in 2020 resulted in Hryvnia devaluation. As at 31 December 2020 the official exchange rate of Hryvnia against US dollar was UAH 28.47 per USD 1 compared to UAH 23.69 per USD 1 as at 31 December 2019..

The repayment period of the sovereign debt raised by Ukraine to maintain the liquidity position during the crisis periods continues. The foreign currency sovereign debt repayments remain concentrated. In 2020-2022 the foreign currency repayments of the Government and the National Bank of Ukraine (the NBU) including interest payments will cumulatively exceed USD 24 billion. The major portion of this amount is expected to be refinanced at external markets.

Over the subsequent periods the key macroeconomic risk is represented by significant sovereign debt repayments. Thus implementation of the new International Monetary Fund programme and terms of cooperation with other international financial organisations remain critically important.

As of the end of 2019 the NBU set its discount rate at 13.5% During 2020 the NBU further eased the monetary policy and the NBU’s discount rate was decreased to 6%. However, in March 2021 the NBU Board took a decision to increase the discount rate to 6.5%. Rapid developments driven by the coronavirus spread resulted in liquidity gaps of certain banks and a growth in demand for interbank credit facilities. To support the financial stability the NBU changed the operational design of its monetary policy implemented long-term refinancing of banks supported banks by foreign currency cash postponed formation of the capital buffer by banks proposed banks to implement a special grace period of loan servicing over the quarantine period for the population and businesses (relief measures).

Significant number of companies in Ukraine have to terminate or limit their operations for an indefinite period of time as of the date of these financial statements. Measures taken to constrain spread of the coronavirus including quarantine social distancing suspension of the social infrastructure activities etc. impact economic activities of companies including the Group.

The Government formed after parliamentary elections in July 2019 was dissolved on 4 March 2020 and a new Government was appointed. Amid political changes the degree of uncertainty including in respect of the future direction of the reforms in Ukraine remains very high. In addition negative trends in global markets due to the coronavirus epidemic may further affect the Ukrainian economy. The final resolution and the ongoing effects of the political and economic situation are difficult to predict but they may have further severe effects on the Ukrainian economy and the Group’s business.

3. Basis of preparation The consolidated financial statements of the Group have been prepared on a historical cost basis.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented unless otherwise stated (refer to Notes 4 and 5).

These consolidated financial statements are presented in UAH and all values are rounded to the nearest thousands except when otherwise indicated.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).

In accordance with p.5 Article 12 of the Law of Ukraine “On accounting and Reporting in Ukraine” IFRS reporters should prepare and submit their financial statements based on taxonomy of financial statements under International standards in a single electronic format (iXBRL).

The Group has not yet prepared the consolidated financial statements based on taxonomy in iXBRL format and plans to prepare and submit them during 2021 due to the following circumstances:

• UA XBRL IFRS 2020 Taxonomy is not updated and published by the regulator as at the date of these consolidated financial statements’ issue;

• In accordance to the announcement of the Financial Reporting System Management Committee the financial statements reporting portal is not operating and companies are not able to upload iXBRL financial statements;

• On 11 March 2021 The National Securities and Stock Market Commission has announced that companies will not be penalised for a non-submission of iXBRL financial statements based on UA XBRL IFRS 2020 Taxonomy in time and that submission dates will be announced additionally.


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4. New or revised standards and interpretations (i) New and amended standards adopted by the Group

COVID-19-Related Rent Concessions Amendment to IFRS 16 issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020. The amendment provides lessees with relief in the form of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for rent concessions in the same way as if they were not lease modifications. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: the change in lease payments results in revised consideration for the lease that is substantially the same as or less than the consideration for the lease immediately preceding the change; any reduction in lease payments affects only payments due on or before 30 June 2021; and there is no substantive change to other terms and conditions of the lease.

The Group concluded not to apply the practical expedient in the IFRS 16 amendment to the rent concessions from lessors.

The following amended standards became effective from 1 January 2020 but did not have any material impact on the Group:

• Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020).

• Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020).

• Definition of materiality – Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020).

• Interest rate benchmark reform - Amendments to IFRS 9 IAS 39 and IFRS 7 (issued on 26 September 2019 and effective for annual periods beginning on or after 1 January 2020).

(ii) New standards and interpretations not yet adopted

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2021 or later and which the Group has not early adopted.

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture.

The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business even if these assets are held by a subsidiary. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021). IFRS 17 replaces IFRS 4 which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage and as they are released from risk. If a group of contracts is or becomes loss-making an entity will be recognising the loss immediately. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments clarify that liabilities are classified as either current or non-current depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right at the end of the reporting period to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the extinguishment of a liability with cash other resources embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. The Group is currently assessing the impact of the amendments on its consolidated financial statements.


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4. New or revised standards and interpretations (continued) Classification of liabilities as current or non-current deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1 January 2022. However in response to the Covid-19 pandemic the effective date was deferred by one year to provide companies with more time to implement classification changes resulting from the amended guidance. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

Proceeds before intended use Onerous contracts – cost of fulfilling a contract Reference to the Conceptual Framework – narrow scope amendments to IAS 16 IAS 37 and IFRS 3 and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1 IFRS 9 IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022). The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items together with the costs of producing them are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset.

The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended by management and subject to depreciation before it has achieved the level of operating performance expected by management.

The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that before a separate provision for an onerous contract is established an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract rather than on assets dedicated to that contract.

IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that for some types of liabilities and contingent liabilities an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21 rather than the 2018 Conceptual Framework. Without this new exception an entity would have recognised some liabilities in a business combination that it would not recognise under IAS 37. Therefore immediately after the acquisition the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets as defined in IAS 37 at the acquisition date.

The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment costs or fees paid to third parties will not be included in the 10% test.

Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.

IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial statements based on the parent’s date of transition to IFRS if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent based on the parent’s date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption.

The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. The Group is currently assessing the impact of the amendments on its consolidated financial statements.


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4. New or revised standards and interpretations (continued) Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023). The amendments include a number of clarifications intended to ease implementation of IFRS 17 simplify some requirements of the standard and transition. The amendments relate to eight areas of IFRS 17 and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made:

• Effective date: The effective date of IFRS 17 (incorporating the amendments) has been deferred by two years to annual reporting periods beginning on or after 1 January 2023; and the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 has also been deferred to annual reporting periods beginning on or after 1 January 2023.

• Expected recovery of insurance acquisition cash flows: An entity is required to allocate part of the acquisition costs to related expected contract renewals and to recognise those costs as an asset until the entity recognises the contract renewals. Entities are required to assess the recoverability of the asset at each reporting date and to provide specific information about the asset in the notes to the financial statements.

• Contractual service margin attributable to investment services: Coverage units should be identified considering the quantity of benefits and expected period of both insurance coverage and investment services for contracts under the variable fee approach and for other contracts with an ‘investment-return service’ under the general model. Costs related to investment activities should be included as cash flows within the boundary of an insurance contract to the extent that the entity performs such activities to enhance benefits from insurance coverage for the policyholder.

• Reinsurance contracts held – recovery of losses: When an entity recognises a loss on initial recognition of an onerous group of underlying insurance contracts or on addition of onerous underlying contracts to a group an entity should adjust the contractual service margin of a related group of reinsurance contracts held and recognise a gain on the reinsurance contracts held. The amount of the loss recovered from a reinsurance contract held is determined by multiplying the loss recognised on underlying insurance contracts and the percentage of claims on underlying insurance contracts that the entity expects to recover from the reinsurance contract held. This requirement would apply only when the reinsurance contract held is recognised before or at the same time as the loss is recognised on the underlying insurance contracts.

• Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts and some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial position in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks using reinsurance contracts held and non-derivative financial instruments at fair value through profit or loss; an accounting policy choice to change the estimates made in previous interim financial statements when applying IFRS 17; inclusion of income tax payments and receipts that are specifically chargeable to the policyholder under the terms of an insurance contract in the fulfilment cash flows; and selected transition reliefs and other minor amendments.

Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9 IAS 39 IFRS 7 IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). The Phase 2 amendments address issues that arise from the implementation of the reforms including the replacement of one benchmark with an alternative one. The amendments cover the following areas:

• Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform: For instruments to which the amortised cost measurement applies the amendments require entities as a practical expedient to account for a change in the basis for determining the contractual cash flows as a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9. As a result no immediate gain or loss is recognised. This practical expedient applies only to such a change and only to the extent it is necessary as a direct consequence of IBOR reform and the new basis is economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS 9 are also required to apply the same practical expedient. IFRS 16 was also amended to require lessees to use a similar practical expedient when accounting for lease modifications that change the basis for determining future lease payments as a result of IBOR reform.

• End date for Phase 1 relief for non contractually specified risk components in hedging relationships: The Phase 2 amendments require an entity to prospectively cease to apply the Phase 1 reliefs to a non-contractually specified risk component at the earlier of when changes are made to the non-contractually specified risk component or when the hedging relationship is discontinued. No end date was provided in the Phase 1 amendments for risk components.

• Additional temporary exceptions from applying specific hedge accounting requirements: The Phase 2 amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform.


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4. New or revised standards and interpretations (continued) • Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the entity is

managing the transition to alternative benchmark rates its progress and the risks arising from the transition; (ii) quantitative information about derivatives and non-derivatives that have yet to transition disaggregated by significant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result of IBOR reform.

The Group is currently assessing the impact of the amendments on its consolidated financial statements.

Unless otherwise described above the new standards and interpretations are not expected to affect significantly the Group’s consolidated financial statements.

5. Significant accounting policies Functional and presentation currencies

The functional and presentation currency of the Group is Ukrainian Hryvnia the currency of the primary economic environment in which the Group operates.

Foreign currency translation Monetary assets and liabilities are translated into the functional currency of the Group at the official exchange rate of the National Bank of Ukraine (“NBU”) at the end of the respective reporting period. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into the Group’s functional currency at the end of the reporting period at the official exchange rates of the NBU are recognised in profit or loss for the year as foreign currency translation gains less losses. Translation at period-end rates does not apply to non-monetary items that are measured at historical cost.

At 31 December 2020 and 2019 the principal rates of exchange used for translating foreign currency balances were as follows:

31 December 2020 UAH 31 December 2019 UAH 1 US dollar (USD) 28.275 23.686 1 Euro (EUR) 34.740 26.422

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary items at exchange rates different from those used to translate monetary items upon initial recognition during the current or prior reporting periods are recognised in profit or loss as originated except for foreign exchange differences recognised in comprehensive income.

Foreign exchange gains and losses resulting from the translation of monetary items (other than cash and cash equivalents) in a foreign currency at the end of the reporting period are shown in unrealised foreign exchange differences. Upon settlement of the monetary items (cash payments or receipts) all previously accumulated unrealised foreign exchange differences arising during the period from initial recognition to the settlement of the monetary item are recorded as realised foreign exchange differences. Foreign exchange gains and losses resulting from the translation of cash and cash equivalents in a foreign currency are always shown in realised foreign exchange differences.

Foreign exchange gains and losses resulting from the translation of monetary items related to investing and financing activities are shown in non-operating foreign exchange differences. These include amounts payable on loan agreements deposits with the contractual maturity in excess of three months accounts payable (receivable) on property plant and equipment and intangible assets loans issued to employees etc.

Foreign exchange gains and losses resulting from the translation of monetary items other than those related to investing and financing activities are included in operating foreign exchange differences.

Amendment of the financial statements after issue

Any changes to these consolidated financial statements after issue require approval of the Group’s management who authorised these consolidated financial statements for issue.

Revenue recognition and measurement

Revenue is income arising in the course of the Group’s ordinary activities. Revenue is recognised in the amount of transaction price. Transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring control over promised goods or services to a customer excluding the amounts collected on behalf of third parties. Revenue is recognised net of discounts returns and value added taxes.


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5. Significant accounting policies (continued) Revenue recognition and measurement (continued) Revenues primarily comprise provision (sales) of:

► services: revenue from air time charges interconnection fees periodic fees connection and one-time subscription fees FTTB internet fixed lines revenues roaming and value added services;

► customer equipment: telephone handsets modems etc.

Services The Group provides services under fixed-price and variable price contracts. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously.

Where the contracts include multiple performance obligations the transaction price is allocated to each separate performance obligation based on the stand-alone selling prices. In case of fixed-price contracts the customer pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment a contract asset is recognised. If the payments exceed the services rendered a contract liability is recognised.

Revenue is deferred as a contract liability until the related services have been provided to the subscribers sold pre-paid card or start packages has expired. The Group derecognises the contract liability and recognises revenue when it transfers services and therefore satisfies its performance obligation. If the contract includes an usage-based fee revenue is recognised in the amount to which the Group has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced.

If the contract includes variable consideration revenue is recognised only to the extent that it is highly probable that there will be no significant reversal of such consideration.

Air time charges

The Group earns air time revenue by providing its pre-paid and post-paid subscribers with access to the cellular network and routing their calls through its network and networks of its roaming partners. Interconnection

Revenue from interconnection represents the revenue earned for the termination of calls from other telecommunication services providers’ networks on the Group’s network.

Air time and interconnection revenue is recognised in the period when the respective service is rendered.

Periodic fees

Periodic fees include fees for subscription to new tariff plans and fees for supplementary subscriptions used by subscribers in particular period. Periodic fees are recognised in the period when the respective service is rendered. Connection and one-time subscription fees

Connection fees are paid by pre-paid subscribers for the first time activation of network service. Revenues from connection are deferred and recognised over the period when the fees are earned within an overall service agreement with subscriber which is the expected period of customer relationship and approximates 60 months for pre-paid subscribers (2019: 54 months). The expected period of customer relationship is based on the past history of churn rate and expected development of the Group.

