Important Notice: Not for Distribution to Any U.S

IMPORTANT NOTICE: NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OTHER THAN AS PERMITTED BY REGULATION S (“REGULATION S”) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). IMPORTANT: You must read the following before continuing. The following applies to the attached document (the “Prospectus”), and you are therefore advised to read this carefully before reading, accessing or making any other use of the Prospectus. In accessing the Prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. If you have gained access to this transmission contrary to any of the following restrictions, you are not authorised and will not be able to purchase any of the securities described herein (the “Securities”). You acknowledge that this electronic transmission and the delivery of the attached Prospectus is intended for you only and you agree you will not forward this electronic transmission or the attached Prospectus to any other person. Any forwarding, distribution or reproduction of this document in whole or in part is unauthorised. Failure to comply with the following directives may result in a violation of the Securities Act or the applicable laws of other jurisdictions. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S TO OR FOR THE ACCOUNT OR BENEFIT OF A PERSON NOT KNOWN TO THE TRANSFEROR TO BE A U.S. PERSON (AS DEFINED IN REGULATION S) OR WITHIN THE UNITED STATES, EXCEPT PURSUANT TO ANOTHER EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. Confirmation of your representation: In order to be eligible to view this Prospectus or make an investment decision with respect to the securities referred to herein, prospective investors must be non- U.S. persons (within the meaning of Regulation S) outside the United States who are not acting for the account or benefit of U.S. Persons. This Prospectus is being sent to you at your request, and by accepting this e-mail and accessing this Prospectus, you shall be deemed to have represented to us that you and any customers you represent are not U.S. persons and/or not acting for the account or benefit of any U.S. persons and the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States that you consent to delivery of such Prospectus by electronic transmission. You are reminded that this Prospectus has been delivered to you on the basis that you are a person into whose possession this Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Prospectus to any other person. The Prospectus does not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the issuer of the Securities in such jurisdiction. Under no circumstances shall this Prospectus constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities being offered, in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Prospectus may only be communicated or caused to be communicated to persons in the United Kingdom in circumstances where section 21(1) of the Financial Services and Markets Act 2000 (the “FSMA”) does not apply and may be distributed in the United Kingdom only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Order”), or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Order (all such persons together being referred to as “Relevant Persons”). In the United Kingdom, the Prospectus is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which the Prospectus relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. The Securities are not eligible for placement and circulation in the Russian Federation, unless, and to the extent, otherwise permitted by Russian law. The information provided in the Prospectus is not an offer, or an invitation to make offers, to sell, exchange or otherwise transfer securities in the Russian Federation or to or for the benefit of any Russian person or entity. The Prospectus and information contained herein does not constitute an advertisement or an offer of any securities in the Russian Federation. It is not intended to be, and must not be, distributed or circulated in the Russian Federation unless and to the extent otherwise permitted under Russian law. This Prospectus is being sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and, consequently, none of PJSC MMC Norilsk Nickel, MMC Finance Designated Activity Company, Bank GPB International S.A., Citigroup Global Markets Limited, ICBC Standard Bank Plc, Mizuho International plc, SIB (Cyprus) Limited, Société Générale, and VTB Capital plc nor any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any difference between the attached document distributed to you in electronic format and the hard copy version available to you on request. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. U.S.$500,000,000 3.849% Loan Participation Notes due 2022 issued by, but with limited recourse to, MMC Finance Designated Activity Company for the sole purpose of financing a loan to PJSC MMC NORILSK NICKEL Issue Price: 100% MMC Finance Designated Activity Company, a company incorporated as a designated activity company under the laws of Ireland (the “Issuer”), is issuing an aggregate principal amount of U.S.$ 500,000,000 3.849% Loan Participation Notes due 2022 (the “Notes”) for the sole purpose of financing a loan (the “Loan”) to PJSC MMC Norilsk Nickel, a public joint stock company organised under the laws of the Russian Federation (the “Company” or the “Borrower”), pursuant to a loan agreement dated 6 June 2017 (the “Loan Agreement”) between the Issuer and the Borrower. Pursuant to the trust deed (the “Trust Deed”) relating to the Notes between the Issuer and Citicorp Trustee Company Limited, as trustee (the “Trustee”), the Issuer will provide certain security for all payment obligations in respect of the Notes for the benefit of the Noteholders, including a first fixed charge in favour of the Trustee of all amounts paid and payable to it under the Loan Agreement and an assignment to the Trustee of the Issuer’s rights and interests under the Loan Agreement, other than in respect of certain reserved rights (as more fully described in “Overview of the Transaction Structure and the Security”). Interest on the Loan will be payable at a rate of 3.849% per annum semi- annually in arrear on the interest payment date falling on 8 April and 8 October in each year, commencing on 8 October 2017, and, provided that the Issuer receives such payment in full, the Notes will bear interest from, and including, 8 June 2017 on such dates at the same rate. The Notes are limited recourse obligations of the Issuer. In each case where amounts of principal, interest, premium (if any) and additional amounts (if any) are stated to be payable in respect of the Notes, the obligation of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders, on each date upon which such amounts of principal, interest, premium (if any) and additional amounts (if any) are due, for an amount equivalent to the principal, interest, premium (if any) and additional amounts (if any) actually received by or for the account of the Issuer from the Borrower pursuant to the Loan Agreement. The Issuer will have no other financial obligation under the Notes. Noteholders will be deemed to have accepted and agreed that they will be relying solely and exclusively on the credit and financial standing of the Borrower in respect of the obligations of the Borrower under the Loan Agreement. The Loan, and correspondingly the Notes, may be redeemed early at the option of the Company in certain circumstances and the Notes, and accordingly the Loan, must be repurchased and redeemed early at the option of the Noteholders, in certain other circumstances, all as more fully described in the Loan Agreement and Terms and Conditions of the Notes. AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 13. The Notes and the Loan (together, the “Securities”) have not been, and will not be, registered under the U.S. Securities Act of 1933 (the “Securities Act”), and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (“Regulation S”)). The Notes are not eligible for placement and circulation in the Russian Federation, unless, and to the extent, otherwise permitted by Russian law. Neither the issue of the Notes nor a securities prospectus in respect of the Notes has been, or intended to be, registered with the Central Bank of the Russian Federation (the “CBR”). For a description of these and certain further restrictions on offers, sales and transfers of the Notes and the distribution of this Prospectus, see “Subscription and Sale” and “Transfer Restrictions”. The Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”) as competent authority under Directive 2003/71/EC (the “Prospectus Directive”). The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and European Union law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange Plc (the “Irish Stock Exchange”) for the Notes to be admitted to the official list of the Irish Stock Exchange (the “Official List”) and trading on its regulated market (the “Main Securities Market”). The Main Securities Market is a regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments. There is no assurance that a trading market in the Notes will develop or be maintained. The Notes are expected to be rated “BBB-” by Standard and Poor’s Credit Market Service Europe Limited (“S&P”) and “BBB-” by Fitch Rating Ltd (“Fitch”). A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. S&P and Fitch are established in the European Union and are registered under the Regulation (EC) No. 1060/2009, as amended (the “CRA Regulation”). The Notes will be offered and sold in the minimum denomination of U.S.$200,000 and higher integral multiples of U.S.$1,000. The Regulation S Notes will initially be represented by interests in a global note certificate in registered form (the “Global Note Certificate”), without interest coupons, which will be deposited with a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”), and registered in the name of a nominee, on or about 8 June 2017 (the “Issue Date”). Beneficial interests in the Global Note Certificate will be shown on, and transfers thereof will be effected only through records maintained by, Euroclear or Clearstream, Luxembourg (as the case may be) and their respective participants. See “Clearing and Settlement”. Individual note certificates in registered form will only be available in certain limited circumstances as described herein. Joint Lead Managers Bank GPB Citigroup ICBC Mizuho Sberbank Société Générale VTB Capital International S.A. Standard Bank Securities CIB Corporate & Investment Banking

