PJSC PhosAgro : 2021 INTEGRATED REPORT

AFRAMEWORKFOR SUSTAINABLE SOILFERTILITY

INТEGRATED REPORT 2021

Contents

4 About this Report 7 Material topics 9 Stakeholder engagement Company Profile 14 Our history 16 Key activities in 2021 18 Key highlights 20 Our mission and values 24 Business model 26 Geographical footprint 28 Investment case and credit ratings PhosAgro is a vertically integrated Rus world's leading producers of	Strategic Report 34 Chairman's statement 38 CEO's statement 42 Business environment 46 54 56 68 Market overview The Company's role in the industry Strategy Strategic risks company and one of the osphate-based fertilizers.
sia ph

80 Financial performance

88

Operational performance

93

Customers and product management

104

Research and education

114

Supply chain

122

People development

138

Industrial safety

156

Environmental review

190

Contributing to local communities

For interactive version of the report, please visit

www.phosagro.com

Corporate Governance

• 202 Chairman's statement

  Corporate

• 204 governance framework

• 212 Board of Directors

• 240 Executive bodies

• 246 Corporate controls

• 252 Ethical practices

• 262 Remuneration report

Share Capital

• 268 Ownership structure

• 269 Share performance

• 270 Debt management

• 271 Analyst coverage

• 271 Dividend policy

  Relationship with

• 273 shareholders and investors

Additional Information

278 326

Financial statements

Changes in the status of conformity with the Corporate Governance Code (CGC) principles in 2021

329

Independent limited assurance report

334

GRI content index

343

SASB content index

345

TCFD recommendations

346

Glossary

347

Contacts

• > the Bank of Russia's Information Letter on Recommendations on Disclosure by

• > the Bank of Russia's Letter On the Disclosure in the Annual Report of a Public Joint-Stock Company of a Report on Compliance with the Principles and Recommendations of the Code of Corporate Governance No. IN-06- 28/102 dated 27 December 2021,

• > the Bank of Russia's Letter No. 06-52/2463 On Corporate Governance Code dated

  About this Report

  GRI 2-1, 2-3, 2-2

  The report was pre-approved by PhosAgro's Board of Directors on 03 March 2022 (Minutes dated 05 March 2022).

  It is our pleasure to welcome you to the 2021 integrated Annual Report (the "Report") of PJSC PhosAgro (PhosAgro). PhosAgro is a vertically integrated Russian company and one of the world's leading producers of phosphate-based fertilizers.

  Boundaries

  This Report provides insight into the performance of parent company PhosAgro and its subsidiaries (jointly referred to as "PhosAgro Group", the "Group", or the "Company"). The key subsidiaries of the Group and PhosAgro's stake in these subsidiaries are presented in the Group's 2021 IFRS consolidated financial statements. There have been no significant changes to the Group's size, structure or ownership during the reporting period.

  The boundaries of the Group companies covered in this Report differ from those

  Standards

  The following sources of guidance and requirements were used when drafting this Report:

• > the Bank of Russia's Regulation on Disclosure of Information by the Issuers of Issue-Grade Securities No. 714-P dated 27 March 2020,

• 10 October 2014,

  The Company maintains an annual reporting cycle, with the previous report released on 28 April 2021. The Report highlights how we integrate ESG principles into everything we do. The Company's financial reporting follows the annual cycle too.

  The c the sc knowl streng crops The pi a sym handp positi to red

  e cover of the Report symbolises e scientific approach, a man's owledge, intelligence and ength to till the land and grow ps on fertile land. e picture of a hand is also ymbol of the so-called "carbon ndprint", that is, of all the sitive actions a person takes reduce their carbon footprint.

  in consolidated financial statements when it comes to specific non-financial disclosures.

  To ensure compliance with the materiality principle, we determined such boundaries in a way that this Report describes all material aspects of PhosAgro Group.

  The data disclosed in this Report includes information on:

  Boundary 1: PhosAgro and companies that are part of the group to which PhosAgro belongs (the scope of disclosure in IFRS consolidated financial statements).

  GRI 2-5

  Joint-Stock Companies of Non-Financial Information Pertaining to Their Activities No. IN-06-28/49 dated 12 July 2021,

  • > the Listing Rules of the Moscow Exchange,

  • > the Guide to Listing of the London Stock Exchange,

  • > the AA 1000 and ISO 26000 standards,

  • > CDP - Carbon Disclosure Project standards,

  • > the Value Reporting Foundation,

  • > the Task Force on Climate-Related Financial Disclosures (TCFD).

  The Company has reported in accordance with the GRI Universal Standards which will take effect from January 2023. Appropriateness of the selected qualitative and quantitativeBoundary 2: PhosAgro and Apatit, including its branches and standalone business units.

  Boundary 3: Apatit, including its branches and standalone business units.