One-time subscription fees mainly consist of one-time fees for various supplementary subscriptions and also include fees for change of subscription type and transfer of subscriptions from one location to another. One-time subscription fees are deferred and recognised over the subscription validity period or in case of unlimited validity period the expected period of customer relationship which approximates 93 months for contract subscribers 60 months for pre-paid subscribers and 102 months for fixed line subscribers (2019: 82 months 54 months and 104 months respectively).

Fiber-to-building FTTB internet

Revenue from FTTB services represents fixed monthly charges for the internet access provided to the Group’s subscribers. Such revenue is recognised in the period when the respective service is rendered to subscribers.

Fixed lines

Revenue from fixed lines services represents monthly charges to the Group’s subscribers for access to the fixed telephone lines network and for routing the subscribers’ calls through this network. Such revenue is recognised in the period when the respective service is rendered to subscribers.


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5. Significant accounting policies (continued) Revenue recognition and measurement (continued)

Roaming and access to network

Roaming revenues and revenues from access to network include (i) charges for services provided to the Group’s subscribers in the networks of its roaming partners (ii) charges for services provided by the Group in its network to subscribers of the Group’s roaming partners and (iii) charges for access to the Group’s network by the foreign operators without termination of calls. Such revenues are recognised in the period when the respective services are rendered.

Value added services

Revenues from value added services include charges for outgoing SMS and MMS packet switched data (WAP GPRS EDGE etc.), content and MFC services (transfer of money between subscribers’ balances extra money services). Revenues from charges for data transmission services are recognised in the period when the respective services are rendered.

Customer equipment sales

Sales are recognised when control of the good has transferred being when the goods are delivered to the customer the customer has full discretion over the goods and there is no unfulfilled obligation that could affect the customer’s acceptance of the goods. Delivery occurs when the risks of obsolescence and loss have been transferred to the customer and either the customer has accepted the goods in accordance with the contract the acceptance provisions have lapsed or the Group has objective evidence that all criteria for acceptance have been satisfied.

If the Group provides any additional services to the customer after control over goods has passed revenue from such services is considered to be a separate performance obligation and is recognised over the time of the service rendering.

Discounts to roaming partners Discounts are often provided in the form of cash payments calculated based on the terms of the agreement with roaming partner and billing data on the roaming traffic for the period. Discounts are recognized in the period when the discount is earned as a reduction of revenue of corresponding period. Loyalty programs Customer loyalty credits are accounted for as a separate component of the sales transaction in which they are granted. A portion of the fair value of the consideration received is allocated to the award credits and deferred based on estimated number of award credits that will actually be redeemed by the customer. This is then recognised as revenue over the period that the award credits are redeemed. Presentation Where the Group’s role in a transaction is a principal revenue is recognised on a gross basis. In this case revenue comprises the gross value of the transaction billed to the customer after trade discounts with any related expenditure charged as an operating cost. Where the Group’s role in a transaction is that of an agent revenue is recognised on a net basis and represents the margin earned. The evaluation of whether the Group is acting as principal or an agent is based on the analysis of the substance of transaction the responsibility for providing the goods or services and setting prices as well as the underlying financial risks and rewards. Interest income Interest income is recorded for all debt instruments on an accrual basis using the effective interest method. This method defers as part of interest income all fee received between the parties to the contract that are an integral part of the effective interest rate all other premiums or discounts. Fees integral to the effective interest rate include origination fees received or paid by the Group relating to the creation or acquisition of a financial asset for example fees for evaluating creditworthiness evaluating and recording guarantees or collateral negotiating the terms of the instrument and for processing transaction documents. For financial assets that are originated or purchased credit-impaired the effective interest rate is the rate that discounts the expected cash flows (including the initial expected credit losses) to the fair value on initial recognition (normally represented by the purchase price). As a result the effective interest is credit-adjusted. Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets except for (i) financial assets that have become credit impaired (Stage 3) for which interest revenue is calculated by applying the effective interest rate to their AC net of the ECL provision and (ii) financial assets that are purchased or originated credit impaired for which the original credit-adjusted effective interest rate is applied to the AC. Interest income on current bank accounts and on demand deposits or term deposits with the maturity less than three months classified as cash and cash equivalents is recognised in the operating cash flows. Interest income on term deposits other than those classified as cash and cash equivalents is recognised in the investing cash flows.


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5. Significant accounting policies (continued) Expense recognition and measurement The Group recognises expenses upon outflow of future economic benefits from decrease in an asset or increase in a liability that can be measured reliably. The Group classifies its expenses by functional group: cost of materials and services administrative expenses selling expenses other operating expenses financial expenses and other expenses. The Group applies the classification of expenses by element according to their economic substance (such as depreciation/amortisation payroll roaming dealership fees repairs advertising etc.) which is disclosed in the notes to these financial statements. The cost of materials and services comprises the cost of materials and services to be realised during the reporting period and unallocated fixed general productions costs. The cost includes: direct material direct labor and other direct expenses and general production costs. The cost includes the following (the list is not exhaustive): costs of interconnection traffic transit international roaming services inter-operator line leases content subscriber product purchases leases and electricity supplies of telecommunication network facilities technical maintenance of the network technical function staff and other direct expenses. Administrative expenses are general business expenses associated with management and maintenance of the Group's operations. Administrative expenses include the following (the list is not exhaustive): management services professional services banking charges provisions and other expenses related to maintenance of the Group's operations. Selling expenses are expenses related to sales (distribution) of the Group's goods and services. Selling expenses include the following (the list is not exhaustive): dealers fees (except for costs to obtain or fulfil a contract that are subject for capitalisation) advertising marketing sales market researches payroll and other employee benefits of selling units etc. Other operating expenses are the Group's expenses not included in the cost of sales administrative expenses selling expenses financial expenses and corporate profit tax expenses but associated with the Group's operating activity. Other operating expenses include the following (the list is not exhaustive): provisions for expected credit losses other provisions fines and penalties operating foreign exchange differences and membership fees to professional associations. Financial expenses result from finance raising transactions including finance leases and from accounting for financial assets or financial liabilities at discounted (amortised) cost. Other expenses are the Group's expenses not related to its operating activities. These include expenses resulting from unusual events not inherent in the Group's operations: non-operating foreign exchange differences charitable contributions cost of disposal of property plant and equipment intangible assets impairment of non-current assets decommissioning of unusable fixed assets and other non-operating expenses. Assets arising from contracts with customers Capitalised connection costs Initial direct costs incurred in connecting customers to the network are deferred over the same period as connection fee charged to customers. Such costs consist primarily of the costs of the start packages scratch cards etc. Capitalised dealer commissions Dealer commission for acquisition of customers are capitalised as non-current assets and amortised over the average customer life estimated based on recent churn rate. Respective amortisation is presented within selling expenses in the same line item that the expenses were previously booked when incurred. An impairment loss is recognised to the extent that the carrying amount of asset exceeds: (a) the amount of consideration to which the Group expects to be entitled in exchange for the goods and services to which the asset relates; less (b) the remaining costs that relate directly to providing those goods and services. Advertising costs marketing and sales commissions Advertising costs marketing and sales commissions are expensed as incurred unless they form a part of the costs that are deferred in relation to connection fees as described above. Expenditure on advertising and promotional activities is recognised as an expense when the Group has either the right to access the goods or has received the service. Property plant and equipment Property plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes professional fees and for qualifying assets borrowing costs are capitalised. Depreciation is calculated to reduce the cost of assets other than land to their estimated residual value if any over their estimated useful lives. Depreciation commences when the assets are ready for their intended use. Repair and maintenance are capitalised in case significant improvement of assets is in place which brings new functionality and could result in increased useful life of an asset. Current repair and maintenance is expensed as incurred. If new parts are capitalised replaced parts are derecognised and any remaining net book value is recorded as loss on disposal.

When the expected cost of decommissioning of an asset after its use is material to the consolidated financial statements the present value of the expected cost of decommissioning of an asset after its use is included into the cost of the respective asset if the recognition criteria for a provision are met. Subsequent increases in decommissioning liability as a result of change in assumptions (i.e. discount rate period until dismantling cost of dismantling etc.) are recognised in the additions to property plant and equipment. Subsequent decreases in decommissioning liability as a result of change in assumptions are recognised in disposal of property plant and equipment.


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5. Significant accounting policies (continued) Property plant and equipment (continued) Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Group of property plant and equipment Useful life (years) Buildings constructions and transmission equipment 5-30 Machinery and equipment 5-20 Vehicles 3-5

Depreciation method estimated useful life and residual value are evaluated at least annually and adjusted prospectively if appropriate. Residual value is estimated to be zero for most of the assets as the Group expects to use these assets for their entire economic life. An item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated statement of comprehensive income in the year when the item is derecognised.

Leasehold improvements are depreciated over their expected useful lives on the same basis as owned assets or where shorter the term of the relevant lease.

Land

Freehold land to which the Group has due legal title is included in the Group’s consolidated statement of financial position at its historical cost less any accumulated impairment losses. Freehold land is not depreciated.

Construction in progress

The construction-in-progress items are capitalised as a separate element of non-current assets and are stated at cost less any accumulated impairment losses. On completion the constructed asset at its cost less accumulated impairment loss is transferred to the appropriate category of property plant and equipment. Construction in progress is not depreciated. Uninstalled equipment

Uninstalled equipment is equipment purchased by the Group but not put into operation and is stated at cost less any accumulated impairment losses. Uninstalled equipment is not depreciated.

Right-of-use assets

The Group leases various buildings constructions and transmission equipment offices and vehicles. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However for leases of real estate constructions and transmission equipment for which the Group is a lessee it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Right-of-use assets are measured at cost comprising the following: ► the amount of the initial measurement of lease liability ► any lease payments made at or before the commencement date less any lease incentives received ► any initial direct costs and ► costs to restore the asset to the conditions required by lease agreements if stipulated by the contract.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option the right-of-use asset is depreciated over the underlying assets’ useful lives. Depreciation on the items of the right-of-use assets is calculated using the straight-line method over their estimated lease term as follows:

Group of right-of-use assets Lease term (years) Buildings constructions and transmission equipment 3-7 Vehicles 3-5


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5. Significant accounting policies (continued) Lease term reassessment

The Group performs revision of lease terms or reassess options included in the lease term only upon the occurrence of certain triggers. These are events or changes in circumstances Group considers may lead to a reassessment:

• Significant CAPEX on or within the underlying asset;

• SWAP with full or partial replacement of equipment. Following categories were identified as the main radio equipment for trigger identification: RBS-main equipment Antennas Repeaters Transmission systems/Access equipment;

• Significant rollout of new technologies;

• Commencing internal/external disscussions regardind extension/termination option not previously included in the lease term.

• Consolidation of tower sites that might change the expected use of surrounding sites and impact the assessment of extension and termination options.

• Other full or partial replacement of equipment for signal amplification.

For all leases a revision of the lease term would only occur due to changes in the non-cancelable period or assessments of extension and termination options – but this assessment can only take place if there has been a significant event or change in circumstances.

Borrowing costs

Borrowing costs directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. Substantial period of time is project with construction period of 6 month or more. All other borrowing costs are expensed in the period they occur included to financial expenses. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds.

Intangible assets

Intangible assets acquired separately are initially measured at cost. Following initial recognition intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses.

Internally generated intangible assets excluding capitalised development costs are not capitalised and expenditures are charged to profit and loss as incurred.

Amortisation is provided using the straight-line basis over the estimated useful lives of the related assets as follows:

Asset category Useful life (years) Licenses 5-20 Network and billing software 5-10

Intangible assets all of which are determined as having finite useful lives are amortised over their useful lives. The amortisation period and amortisation method for intangible assets is reviewed at least annually and adjusted prospectively if appropriate.

Individual useful lives can be applied to intangible assets according to contractual or license terms.

Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised as other expenses or other income in the consolidated statement of comprehensive income.

Inventories Inventories are valued at the lower of cost and net realisable value for items that will be sold as separate products. Inventories that will be sold as part of a transaction with several components which the Group expects to earn net income from are valued at cost even if the selling price of the inventories is below cost. Cost of inventories used in multiple arrangements is determined using the weighted average method.

Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists or when annual impairment testing for an asset is required the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.


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5. Significant accounting policies (continued) Impairment of non-financial assets (continued) Where the carrying amount of an asset or cash generating unit exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. 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. In determining fair value less costs to sell recent market transactions are taken into account if available. If no such transactions can be identified an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Impairment losses of continuing operations are recognised in profit and loss. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Based on the specifics of the Group’s operations the management concluded that the Group has one cash generating unit which is the Group’s network as a whole. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined net of depreciation had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit and loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount less any residual value on a systematic basis over its remaining useful life. Financial instruments – key measurement terms

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is the price in an active market. An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the number of instruments held by the entity. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price. Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing information is not available. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability either directly (that is as prices) or indirectly (that is derived from prices) and (iii) level three measurements are valuations not based on solely observable market data (that is the measurement requires significant unobservable inputs). Transaction costs are incremental costs that are directly attributable to the acquisition issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents) advisors brokers and dealers levies by regulatory agencies and securities exchanges and transfer taxes and duties. Transaction costs do not include debt premiums or discounts financing costs or internal administrative or holding costs. Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any principal repayments plus accrued interest and for financial assets less any allowance for expected credit losses (“ECL”). Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to the maturity amount using the effective interest method. Accrued interest income and accrued interest expense including both accrued coupon and amortised discount or premium (including fees deferred at origination if any) are not presented separately and are included in the carrying values of the related items in the consolidated statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period if appropriate to the gross carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate. For assets that are purchased or originated credit impaired (“POCI”) at initial recognition the effective interest rate is adjusted for credit risk i.e. it is calculated based on the expected cash flows on initial recognition instead of contractual payments.