Prospectus dated 6 June 2017 IMPORTANT INFORMATION ABOUT THIS PROSPECTUS

This Prospectus comprises a prospectus for the purposes of the Prospectus Directive, as implemented in Ireland by the Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”), for the purpose of giving information with regard to the Issuer, the Company, the Company and its subsidiaries taken as a whole (the “Group”), the Loan and the Notes which, according to the particular nature of the Issuer, the Company, the Group, the Notes and the Loan, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer and the Company. Each of the Issuer and the Company (whose registered offices are set out on pages 177 and 257 of the Prospectus, respectively) accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of each of the Issuer and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Company, the Joint Lead Managers (as defined in “Subscription and Sale”) or the Trustee to subscribe for or purchase any Notes in any jurisdiction where it is unlawful to make such an offer or invitation. The distribution of this Prospectus and the offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer, the Company, the Joint Lead Managers and the Trustee to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Notes and distribution of this Prospectus, see “Subscription and Sale” and “Transfer Restrictions”. No person is authorised to provide any information or to make any representation not contained in this Prospectus and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer, the Company, the Joint Lead Managers or the Trustee. The delivery of this Prospectus at any time does not imply that the information contained in it is correct as at any time subsequent to its date. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or the Company since the date of this Prospectus. None of the Issuer, the Company, the Joint Lead Managers, the Trustee or any of its or their respective representatives or affiliates makes any representation to any offeree or purchaser of the Notes offered hereby regarding the legality of an investment by such offeree or purchaser under applicable legal, investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of the purchase of the Notes. Prospective purchasers must comply with all laws that apply to them in any place in which they buy, offer or sell any Notes or possess this Prospectus. Any consents or approvals that are needed in order to purchase any Notes must be obtained. The Issuer, the Company, the Joint Lead Managers and the Trustee are not responsible for compliance with these legal requirements. The appropriate characterisation of the Notes under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Notes, is subject to significant interpretative uncertainties. No representation or warranty is made as to whether, or the extent to which, the Notes constitute a legal investment for investors whose investment authority is subject to legal restrictions, and investors should consult their legal advisers regarding such matters. In connection with the issue of the Notes, Société Générale (the “Stabilising Manager”) (or any person acting on behalf of the Stabilising Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any person acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if commenced, may be discontinued at any time and must be brought to an end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. The contents of the Company’s website do not form any part of this Prospectus.

ii No representation or warranty, express or implied, is made and no responsibility is accepted by the Joint Lead Managers, the Trustee or any of its or their affiliates or any person acting on their behalf as to the accuracy or completeness of the information set forth in this Prospectus. Nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Each person receiving this Prospectus acknowledges that such person has not relied on the Joint Lead Managers, the Trustee or any of its or their affiliates or any person acting on their behalf in connection with its investigation of the accuracy or completeness of such information or its investment decision. Each person contemplating making an investment in the Notes from time to time must make its own investigation and analysis of the creditworthiness of the Company and the Group and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such investment. To the fullest extent permitted by law, the Joint Lead Managers do not accept any responsibility whatsoever for the contents of this Prospectus or for any other statement made or purported to be made by them, or on their behalf, in connection with the Issuer, the Company, the Group or the Notes. The Joint Lead Managers accordingly disclaim all and any liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this Prospectus or any such statement. The Prospectus will be filed and approved by the Central Bank as required by the Prospectus Regulations. The Prospectus approved by the Central Bank will be filed with the Irish Companies Registration Office in accordance with Regulation 38(1)(b) of the Prospectus Regulations. The Issuer is not and will not be regulated by the Central Bank as a result of issuing the Notes. An investment in the Notes does not have the status of a bank deposit and is not within the scope of the deposit scheme operated by the Central Bank.

THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER U.S. REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF NOTES OR THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

THE NOTES HAVE NOT AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT.

THIS PROSPECTUS IS BEING PROVIDED TO INVESTORS OUTSIDE THE UNITED STATES WHO ARE NOT U.S. PERSONS IN CONNECTION WITH OFFSHORE TRANSACTIONS COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S.

NOTICE TO UNITED KINGDOM RESIDENTS This document is only being distributed to and is only directed at (1) persons who are outside the United Kingdom or (2) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (3) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “Relevant Persons”). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

iii NOTICE TO RUSSIAN INVESTORS

This Prospectus or information contained therein is not an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities in the Russian Federation to or for the benefit of any Russian person or entity, and does not constitute an advertisement of offering of any securities in the Russian Federation within the meaning of Russian securities laws. Information contained in this Prospectus is not intended for any persons in the Russian Federation who are not “qualified investors” within the meaning of Article 51.2 of the Federal Law “On the Securities Market” No. 39-FZ dated 22 April 1996, as amended (“Russian QIs”) and must not be distributed or circulated into Russia or made available in Russia to any persons who are not Russian QIs, unless and to the extent they are otherwise permitted to access such information under Russian law.

iv FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus are not historical facts and are forward-looking statements. Forward-looking statements appear in various locations, including, without limitation, under the headings “Overview”, “Risk Factors”, “Operating and Financial Review” and “Business”. The Group may also from time to time make written or oral forward-looking statements in reports to shareholders and in other communications. Forward-looking statements include, but are not limited to, statements concerning the Group’s strategy, objectives, goals, future events, future revenues or performance, production targets, expected levels of capital expenditures, financing needs, plans or intentions relating to acquisitions, its competitive strengths and weaknesses, its business strategy and the trends the Company anticipates in the industries and the political and legal environment in which the Group operates and other information that is not historical information. Words such as “believes”, “anticipates”, “estimates”, “expects”, “intends”, “predicts”, “projects”, “could”, “may”, “will”, “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. These risks, uncertainties and other factors include, among other things, those listed under “Risk Factors”, as well as those included elsewhere in this Prospectus. Each prospective investor should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, among others:  the Group’s ability to continue to successfully implement its strategy;  the ongoing armed conflict in Eastern Ukraine, which adversely affects the economic environment in Russia and may lead to more expansive sanctions targeting metals and mining companies or a broader segment of the Russian economy;  economic, social, legal and political developments in the Russian Federation and the international markets in which the Group operates;  the prices of the Group’s products and the raw materials which it requires;  the costs of energy and transportation;  the Group’s ability to successfully explore and develop new resources, and, if found, to successfully exploit such discoveries;  the Group’s ability to fund its future operations and capital needs through borrowing or otherwise;  the Group’s ability to integrate its businesses, including recently acquired businesses, and to realise anticipated cost savings and operational benefits from such integration, or to realise value upon the disposal of assets;  an increase or decrease in demand for the Group’s products and services;  the Group’s ability to obtain the licences necessary for its businesses;  the effects of competition;  inflation, interest rate and exchange rate fluctuations; and  the Group’s success in identifying other risks to its businesses and managing the risks of the aforementioned factors. This list of factors is not exhaustive. Some of these factors are discussed in greater detail in this Prospectus, in particular, but not limited to, discussion in “Risk Factors”. When relying on forward- looking statements, each prospective investor should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Group operates. Such forward-looking statements speak only as of the date on which they

v are made. Accordingly, neither the Issuer nor the Company undertakes any obligation to update or revise any of them, whether as a result of new information, future events or otherwise, unless required to do so by applicable law. Neither the Issuer nor the Company makes any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

vi PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Presentation of Financial Information of the Group

The consolidated financial information of the Group included in this Prospectus:

 as at and for the year ended 31 December 2016 has been derived from the audited consolidated financial statements of the Group as at and for the year ended 31 December 2016 (the “2016 Consolidated Financial Statements”); and

 as at and for the year ended 31 December 2015 and as at and for the year ended 31 December 2014 has, except for certain reclassified amounts as described below, been derived from the audited consolidated financial statements of the Group as at and for the year ended 31 December 2015 (the “2015 Consolidated Financial Statements”).

See “Presentation of Financial and Other Information – Reclassification” as set out below.

The 2016 Consolidated Financial Statements and the 2015 Consolidated Financial Statements are together referred to as the “Annual Consolidated Financial Statements”.

The Annual Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”).

The Annual Consolidated Financial Statements, together with the related independent auditor’s reports, are set out in the Appendix to this Prospectus.

Reclassification

In 2016, the Group changed the presentation of certain information in its income statement relating to cost of metal sales including certain cash operating costs, cost of other sales and respective export duties, and reclassified comparative amounts for the year ended 31 December 2015 to conform to the presentation of the financial information with the 2016 Consolidated Financial Statements.