  For more information on specific disclosures and their boundaries used in this Report, see the GRI Indicator section on page 334.

  information disclosures prepared under the related GRI Standards (the "sample information") has been assured by AO PricewaterhouseCoopers Audit (AO PwC Audit) in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The Independent Limited Assurance Report and the GRI Content Index are both available in the Report.

  Financial results in the Report have been disclosed based on the IFRS consolidated financial statements of the Group for 2021 audited by AO PwC Audit in accordance with the International Standards on Auditing.

  The Company takes into account and implements global best practices in sustainable development.

  Letter from the CEO

  stages. In March-April, we began a trial of the new +10 m level at the Kirovsky mine. It is expected to compensate for the levels being shuttered and even increase the mine's overall output.

  PhosAgro's 2021 Annual Report was pre-approved by the Board of Directors on 3 March 2022. The end of February brought a set of new, unprecedented challenges for our Company.

  From 10 to 14 March 2022, four directors left their positions: Irina Bokova, Andrey A. Guryev, Andrey G. Guryev, and Xavier Rolet. Andrey A. Guryev also stepped down as PhosAgro's CEO and Chairman of the Management Board. We are revising our market outlook.

  Having been plunged into this challenging macroeconomic environment, we are looking towards our high degree of vertical integration and self-sufficiency in raw materials to pull us through.

  This is what enables us to maintain business continuity and stable supplies amid the growing global fertilizer shortage.

  At the same time, we are keeping our finger on the pulse, and should any new restrictions be introduced in our markets, we will be able to promptly redirect our exports elsewhere, as well as increase supplies to the priority domestic market.

  A highly diversified debt portfolio and comfortable net debt to EBITDA ratio of 0.8x (as at the end of 2021) underlie the Company's financial resilience. No big payments on our corporate debt are scheduled for this year, and we do not plan any new borrowings.

  PhosAgro's revenue is largely FX-denominated, which represents a hedge against risks. We also consider our rouble liquidity to be sufficient for sustaining the Company's operations.

  Current investment projects, in particular, a new plant being built in Volkhov, are in their final

  Contracts for most materials and equipment necessary to carry out major repairs were made in advance. In the near future, we will do an additional analysis of feasibility and potential timelines for new investment projects.

  PhosAgro does not plan to optimise headcount, and all our social and charitable projects will carry on. Coupled with February's salary indexation, this will go a long way towards keeping the people socially protected and ensuring stability in our regions of operation.

  However, Russian businesses may be experiencing a negative knock-on effect from the US, EU, and other sanctions. The Russian economy's prolonged exposure to such restrictions might result in a material impact on financial and logistics processes and domestic customers' ability to pay. It may also become harder for us to raise capital.

  Overall, PhosAgro is going to continue delivering on its commitments to the personnel, regions of operation, creditors, and partners both in Russia and abroad.

  Mikhail Rybnikov

  CEO and Chairman of the Management Board from 11 March 2022

  15 April 2022

Letter from the Chair of the Board of Directors' Sustainable Development Committee

In this report, we have endeavoured to paint as comprehensive a picture of PhosAgro in 2021 as possible. In doing so, we strive to match the holistic approach the Board of Directors and management takes to steering this one-of-a-kind company. Indeed, in a business environment defined by the persisting COVID-19 pandemic and great uncertainties, highly changeable domestic and global legislation, and increasing public attention to food security, climate change and corporate social responsibility, it would be nigh impossible to remain successful without adopting such a holistic approach.

This year, the Company celebrated its 20th anniversary. It is an important milestone, where we, on the one hand, cast our minds back and take stock, while, on the other, look boldly to the future and set new ambitious goals.

In keeping with this past-conscious and future-forward ideology, we have chosen to look at all of PhosAgro's activities through the lens of the product life cycle, much in tune with our "from mine to plate" principle.

When disclosing the Company's operational results, we have done our best to comply with the TCFD non- financial disclosure principles, such as strategy, governance, risks and opportunities, performance and metrics.

This approach has enabled us to take a 360-degree view of our value chain make-up and its links, as well as to show how effective corporate governance facilitates internal synergies.

On behalf of the Board of Directors,

I would like to thank PhosAgro Group's employees and managers for the

daily hard work you put in to ensure the Company's sustainable development, which in turn trickles down to all stakeholder communities and regions.

In the end, only you decide whether we reach our environmental, climate and social goals. And if 2021's impressive results are anything to go by, it appears you have made your decision.

Irina Bokova

Chair of the Board of Directors' Sustainable Development Committee from May 2019 to 15 March 2022

Material topics

Defining material topics: approach and steps

GRI 3-1, 3-2

In 2021, we revised our approach to identifying material topics to be disclosed in an integrated report.

We used our previous experience of working with stakeholders and actively built on it.

We managed to draft a more relevant list of material topics as we included more ESG ratings in our score analysis, obtained a Second Party Opinion (SPO) based on five ESG indicators

Evolution of our approach to selecting material topics

from a leading sustainability agency, worked to advance the UN Sustainable Development Goals (SDGs) and the UN Global Compact, and identify any new non-financial disclosure requirements.