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5. Significant accounting policies (continued) Financial instruments – initial recognition

Financial instruments at fair value through profit and loss (FVTPL) are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. After the initial recognition an ECL allowance is recognised for financial assets measured at AC and investments in debt instruments measured at fair value through other comprehensive income (FVTOCI) resulting in an immediate accounting loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date which is the date on which the Group commits to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual provisions of the instrument. Financial assets – classification and subsequent measurement – measurement categories

The Group classifies financial assets in the following measurement categories: FVTPL FVOCI and AC. The classification and subsequent measurement of debt financial assets depends on: (i) the Group’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. The Group’s financial assets include cash and cash equivalents trade and other receivables other financial assets all of which are classified as AC in accordance with IFRS 9. Financial assets – classification and subsequent measurement – business model

The business model reflects how the Group manages the assets in order to generate cash flows – whether the Group’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows” ) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or if neither of (i) and (ii) is applicable the financial assets are classified as part of “other” business model and measured at FVTPL. The Group’s business model for financial assets is to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”). Financial assets – classification and subsequent measurement – cash flow characteristics

Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell the Group assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). In making this assessment the Group considers whether the contractual cash flows are consistent with the basic landing arrangements i.e. interest includes only considerations for credit risk time value of money other basic lending risks and profit margin. The SPPI assessment is performed on initial recognition of an asset and is not subsequently reassessed. Financial assets – reclassification

Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. Financial assets impairment – credit loss allowance for ECL

The Group assesses on a forward-looking basis the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts for contract assets. The Group measures ECL and recognises net impairment losses on financial and contract assets at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events current conditions and forecasts of future conditions. Debt instruments measured at AC and contract assets are presented in the statement of financial position net of the allowance for ECL. For loan commitments and financial guarantees a separate provision for ECL is recognised as a liability in the consolidated statement of financial position. For debt instruments at FVOCI changes in amortised cost net of allowance for ECL are recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses on debt instruments at FVOCI. The Group applies a three stage model for impairment based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity if shorter (“12 Months ECL”). If the Group identifies a significant increase in credit risk (“SICR”) since initial recognition the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis that is up until contractual maturity but considering expected prepayments if any (“Lifetime ECL”). If the Group determines that a financial asset is credit-impaired the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. For financial assets that are purchased or originated credit-impaired (“POCI Assets”) the ECL is always measured as a Lifetime ECL.


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5. Significant accounting policies (continued) Financial assets – write-off

Financial assets are written-off in whole or in part when the Group exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Group may write-off financial assets that are still subject to enforcement activity when the Group seeks to recover amounts that are contractually due however there is no reasonable expectation of recovery. Financial assets - derecognition

The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expire or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement whilst (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all the risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale. Financial assets – modification

If the modified terms are substantially different the rights to cash flows from the original asset expire and the Group derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes including determining whether a SICR has occurred. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss unless the substance of the difference is attributed to a capital transaction with owners. If the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Group recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets) and recognises a modification gain or loss in profit or loss. Financial liabilities – measurement categories

Financial liabilities are classified as subsequently measured at AC except for (i) financial liabilities at FVTPL: this classification is applied to derivatives financial liabilities held for trading (e.g. short positions in securities) contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments. The Group’s financial liabilities include trade and other payables other financial liabilities borrowings all of which are classified as AC in accordance with IFRS 9. Financial liabilities – derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged cancelled or expires). Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to either settle on a net basis or to realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the following circumstances: (i) in the normal course of business (ii) in the event of default and (iii) in the event of insolvency or bankruptcy.

Borrowings

Borrowings include long- and short-term bank borrowings. Borrowings are recognised initially at fair value net of transaction costs incurred and are subsequently carried at AC using the effective interest method.

Trade and other receivables Trade and other receivables are recognised initially at fair value and are subsequently carried at AC using the effective interest method.

Trade and other payables

Trade payables are accrued when the counterparty performs its obligations under the contract and are recognised initially at fair value and subsequently carried at AC using the effective interest method.

Customer advances

The initial and subsequent payments of credit balance loaded by prepaid customers are recognized as a financial liability (customer advances) in the event that the prepaid credit balance is refundable to the customer or if the credit balance can be used by the customer as currency to purchase goods or services from other suppliers (other than Group’s mobile services). If the prepaid credit balances are non-refundable and can only be used to purchase Group’s mobile services such balances are recognised as deferred revenue in the consolidated balance sheet.


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5. Significant accounting policies (continued) Lease liabilities

Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

► fixed payments (including in-substance fixed payments) less any lease incentives receivable ► variable lease payment that are based on an index or a rate initially measured using the index or rate as at the

commencement date ► amounts expected to be payable by the Group under residual value guarantees ► the exercise price of a purchase option if the Group is reasonably certain to exercise that option and ► payments of penalties for terminating the lease if the lease term reflects the Group exercising that option.

Extension and termination options are included in a number of buildings constructions and transmission equipment lease agreements across the Group. These terms are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Extension options (or period after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined which is generally the case for leases of the Group the Group’s incremental borrowing rate is used being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms collateral and conditions.

To determine the incremental borrowing rate the Group:

► uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk and ► makes adjustments specific to the lease e.g. term country currency and collateral.

The Group is exposed to potential future increases in variable lease payments based on an index or rate which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance costs. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Operating lease

Where the Group is a lessor in a lease which does not transfers substantially all the risks and rewards incidental to ownership to the lessee (i.e. operating lease) lease payments from operating leases are recognised as other income on a straight-line basis.

Employee benefits

The Group makes defined contributions to the State Pension Fund at the relevant statutory rates in force during the year based on gross salary payments; such an expense is charged in the period when the related salaries are earned.

In addition to the above employees of the Group are entitled to jubilee and post-employment benefits.

Post-employment benefits are paid out as a one-off benefit upon retirement. The amount of those benefits depends on the tenure with the Group and the average salary. The benefits payable under these arrangements are unfunded.

The expected cost of providing employee benefits is determined annually using the projected unit credit actuarial valuation method to calculate the net present value of benefit obligations at the reporting date. The balance of employee benefit obligations equals discounted payments to be made in the future and accounts for staff turnover and relates to the period to the reporting date. Demographic information and assumptions on staff turnover are based on historical data.

Re-measurements comprising of actuarial gains and losses are recognised immediately in the consolidated statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit and loss in subsequent periods.


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5. Significant accounting policies (continued) Employee benefits (continued)

Past service costs are recognised in profit and loss on the earlier of: ► the date of the plan amendment or curtailment and ► the date that the Group recognises restructuring-related costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability. Service costs comprise current service cost past service cost gains and losses on curtailments and non-routine settlements and are recognised in profit and loss.

Any actuarial gains or losses relating to jubilee benefits are recognised in profit and loss in the period in which they arise. The past service cost is recognised immediately.

Taxes

Current income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except:

► where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit and loss; and

► taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses carried forward to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and unused tax losses carried forward can be utilised except:

► when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit and loss;

► in respect of deductible temporary differences associated with investments in subsidiaries deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to be applied in the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit and loss is recognised outside profit and loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Value added tax

► Revenues expenses and assets are recognised net of value added tax (VAT) except: where VAT incurred on a purchase of assets or services is not recoverable from the taxation authority in which case VAT is recognised as part of the cost of acquisition of the asset or as part of expense item as applicable; and

► receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from or payable to the taxation authority is disclosed in the notes to the consolidated financial statements.

Within the scope of its economic activities the Group simultaneously performs operations subject to VAT and those that are not subject to VAT. The Group may purchase goods and services which are simultaneously used in taxable and non-taxable transactions. In such case the Group makes a proportionate allocation of tax amounts to a tax credit in respect of purchases of goods / services / non-current assets intended for simultaneous use in transactions subject to VAT and VAT exempt.


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5. Significant accounting policies (continued) Current/non-current classification

An asset/liability is classified as current when it is expected to be realised (settled) or is intended for sale or consumption within twelve months after the reporting date. Other assets/liabilities are classified as non-current. Financial instruments are classified based on expected life. Deferred tax assets are classified as non-current.

Cash and cash equivalents

Cash and cash equivalents include cash in hand deposits held at call with banks and other short-term highly liquid investments with original maturities of three months (92 days) or less. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI and (ii) they are not designated at FVTPL.

For the purpose of consolidate cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above net of outstanding bank overdrafts if any.

Provisions and reserves

Provisions and reserves are recognised when the Group has a present obligation (legal or constructive) as a result of a past event it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed for example under an insurance contract the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit and loss net of any reimbursement. If the effect of the time value of money is material provisions are discounted using a current pre-tax rate that reflects where appropriate the risks specific to the liability. Where discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.

Contingent assets and liabilities

A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of economic benefits is probable.

Contingent liabilities are not recognised in the consolidated financial statements unless it is probable that an outflow of economic resources will be required to settle the obligation and it can be reasonably estimated. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

Withdrawn capital (treasury shares)

Treasury shares are recognised at purchase price and are deducted from equity. No gain or loss is recognised in the profit and loss on the purchase sale issue or cancellation of the Company’s own equity instruments. Any difference between the carrying amount and the consideration if shares are reissued is recognised in share premium. Voting rights related to treasury shares are nullified for the Company and no dividends are allocated to them.

Events after the reporting period

Events after the reporting period that provide additional information on the Group’s position at the reporting date (adjusting events) are reflected in the consolidated financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material.

Transactions with the ultimate parent and entities under common control

Transactions between unrelated parties are presumed to be exchanges of equal fair values. When the Group is engaged in transactions with the ultimate parent and entities under common control where there is no presumption of equal fair values and IFRS require the transaction to be recognised at fair value the Group accounts for the difference between fair value and the amount of such transaction directly in equity as distribution from or capital from shareholders in accordance with its economic substance. Changes in presentation

Where necessary corresponding figures have been adjusted to conform to changes in the presentation in the current year.


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6. Critical accounting judgements and key sources of estimation uncertainty Key sources of estimation uncertainty - critical accounting estimates

Certain amounts included in or affecting the consolidated financial statements and related disclosures must be estimated requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the consolidated financial statements are prepared.

A critical accounting estimate is one which is both important to the portrayal of the Group’s financial condition and results and requires management’s most difficult subjective or complex judgments often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Management evaluates such estimates on an ongoing basis based upon historical results and experience consultation with experts trends and other methods which management considers reasonable in the particular circumstances as well as the forecasts as to how these might change in the future. However uncertainty about these estimates could result in outcomes that require a material adjustment to the carrying amount of an asset or liability affected in future periods.

Revenue recognition

The main part of the Group’s revenues is earned from mobile services such as airtime one-time connection fees or periodic subscriptions. The Group has many pre-paid and post-paid subscribers and offers a number of different services with different tariff plans. The Group also provides discounts of various types often in connection with different campaigns. Revenues from one-time subscriptions or connections to the Group's network are deferred and released to the profit and loss in the periods when the fees are earned within an overall service agreement with a customer based on the average customer relationship period. The management regularly reviews its estimates in respect of customer relationship period based on the historical experience and its plans for future development of the Group. As at 1 January 2020 the management estimated the customer relationship period to be equal to 93 months for contract subscribers and 60 months for pre-paid subscribers (2019: 82 months and 54 months respectively). As a result of change in the above mentioned accounting estimates starting from 1 January 2020 the Group’s profit before tax for the year 2020 decreased by UAH 7 761 thousands.

Capitalised dealer commissions

Incremental costs incurred to acquire customer contract such as commissions to third party dealers for the acquisition of customers are capitalised within other non-current assets. Costs that have been capitalised are then amortised consistently with the pattern of when services to which the asset relates are transferred to the customer. Judgement is required to identify which costs are eligible for capitalisation the period over which the costs are charged to the income statement and the assessment of capitalised costs for impairment. The costs capitalised are amortised over the average customer relationship period calculated based on the most recent full-year churn rate available based on management judgement. In assessing recoverability of the asset the company tracks churn credit risk and margin contribution of customers applying a portfolio approach to contracts with similar characteristics. No impairment was identified by management as of the reporting date.

Depreciation and amortisation

Depreciation and amortisation methods are based on management estimates of the expected useful lives of property plant and equipment and intangible assets. Estimates may change due to technological developments competition changes in market conditions and other factors and may result in changes in the estimated useful lives and in the amortisation or depreciation charges. Some technological developments are difficult to predict and the Group’s views on the trends and pace of development may change over time. Some of the assets and technologies in which the Group invested several years ago are still in use and provide the basis for the new technologies.

The useful lives of property plant and equipment and intangible assets are reviewed at least annually taking into consideration the factors mentioned above and all other important factors. In case of significant changes in estimated useful lives depreciation and amortisation charges are adjusted prospectively.

Depreciation of right-of-use assets

Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Details of judgements applied for lease term determination are disclosed in paragraph “Extension and termination options”.

Private Joint Stock Company Kyivstar Notes to the Financial Statements - 31 December 2020

31

6. Critical accounting judgements and key sources of estimation uncertainty (continued) Extension and termination options

Extension and termination options are included in a number of buildings constructions and transmission equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.

In determining the lease term management considers all facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

For leases term determination the following factors are normally the most relevant:

► If there are significant penalties to terminate (or not extend) the Group is typically reasonably certain to extend (or not terminate);

► Otherwise the Group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

Sensativity analyses

The lease term is limited by the reasonably certain period, which is determined based on useful life of the core equipment.

The following table demonstrates the impact on the carrying amount of lease liabilities and right-of-use assets in case if estimated lease term of the Group’s lease agreements differs from management’s estimates:

31 December 2020

Increase/ (decrease) in

years Increase/ (decrease)

in balances

Lease liabilities/Right-of-use assets + 1 year 405 426 Lease liabilities/Right-of-use assets - 1 year (481 108)

31 December 2019

Increase/ (decrease) in

years Increase/ (decrease)

in balances

Lease liabilities/Right-of-use assets + 1 year 241 140 Lease liabilities/Right-of-use assets - 1 year (395 145)

Impairment of non-financial assets

The Group has made significant investments in property plant and equipment construction in progress and intangible assets. These assets are tested for impairment when circumstances indicate there may be a potential impairment. Factors considered important which could trigger an impairment evaluation include the following: significant fall in market values significant underperformance relative to historical or projected future operating results significant changes in the use of assets or the strategy for the Group’s overall business including assets that are decided to be phased out or replaced and assets that are damaged or taken out of use significant negative industry or economic trends and significant cost overruns in the development of assets.