Year ended 31 December 2015 As previously Changes in As reported classification reclassified (Amounts in millions of U.S. dollars) (unaudited) Cost of metal sales 3,179 (14) 3,165 Materials and supplies 450 9 459 Mineral extraction tax and other levies 117 11 128 Electricity and heat energy 131 (23) 108 Sundry costs 137 (11) 126 Cost of other sales 592 24 616 Selling and distribution expenses, including 139 (10) 129 Export duties 88 (10) 78

For the purposes of this Prospectus, the Group has similarly changed the presentation of certain information in its income statement relating to cost of other sales and respective export duties for the year ended 31 December 2014 to conform to the presentation of the financial information with the 2016 Consolidated Financial Statements. No reclassification of cost of metal sales, including certain cash operating costs, has been made for the year ended 31 December 2014 as the impact of the change in presentation is not material.

vii Year ended 31 December 2014 As previously Changes in As reported classification reclassified (Amounts in millions of U.S. dollars) (unaudited) Cost of other sales 869 52 921 Selling and distribution expenses, including 335 (52) 283 Export duties 225 (52) 173

Alternative Performance Measures

This Prospectus contains certain unaudited non-IFRS financial measures relating to the Group’s business and financial results, including EBITDA, EBITDA margin, net debt, cash operating costs, free cash flow, invested capital and return on invested capital. See “Selected Consolidated Financial Information” and “Operating and Financial Review”. These non-IFRS financial measures are not prepared in accordance with IFRS and may be different from non-IFRS financial measures used by other companies. The Company uses these non-IFRS financial measures as supplemental measures since it believes they provide meaningful supplemental information regarding the Group’s operational performance. Investors are encouraged not to put undue weight on these non-IFRS financial measures and to read them in conjunction with the Annual Consolidated Financial Statements included in this Prospectus. These non-IFRS financial measures should not be considered as substitutes for the information contained in the Annual Consolidated Financial Statements included in this Prospectus.

Financial Statements of the Issuer

The audited financial statements of the Issuer as at and for the years ended 31 December 2016 and 2015 together with the audit reports thereon, have been filed with the Central Bank of Ireland and shall be deemed to be incorporated in, and to form part of, this Prospectus. Such financial statements are located at http://www.ise.ie/debt_documents/Annual%20Financial%20Statement_4a92db26-c378- 45e6-a677-46cba57d6756.pdf; http://www.ise.ie/debt_documents/Annual%20Financial%20Statement_2edf0309-5a1d-44be-b0d3- bc7fc5964c0c.pdf.

Presentation of Ore Reserves and Mineral Resources

Unless otherwise indicated, the information contained in this Prospectus relating to estimates of the Group’s ore reserves and mineral resources is presented as at 31 December 2016 in accordance with the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”). An independent review of ore reserves and mineral resources of the Group’s Russian operations was conducted in 2013, and no other independent review has been conducted since 2013. The information on the ore reserves and mineral resources of the Group’s Russian operations is based on the results of the analysis and conversion by the Group of its ore and metal balance reserves under the categories of the Russian classification system into the relevant categories under the JORC Code, and the estimates presented in this Prospectus have been prepared solely by the Group and have not been subject to any audit or verification by independent metals and mining engineers. If the Group’s ore reserves and mineral resources were to be subjected to a third party independent audit or verification, there can be no guarantee that the findings of such a review would not be materially different from the Group’s estimates. See “Risk Factors – Ore reserves and mineral resources are very difficult to estimate, may be significantly adjusted, may not prove accurate and have not been independently reviewed, audited or verified”.

General Information

In this Prospectus, references to: the “Company” or the “Borrower” are to PJSC MMC Norilsk Nickel; the “Group” are to the Company together with its consolidated subsidiaries; and the “Issuer”

viii or the “Lender” are to MMC Finance Designated Activity Company. References to: “JSC “Kola GMK” are to JSC Kola Mining and Metallurgical Company; “Norilsk Nickel Harjavalta” are to Norilsk Nickel Harjavalta Oy; “Norilsk Nickel Cawse” are to Norilsk Nickel Cawse Pty. Ltd; “Tati Nickel” are to Tati Nickel Mining Company Proprietary Limited; and “Nkomati Nickel Mine” are to the unincorporated joint venture established between the Group and African Rainbow Minerals. In this Prospectus, all references to “Russia” are to the Russian Federation. References to “U.S.” or the “United States” are to the United States of America. References to “U.K.” or the “United Kingdom” are to the United Kingdom of Great Britain and Northern Ireland. References to “Ireland” are to Ireland. References to the “E.U.” or the “European Union” are to the union formed following ratification of the Maastricht Treaty and currently comprising 28 states, and references to “Europe” are to the geographical region of Europe, including those states which are members of the European Union. Definitions of certain terminology associated with the Group’s business are set forth under “Glossary of Terms”.

Currencies and Exchange Rates

In this Prospectus, references to “U.S. dollars” or “U.S.$” are to the lawful currency of the United States, references to “roubles” or “RUB” are to the lawful currency of the Russian Federation, and references to “euro” or “EUR” are to the lawful currency of the member states of the European Union that adopted the single currency in accordance with the Treaty of Rome establishing the European Economic Community, as amended, and references to “ZAR” are to lawful currency of the Republic of South Africa. The Russian rouble is the functional currency of the Company and all Russian subsidiaries of the Group. The rouble is also the functional currency of all non-Russian companies that are currently, or were in the periods under review, subsidiaries of the Group, except for the following subsidiaries: the functional currency of Norilsk Nickel Harjavalta Oy is the U.S. dollar, the functional currency of MPI Nickel Pty Ltd, NN Wildara Pty Ltd, NN Cawse Pty Ltd and NN Avalon Pty Ltd is the Australian dollar, the functional currency of Norilsk Nickel Africa Proprietary Limited and Norilsk Nickel Mauritius is the South African Rand and the functional currency of Palladium Global Marketing Limited is the British Pound. The Group’s consolidated financial statements have been prepared using the U.S. dollar as the Group’s presentation currency. The translation into presentation currency is made as follows:  all assets and liabilities, both monetary and non-monetary, in the consolidated statement of financial position are translated at the closing exchange rates at the end of the respective reporting period;  income and expense are translated at the average exchange rates for the period (unless this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in these cases income and expenses are translated at the dates of the transaction);  all equity items are translated at the historical exchange rates at the dates of the transaction;  all resulting exchange differences are recognised as a separate component in other comprehensive income;  in the consolidated statement of cash flows, cash balances at beginning and end of each period presented are translated at exchange rates at the respective dates;  all cash flows are translated at the average exchange rates for the periods presented with the exception of borrowings, dividends and advances received, gains and losses from disposal of subsidiaries, which are translated using the prevailing exchange rates at the dates of the transactions; and  resulting exchange differences are presented in the consolidated statement of cash flows as effects of foreign exchange differences on balances of cash and cash equivalents.

ix The following tables show, for the periods indicated, certain information regarding the exchange rate between the rouble and the U.S. dollar, based on the official exchange rate quoted by the CBR. Roubles per U.S. dollar Period For the period High Low Average(1) end Year ended 31 December 2012 34.04 28.95 31.09 30.37 Year ended 31 December 2013 33.47 29.93 31.85 32.73 Year ended 31 December 2014 67.79 32.66 38.42 56.26 Year ended 31 December 2015 72.88 49.18 60.96 72.88 Year ended 31 December 2016 83.59 60.27 67.03 60.66

(1) The average of the exchange rate for the relevant period, based on the rates in such period for each Russian business day (quoted by the CBR for that day) and each Russian non-business day (which is equal to the rate quoted by the CBR for the preceding Russian business day).

Roubles per U.S. dollar For each month from January 2017 to June 2017 High Low January 2017 60.32 59.15 February 2017 60.31 56.77 March 2017 59.22 56.38 April 2017 57.39 55.85 May 2017 58.54 56.07 June 2017 (up to and including 6 June 2017) 56.69 56.54 The exchange rate between the rouble and the U.S. dollar on 6 June 2017 was RUB 56.62 per U.S.$1.00. No representation is made that amounts presented in a particular currency in this Prospectus could have been converted into such currency at any particular rate or at all. A market exists for the conversion of roubles into other currencies, but the limited availability of other currencies may tend to inflate their values relative to the rouble. Fluctuations in the exchange rate between the rouble and the U.S. dollar in the past are not necessarily indicative of fluctuations that may occur in the future. These rates may also differ from the actual rates used in the preparation of certain information in this Prospectus.