Source of data for selecting material topics	2019	2020	2021
Stakeholder surveys (within the Company)	Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment	Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment	Conducting a survey of the management on significant operational aspects that has an impact on the society and the environment
Stakeholder surveys (outside the Company)	Conducting a survey of key stakeholders to find out how important and relevant these topics are for them	Conducting a survey of key stakeholders to find out how important and relevant these topics are for them	Conducting a survey of key stakeholders to find out how important and relevant these aspects of the Company's operations are for them
Investor material topic surveys	None	Conducting a survey of investors on a list of ESG-related questions jointly with IR	Obtaining a five-component SPO to map out KPIs as part of the preparation for issuing green finance instruments Planning a survey of investors on a list of ESG-related questions in cooperation with IR for 2022
Analysis of global and local ESG ratings and rankings	None	Analysing reports and questionnaires of global ESG rankings (MSCI ESG Research, Sustainalytics, CDP Climate Change)	Expanding the range of global ESG ranking questionnaires (MSCI ESG Research, Sustainalytics, CDP Climate Change, CDP Water Security, Standard & Poor's Corporate sustainability assessment (S&P CSA), RAEX)
Analysis and prioritising of the UN SDGs	None	Setting UN SDG priorities on a PwC-led project in late 2020	Analysing the activities to advance the UN SDGs, revising their scope, and conducting social responsibility research together with the Donors Forum

1Disclosure of our sustainability metrics in this Report is prepared in accordance with the revised GRIOur work to define material topics resulted in a materiality matrix based on the entire range of stakeholder interests and opinions related to the Company's disclosures.

A disclosure approach focused on a product's lifecycle enables us to provide the most complete and well-structured information about the Company's performance in 2021, while maintaining a balance between the interests of diverse stakeholder groups.

For more information, see the GRI Indicator section on page 334

Key changes in 2021 reporting that deserve a special mention

Universal Standards early adopted by the Group. In line with the revised GRI requirements, we excluded three GRI standards from the list of material topics: > Environmental Compliance (GRI 307) and

Socioeconomic Compliance (GRI 419) were replaced with Compliance with Laws and Regulations (GRI 2-27) which became a part of General (Universal) GRI 2 standard wich is mandatory for disclosure;

>

Human Rights Assessment (GRI 412) is has been covered by general (universal) GRI standards.

As these standards are no longer subject to the materiality assessment process, we did not include their respective indicators in our matrix, but disclosed them in the Report.

240 GRI indicators underwent external independent limited assurance procedures by AO PwC Audit.

Influenceonstakeholderassessmentsanddecisions

Low

Significance of economic, environmental and social impacts, including human rights impacts

Material topics

Economic Category

201 Economic performance

202 Market presence

203 Indirect economic impacts

204 Procurement practices

205 Anti-corruption

207 Taxes

Environmental Category

302

Energy

303

304

305

306

308

Water and waste water Biodiversity Emissions Waste

Supplier environmental assessment

Social Category 401 Employment

403 404 413 417

Occupational health and safety

Training and education Local communities Marketing and labelling

Less relevant topics

206

301

402

405

406

407

Anti-competitive behaviour Materials Labour/management relations Diversity and equal opportunity Non-discrimination

Freedom of association and collective bargaining

408

Child labour

409

410

411

Forced or compulsory labour Security practices

414

415

416

Rights of indigenous peoples Supplier social assessment Public policy

418

Customer health and safety Customer privacy

High

Stakeholder engagement

Approach to stakeholder engagement; identifying and selecting stakeholders

GRI 2-29

Wherever we operate, PhosAgro is an integral part of a community that includes businesses, government agencies, NGOs and individuals - locally, globally and nationwide. Our ability to listen and understand, be quick in our response, and effectively work with a wide range of stakeholders is key to the approach we use in doing business. It provides a solid foundation for delivering on strategic SDGs.

For us, engagement with stakeholders begins when we realise our common goals and interests. A stakeholder is a person or organisation that has an interest in what we do.

Stakeholders also include persons or organisations that may be affected by our activities or can influence our business decisions.

Understanding stakeholder views facilitates many processes. It helps us develop new products for our customers, raise awareness among farmers about modern agricultural practices and techniques, work with researchers to present ambitious innovative projects connecting

science and business and, most importantly, make informed practical choices to improve economic, social and environmental conditions where the Company can make a difference.

PhosAgro's framework for stakeholder engagement management covers relevant areas on all tiers of corporate governance, with the Board of Directors as the supreme body responsible for this process. The Sustainable Development Committee considers matters related to stakeholder engagement at least twice a year. On the day- to-day level, this matter is handled by dedicated functions that have annual plans based on an analysis of material topics, survey results, known expectations and other factors.

In our engagement with our stakeholders, we strive to be constructive, open and principled. Thus, we work hard to build relationships with people at all government levels in the countries where we operate and ensure that we strictly comply with all applicable regulatory requirements.