Estimating recoverable amounts of assets must in part be based on management’s evaluations including determining appropriate cash generating units estimates of future performance revenue generating capacity of the assets assumptions of the future market conditions and the success in marketing of new products and services. Changes in circumstances and in management’s evaluations and assumptions may give rise to impairment losses in the relevant periods. Additional information about loss on impairment of property plant and equipment construction in progress intangible assets and assets of disposal group classified as held for sale is disclosed in Note 27.

Private Joint Stock Company Kyivstar Notes to the Consolidated Financial Statements - 31 December 2020 (in thousands of Hryvnia)

32

7. Related party disclosure As at 31 December 2020 and 2019 income and expenses with related parties were as follows:

2020 2019

Immediate

parent

Entities under common

control Immediate

parent


control

Sales of goods and services - 189 230 - 645 139 Cost of materials traffic charges and other direct costs - (94 280) - (246 591)

Other operating expenses (38 240) (37 152) (38 178) (134 169) Other income - 879 - 1 844

Total (38 240) 58 677 (38 178) 266 223 During 2020 the Group sold UAH 628 thousand of property plant and equipment to an entity under common control (2019: UAH 1 267 thousand).

During 2020 Kyivstar did not provide interconnect services to VEON Wholesale Services B.V. the entity under common control. During 2019 2.9% of total revenue represents sales to VEON Wholesale Services B.V.

As at 31 December 2020 and 2019 balances with related parties were as follows:

2020 2019

Immediate

parent


control Immediate

parent


control

Trade and other receivables - 51 240 - 37 323 Trade and other payables (63 264) (24 188) (19 526) (22 948) Payables to shareholders (3 096 916) - (3 484 063) - Other current liabilities - (3 366) - (95 841)

Total (3 160 180) 23 686 (3 503 589) (81 466)

Transactions with related parties were on contractual terms.

Terms and conditions of transactions with related parties

Outstanding balances with related parties at the year-end are unsecured and settlement occurs in cash. Outstanding balances with related parties are interest free. There have been no financial guarantees issued in favor of the Group or received to/from any related party. For the years ended 31 December 2020 and 2019 the Group has not recorded any significant impairment of receivables due from the related parties.

Revenues and trade receivables

In 2020 the Group provided to foreign telecom operators being the Group’s related parties roaming and access to network services in the total amount of UAH 189 230 thousand (2019: UAH 645 139 thousand). The decrease in Interсonnect services is associated with the conclusion of direct contracts with other operators (previously agreements were conducted via VEON Wholesale Services B.V.).

The related trade receivables as at 31 December 2020 and 2019 due from related parties are non-interest bearing unsecured and are settled in the normal course of business.


33

7. Related party disclosure (continued)

Cost of materials traffic charges and other direct costs and trade payables

Cost of materials traffic charges and other direct costs included access to network roaming and interconnection services provided by entities under common control and other related parties.

Trade payables to entities under common control and other related parties comprise amounts due for access to network roaming and interconnection services. Trade payables to related parties are non-interest bearing and are settled in the normal course of business.

Other operating expenses

Other operating expenses included consultancy fees and external personnel services provided by the ultimate parent and entities under common control.

Settlements with shareholders

Settlements with shareholders comprise of dividends declared but not yet paid to shareholders as at 31 December 2020 and 2019.

Other current liabilities

Other current liabilities to entities under common control are mostly represented by intangment for the share in Golden Telecom LLC that was acquired by the Group. The liability was fully settled in 2020.

Compensation to management personnel

As at 31 December 2020 key management personnel consisted of 18 top executives of the Group (2019: 13 top executives).

For the years ended 31 December total compensation to key management personnel included in salaries and personnel costs comprised:

2020 2019 Short-term employee benefits 106 321 88 313 Accrual/reversal of long term incentive plan for management (4 598) (29 459) Total compensation to key management personnel 101 723 58 854

The long-term insentive plan for management was cancelled as at 31 December 2020.


34

8. Property plant and equipment The movement of property plant and equipment during 2020 is as follows:

Groups of property plant and equipment

Line code

Balance at the beginning of the year Addi-

tions in the year

Revaluation (upward +

downward -) Disposals in the

year Depreci-ation

charge for the year

Impair-ment loss

Other changes for the year

Balance at the end of the year

Including:

Received on lease Transferred on operating

lease

Cost or valuation

Accum. deprec’n

Cost or valua-tion

Accum. deprec'

n

Cost or valua-tion

Accum. deprec'n

Cost or valuation

Accum. deprec'n

Cost or valuation

Accum deprec'n

Cost or valua-tion

Accum deprec'n

Cost or valu-ation

Accum

deprec'n

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44 684 - - - - - - - - - - 44 684 - - - - - Investment property 105 - - - - - - - - - - - - - - - - - Capital costs of land improvement 110 - - - - - - - - - - - - - - - - -

Buildings constructions and transmission equipment *

120 5 059 466 1 378 437 1 281 266 - - 227 415 46 210 721 104 - - - 6 113 317 2 053 331 3 970 437 1 014 801 - -

Machinery and equipment 130 21 886 326 13 634 229 3 328 791 - - 597 576 577 196 1 919 488 28 011 - - 24 617 541 15 004 532 - - - -

Vehicles* 140 210 358 130 163 87 462 - - 114 402 109 806 55 678 - - - 183 418 76 035 162 676 62 129 - - Tools fittings and furniture 150 123 43 - - - - - 24 - - - 123 67 - - - -

Livestock 160 - - - - - - - - - - - - - - - - - Perennial plants 170 - - - - - - - - - - - - - - - - - Other fixed assets 180 44 381 7 590 6 866 - - - - 9 310 - - - 51 247 16 900 - - - - Library assets 190 - - - - - - - - - - - - - - - - - Non-current low-value items 200 - - - - - - - - - - - - - - - - -

Temporary buildings 210 - - - - - - - - - - - - - - - - - Natural resources 220 - - - - - - - - - - - - - - - - - Packaging 230 - - - - - - - - - - - - - - - - - Hire items 240 - - - - - - - - - - - - - - - - - Other non-current tangible assets 250 - - - - - - - - - - - - - - - - -

Total 260 27 245 338 15 150 462 4 704 385 - - 939 393 733 212 2 705 604 28 011 - - 31 010 330 17 150 865 4 133 113 1 076 930 - - * “Buildings constructions and transmission equipment” and “Vehicles” include right-of-use asset recognized in the result of IFRS 16 Leases implementation. Refer to Note 9.


35

8. Property plant and equipment (continued) The movement of property plant and equipment during 2019 is as follows:

Groups of property plant and

equipment Line code

Balance at the beginning of the year

Additions in the year



year Depreci-ation

charge for the year

Impair-ment loss



Including:

Received on lease Transferred on

operating lease

Cost or valuation

Accum. deprec’n

Cost or valua-tion

Accum. deprec'

n

Cost or valua-tion

Accum. deprec'n

Cost or valua-tion

Accum.

deprec'n

Cost or valuation

Accum deprec'n

Cost or valua-tion

Accum deprec'

n

Cost or

valu-ation

Accum deprec'

n

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44 684 - - - - - - - - - - 44 684 - - - - - Investment property 105 - - - - - - - - - - - - - - - - - Capital costs of land improvement 110 - - - - - - - - - - - - - - - - - Buildings constructions and transmission equipment **

120

4 069 226 833 943 1 231 800 - - 241 560 13 305 557 799 - - - 5 059 466 1 378 437 3 000 049 448 174 - - Machinery and equipment 130 19 533 668 12 716 276 2 989 628 - - 636 970 617 830 1 509 177 26 606 - - 21 886 326 13 634 229 - - - - Vehicles** 140 218 180 93 853 19 065 - - 26 887 22 880 59 190 - - - 210 358 130 163 80 277 24 099 - - Tools fittings and furniture 150 270 167 2 - - 149 149 25 - - - 123 43 - - - - Livestock 160 - - - - - - - - - - - - - - - - - Perennial plants 170 - - - - - - - - - - - - - - - - - Other fixed assets 180 21 551 1 241 22 848 - - 18 18 6 367 - - - 44 381 7 590 - - - - Library assets 190 - - - - - - - - - - - - - - - - - Non-current low-value items 200 - - - - - - - - - - - - - - - - - Temporary buildings 210 - - - - - - - - - - - - - - - - - Natural resources 220 - - - - - - - - - - - - - - - - - Packaging 230 - - - - - - - - - - - - - - - - - Hire items 240 - - - - - - - - - - - - - - - - - Other non-current tangible assets 250 - - - - - - - - - - - - - - - - - Total 260 23 887 579 13 645 480 4 263 343 - - 905 584 654 182 2 132 558 26 606 - - 27 245 338 15 150 462 3 080 326 472 273 - - * “Balance at the beginning of the year” include effect from the adoption of IFRS 16 Leases effective from 1 January 2019. Refer to Note 9. ** “Buildings constructions and transmission equipment” and “Vehicles” include right-of-use asset recognized in the result of IFRS 16 Leases implementation. Refer to Note 9.


36

8. Property plant and equipment (continued) Additions in the year are represented by transfers from CIP.

Net book value in 2020 was:

Net book value Land plots

Buildings constructions

and transmission equipment

Machinery and

equipment Vehicles

Tools fittings

and furniture

Other fixed

assets Total

At the beginning of period 44 684 3 681 029 8 252 097 80 195 80 36 791 12 094 876 At the end of period 44 684 4 059 986 9 613 009 107 383 56 34 347 13 859 465

Net book value in 2019 was:

Net book value Land plots

Buildings constructions

and transmission equipment

Machinery and

equipment Vehicles

Tools fittings

and furniture

Other fixed

assets Total

At the beginning of period 44 684 1 130 339 6 817 392 124 327 103 20 310 8 137 155 At the end of period 44 684 3 681 029 8 252 097 80 195 80 36 791 12 094 876

The group “Machinery and equipment” includes the following categories: local regional & trunk networks mobile telephone network and switches radio installations. The group “Buildings constructions and transmission equipment” are comprised of buildings and corporate administrative assets and right-of-use assets under IFRS 16.

Temporarily dismantled equipment continues to be depreciated over the estimated remaining useful life.

9. Right-of-use assets and lease liabilities The Group leases various buildings and land used to place the upderlying constructions and transmission equipment and vehicles. Rental contracts are typically made for fixed periods of 6 months to 7 years but may have extension options as described in Notes 5 6.

Until 31 December 2018 leases of property plant and equipment were classified as either finance leases or operating leases. From 1 January 2019 leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available for use by the Group.

Buildings constructions and

transmission equipment

Vehicles Total

Carrying amount at 1 January 2019 2 104 944 56 268 2 161 212

Additions 1 136 092 19 033 1 155 125 Disposals (227 959) - (227 959) Depreciation charge (461 202) (19 123) (480 325)

Carrying amount at 31 December 2019 2 551 875 56 178 2 608 053

Additions 1 193 751 84 013 1 277 764 Disposals (179 408) (998) (180 406) Depreciation charge (610 582) (38 646) (649 228)

Carrying amount at 31 December 2020 2 955 636 100 547 3 056 183

Amount of additions during 2020 includes amount of UAH 358 273 thousand due to lease term reassessment as result of triggering events identified.

Right-of use assets as at 31 December 2020 and 2019 are included in “Property plant and equipment” refer to Note 8.

The Group recognised lease liabilities as follows:

31 December

2020 31 December

2019

Short-term lease liabilities (Note 21) 796 730 710 221 Long-term lease liabilities (Note 21) 2 732 134 2 103 225

Total lease liabilities 3 528 864 2 813 446

Interest expense included in financial expenses of 2020 was UAH 394 387 thousand (2019: UAH 337 379 thousand). Expense relating to the short-term leases and to the contracts with non-identifiable assets are included in general and administrative expenses of 2020 in the amount of UAH 119 153 thousand (2019: UAH 188 067 thousand).

Total cash outflows for leases during 2020 amounted to UAH 738 899 thousand (2019: UAH 626 273 thousand).


37

10. Intangible assets The movement of intangible assets during 2020 is as follows:

Groups of intangible assets Line code

Balance at the beginning of the year Addi-tions

in the year

Revaluation (upward + downward -) Disposals in the year Amortisation

charges for the year

Impairment losses for the

year



Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Rights to use natural resources 010 - - - - - - - - - - - - - Rights to use property 020 - - - - - - - - - - - - - Rights for commercial signs 030 - - - - - - - - - - - - - Rights for the industrial property objects 040 - - - - - - - - - - - - - Copyright and allied rights 050 - - - - - - - - - - - - - 060 - - - - - - - - - - - - - Other intangible assets 070 13 306 477 5 144 050 1 371 617 - - 322 879 322 809 1 272 346 737 - - 14 355 215 6 094 324 Total 080 13 306 477 5 144 050 1 371 617 - - 322 879 322 809 1 272 346 737 - - 14 355 215 6 094 324 Goodwill 090 - - - - - - - - - - - - -

The movement of intangible assets during 2019 is as follows:



in the year




year



Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Rights to use natural resources 010 - - - - - - - - - - - - - Rights to use property 020 - - - - - - - - - - - - - Rights for commercial signs 030 - - - - - - - - - - - - - Rights for the industrial property objects 040 - - - - - - - - - - - - - Copyright and allied rights 050 - - - - - - - - - - - - - 060 - - - - - - - - - - - - - Other intangible assets 070 12 708 701 4 402 862 896 140 - - 298 364 296 235 1 027 576 9 847 - - 13 306 477 5 144 050 Total 080 12 708 701 4 402 862 896 140 - - 298 364 296 235 1 027 576 9 847 - - 13 306 477 5 144 050 Goodwill 090 - - - - - - - - - - - - -


38

10. Intangible assets (continued) NBV of intangible assets as 31 December 2020 and 2019 was UAH 8 260 891 thousand and UAH 8 162 427 thousand respectively.