Rounding

Certain amounts that appear in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Reproduction of Information

The Company obtained the market data used in this Prospectus under the headings “Overview”, “Risk Factors”, “Operating and Financial Review”, “Industry Overview” and “Business” from internal surveys, industry sources and currently available public information. The main sources for information on the industries in which the Group operates were (i) the Company; and (ii) Wood Mackenzie-Brook Hunt, a mining and metal industry consultant (“Wood Mackenzie”), though, for the avoidance of doubt, Wood Mackenzie have not independently verified or audited the data of the Group presented in this Prospectus, including the data on the Group’s ore reserves and mineral resources under the JORC Code presented herein. The Company also obtained historical price information from the London Metal Exchange (“LME”) and the London Platinum and Palladium market (“LPPM”), as well as Russian macroeconomic and foreign exchange data from the CBR, the Russian Ministry of Economics and Trade and the Federal Service for State Statistics of the Russian Federation. The Issuer and the Company accept responsibility for having correctly reproduced information obtained from industry publications or public sources, and, as far as the Issuer and the Company are aware and have been able to ascertain from information published by those industry publications or public sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, investors should keep in mind that neither the Issuer nor the Company have

x independently verified information which they have obtained from third party sources, including from industry and Russian governmental bodies. Certain market share information and other statements in this Prospectus regarding the industry in which the Group operates and the position of the Group relative to its competitors are not based on published statistical data or information obtained from independent third parties. Rather, such information and statements reflect the reasonable estimates and calculations of the Company based upon information obtained from the sources indicated in the previous paragraph as well as from trade and business organisations and associations and other contacts within the metallurgical industry. Furthermore, measures of the financial or operating performance of the Group’s competitors used in evaluating the Group’s comparative position may have been calculated in a different manner to the corresponding measures employed by the Group. This information from the internal estimates and surveys of the Group has not been verified by any independent sources.

xi ENFORCEABILITY OF JUDGMENTS

The Issuer is a limited liability company incorporated under the laws of Ireland. The Company is a public joint stock company incorporated under the laws of the Russian Federation. Substantially all of the assets of the Issuer and most of the assets of the Company are located outside the United Kingdom and the United States. In addition, all of the directors of the Issuer and substantially all of the directors and executive officers of the Company named in this Prospectus reside outside the United Kingdom and the United States, and a substantial part of the assets of such persons are located outside the United Kingdom and the United States. As a result, it may not be possible for Noteholders or the Trustee to effect service of process within the United Kingdom or the United States upon any of the Issuer or the Company or their respective officers and directors or to enforce against any of them court judgments obtained in English or U.S. courts. In addition, it may be difficult for the Noteholders or the Trustee to enforce, in original actions brought in courts in jurisdictions located outside the United Kingdom and the United States, liabilities predicated upon English laws or U.S. federal securities laws. Courts in the Russian Federation will generally recognise judgments rendered by a court in any jurisdiction outside the Russian Federation only if an international treaty providing for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the jurisdiction where the judgment is rendered or a federal law is adopted in the Russian Federation providing for the recognition and enforcement of foreign court judgments. No such treaty for the reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters exists between the Russian Federation and certain other jurisdictions (including the United Kingdom and the United States), and no relevant federal law on enforcement of foreign court judgments has been adopted in the Russian Federation. As a result, new proceedings may have to be brought in the Russian Federation in respect of a judgment already obtained in any such jurisdiction against the Company or its officers or directors. These limitations, as well as the general procedural grounds set out in Russian legislation for the refusal to recognise and enforce foreign court judgments in the Russian Federation, may significantly delay the enforcement of such judgments or deprive the Issuer and/or the Noteholders of effective legal recourse for claims related to the investment in the Notes. In the absence of an applicable treaty, enforcement of a final judgment rendered by a foreign court may still be recognised by a Russian court on the basis of reciprocity, if courts of the jurisdiction where the foreign judgment is rendered have previously enforced judgments issued by Russian courts. In a number of recent instances, Russian courts have recognised and enforced a foreign court judgment (including English court judgements) on the basis of a combination of the principle of reciprocity and the existence of a number of bilateral and multilateral treaties to which the Russian Federation and certain other jurisdictions, including the United Kingdom, are parties. The courts determined that such treaties constituted grounds for the recognition and enforcement of the relevant foreign court judgment in the Russian Federation. In the absence of established court practice, however, no assurances can be given that a Russian court would be inclined in any particular instance to recognise and enforce a foreign court judgment on these or similar grounds. The existence of reciprocity must be established at the time the recognition and enforcement of a foreign judgment is sought, and it is not possible to predict whether a Russian court will in the future recognise and enforce on the basis of reciprocity a judgment issued by a foreign court, including an English court. Accordingly, it may be difficult or impossible for investors to:

 effect service of process within the United Kingdom or other jurisdictions in which investors may be located, on certain directors or members of senior management of the Company;

 enforce judgments obtained in courts in the United Kingdom or other jurisdictions in which investors may be located, against the Company’s assets and against certain directors or members of senior management of the Company; or

xii  enforce, in original actions brought in courts in the Russian Federation, liabilities predicated upon the civil liability provisions of the laws of the United Kingdom or the laws of other jurisdictions in which investors may be located.

The Loan Agreement and any non-contractual obligations arising out of or in connection with the Loan Agreement will be governed by English law and will provide for disputes, controversies and causes of action brought by any party thereto against the Company be referred to arbitration in London, England, in accordance with the rules of the LCIA (formerly the London Court of International Arbitration) (the “LCIA Rules”). The Russian Federation and the United Kingdom are parties to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Consequently, Russian courts should generally recognise and enforce in the Russian Federation an arbitral award from an arbitral tribunal in the United Kingdom on the basis of the rules of the New York Convention, subject to qualifications provided for in the New York Convention and compliance with Russian procedural regulations and law. However, it may be difficult to enforce arbitral awards in Russia due to:

 the inexperience of Russian courts in enforcing international commercial arbitral awards;

 official and unofficial political resistance to enforcement of awards against Russian companies in favour of foreign investors; and

 the Russian courts’ inability or unwillingness to enforce such awards.

Recognition and enforceability of any arbitral award may also be limited by mandatory provisions of Russian laws relating to the exclusive jurisdiction of Russian courts and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies. The Arbitrazh Procedural Code of the Russian Federation (the “Arbitrazh Procedural Code”) sets out the procedure for the recognition and enforcement of foreign awards by Russian courts. The Arbitrazh Procedural Code also contains an exhaustive list of grounds for the refusal of recognition and enforcement of foreign arbitral awards by Russian courts, which grounds are broadly similar to those provided by the New York Convention. The Arbitrazh Procedural Code and other Russian procedural legislation could change, and other grounds for Russian courts to refuse the recognition and enforcement of foreign courts’ judgments and foreign arbitral awards could arise in the future. Furthermore, any arbitral award pursuant to arbitration proceedings in accordance with the LCIA Rules and the application of English law to the Loan Agreement and any non-contractual obligations arising out of or in connection with the Loan Agreement may be limited by the mandatory provisions of Russian laws relating to the exclusive jurisdiction of Russian courts and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies in particular.

xiii TABLE OF CONTENTS

IMPORTANT INFORMATION ABOUT THIS PROSPECTUS...... ii FORWARD-LOOKING STATEMENTS ...... v PRESENTATION OF FINANCIAL AND OTHER INFORMATION ...... vii ENFORCEABILITY OF JUDGMENTS...... xii OVERVIEW ...... 1 RISK FACTORS ...... 13 USE OF PROCEEDS ...... 55 CAPITALISATION...... 56 SELECTED CONSOLIDATED FINANCIAL INFORMATION ...... 58 OPERATING AND FINANCIAL REVIEW ...... 62 INDUSTRY OVERVIEW...... 104 BUSINESS...... 116 MANAGEMENT AND CORPORATE GOVERNANCE...... 151 PRINCIPAL SHAREHOLDERS ...... 159 RELATED PARTY TRANSACTIONS...... 160 REGULATORY MATTERS...... 161 DESCRIPTION OF THE ISSUER...... 182 OVERVIEW OF THE TRANSACTION STRUCTURE AND THE SECURITY ...... 184 THE LOAN AGREEMENT ...... 186 TERMS AND CONDITIONS OF THE NOTES ...... 212 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM...... 227 TRANSFER RESTRICTIONS...... 231 CLEARING AND SETTLEMENT...... 232 CERTAIN ERISA CONSIDERATIONS ...... 234 TAXATION...... 236 SUBSCRIPTION AND SALE ...... 248 GENERAL INFORMATION...... 251 GLOSSARY OF TERMS...... 253 APPENDIX - CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP...... 258

xiv OVERVIEW

This overview may not contain all the information that may be important to prospective purchasers of the Notes and, therefore, should be read in conjunction with this entire Prospectus, including the more detailed information regarding the Group’s business and the financial statements and related notes included elsewhere in this Prospectus. Prospective purchasers of the Notes should also carefully consider the information set forth under the heading “Risk Factors”. Certain statements in this Prospectus include forward-looking statements that also involve risks and uncertainties as described under “Forward-Looking Statements”.