The Group’s intangible assets are represented mainly by licences and network and billing software. The movement of intangible assets by group of assets is as follow:

Note

Licences Network and Billing

software Other

software Total

Carrying amount at 1 January 2019 6 845 759 1 223 624 236 456 8 305 839

Additions 123 167 471 853 301 120 896 140 Disposals - (1 829) (300) (2 129) Depreciation charge (566 819) (307 956) (152 801) (1 027 576) Impairment - - (9 847) (9 847)

Carrying amount at 31 December 2019 6 402 107 1 385 692 374 628 8 162 427

Additions 352 449 857 497 161 671 1 371 617 Disposals (2) (48) (20) (70) Depreciation charge (680 953) (376 427) (214 966) (1 272 346) Impairment - - (737) (737)

Carrying amount at 31 December 2020 6 073 601 1 866 714 320 576 8 260 891

The Group’s major licenses as at 31 December are as follows:

License # Coverage License Acquisition

date Expiration

date

Net book value as at

31 December 2020

Net book value as at 31

December 2019

ДЛ №000912 (#8665) National

Digital Mobile Radio IMT-2000 (UMTS) (i) Apr 2015 Mar 2030 2 422 446 2 684 332

#9446 National

Digital Mobile Radio IMT (Frequency range: 2520-2525/2640-2645 MHz) (ii) Mar 2018 Feb 2033 320 797 346 984

#9445 National


#9444 National


#9517 National

Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1725-1750/1820-1845 MHz) (iii) Jul 2018 Jun 2033 1 111 528 1 199 861

#9503 National

Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1770-1775/1865-1870 MHz) (iii) Jul 2018 Jun 2033 513 400 554 200

#9518 National

Digital Mobile Radio IMT-GSM-1800 (Frequency range: 1775-1780/1870-1875 MHz) (iii) Jul 2018 Jun 2033 755 000 815 000

#10160 National Digital Mobile Radio IMT - GSM-900 - E-GSM (iv) Jul 2020 Jul 2040 217 025 -

#10126 National Digital Mobile Radio - GSM-900 (iv) Jul 2020 Jul 2030 4 806 -

#10127 National Digital Mobile Radio - E-GSM (iv) Jul 2020 Jul 2030 33 484 -

#10252 National Digital Mobile Radio - GSM-900 (iv) Oct 2020 Oct 2030 18 037 -

#10253 National Digital Mobile Radio - E-GSM (iv) Oct 2020 Oct 2030 63 858 -

Total 6 041 051 6 228 449


39

10. Intangible assets (continued) (i) Based on the results of the auction in 2015 the Group received Licences to use the radio frequency band 1965-1980 / 2155-2170 MHz for services provision in the standard 3G («digital cellular radio Communication IMT-2000 (UMTS)»). On 1 April 2015 the Group paid for the respective Licenses. (ii) In January 2018 the National Commission for the Regulation of Communications and Informatisation (NCCIR) held an auction for the 15-year right to use of 4G licenses in the 2600 MHz band. Based on the results of the auction the Group received Licenses to use the radio frequency band for services provision in the standard 4G. (iii) In March 2018 the National Commission for the Regulation of Communications and Informatisation (NCCIR) held an auction for the 15-year right to use of 4G licenses in the 1800 MHz band. Based on the results of the auction the Group received Licenses to use the radio frequency band for services provision in the standard 4G. (iv) In March 2020 as part of the reframing process the Kyivstar received a 10-20-year license for using of 4G and 2G technologies on 888 8-895 0/933 8-940 0 MHz (6 2 х 2 MHz) freequences in 25 regions of Ukraine and a total bandwidth of 310 MHz. The licenses become active in July and October 2020.


40

11. Construction-in-progress Construction in progress for 2020 was as follows:



in the year




year



Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Capital construction 280 121 189 - 1 410 194 - - 609 - - - 1 344 301 - 186 473 - Purchase (manufacturing) of property plant and equipment 290 381 545 - 2 346 348 - - 13 705 - - 24 547 2 082 320 - 607 321 - Purchase (manufacturing) of other non-current tangible assets 300 - - - - - - - - - - - - - Purchase (manufacturing) of intangible assets 310 93 737 - 1 415 614 - - 1 482 - - - 1 371 617 - 136 252 - Purchase (growing) of long-term biological assets 320 - - - - - - - - - - - - - Other 330 - - - - - - - - - - - - - Total 340 596 471 - 5 172 156 - - 15 796 - - 24 547 4 798 238 - 930 046 -

Construction in progress for 2019 was as follows:



in the year




year



Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Capital construction 280 125 145 - 1 211 885 - - 719 - - - 1 215 122 - 121 189 - Purchase (manufacturing) of property plant and equipment 290 453 912 - 1 839 357 - - 2 038 - - 16 590 1 893 096 - 381 545 - Purchase (manufacturing) of other non-current tangible assets 300 - - - - - - - - - - - - - Purchase (manufacturing) of intangible assets 310 23 509 - 966 368 - - - - - - 896 140 - 93 737 - Purchase (growing) of long-term biological assets 320 - - - - - - - - - - - - - Other 330 - - - - - - - - - - - - - Total 340 602 566 - 4 017 610 - - 2 757 - - 16 590 4 004 358 - 596 471 - * “Other changes for the year” include movements between Construction-in-progress, Property plant and equipment, and Intangible assets (Note 8, 10).


41

12. Other non-current assets Other non-current assets as at 31 December are as follows:

2020 2019

Non-current contract assets arising from contract with customers (Note 15) 1 230 488 1 072 562 Prepayments for property plant and equipment 19 763 63 709 Prepayments for intangible assets 1 154 599

Total 1 251 405 1 136 870

13. Trade and other receivables Trade and other receivables consist of the following as at 31 December:

2020 2019

Trade receivables – subscribers 360 449 330 576 Trade receivables – interconnection and access to network 298 560 212 910 Trade receivables – roaming 150 715 280 123 Accounts receivable from sale of non-current assets 6 793 2 552 Trade receivables – dealers for pre-paid cards and packages 5 448 25 035 Accounts receivable for settlements on accrued income 1 610 4 999 Other receivables 22 063 36 245 Expected credit loss allowance (180 358) (168 787)

Total financial assets within trade and other receivables 665 280 723 653

Advances issued 91 836 74 653 Other settlements with budget 74 203 54 824 Expected credit loss allowance (3 856) (5 064)

Total 827 463 848 066

Financial trade and other receivables net of allowance for impairment as at 31 December are denominated in the following currencies:

2020 2019

UAH 361 943 315 908 EUR 204 928 264 898 USD 98 109 140 367 GBP 300 2 480

Total 665 280 723 653

As at 31 December 2020 and 2019 trade and other receivables are non-interest bearing and are settled in the normal course of business.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade and other receivables.

To measure the expected credit losses trade and other receivables have been grouped based on shared credit risk characteristics and the days past due.

The expected loss rates are based on the payment profiles of sales over a period of 18 month before each balance sheet date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.


42

13. Trade and Other Receivables (continued) The credit loss allowance for trade and other receivables is determined according to provision matrix presented in the table below. The provision matrix is based on the number of days that an asset is past due.

31 December 2020 31 December 2019

In % of gross value Loss rate

Gross carrying amount

Lifetime ECL

Loss rate

Gross carrying amount

Lifetime ECL

Trade and other receivables - current 5.76% 588 511 33 898 1.95% 613 814 11 950 - less than 30 days overdue 7.47% 95 228 7 110 9.90% 93 011 9 212 - 30 to 60 days overdue 22.92% 23 825 5 460 41.11% 23 471 9 649 - 61 to 90 days overdue 67.92% 8 494 5 769 38.42% 38 203 14 676 - 91 to 120 days overdue 80.85% 7 617 6 158 90.08% 6 463 5 822 - over 120 days overdue 100.00% 121 963 121 963 100.00% 117 478 117 478

Total trade and other receivables (gross carrying amount) 845 638 180 358 892 440 168 787

Credit loss allowance (180 358) (168 787)

Total trade and other receivables (carrying amount) 665 280 723 653

The following table explains the changes in the credit loss allowance for trade and other receivables under simplified ECL model between the beginning and the end of the annual period:

2020 2019

Allowance for credit losses on trade receivables at 1 January 168 787 163 668

New originated or purchased 85 348 71 362 Financial assets derecognised during the period (18 420) (19 847)

Total credit loss allowance charge in profit or loss for the period 66 928 51 515

Write-offs (57 044) (37 337) FX movements 1 687 (9 059)

Allowance for credit losses on trade receivables at 31 December 180 358 168 787

In 2020 bad debt expense in the amount of UAH 66 928 thousand (2019: UAH 51 515 thousand) is included in other operating expenses (Note 25). Accounts receivable with related parties are disclosed in Note 7.


43

14. Cash and cash equivalents Cash and cash equivalents consist of the following as at 31 December:

2020 2019

Cash at banks 1 146 678 225 970 Cash in transit 176 702 286 322 Short-term deposits 16 000 544 301

Total 1 339 380 1 056 593

As at 31 December cash at banks is denominated in the following currencies: 2020 2019

USD 661 981 11 863 UAH 374 451 212 257 EUR 106 877 1 362 GBP 3 355 473 RUR 14 15

Total 1 146 678 225 970

Cash in transit is denominated in UAH.

In 2020 cash at bank accounts earned interest at fixed rates varying from 0.1% to 10.0% per annum (2019: 0.1% to 19.2% per annum).

As at 31 December 2019 short-term deposits split by contractual maturity currency and interest rate earned is as follows:

2020 2019

Currency Maturity date UAH

thousands Interest rate p.a. UAH

thousands Interest rate

p.a.

UAH 31-60 days 16 000 6.0% 90 000 14.0% USD 31-60 days - - 454 301 1.9%

Total 16 000 544 301

15. Assets arising from Contracts with Customers The Group has recognised the following assets arising from contracts with customers:

31 December

2020 31 December

2019

Dealer commission (iv) 1 107 861 973 000 Connection costs (i) 90 350 99 171 Fixed line connections (iii) 21 350 19 621 Start packages and scratch-cards (ii) 13 156 15 268 Other assets 121 669 63 545

Total 1 354 386 1 170 605

Current part 123 898 98 043 Non-current part (Note 12) 1 230 488 1 072 562

(i) Capitalised connection costs mainly consist of costs of start packages activated by subscribers and cost of Wi-Fi routers;

(ii) Capitalised start packages and scratch-cards represent costs of start packages and scratch-cards sold to dealers but not yet activated by subscribers;

(iii) Capitalised fixed line connections consist of costs of last mile;

(iv) Capitalised dealer commission consist of costs of dealer’s commissions for new subscribers dealers’ fees for migration of contract and prepayment subscribers dealers’ fees for sales promotion commission for SME segment direct sales.


44

15. Assets arising from Contracts with Customers (continued) The movement in assets arising from contracts with customers is as follows:

Dealer

commission Connection

costs

Start packages

and scratch-

cards

Fixed line connect-

ions

Other deferred

costs Total As at 1 January 2019 861 091 110 200 16 359 16 107 61 878 1 065 635

Deferred during the year 472 036 49 763 42 279 8 333 136 639 709 050 Released to profit and loss (360 127) (60 792) (43 370) (4 819) (134 972) (604 080)

As at 31 December 2019 973 000 99 171 15 268 19 621 63 545 1 170 605

Deferred during the year 463 095 36 854 30 741 9 658 261 913 802 261 Released to profit and loss (328 234) (45 675) (32 853) (7 929) (203 789) (618 480)

As at 31 December 2020 1 107 861 90 350 13 156 21 350 121 669 1 354 386

16. Statutory capital Registered (share) capital

As at 31 December 2020 the authorised and fully paid share capital comprised 13 095 262 ordinary shares (2019: 17 742 389 ordinary shares) at a par value of UAH 50 each. The nominal registered amount of the Company’s issued share capital corresponds to the amount reported in these financial statements. Decrease of the number of treasury shares for 4 647 127 during 2020 was in result of treasury shares cancellation which is disclosed below.

Treasury shares

On 2 December 2019 the Company’s shareholders approved a resolution to cancel 4 647 127 of the Company’s Treasury shares. The process was completed on 3 November 2020 and the impact on Statement of Shareholders’ Equity in 2020 is as follows:

2020 Registered (share) capital (232 356) Retained earnings (accumulated deficit) (138 042) Withdrawn capital 370 398

Dividends declared

In 2020 the Group declared dividends in the amount of UAH 12 600 259 thousand or UAH 962.20 per share (2019: UAH 11 986 879 thousand or UAH 915.36 per share). As at 31 December 2020 the total amount of unpaid dividends is UAH 3 096 916 thousand (2019: UAH 3 484 063 thousand).

As at 31 December 2020 and 2019 additional capital includes share premium of UAH 102 338 thousand.


45

17. Borrowings The carrying amounts and fair values of borrowings are as follows:

Carrying amounts Fair values 2020 2019 2020 2019

Long-term bank borrowings 3 870 638 - 3 871 930 - Short-term bank borrowings 117 375 - 117 561 - Interest accrued 23 041 - 23 041 -

Total 4 011 054 - 4 012 532 -

As at 31 December 2020 the Group’s borrowings split by contractual maturity including interest to be repaid during the period of validity of agreements currency and interest rate is as follows:

2020

Currency Maturity date Principal

(in UAH thousands) Interest

(in UAH thousands) Interest rate p.a.

UAH 0-30 days - 33 930 9.0% - 11.0% UAH 31-60 days 120 000 30 055 9.0% - 11.0% UAH 3 to 12 months - 325 869 9.0% - 11.0% UAH 12 months to 3 years 2 480 000 768 693 9.0% - 11.0% UAH 3 to 5 years 1 400 000 235 747 9.0% - 11.0%

Total 4 000 000 1 394 294

The fair values are based on cash flows discounted using a rate based on the borrowing rate of 7.7% for facilities with maturity up to one year 10.32% for facilities with maturity between one and three years 11.93% for facilities with maturity between three and five years and are within level 2 of the fair value hierarchy.

Compliance with covenants. The Group is subject to certain covenants related to its borrowings. The Group was in compliance with covenants at 31 December 2020 (no borrowings 31 December 2019).

18. Trade and other payables As at 31 December trade and other payables consist of the following:

2020 2019

Equipment and construction works 452 105 300 471 Software 239 194 110 487 Technical support services 222 312 193 709 Professional and consultancy fees 106 156 51 718 Roaming 105 278 198 207 Dealers 86 774 76 434 Advertising and promotion 70 960 84 039 Content services 40 030 29 542 Rent 25 264 25 863 Inventory 21 805 12 193 Interconnection 17 637 24 936 Other payables 55 235 41 113 Total financial payables within trade and other payables at amortised cost 1 442 750 1 148 712

Payables for professional and consultancy fees and for interconnection are mostly due to related parties (refer to Note 7) mainly denominated in foreign currencies.

As at 31 December trade and other payables are denominated in the following currencies:

2020 2019

UAH 854 113 744 633 USD 497 973 222 255 EUR 81 789 172 754 GBP 6 942 7 249 RUR 1 933 1 821 Total 1 442 750 1 148 712

As at 31 December 2020 and 2019 trade and other payables are non-interest bearing and are settled in the normal course of business.


46

19. Taxes payable other than income tax Taxes payable other than income tax consist of the following as at 31 December:

2020 2019

VAT payable 227 639 172 891 Frequency fee 80 095 82 558 Pension fund duty for mobile services 72 114 70 071 Miscellaneous other taxes 279 1 463

Total 380 127 326 983

20. Provisions The movement in provisions is as follows:

Decommi-

ssioning Legal cases

and penalties

Long-terms incentive to

management Other Total

As at 1 January 2019 81 233 90 412 34 057 142 840 348 542

Arising during the year 8 852 55 852 2 546 - 67 250 Utilised (1 142) - - - (1 142) Unused amounts reversed - (77 115) (32 005) (22 465) (131 585) Reclassified to liability on corporate profit tax - - - (83 595) (83 595) Change in estimates 113 270 - - - 113 270 Discount rate adjustment 6 741 - - - 6 741

As at 31 December 2019 208 954 69 149 4 598 36 780 319 481 Arising during the year 12 208 - - 1 863 14 071 Utilised (2 263) - - - (2 263) Unused amounts reversed - (3 705) (4 598) (3 766) (12 069) Change in estimates (49 409) - - - (49 409) Discount rate adjustment 10 683 - - - 10 683

As at 31 December 2020 180 173 65 444 - 34 877 280 494

As at 31 December 2019 208 954 69 149 4 598 36 780 319 481

Current - 69 149 - 36 780 105 929 Non-current 208 954 - 4 598 - 213 552

As at 31 December 2020 180 173 65 444 - 34 877 280 494

Current - 65 444 - 34 877 100 321 Non-current 180 173 - - - 180 173

Decommissioning liabilities

As at 31 December 2020 the Group recognised UAH 180 173 thousand (2019: UAH 208 954 thousand) of provision for decommissioning in respect of future dismantling costs related to its network equipment installed on leased sites. Provision for decommissioning has decreased in 2020 due to the changes in input assumptions as follows:

Assumptions used as at

31 December 2020 Assumptions used as at

31 December 2019 Cost of dismantling per site UAH 83 000 79 265 Discount rate 11.2% 10.3% Inflation rate 5.0% 5.0%

As at 31 December 2020 the 1% decrease in the discount rate would increase the provision by UAH 56 084 thousand. As at 31 December 2019 the 1% decrease in the discount rate would increase the provision by UAH 65 644 thousand.


47

21. Other liabilities As at 31 December other current liabilities consist of the following:

2020 2019

Bonuses accrued 284 448 254 384 Guarantee payments received 105 813 44 321 Accrual for unused vacations 89 604 94 994 Other 6 929 18 560

Total non-financial liabilities 486 794 412 259

Lease liability (Note 9) 796 730 710 221 Deferred payment for investment in subsidiaries (Note 7) 3 366 95 841

Total financial liabilities at AC 800 096 806 062

Total 1 286 890 1 218 321

As at 31 December 2020 and 2019 other current liabilities are non-interest bearing and denominated in UAH.

As at 31 December 2020 other non-current liabilities include UAH 2 732 134 thousand representing non-current part of financial lease liability denominated in UAH (2019: UAH 2 103 225 thousand) UAH 183 836 thousand of non-current part of contract liabilities as disclosed below (2019: UAH 168 384 thousand) and UAH 18 841 thousand representing non-current part of deffered payments for intangible assets (2019: UAH 15 191 thousand).

22. Liabilities arising from Contracts with Customers As at 31 December contract liabilities consist of the following:

2020 2019

Contract liabilities – Deferred revenue 911 681 819 168 Contract liabilities – Advances received from customers 742 917 673 221 Contract liabilities – Other advances received 1 761 19 502

Total 1 656 359 1 511 891

As at 31 December 2020 advances received from customers amounting to UAH 712 593 thousand are financial liabilities at AC (2019: UAH 644 440 thousand) and represent prepaid credit balances that are refundable to the customers or can be used by customers as currency to purchase goods or services from other suppliers.

As at 31 December contract liabilities – deferred revenue consists of the following:

2020 2019

Contract liabilities – dealers and customers (i) 641 038 555 451 Contract liabilities – connection and one-time subscription fees mobile (ii) 252 829 248 600 Contract liabilities – connection fees fixed (iii) 17 814 15 117

Total 911 681 819 168 Contract liabilities current 727 845 650 784 Contract liabilities non-current 183 836 168 384

(i) Contract liabilities – dealers – represents deferred revenue from pre-paid cards which were sold by dealers but have not yet been activated by customers. Contract liabilities – dealers are recognised in the statement of financial position until the pre-paid cards have been activated by customers or the pre-paid card has expired. Contract liabilities – customers – mainly consists of deferred revenue from unused time on pre-paid cards which were activated by customers. Contract liabilities – customers is recognised as revenue in the statement of comprehensive income on the basis of actual mobile communication services usage by customers;

(ii) Contract liabilities – connection and one-time subscription fees mobile – mainly consist of fees for initial connection to the network and one-off payments for subscription to additional services. Deferred connection and subscription fees are recognised in the statement of comprehensive income over the periods that the fees are earned within an overall service agreement with a customer;

(iii) Contract liabilities – connection fees fixed – consist of fees for initial connection to the fixed network. Contract liabilities – connection fees are recognised in the statement of comprehensive income over the periods that the fees are earned within an overall service agreement with a customer.


48

22. Liabilities arising from Contracts with Customers (continued) The movements in contract liabilities are as follows:

Dealers and subscribers

Connection and one-time

subscription fees mobile

Connection fees fixed

Customer loyalty

programs Total

As at 1 January 2019 465 592 254 431 10 977 283 731 283

Deferred during the year 107 635 103 235 6 190 - 217 060 Released to profit and loss (17 776) (109 066) (2 050) (283) (129 175)

As at 31 December 2019 555 451 248 600 15 117 - 819 168

Deferred during the year 100 264 99 031 5 323 - 204 618 Released to profit and loss (14 677) (94 802) (2 626) - (112 105)

As at 31 December 2020 641 038 252 829 17 814 - 911 681

23. Revenue

2020 2019

Periodic fees 16 500 872 14 019 436 Interconnect fees 2 905 465 2 518 216 Value added services 1 973 985 1 984 328 Air time charges 1 274 276 1 238 959 FTTB internet 1 038 194 863 372 Roaming (subscribers) 374 373 752 557 Fixed lines 502 541 441 778 Roaming and access to network 149 264 166 158 Connection and one-time subscription fees 94 802 109 066 Customer equipment sales 9 257 11 472 Other revenue 218 918 169 581

Total 25 041 947 22 274 923

Increase in Revenues from Periodic fees mainly represent increase in subscription tariffs and shifts to new tariff plans with obligatory regular payments. Increase of Revenues from Interconnect fees was mainly caused by higher tariffs for international and national interconnect between operators higher international traffic compensated by effect of foreign exchange differences in the result of weakening of Ukrainian hryvnia during 2020. Increase in Revenues from FTTB internet mainly represent increase in number of subscribers and shifts to new tariff plans with obligatory regular payments. Decrease in Revenue from Roaming represent impact on customers’ restrictions to cross-border travel as a result of COVID-19. More details on the Group’s services are presented in Note 5.

24. Other operating income

2020 2019

Foreign exchange gain 63 024 13 575 Rent income 74 046 71 163 Data service income 29 359 17 122 Agent fee 17 513 - HUB service income 6 750 16 379 Other income 4 855 12 613

Total 195 547 130 852

Foreign exchange gain in 2020 (2019: loss Note 25) mainly represent foreign exchange gain on deposits in currencies other than Ukrainian hryvnia caused by weakening of Ukrainian hryvnia against these currencies.


49

25. Operating expenses 2020 2019

Cost of materials and services 161 294 111 271 Material expenses 161 294 111 271 Salaries and wages 1 114 526 962 941 Bonuses to employees 428 719 360 827 Other staff costs 166 003 95 666 Payroll 1 709 248 1 419 434

Social payments 312 569 244 057

Depreciation/amortisation 3 979 062 3 160 134 Interconnection 1 207 846 1 095 323 Repair and maintenance 1 098 601 1 056 693 Freequency fees 975 900 990 613 Marketing and sales commission 642 540 811 900 Electricity 633 332 635 416 Advertising 325 733 283 018 License and research fees 258 048 191 175 Roaming 213 955 340 035 Consultancy fees and external personnel 148 592 218 185 Outsourced services 113 222 204 614 Costs for using telephone lines 71 924 64 918 Bad debts 66 928 51 515 Local taxes and non-reimbursable VAT 66 326 56 662 Access to network 58 334 29 051 Short-term leases of building land and equipment 47 229 123 149 Materials and supplies 44 653 46 054 Postage, freight, distribution and telecommunication 25 068 12 493 Insurance 14 266 5 038 Business trip expenses 8 096 46 865 Bank charges 1 469 8 298 Foreign exchange loss - 510 313 Other operating expenses 43 066 21 628 Other operating expenses 6 065 128 6 802 956

Total 12 227 301 11 737 852 Cost of sales of goods works and services 8 506 957 7 753 253 Administrative expenses 1 686 913 1 423 025 Selling expenses 1 967 636 1 956 401 Other operating expenses 65 795 605 173 Total 12 227 301 11 737 852

The average number of employees of the Group in 2020 was 3 698 (2019: 3 027). Foreign exchange loss in 2019 mainly represent foreign exchange loss on deposits in currencies other than Ukrainian hryvnia caused by strengthening of Ukrainian hryvnia against these currencies.

26. Finance income and expenses 2020 2019

Interest income 50 022 332 973 Finance income 50 022 332 973 Interest expenses on lease (394 387) (337 379) Interest expenses on bank loans (23 229) 0 Provision for assets retirement obligations: unwinding of present value discount (10 683) (6 741) Other finance expenses (1 527) (625) Finance expenses (429 826) (344 745)

Total (379 804) (11 772)


50

27. Other income and expenses 2020 2019

Income form write-off of account payables 27 146 - Gain on disposal of property plant and equipment construction in progress intangible assets and assets of disposal group classified as held for sale 10 812 26 007 Reversal of impairment loss from other financial assets 9 575 - Net gain on lease termination - 546 Other income 2 200 1 503 Other income 49 733 28 056 Write-off of property plant and equipment construction in progress intangible assets and assets of disposal group classified as held for sale (43 022) (14 801) Loss on impairment of property plant and equipment construction in progress intangible assets and assets of disposal group classified as held for sale (30 677) (53 615) Contributions and donations (30 342) (1 924) Loss from termination of lease liabilities and right of use (7 229) - Other expenses (617) (1 609) Other expenses (111 887) (71 949)

Total (62 154) (43 893)

In 2020 the Group recognised impairment losses on property plant and equipment construction in progress intangible assets and assets of disposal group classified as held for sale in the amount of UAH 30 677 thousand (2019: UAH 53 615 thousand) based on internal indications of impairment for various individual components of network equipment as the Group did not plan to use this equipment in future. Assets identified as no longer in use were written down to their recoverable amounts which were based on value in use determined for individual assets usually zero.