OVERVIEW OF THE GROUP

The Group is the leading metals and mining company, the world’s largest producer of refined nickel1 and palladium and a major producer of platinum and copper. The Group’s production of nickel and palladium in 2016 represented 12% and 40%, respectively, of total global primary production of those metals according to Company estimates. The Company is the world’s largest producer of platinum outside South Africa and a major copper producer according to Company estimates. In addition, the Group produces various other joint products such as cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium and sulphur. The Group’s principal mining and metallurgical facilities are located in Russia and Finland, and it has sales and distribution offices in all key markets, such as Europe, Asia and North America. In 2016, the Group’s total revenue amounted to U.S.$8,259 million with EBITDA of U.S.$3,899 million and EBITDA margin of 47.2% (total revenue of U.S.$8,542 million, EBITDA of U.S.$4,296 million and EBITDA margin of 50.3% in 2015). In 2016, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 77.2%, 97.3%, 97.6% and 96.6% of total Group production of those metals, respectively. The Group’s principal operations in Russia comprise its Polar Division, which is located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. The Polar Division operates fully integrated metal production cycle, including mining, concentration, metallurgy and refining of metals and operates a number of supporting activities. At the Polar Division three sulphide copper-nickel ore deposits, Norilsk-1, Talnakh and Oktyabrskoye (which comprise the Talnakh ore field), are developed. As at 31 December 2016, the total proven and probable reserves of these deposits comprised 695,052 thousand tonnes of ore, containing 6,380 thousand tonnes of nickel, 11,756 thousand tonnes of copper, 93,341 thousand ounces of palladium and 24,903 thousand ounces of platinum. The Company believes that the geology of the Talnakh ore field in its Polar Division is unique as it comprises a single large deposit with high grades of multiple metals, including nickel, copper, platinum group metals (“PGMs”), gold, silver and cobalt. According to Wood Mackenzie estimates, the Company is the world’s lowest cost producer of nickel as the presence of other valuable joint metals reduce the Group’s overall production costs. The Group’s strategic development is focused primarily on operations at the Polar Division. Since the Taimyr Peninsula is not connected to Russia’s rail and road network or national electricity grid, the Group operates various transportation and energy generation infrastructure which service and supply the Polar Division, as well as industrial and residential customers in that region. In addition to its main Polar Division operations, the Group operates through its subsidiary JSC Kola “GMK” in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts underground and open pit mining operations at four deposits containing sulphide copper and nickel ores and operates enrichment plant, metallurgical facilities and a nickel refinery. In addition to processing its own mined materials, JSC Kola “GMK” also refines high grade nickel matte supplied by the Polar Division. As at 31 December 2016, the total proven and probable reserves of the deposits of JSC Kola “GMK” comprised 132,647 thousand tonnes of ore, containing 769 thousand tonnes of nickel, 378 thousand tonnes of copper, 130 thousand ounces of palladium and 93 thousand ounces of platinum.

1 LME deliverable.

1 The Group also currently operates a nickel refinery in Finland operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of 66,000 tonnes of refined nickel products, and holds a licence for development of the Honeymoon Well Deposit, a sulphide nickel deposit in Australia. In accordance with the Group’s strategy with its focus on Tier I assets, the Group is considering a disposal of the Honeymoon Well Deposit. The table below shows the mineral reserves and resources (in terms of metal content) of the Group as at 31 December 2016, prepared by the Group according to the JORC Code (but not independently verified). See “Presentation of Financial and Other Information – Presentation of Ore Reserves and Mineral Resources”. The palladium and platinum reserves and resources do not include reserves and resources of the Group’s operations outside of Russia. Metal Content Nickel Copper Palladium Platinum Classification Categories (‘000 tonnes) (‘000 tonnes) (‘000 ounces) (‘000 ounces) Reserves Proven and probable Polar Division 6,380 11,756 93,341 24,903 JSC Kola “GMK” 769 378 130 93 Honeymoon Well – – – – Total 7,149 12,134 93,471 24,996 Resources Measured and Indicated Polar Division 11,990 22,339 196,028 55,467 JSC Kola 2,328 1,124 506 330 “GMK” Honeymoon 1,181 – – – Well Total 15,499 23,463 196,534 55,797 Inferred Polar Division 3,942 8,160 62,718 15,922 JSC Kola 874 432 178 119 “GMK” Honeymoon 2,827 – – – Well Total 7,643 8,592 62,896 16,041 The Company believes there is significant potential to develop new reserves around the areas of its current operations on the Taimyr Peninsula and plans to continue geological exploration at those sites. Since 2007, the Group has also been undertaking geological explorations in the Zabaikalsk region, primarily at the Bystrinskoye gold-iron-copper deposit. The Group maintains a global network of representative and marketing offices located in Russia and its principal export markets in Asia, Europe and North America. In 2016, the Group derived 57% and 23% of its total metal sales revenues from sales to Europe and Asia, respectively, with North America and Russia each accounting for 10%, with sales to those regions representing 59%, 27%, 8% and 6%, respectively, of total metal sales revenues in the 2015.

2  Significant Resources and Reserves. The Company estimates that under the JORC Code, as at 31 December 2016, the Group had proven and probable reserves in Russia of 827.7 million tonnes of ore, with a metal content of 7.1 million tonnes of nickel (comprising approximately 14% of global nickel reserves, according to publicly available information), 12.1 million tonnes of copper, 93.5 million ounces of palladium and 25.0 million ounces of platinum, and measured and indicated resources (inclusive of proven and probable reserves) of 2,058 million tonnes of ore in Russia, with a metal content of 14.3 million tonnes of nickel, 23.5 million tonnes of copper, 196.5 million ounces of palladium and 55.8 million ounces of platinum. At current production levels, the Company believes, on the basis of its calculations, that proven and probable reserves of the Group in Russia should have a life of approximately 30 years, and the measured and indicated mineral resources, a life of approximately 60 years. In addition, the Company believes that it has lower resource replacement costs (calculated by reference to the amount of exploration costs incurred in finding new mineral resources) than its principal competitors.  Unique Ore Body. Based on Wood Mackenzie estimates, the Company believes that the Talnakh ore field in its Polar Division has a unique geology because it is a single large deposit with high grades of multiple metals, including nickel, copper, PGMs, gold, silver and cobalt. The Company believes that the grades of nickel and copper in the Talnakh ore field are higher on average than the grades of deposits mined by its competitors and that, consequently, the value per tonne of the ore reserves of its Polar Division (calculated by reference to ore metal grades and using an assumed long-term price for the relevant metals) is higher as compared with the Group’s competitors.  The Lowest Production Costs of all Major Nickel Producers. Based on Wood Mackenzie estimates, the Company believes that the Group has the lowest nickel production costs of all major nickel producers (taking into account the revenues from the copper and PGM products that it derives from the ores that it extracts at its Russian operations), and the cash production costs for all the metals it produces are substantially below current and recent historical market prices. The Group’s labour and energy costs are also relatively low compared with those of many of its competitors, partially as a result of the Group’s significant degree of vertical integration, and the Group is implementing various measures with a view to achieving additional cost savings. Consequently, the Company believes that the Group is better positioned to maintain a positive operating margin in a relatively depressed pricing environment, such as the period since the second half of 2014, than many of its competitors. According to the Company’s estimates, the Group has the leading positions in EBITDA margin compared with other nickel producers in the industry.  Global Distribution Network and Customer Base. The Group operates a global distribution network with sales offices in Russia, Europe, Asia and North America, the areas of largest demand for its products. The Group has a diversified customer base, comprising industrial end users of its products, and, with respect to a significant part of its sales, has direct relations with its customers under long-term sales contracts. See “Business – Sales and Distribution – Product Sales”.  Strong Financial Profile and Credit Rating. The Company believes that its control over its energy supplies and its transportation and distribution network enables it to achieve a high level of operating and financial performance. As at 31 December 2016, the Group’s net debt to EBITDA ratio was 1.2x. As part of its financial strategy, the Group seeks to maintain its credit metrics in accordance with “investment grade” standards. The Group is rated BBB- by both S&P and Fitch, which is currently the highest rating level attainable for Russian corporations. In particular, the Group’s S&P rating stands one notch above the Russian long term sovereign credit rating in foreign currency.  Experienced Management. The Company believes that its senior management team, led by President and Chairman of the Management Board, Mr. Vladimir Potanin, has the technical, financial and strategic expertise necessary for the development of the Group’s assets. The

3 Group’s senior managers have extensive experience in the mining, finance, distribution, sales, transportation and energy sectors. See “Management and Corporate Governance”.