28. Income tax The Group's profits are subject to corporate profit tax in Ukraine only.

The major components of income tax expense for the years ended 31 December are: 2020 2019

Current income tax: Current income tax charge 2 203 939 1 880 238 Adjustments of current income tax related to prior periods (1 945) (23 347) Deferred tax: Relating to origination and reversal of temporary differences 44 188 (182 787)

Total 2 246 182 1 674 104

Reconciliations between tax expense and the product of accounting profit multiplied by the tax rate for the years ended 31 December are as follows:

2020 2019 Accounting profit before tax 12 568 235 10 612 258 Income tax at actual rate (18%) 2 262 282 1 910 206 Non - taxable income - (8 172) Non - deductible expenses for tax purposes 15 975 25 490 Change of approach in temporary differences recognition (30 130) (230 073) Adjustments recognised in the period for current tax of prior periods (1 945) (23 347)

Total 2 246 182 1 674 104


51

28. Income tax (continued) Deferred tax assets and liabilities relate to the following items in 2020:

31 December 2019

Recognised in profit and loss

31 December 2020

Deferred tax assets / (liability) : Property plant and equipment (i) 234 350 (41 976) 192 374 Intangible assets (i) 68 848 (10 343) 58 505 Trade and other receivables 31 979 1 507 33 486 Assets arising from contracts with customers (ii) (46 004) 21 072 (24 932) Employee benefit liability (ii) 6 057 29 6 086 Provisions (ii) 107 954 (14 477) 93 477 Accumulated tax losses (iii) 56 063 (56 063) - Total 459 247 (100 251) 358 996

Provision for deferred tax asset (56 063) 56 063 - Net deferred tax asset / (liability) 403 184 (44 188) 358 996

Deferred tax assets and liabilities relate to the following items in 2019:

1 January 2019

Recognised in profit and loss

31 December 2019

Deferred tax assets / (liability) : Property plant and equipment (i) 180 876 53 474 234 350 Intangible assets (i) 58 805 10 043 68 848 Trade and other receivables - 31 979 31 979 Other current liabilities (ii) 19 (19) - Assets arising from contracts with customers (ii) (84 504) 38 500 (46 004) Employee benefit liability (ii) 9 521 (3 464) 6 057 Provisions (ii) 55 680 52 274 107 954 Accumulated tax losses (iii) 56 063 - 56 063 Total 276 460 182 787 459 247

Provision for deferred tax asset (56 063) - (56 063) Net deferred tax asset / (liability) 220 397 182 787 403 184

The nature of the temporary differences is as follows:

(i) For property plant and equipment intangible assets – differences arise mainly due to different useful lives and impairment estimation; differences in capitalisation principles;

(ii) For assets arising from contracts with customers contract liabilities employee benefit liability other current liabilities provisions– differences arise due to different period of expenses recognition in financial and tax accounting as well as due to the differences in measurement and recognition principles;

(iii) In 2014 the Group recognised deferred tax assets of UAH 56 063 thousand on accumulated tax losses inherited from ‘Golden Telecom LLC’ (“GT”). In 2015 the Group recognised provision for deferred tax assets of UAH 56 063 thousand on accumulated tax losses inherited from LLC "Golden Telecom" (“GT”). As of 31 December 2020 DTA on GT tax losses can no longer be recovered thus the Group wrote-off such DTA on GT tax losses due to expiry. The Group can no longer adjust CPT return for 2015 by including such GT tax loss to deductible expenses as a result of statutory 1095 days limitation expiration.

As at 31 December 2020 the Group has payable position on settlements with the budget amounted to UAH 653 515 thousand (2019: UAH 618 819 thousand) which was classified as a current liabilities.

It is expected that all tax differences except those arising on property plant and equipment intangible assets and assets arising from contracts with customers will be utilized within the next accounting period.


52

29. Commitments and contingencies (i) Estimation uncertainty, related to tax risks and uncertain tax positions

Ukrainian legislation and regulations regarding taxation and other operational matters including currency exchange control and custom regulations continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations by local regional and national authorities and other governmental bodies. Instances of inconsistent interpretations are not unusual.

Uncertain tax positions are recognized when it is probable that a tax position will not be sustained. Management performs the assessment related to the uncertain tax positions based on their interpretations of the relevant tax legislation. Management usually involves external legal advisors and forms the formal position papers for all significant cases to maintain their position.

For most matters concluded upon by management at the reporting date the related ris that certain tax positions taken by the Group would not be sustained if challenged by the tax authorities was assessed as remote. For those matters where the Group assesses risks as probable and possible the respective provisions were accrued and disclosures were reflected in these consolidated financial statements based on management’s best estimate.

The tax authorities can perform inspections for the financial period of three calendar years preceding the year of the inspection. Under certain circumstances reviews may cover longer periods. The resolution of uncertain tax positions is not always within the control of the Group and it is often dependent on the efficiency of the legal processes. Issues can and often do take many years to resolve.

(ii) Legal matters

In the ordinary course of business the Group is subject to legal actions and complaints. Where the risk of outflow of resources is probable the Group has accrued provisions based on management’s best estimate. Management believes that the ultimate liability arising from unasserted claims and complaints if any will not have an adverse effect on the Group’s consolidated financial position or the results of its future operations in excess of provisions that have been made in these consolidated financial statements.

(iii) Other capital and purchase of services commitments

As at 31 December 2020 the Group had outstanding commitments in respect of purchase and construction of property plant and equipment in the amount of UAH 647 915 thousand (2019: UAH 748 054 thousand). Increase from prior year represent commitments on new arrangements based on plans of network extension.

As at 31 December 2020 the Group had outstanding commitments related to purchases of intangible assets in the amount of UAH 69 867 thousand (2019: UAH 142 504 thousand).

As at 31 December 2020 the Group had outstanding commitments related to purchases of services in the amount of UAH 858 673 thousand (2019: UAH 746 570 thousand).

(iv) Transfer pricing

Ukrainian transfer pricing rules were amended during 2020 compared to 2019; in particular by introducing the ‘business purpose’ concept and introducing three-level transfer pricing documentation. At the same time the value criteria for recognition of controlled transactions have remained unchanged since 2017. Transactions are considered as controlled transactions for the transfer pricing purposes if the volume of all transactions with the same counterparty exceeds UAH 10 million net of indirect taxes provided that the total annual income of the taxpayer exceeds UAH 150 million net of indirect taxes. The deadline for submitting the report on controlled transactions is 1 October of the year following the reporting one. The amended Tax Code of Ukraine effective from 1 January 2018 extends the deadline for preparation of transfer pricing documentation. As such tax authorities may request transfer pricing documentation from taxpayers to support the arm's length basis of respective transactions starting from 1 October of the year following the calendar year in which those controlled transactions were conducted.

Management believes that the Group pricing policy is on the arm's length basis and all transactions are performed in line with the ‘business purpose’ concept as the Group has implemented relevant internal controls to ensure compliance with the transfer pricing legislation.

Given that the practice of implementation of the new transfer pricing rules in Ukraine has not yet developed the impact of any challenge of the Group transfer prices by respective authorities cannot be reliably estimated.

30. Fair value of financial instruments The management assessed that as at 31 December 2020 and 2019 fair value of cash and short-term deposits trade and other receivables other current financial assets other non-current financial liabilities trade and other payables approximates their carrying amounts largely due to the short-term maturities of these instruments and its estimate is based on the cash flows discounted at the rates determined under Level 3 of the fair value hierarchy with the exception of cash in banks for which Level 1 rates were used. For fair values of borrowings please refer to Note 17.


53

31. Financial instruments and risk management The Group’s principal financial instruments comprise cash and cash equivalents and other current financial assets. The Group has various other financial instruments such as trade payables and trade receivables prepaid credit balances that are refundable to the customers or can be used as currency to purchase items from other suppliers which arise directly from its operations.

It is the Group’s policy not to trade with financial instruments. The Group is exposed to market risk credit risk and liquidity risk.

The Group’s overall risk management program focuses on the unpredictability and inefficiency of the Ukrainian financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group’s senior management oversees the management of these risks and financial risk-taking activities are governed by appropriate policies and procedures so that financial risks are identified measured and managed in accordance with the Group policies.

The policies for managing each of these risks are summarised below. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk currency risk and other price risk. The Group does not have significant exposure to interest rate risk as it normally borrows at fixed rates. Neither it has exposure to other price risk.

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when the Group’s trade receivables and trade payables are denominated in foreign currencies) and financing activities (when interest-bearing borrowings are denominated in foreign currencies).

The exchange rates for foreign currencies in which the Group’s financial assets and liabilities were denominated against Ukrainian hryvnia as declared by the National Bank of Ukraine as at the dates and periods stated are as follows:

USD EUR

1 January 2019 27.688 31.714 Average for 2019 25.837 28.941 31 December 2019 23.686 26.422 Average for 2020 26.964 30.801 31 December 2020 28.275 34.740

The following tables demonstrate the sensitivity to a reasonably possible change in the corresponding exchange rates with all other variables held constant of the Group’s profit before tax (due to the changes in the fair value of monetary assets and liabilities).

The sensitivity analyses have been prepared on the basis that the proportion of financial instruments in foreign currencies is constant at 31 December 2020 and 2019.

2020

Increase/ (decrease)

in %

Increase/ (decrease) of

profit before tax


retained earnings

Change in USD exchange rate +10.00% 26 441 21 682 Change in the EUR exchange rate +10.00% 24 243 19 879 Change in the USD exchange rate -1.00% (2 644) (2 168) Change in the EUR exchange rate -1.00% (2 424) (1 988)

2019

Increase/ (decrease)

in %


profit before tax


retained earnings

Change in USD exchange rate +10.00% 38 923 31 917 Change in the EUR exchange rate +10.00% 10 029 8 224 Change in the USD exchange rate -1.00% (3 892) (3 191) Change in the EUR exchange rate -1.00% (1 003) (822)


54

31. Financial instruments and risk management (continued) Liquidity risk

The Group analyses the ageing of its assets and the maturity of its liabilities and plans its liquidity depending on the expected repayment of various instruments. The Group’s short-term and long-term liquidity needs are funded largely through cash flow from operating activities and bank borrowings.

The table below shows liabilities at 31 December 2020 by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows including gross lease obligations (before deducting future finance charges). Such undiscounted cash flows differ from the amount included in the consolidated statement of financial position because the consolidated statement of financial position amount is based on discounted cash flows. The maturity analysis of financial liabilities at 31 December 2020 is as follows:

Demand and less

than 3 months

From 3 to 12

months

From 12 months to 5 years

Over 5 years

Total

Bank borrowings 183 985 325 869 4 884 440 - 5 394 294 Lease liabilities 216 118 643 523 3 187 659 566 761 4 614 061 Dividends payable 3 096 916 - - - 3 096 916 Trade and other payables 1 442 750 - - - 1 442 750 Advances received from customers 712 593 - - - 712 593 Other financial liabilities 3 366 - - - 3 366

Total 5 655 728 969 392 8 072 099 566 761 15 263 980

The maturity analysis of financial liabilities at 31 December 2019 is as follows:

Demand and less

than 3 months

From 3 to 12

months

From 12 months to 5 years

Over 5 years

Total

Lease liabilities 192 310 543 451 2 580 066 573 369 3 889 196 Dividends payable 3 484 063 - - - 3 484 063 Trade and other payables 1 148 712 - - - 1 148 712 Advances received from customers 644 440 - - - 644 440 Other financial liabilities 95 841 - - - 95 841

Total 5 565 366 543 451 2 580 066 573 369 9 262 252

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities including deposits with banks and financial institutions foreign exchange transactions and other financial instruments.

Financial instruments which potentially expose the Group to significant concentrations of credit risk consist principally of cash in bank short-term deposits and trade and other receivables.

The Group’s maximum credit risk exposure at 31 December comprises:

2020 2019

Cash and cash equivalents (except for cash in hand) 1 339 380 1 056 593 Trade and other receivables 665 280 723 653 Other current assets 477 394

Total 2 005 137 1 780 640 The Group’s cash and deposits are primarily held in major reputable banks located in Ukraine. As at 31 December 2020 69% of cash and cash equivalents were held in one bank (2019: 70% in one bank). Analysis by credit quality of cash and cash equivalents based on Fitch’s ratings as at 31 December is as follows:

2020 2019

- B rated 622 298 - B- rated 930 554 736 153 - Unrated – Other Ukrainian banks 408 204 320 142

Total 1 339 380 1 056 593


55

31. Financial instruments and risk management (continued) Credit risk (continued)

For cash and cash equivalents the Group assessed ECL based on the Fitch’s rating for rated banks and based on the sovereign rating of Ukraine defined by Fitch as “B” as of 31 December 2020 for non-rated banks (2019: rating of Ukraine defined by Fitch as “B”). Based on this assessment the Group concluded that the identified impairment loss was immaterial.

Accounts receivable are presented net of allowances. The Group does not require collateral for trade receivables. As at 31 December 2020 part of trade receivables are due from entities under common control totaling to 7 2% (2019: 10.7%) and due from other related parties totalling to zero (2019: zero).

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed for all customers requiring credit over a certain amount. Credit risk arising from financial transactions is reduced through diversification through accepting counterparties with high credit ratings only and through defining limits on aggregated credit exposure towards each counterparty. The Group’s credit risk exposure is monitored and analysed on a case-by-case basis and the Group’s management believes that credit risk is appropriately reflected in impairment allowances recognised against assets.

32. Reconciliation of liabilities arising from financing activities The table below sets out an analysis of liabilities from financing activities and the movements in the Group’s liabilities from financing activities for each of the periods presented. The items of these liabilities are those that are reported as financing in the consolidated statement of cash flows:

Borrowings Dividends

payable Lease

Liabilities Total

Liabilities from financing activities at 1 January 2019 - 3 730 603 2 161 323 5 891 926

Cash flows Payment of dividends - (12 233 420) - (12 233 420) Loan drawdowns - - - - Lease principal repayments - - (291 195) (291 195) Interests repayments (335 078) (335 078) Non-cash changes Dividends declared - 11 986 880 - 11 986 880 Interest accrual - - 337 379 337 379 Additions - - 1 155 125 1 155 125 Foreign exchange adjustments - - (6 382) (6 382) Disposals - - (207 726) (207 726)

Liabilities from financing activities at 31 December 2019 - 3 484 063 2 813 446 6 297 509

Cash flows Payment of dividends - (12 987 406) - (12 987 406) Loan drawdowns 3 988 013 - - 3 988 013 Lease principal repayments - - (390 592) (390 592) Interests repayments (397 372) (397 372) Non-cash changes Dividends declared - 12 600 259 - 12 600 259 Interest accrual 23 041 - 394 387 417 428 Additions - - 1 277 764 1 277 764 Foreign exchange adjustments - - 14 723 14 723 Disposals - - (183 492) (183 492)

Liabilities from financing activities at 31 December 2020 4 011 054 3 096 916 3 528 864 10 636 834


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33. Management of Capital The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders return capital to shareholders issue new shares or sell assets to reduce debt. The Group has established certain financial targets and coverage ratios that it monitors on a quarterly and annual basis and may adjust its capital management policies and targets following changes of its operating environment market sentiment or its development strategy. Management is still assessing their optimum capital structure. The Group considers its net debt and equity as its primary capital sources. Its net debt comprises long-term and short-term borrowings adjusted for the amount of cash and cash equivalents and short-term deposits over 3 months (if any). The amount of capital that the Group managed as of 31 December 2020 was UAH 14 079 950 thousand (2019: UAH 12 568 627 thousand).

34. Events after the reporting period The following non-adjusting events were identified: As from 1 January 2021 to the date of the issue of these consolidated financial statements April 2021 there were repayments of dividends for the amount of UAH 3 096 916 thousand.

As at 29 January 2021 the Group received a bank loan from OTP bank amounting to UAH 250 000 thousand at 10.15% per annum for 3 year-period. As at 8 February 2021 the Group has paid out UAH 120 000 thousand of loan outstanding to Alfa-Bank. In March 2021, the Group has signed a 3-year general purpose loan facility agreement with City Bank for the total amount of UAH 1 350 000 thousands, with an interest rate and maturity to be determined for each individual tranche on interest determination date(-s). As at the date of these consolidated financial statements issue, the Group has not drawn the facility.


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35. Supplementary notes (non-IFRS disclosures)

Codes Date (year month date) 2020 12 31 Company: Private Joint Stock Company “Kyivstar” EDRPOU 21673832 Territory: Kyiv Shevchenkivsky district КОАТUU 8038900000 State power authority: - SPODU Organisational and legal form of economic activity: Joint Stock Company KOPFG 230 Type of economic activity: Activities in the field of wireless telecommunications КVЕD 61.20 Measurement unit: thousands of Hryvnia no decimal point

Notes to the Annual Financial Statements for the year ended 31 December 2020

Form 5 DKUD code 1801001 І. Intangible assets


Balance at the beginning of the year Additions in

the year




year



Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

Cost or valuation

Accum. amortisation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Rights to use natural resources 010 - - - - - - - - - - - - -

Rights to use property 020 - - - - - - - - - - - - -

Rights for commercial signs 030 - - - - - - - - - - - - - Rights for the industrial property objects 040

- - - - - - - - - - - - -

Copyright and allied rights 050 - - - - - - - - - - - - -

060 - - - - - - - - - - - - - Other intangible assets 070 13 306 477 5 144 050 1 371 617 - - 322 879 322 809 1 272 346 737 - - 14 355 215 6 094 324 Total 080 13 306 477 5 144 050 1 371 617 - - 322 879 322 809 1 272 346 737 - - 14 355 215 6 094 324 Goodwill 090 - - - - - - - - - - - - -

Item Line code Amount 1 2 3

From line 080 col. 14 cost of intangible assets with restricted ownership rights 081 - cost of pledged intangible assets 082 - cost of intangible assets created in-house 083 - From line 080 col. 5 cost of intangible assets received for targeted financing 084 - From line 080 col. 15 accumulated amortisation of intangible assets with restricted ownership rights 085 -


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Notes to the Annual Financial Statements for the year ended 31 December 2020 Form 5

(continued)

II. Property plant and equipment

Groups of property plant and

equipment Line code

Balance at the beginning of the year

Additions in the year



year Depreciation charge

for the year

Impair-ment loss



Including:

Received on lease Transferred on operating

lease

Cost or valuation

Accum deprec'n

Cost or valuation

Accum. deprec'n

Cost or valuation

Accum. deprec'n

Cost or valuation

Accum. deprec'n

Cost or valuation

Accum deprec'n

Cost or valuation

Accum deprec'n

Cost or

valu-ation

Accum. deprec’

n

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Land plots 100 44 684 - - - - - - - - - - 44 684 - - - - - Investment property 105 - - - - - - - - - - - - - - - - - Capital costs of land improvement 110 - - - - - - - - - - - - - - - - -

Buildings constructions and transmission equipment *

120 5 059 466 1 378 437 1 281 266 - - 227 415 46 210 721 104 - - - 6 113 317 2 053 331 3 970 437 1 014 801 - -

Machinery and equipment 130 21 886 326 13 634 229 3 328 791 - - 597 576 577 196 1 919 488 28 011 - - 24 617 541 15 004 532 - - - -

Vehicles 140 210 358 130 163 87 462 - - 114 402 109 806 55 678 - - - 183 418 76 035 162 676 62 129 - - Tools fittings and furniture 150 123 43 - - - - - 24 - - - 123 67 - - - -

Livestock 160 - - - - - - - - - - - - - - - - - Perennial plants 170 - - - - - - - - - - - - - - - - - Other fixed assets 180 44 381 7 590 6 866 - - - - 9 310 - - - 51 247 16 900 - - - - Library assets 190 - - - - - - - - - - - - - - - - - Non-current low-value items 200 - - - - - - - - - - - - - - - - -

Temporary buildings 210 - - - - - - - - - - - - - - - - -

Natural resources 220 - - - - - - - - - - - - - - - - - Packaging 230 - - - - - - - - - - - - - - - - - Hire items 240 - - - - - - - - - - - - - - - - - Other non-current tangible assets 250 - - - - - - - - - - - - - - - - -

Total 260 27 245 338 15 150 462 4 704 385 - - 939 393 733 212 2 705 604 28 011 - - 31 010 330 17 150 865 4 133 113 1 076 930 - - * “Buildings constructions and transmission equipment” includes right-of-use asset recognized in the result of IFRS 16 Leases implementation. Refer to Note 9.


59


Form 5 (continued)

II. Property plant and equipment

(continued)

Item Supplementary notes

Line code Amount

From line 260 col. 14 cost of PPE where legal restrictions of ownership rights exist 261 - cost of pledged PPE 262 - residual value of PPE out of use on a temporary basis (conservation reconstruction etc.) 263 - cost (or valuation) of fully depreciated PPE 264 8 190 579 PPE of leased property 2641 -

From line 260 col. 8 residual value of PPE decommissioned for future sale 265 353 residual value of fixed assets lost due to accidents 2651 -

From line 260 col. 5 cost of PPE purchased for targeted finance 266 - Cost of PPE received on operating lease terms 267 - From line 260 col. 15 accumulated depreciation of fixed assets where legal restrictions of ownership rights exist 268 - From line 105 col. 14 cost of investment property valued at fair value 269 -


60


Form 5 (continued)

ІІІ. Capital investments

Item Line code For the year At the end of

the year 1 2 3 4

Capital construction 280 1 410 194 186 473 Purchase (manufacturing) of PPE 290 2 346 348 607 321

Purchase (manufacturing) of other non-current tangible assets 300 - -

Purchase (manufacturing) of intangible assets 310 1 415 614 136 252

Purchase (growing) of long-term biological assets 320 - -

Other 330 - -

Total 340 5 172 156 930 046 From line 340 col. 3 capital investments in investment property (341) ____-_____ financial costs included in financial investments (342) ____-_____

IV. Financial investments

Item

Line code For the year At the end of the year

Long-term Current 1 2 3 4 5

А. Financial investments under equity method into: associates 350 - - -

subsidiaries 360 - - -

joint activities 370 - - -

В. Other financial investments into:

shares in other entities’ statutory capital 380 - - - shares 390 - - -

bonds 400 - - -

other 410 - - -

Total (A+ B) 420 - - - From line 1035 col. 4 of the Balance Sheet Other long-term financial investments stated: (Statement of Financial Position) at cost (421) __ - ___

at fair value (422) __ - ___ at fair value (423) __ -___

From line 1160 col. 4 of the Balance Sheet Current financial investments stated: (Statement of Financial Position) at cost (424) __ - ___

at fair value (425) __ - ___ at amortised cost (426) __ -____


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Form 5 (continued)

V. Income and expenses

Item Suppleme

ntary notes

Line code Income Expenses

1 2 3 4 А. Other operating income and expenses

Operating lease of assets 440 69 710 - Operating exchange difference 450 63 024 Sale of other current assets 460 - Fines penalties and interest 470 1 429 5 251 Maintenance of social assets 480 Other operating income and expenses 490 61 384 60 544 Including: charges to bad debt reserve

491

X 65 971

non-productive expenses and losses 492 X B. Income and expenses from participation in equity of:

associates 500 - - subsidiaries 510 - - joint activities 520 - -

C. Other financial income and expenses Dividends 530 - X Interest 540 X - Finance lease of assets 550 2 483 2 088 Other financial income and expenses 560 47 539 427 738

D. Other income and expenses Sale of financial investments 570 - - Income from business combinations 580 - - Result of impairment test 590 - - Non-operating exchange difference 600 - - Assets received for free 610 - - Write-off of non-current assets 620 X 24 696 Other income and expenses 630 49 733 87 191

Item Line code Amount

1 2 3 Barter transactions with goods works and services 631 - Share in sales revenue from sales of goods works and services under barter agreements with related parties (%)

632 -

From lines 540-560 col. 4: finance expenses included in cost of sales 633 -


62


Form 5 (continued)

VI. Cash

Item Line code At the end of the year

1 2 3 Cash on hand 640 - Current bank account 650 1 146 678 Other bank accounts (letters of credit cheque books) 660 16 000 Cash in transit 670 176 702 Cash equivalents 680 - Total 690 1 339 380 From line 1090 col. 4 of the Balance Sheet (Statement of Financial Position) cash with restricted use 691 -

VII. Provisions

Type of provision

Line code

Balance at the begin-ning of the

year

Increase during the reporting period

Amount used during the year

Reversal of unused

amounts during the reporting

year

Amount of expected

compensation by the other party included in the

provision assessment

Balance at the end of the year Provision

created Additional charges

1 2 3 4 5 6 7 8 9 Provision for vacation payments to employees 710 95 307 113 583 - 119 286 - - 89 604

Provision for additional future pension expenses 720 23 312 3 682 - - - - 26 994 Provision for future expenses related to guarantees 730 - - - - - - - Provision for future restructuring expenses 740 - - - - - - - Provision for future expenses related to onerous contracts 750 - - - - - - - Other provisions 760 318 814 - - - 38 320 - 280 494 770 - - - - - -

Doubtful debt provision 775 173 851 65 971 - 55 608 - - 184 214 Total 780 611 284 183 236 - 174 894 38 320 - 581 306


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Form 5 (continued)

VIII. Inventories

Item Line code

Closing book value

Revaluation in the year Increase in the net realisable value*

Downward revaluation

1 2 3 4 5 Raw and other materials 800 43 741 - - Purchased components and units 810 - - - Fuel 820 1 312 - - Packaging 830 - - - Construction materials 840 - - - Spare parts 850 - - - Agricultural materials 860 - - - Current biological assets 870 - - - Low-value items 880 1 130 - - Work in progress 890 - - - Finished goods 900 - - - Goods for resale 910 5 302 - - Total 920 51 485 - - From line 920 col. 3 Book value of inventories: Supplemen-

tary notes

shown at net realisable value (921) __-__ transferred for processing (922) __-__ pledged (923) __-__ transferred on commission (924) __-__ Assets on safekeeping (off-balance sheet account 02) (925) __-__ From line 1200 col. 4 of the Balance Sheet (Statement of Financial Position) Inventories held for sale

(926) __-__

* determined according to p. 28 of NR(S)AU 9 “Inventories”


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Form 5 (continued)

IX. Accounts receivable

Item Line code

Total at year-end

Including outstanding by age:

Less than 12 months

From 12 to 18 months

From 18 to 36 months

1 2 3 4 5 6 Accounts receivable for goods works and services 940 663 670 663 670

- -

Other current accounts receivable 950 - - - - Bad accounts receivable written-off during the reporting year (951) _57 295_ From lines 940 and 950 accounts receivable with related parties (952) 51 240_

X. Losses and shortages resulting from damages


1 2 3 Losses and shortages identified and written-off during the year 960 397 Recognised as debts of the guilty parties during the year 970 - Losses and shortages where guilty parties are not identified at year end (off-balance sheet account 072) 980 -

XI. Construction contracts


1 2 3 Revenue from construction contracts for current year 1110 - Amounts outstanding at reporting year end:

from customers gross 1120 -

to customers gross 1130 -

on advances received 1140 -

Overdue amounts at year end 1150 -

Cost of work done by subcontractors for construction contracts in progress 1160 -


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Form 5 (continued)

XII. Corporate profit tax

Item Line

code Amount

1 2 3 Current corporate profit tax 1210 2 201 994 Deferred tax assets:

at the beginning of year 1220 403 184 at the end of year 1225 358 996

Deferred tax liabilities: at the beginning of year 1230 - at the end of year 1235 -

Included in the Statement of Financial Results – total 1240 2 246 182 Including:

current corporate profit tax 1241 2 201 994 decrease (increase) of deferred tax assets 1242 44 188 increase (decrease) of deferred tax liabilities 1243 -

Recorded in equity – total 1250 - Including:

current corporate profit tax 1251 - decrease (increase) of deferred tax assets 1252 - increase (decrease) of deferred tax liabilities 1253 -

XIII. Use of depreciation charge


1 2 3 Depreciation charge for the year 1300 3 977 950 Used during the year – total 1310 3 977 950 Including for:

construction of units 1311 1 084 592 purchasing (manufacturing) and improvements of PPE 1312 1 804 597 including machines and equipment 1313 1 717 135 purchasing (manufacturing) of intangible assets 1314 1 088 761 paying off loans received for capital investments 1315 -

1316 - 1317 -

_______________ Oleksandr Komarov President

_______________ Olena Ksenich Chief Accountant

Closed Joint Stock Company Kyivstar G

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Transcript of Closed Joint Stock Company Kyivstar G