Strategy The Group’s strategy is to seek a high, sustainable return on investment by owning and efficiently operating “Tier I” assets located in regions with the geological potential to expand its mineral resource base and where the Group has competitive advantages. In accordance with this strategy, the Group classifies an asset as Tier I if it generates annual revenues in excess of U.S.$1.0 billion with EBITDA margin in excess of 40% and has an ore reserve life in excess of 20 years. In order to reach this objective, the Group’s strategy focuses on the following steps:

Effective operation and development of production base through focus on Tier I assets One of the key objectives of the Group’s strategy is to maintain its competitive advantage as a leading nickel producer with the lowest per output unit costs in the industry. To attain this objective, the Group’s strategy is to optimise its production assets by focusing on its best in class assets, which include its Tier I asset, the Polar Division. The Group’s current and prospective development projects for the Polar Division seek to increase profitable production through elimination of production bottlenecks, development of new mining capacity at the Skalisty mine, investment in new technologies and optimisation of downstream processes, including through the upgrading and expansion of capacity of the Talnakh Enrichment Plant and the Nadezhda Metallurgical Plant, as well as the decommissioning of the outdated Norilsk Nickel Plant completed in 2016. For 2017, the Group has approved total capital expenditure of U.S.$2.0 billion. The Company expects average annual investment levels of approximately U.S.$2.0 billion (at the currently anticipated currency exchange rates) through 2018. For 2017-2018, the Group’s development strategy contemplates that approximately 60 per cent of total capital expenditure will be allocated to development projects and the remainder to “stay-in-business” needs (i.e. maintenance and other mandatory projects). As part of its strategy and optimisation of its corporate structure, the Group is actively considering the disposal of assets which the Company does not consider to be Tier I assets or production assets in Russia critical for the successful operation and development of Tier I assets, including international production assets and some of its energy assets. Since the approval of the new strategy in 2013, the Group has disposed of almost all of its production assets in Australia and Africa, except for a 50% participation interest in the Nkomati Nickel Mine in Africa (which was expected to be sold during the second quarter of 2015, but the actual sale was delayed due to voluntary liquidation of the purchaser commenced in October 2016) and the Honeymoon Well deposit in Australia. In addition, the Company conducted a strategic review of the Group’s asset portfolio which identified a number of undercapitalised ”legacy assets” that do not meet the Tier I criteria but have been historically owned and operated by the Group. These assets include Southern Cluster “tail assets” in the Polar division (the outdated Norilsk Enrichment Plant, as well as two assets with declining production – the Zapolyarny mine and the Medvezhy Ruchey open pit), upstream gas assets and certain non-core transportation assets.

4 operations closer to key customers in Asia, as well as increase the share of copper in the Group’s total output. The Group will also seek to optimise its licence portfolio, through the extension of existing licences and obtaining new licences for geological research, exploration and mining, particularly at sites adjoining existing mining allotments. The Group may also consider disposal of licences for non- core assets.

Development of an investment governance system focused on return on investment The Group seeks to select and implement its development projects within a uniform investment framework and broader management culture focused on return on invested capital. In 2013, the Group implemented a centralised system of investment governance under the supervision of an investment committee with sub-committees and commissions at central management level and branch or subsidiary level, respectively. This new investment governance system contemplates the allocation of resources for development based on an analysis of each project in accordance with growth and efficiency parameters and applying a minimum required investment rate of return of 20%, calculated under a base case scenario and using stress tests.

Sustainable development and social responsibility The reduction of the environmental impact of the Group’s operations is a key goal of the Group’s strategy. In particular, the Group seeks the reduction of sulphur dioxide emissions from its operations in Russia through the adoption of new technologies and the consolidation of smelting facilities, which will include the decommissioning of obsolete facilities, in conjunction with its increased focus on upstream production. At the Polar Division, the Group plans to focus on the development of programmes and initiatives aimed at maximising sulphur recovery within the final tailings without increasing a loss of base metals, minimising the number of sources generating sulphur containing gases, maximising the percentage of sulphur dioxide in off-gases and recovering sulphur in a form suitable for transportation or storage without risk to the environment. As part of this strategy, the Group is implementing projects for reduction of emissions of sulphur dioxide at the Group’s Copper Plant and Nadezhda Metallurgical Plant. The projects are based on licences of MECS and LGI with target recycling of at least 95% of sulphur dioxide. In addition, the Group shut down the outdated Norilsk Nickel Plant in 2016 in conjunction with the expansion of the smelting capacity of the Nadezhda Metallurgical Plant. At JSC Kola “GMK”, the Group’s strategy is to modernise and develop its production facilities by removing obsolete pelletising and roasting processes for briquetting of copper and nickel products. These measures reduced emissions of sulphur dioxide at the Zapolyarnoe area of JSC Kola “GMK” from 38.0 thousand tonnes in 2015 to 7 thousand tonnes in 2016. Furthermore, the Group is committed to operating in a safe and socially responsible manner. To that end, the Group is implementing and developing a health and safety policy aimed at establishing healthy and safe working conditions for all personnel, developing awareness and motivation for personnel for safe occupational conduct and training personnel about health and safety at work and measures aimed at preventing occupational incidents. The Group conducts regular health and safety training and awareness appraisals for its personnel.

Risk Factors

Investment in the Notes involves a high degree of risk. For a detailed discussion of the risks and other factors to be considered when making an investment with respect to the Notes, see “Risk Factors” and “Forward-Looking Statements”. Prospective investors in the Notes should carefully consider the risks and other information contained in this Prospectus prior to making any investment decision with respect to the Notes. Prospective investors should note that the risks described in this Prospectus are not the only risks the Group faces. The Company and the Issuer have described only the risks they consider to be material. However, there may be additional risks that they currently consider immaterial or of which they are currently unaware.

5 Overview of the Offering

The following overview of the Offering should be read in conjunction with, and is qualified in its entirety by “Terms and Conditions of the Notes”, “Clearing and Settlement” and “The Loan Agreement”.

The Notes

Issuer MMC Finance Designated Activity Company. The Issuer is not a subsidiary of the Company, directly or indirectly. Joint Lead Managers Bank GPB International S.A., Citigroup Global Markets Limited, ICBC Standard Bank Plc, Mizuho International plc, SIB (Cyprus) Limited, Société Générale, and VTB Capital plc. Notes Offered U.S.$500,000,000 3.849% Loan Participation Notes due 2022. Issue Price 100% of the principal amount of the Notes. Issue Date 8 June 2017 Maturity Date 8 April 2022 Trustee Citicorp Trustee Company Limited Paying and Transfer Agent Citibank, N.A., London Branch Registrar Citigroup Global Markets Deutschland AG Interest On each interest payment date (being 8 April and 8 October in each year and commencing on 8 October 2017 and corresponding to the dates on which interest is payable to the Issuer under the Loan), the Issuer shall account to the Noteholders for an amount equivalent to amounts of interest actually received by or for the account of the Issuer pursuant to the Loan Agreement, which interest under the Loan accrues at a rate of 3.849% per annum from and including the Issue Date. The Notes will constitute the obligation of the Issuer to apply an amount equal to the gross proceeds from the issue of the Notes solely for the purpose of financing the Loan to the Company pursuant to the terms of the Loan Agreement. The Issuer will only account to the holders of the Notes for all amounts equivalent to those (if any) actually received and retained (net of tax) by or for the account of the Issuer in respect of principal, interest or any additional amounts under the Loan Agreement less amounts in respect of the Reserved Rights (as defined under “Terms and Conditions of the Notes”). Form and Denomination The Notes will be issued in registered form, in denominations of U.S.$200,000 and higher multiples of U.S.$1,000. The Notes will be represented by the Global

6 Note Certificate. The Global Note Certificate will be exchangeable for Definitive Certificates in the limited circumstances specified in the Global Note Certificate. Initial Delivery of Notes On or before the Issue Date, the Global Note Certificate shall be registered in the name of a nominee of, and deposited with a common depositary for, Euroclear and Clearstream, Luxembourg. Status of the Notes The Notes are limited recourse, secured obligations of the Issuer as more fully described in “Terms and Conditions of the Notes — Status”. The Notes will constitute the obligation of the Issuer to apply the proceeds from the issue of the Notes solely for financing the Loan and to account to the Noteholders for an amount equivalent to sums of principal, interest and other amounts (if any) actually received and retained (net of tax) by or for the account of the Issuer pursuant to the Loan Agreement less any amount in respect of Reserved Rights, all as more fully described in “Terms and Conditions of the Notes — Status”. Security The Notes will be secured by the Charge (as defined in “Overview of the Transaction Structure and the Security”) on:  all principal, interest and other amounts now or hereafter payable to the Issuer by the Company under the Loan;  the right to receive all sums which may be or become payable by the Company under any claim, award or judgment relating to the Loan Agreement; and  all the rights, title and interest in and to all sums of money now or in the future deposited in the Account (as defined in “Overview of the Transaction Structure and the Security”) and the debts represented thereby (including interest from time to time earned on the Account, if any), pursuant to the Trust Deed, provided that Reserved Rights and any amounts relating to Reserved Rights are excluded from the Charge. The Notes will also be secured by an assignment with full title guarantee by the Issuer to the Trustee of its rights under the Loan Agreement (save for the Reserved Rights, any amounts relating to the Reserved Rights and those rights subject to the Charge) pursuant to the Trust Deed. Withholding Taxes and All payments of principal and interest in respect of the Notes

7 Increased Costs by or on behalf of the Issuer will be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of any authority having the power to tax, other than as required by law or regulations. Subject to certain exceptions, in the event that any such deduction or withholding by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax is required by law or regulations, the Issuer will be required to make such additional payments as shall result in receipt by the noteholders of such amounts as they would have received if no such deduction or withholding had been required to the extent that the Issuer receives corresponding amounts from the Company under the Loan Agreement. Optional Redemption by the The Issuer will be required to redeem in whole, but not in Company for Taxation Reasons part, the Notes at the principal amount thereof, together with and Increased Cost accrued and unpaid interest and additional amounts, if any, to the date of redemption in the event that (1) the Company elects to repay the Loan on the basis that it is required to pay increased amounts of principal, interest or any other amount due under the Loan Agreement on account of Russian or Irish withholding taxes or as a result of the enforcement of the security provided for in the Trust Deed, or (2) the Company elects to repay the Loan on the basis that it is required to pay additional amounts on account of certain costs incurred by the Issuer pursuant to the Loan Agreement. Optional Redemption by the In limited circumstances as more fully described in the Loan Issuer for Illegality Agreement, the Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, upon giving notice to the Trustee and the Noteholders, at the principal amount thereof, together with accrued and unpaid interest and additional amounts, if any, to the date of redemption, in the event that it becomes unlawful for the Issuer to fund the Loan or allow the Loan to remain outstanding under the Loan Agreement or allow the Notes to remain outstanding or for the Issuer to maintain or give effect to any of its obligations in connection with the Loan Agreement or the Notes and/or to charge or receive or to be paid interest at the rate then applicable to the Loan or the Notes and in such case the Issuer shall require the Loan to be repaid in full. Optional Redemption by the At any time, the Company may prepay the Loan in whole or Issuer under Make Whole Call in part the Loan at the make whole prepayment amount plus Option accrued and unpaid interest on the Loan so prepaid to but

8 excluding the relevant prepayment date as more fully described in the Loan Agreement. Once the Company so prepays the Loan, the Notes will thereupon become due and repayable and the Issuer shall, subject to receipt of the relevant amounts from the Company under the Loan, redeem the Notes on the relevant prepayment date. In the case of a partial redemption, the Notes shall be selected for redemption either: (a) in accordance with the procedures of the relevant Clearing Systems; or (b) if the Notes are not held in a Clearing System or if the relevant Clearing Systems prescribe no method of selection, the Notes will be redeemed on a pro rata basis according to the holding of each Noteholder; subject, in each case, to compliance with any applicable laws and stock exchange or other relevant regulatory requirements. Neither the Trustee nor any Agent shall have any liability for any selection so made. Optional Redemption by the At any time on or after the date three months prior to the Issuer under Par Call Option Repayment Date, the Company may prepay in whole or in part the Loan at its principal amount plus accrued and unpaid interest on the Loan so prepaid to but excluding the relevant repayment date. In the case of a partial redemption, the Notes shall be selected for redemption either: (a) in accordance with the procedures of the relevant Clearing Systems; or (b) if the Notes are not held in a Clearing System or if the relevant Clearing Systems prescribe no method of selection, the Notes will be redeemed on a pro rata basis according to the holding of each Noteholder; subject, in each case, to compliance with any applicable laws and stock exchange or other relevant regulatory requirements. Neither the Trustee nor any Agent shall have any liability for any selection so made. Relevant Events Upon the occurrence of a Relevant Event (as defined in “Overview of the Transaction Structure and the Security”), the Trustee may, subject as provided in the Trust Deed and subject to being indemnified and/or secured and/or prefunded to its satisfaction, enforce the security created in its favour pursuant to the Trust Deed. Ratings It is expected that the Notes will be rated:  BBB- by S&P; and  BBB- by Fitch. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or

9 withdrawal at any time by the assigning rating organisation. Similar ratings on different types of notes do not necessarily mean the same thing. The ratings do not address the likelihood that the principal on the Notes will be prepaid or paid on a particular date before the legal final maturity date of the Notes. The ratings do not address the marketability of the Notes or any market price. Any change in the credit ratings of the Notes could adversely affect the price that a subsequent purchaser will be willing to pay for the Notes. The significance of each rating should be analysed independently from any other rating. Listing Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on the Main Securities Market. Selling Restrictions The Notes are subject to selling restrictions in the United States, the United Kingdom, the Russian Federation, Ireland, Hong Kong and Singapore. See “Subscription and Sale”. Governing Law and Arbitration The Notes, the Trust Deed, the Agency Agreement (as defined below) and any non-contractual obligations arising out of or in connection with them shall be governed by and construed in accordance with English law and contain provisions for resolution of disputes by arbitration in London, England (in the case of the Notes and the Agency Agreement) and in English courts (in the case of the Trust Deed). Use of Proceeds The gross proceeds to the Issuer from the offering of the Notes are expected to be U.S.$500,000,000, which the Issuer will be required to use for the sole purpose of financing the Loan to the Company pursuant to the terms of the Loan Agreement. Security Codes Common Code: 162214675. International Security Identification Number (“ISIN”): XS1622146758. Clearing Systems Euroclear and Clearstream, Luxembourg. Yield The annual yield of the Notes when issued is 3.849%. Risk Factors An investment in the Notes involves a high degree of risk. See “Risk Factors”. Certain Covenants The Issuer has covenanted under the Trust Deed that, as long as any Notes remain outstanding, it will not, without the prior written consent of the Trustee, agree to any amendment or any modification or waiver of, or authorise any breach or proposed breach of, the terms of the Loan Agreement, except as otherwise expressly provided in the Trust Deed or

10 the Loan Agreement.

The Loan

Lender MMC Finance Designated Activity Company, a company organised and existing as a limited liability company under the laws of Ireland. Borrower PJSC MMC Norilsk Nickel, a public joint stock company organised under the laws of the Russian Federation. Status of the Loan The Loan is a direct, unconditional, unsubordinated and unsecured obligation of the Company and obligations under the Loan will rank at least pari passu with all other direct, unconditional, unsubordinated and unsecured indebtedness of the Company. Principal Amount of the Loan U.S.$500,000,000. Interest on the Loan 3.849% per annum, payable semi-annually in arrear on 8 April and 8 October in each year starting on 8 October 2017. Use of Proceeds The Company intends to use the proceeds of the Loan for general corporate purposes and capital investments. Early Prepayments by the See “Optional Redemption by the Company for Taxation Company Reasons and Increased Cost”, “Optional Redemption by the Issuer for Illegality”, “Optional Redemption by the Issuer under Make Whole Call Option”, “Optional Redemption by the Issuer under Par Call Option” and Clause 5 (Repayment and Prepayment) set out in “The Loan Agreement” Withholding Taxes and Payments under the Loan Agreement shall be made without Increased Costs deduction or withholding for or on account of Russian or Irish taxes, except as required by law. Subject to certain exceptions, in the event that any deduction or withholding for or on account of such taxes is required by law with respect to payments under the Loan Agreement or that any deduction or withholding for or on account of Irish taxes is required by law with respect to payments under the Notes, the Company will be obliged to increase the amounts payable under the Loan Agreement to the extent necessary to ensure that the Issuer receives (or the Noteholders receive, as applicable) the amount which would have been received had such deduction or withholding not been required. Certain Covenants As described in “The Loan Agreement”. Events of Default As described in “The Loan Agreement”. Governing Law and Arbitration The Loan Agreement and any non-contractual obligations

11 arising out of or in connection with it shall be governed by and construed in accordance with English law and contains provisions for resolution of disputes by arbitration in London, England.

12 RISK FACTORS

Investment in the Notes involves a high degree of risk. Prospective investors in the Notes should carefully consider the following information about the risks described below, together with other information contained in this Prospectus prior to making any investment decision with respect to the Notes. The risks highlighted below could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects, which, in turn, could have a material adverse effect on the ability of the Company to service its payment obligations under the Loan Agreement and, as a result, the debt service on, and the trading price of, the Notes. In addition, the trading price of the Notes could decline if any of these risks materialise, and Noteholders may lose some or all of their investment. Prospective investors should note that the risks described below are not the only risks the Group faces. The Company and the Issuer have described only the risks they consider to be material. However, there may be additional risks that they currently consider immaterial or of which they are currently unaware, and any of these risks could have the effect set forth above.

RISKS ASSOCIATED WITH THE GROUP’S BUSINESS AND INDUSTRY

The Group’s business is dependent on the global economic environment.

The global economic downturn which began in 2008 has had an extensive adverse impact on the global commodities markets. While many economies have subsequently recovered from the economic crisis, growth in many markets remains slow, and many markets which previously had seen very high growth have exhibited slower growth in recent years. The global economic environment remained unstable in 2015 with global GDP growth slowing to 2.4 percent from a growth of 2.6 percent in 2014, and further declining to 2.3 percent in 2016. The slowdown has been attributed to slowing growth rates in emerging and developing economies, among other developments. In particular, China has recently seen a substantial decline in its rate of growth, which has contributed to a significant decline in commodity prices. There is a risk of a possible cyclical downturn in the Chinese economy and other developing markets and a stagnation of European and U.S. economies, which could result in a global economic downturn and impact the steel and other industries. The global economic environment is subject to a number of uncertainties, including mounting government deficits, discontinuation of certain stimulus programmes, potential inflation or deflation, continuing high levels of unemployment, political tensions over global trade of goods, labour and capital mobility, terrorism and concerns over the stability of the monetary and political union in the EU. See “—Risks relating to political and economic developments in the Eurozone”. Financial markets and the supply of credit are likely to continue to be impacted by concerns surrounding the sovereign debt of Greece and potentially other EU countries, the possibility of further credit rating downgrades of, or defaults on, such sovereign debt, as well as concerns about a slowdown in growth in certain economies. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the EU in a national referendum. In early February 2017, the parliament of the United Kingdom voted in favour of advancing legislation that would give the prime minister the authority to initiate the formal process of leaving the EU. As a result, there remains significant uncertainty about the future relationship between the United Kingdom and the EU. There is a possibility of trade barriers resulting from the United Kingdom leaving the EU which may affect the macroeconomic environment in Europe. The referendum has also given rise to calls for the governments of other EU member states to consider withdrawal. In some parts of the EU, candidates from opposition parties are gaining popularity and the upcoming elections in Germany may cause further uncertainty and instability on the financial markets. In addition, policy positions taken by the new U.S. presidential administration may result in turbulence in the financial markets and lead to greater uncertainty regarding the status of trade relations between the U.S. and some of its largest trade partners, including the U.S.’s existing trade agreements. Such developments could also lead to an increase of the already high level of protectionism globally. The worsening of such trade relations, in particular between the U.S. and

13 China, could result in negative repercussions in these countries and have an impact on global trade and the economic environment. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to fund their capital and liquidity requirements and operate in certain financial markets. Any of these factors could depress economic activity, reduce demand for commodities and reduce their prices, and restrict access to capital. If global economic conditions deteriorate or a similar economic contraction were to reoccur, the resulting contraction in demand for the Group’s metals and limitations on the Group’s access to capital as the result of a tightening of the credit markets could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Volatility of metal prices may materially adversely affect the Group’s financial condition and results of operations.

The Group derives substantially all of its revenues from the mining and sale of metals, primarily nickel, PGMs and copper. Nickel is the single largest component of metals sales revenue, comprising 34%, 38% and 43% of total metal sales revenue in 2016, 2015 and 2014, respectively. The Group generally sells its products by reference to market prices, including sales under long-term contracts. The prices of the Group’s products have demonstrated substantial volatility in the past and are affected by various factors outside the Group’s control, including:  global and regional economic and political conditions;  changes in the regulation of mining activities in countries, which are major suppliers of mined ores such as Indonesia and Philippines;  global and regional supply and demand and expectations of future supply and demand;  weather conditions, actions by labour unions and issues with electricity supply and transportation routes affecting the availability of metals;  demand for key products for which the metals produced by the Group are used, such as stainless steel for nickel and automobile catalytic converters for PGMs;  the impact of commodity investment funds and speculative trading;  overproduction;  release of built-up reserves of metals; and  use of new technologies, including technologies that enable substitution of the metals or grade of metals produced by the Group, such as nickel pig iron in China, or the use of scrap metals. Commodity prices rapidly declined in response to the global economic downturn and subsequent global destocking in late 2008 and the first quarter of 2009, and in recent years continued to fluctuate in response to changes in global economic growth rates and market demand for metals. Between December 2013 and May 2014, the nickel market experienced steady price growth due to expectations surrounding a positive effect from the ban imposed on nickel ore exports from Indonesia. During that period, the price of nickel increased from a 2014 minimum of U.S.$13,445 per tonne to a high for 2014 of U.S.$21,200 per tonne. The price trend reversed during the second half of 2014, due to fundamental weakness in the nickel market, as well as significant investment outflow from commodities, and nickel prices continued to decrease in the first half of 2015, falling below U.S.$10,000 per tonne in August 2015, the lowest level since 2008. In the first quarter of 2016, the nickel price on LME reached its 12-year low of U.S.$7,710 per tonne, but then recovered strongly towards the year end reaching U.S.$11,700 per tonne in November 2016. The average price of nickel (LME) was U.S.$9,609 per tonne in 2016, as compared with U.S.$11,807 per tonne in 2015. The copper price has also generally declined in 2016, following a decrease in oil prices, with which copper

14 prices have traditionally had a high correlation. The average price of copper (LME) was U.S.$4,863 per tonne in 2016, as compared with U.S.$5,494 per tonne in 2015. The Group’s metal sales revenue in 2016 decreased by 3%, as compared with 2015, largely as a result of fluctuations in the price of nickel and other metals. The Group has limited flexibility to respond to declines in metals prices by reducing operating costs or capital expenditure since many of the Group’s operating costs are relatively fixed and, furthermore, a substantial portion of the Group’s capital expenditure budget is devoted to maintenance. Accordingly, any continuing or future significant declines in the prices of the Group’s principal products could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The on-going conflict in Ukraine, the international reaction to Russia’s action in connection with Crimea resulting in the imposition of sanctions, and other disputes between Russia and other countries, could further materially adversely affect the economic environment in Russia, including the business, financial condition and results of operations of the Group, and create significant political and economic uncertainty.

The continuing political crisis and armed conflict in Ukraine have affected Russia’s relations with the EU, the United States and certain other countries (including Canada, Australia, Japan and Norway). In March 2014, a referendum on the status of Crimea was held there and resulted in a substantial majority of votes in favour of seceding from Ukraine and joining the Russian Federation as a federal constituent entity. On 18 March 2014, Russia and Crimea signed an agreement on the accession of the Republic of Crimea to the Russian Federation. On 21 March 2014, the Russian parliament passed legislation extending the effect of Russian laws and operation of governmental authorities to the territory of Crimea. The events in Ukraine and Crimea and the resulting change in its legal status brought about a negative reaction from the EU, the United States and a number of other countries. Several countries imposed sanctions against Russia and refused to recognise the referendum held in Crimea as legal. The United States and the EU have imposed sanctions on a number of Russian officials and individuals, former Ukrainian officials, and several Russian companies, banks and businessmen with the consequences that entities and individuals in the U.S. and the EU cannot do business with them or provide funds or economic resources to them, with assets in the relevant sanctioning jurisdictions subject to seizure and the individuals to visa bans. In addition, the U.S. and the EU have applied “sectoral” sanctions, whose principal consequences are that several leading Russian state-owned banks have been restricted from accessing Western capital. Similar sanctions have been imposed on major companies in the oil and gas and defence sectors of the Russian economy. The U.S. executive order implementing sectoral sanctions also permits sanctions to be applied against companies in the metals and mining sectors, although such sanctions are not currently in effect against any Russian metals and mining companies. The current sanctions regime is a result of multiple extensions by the U.S. and EU in the term and scope of sanctions, the most recent of which were taken in March 2017 (in relation to the EU sanctions) and January 2017 (in relation to the U.S. sanctions). As a countermeasure to the Western sanctions, Russia imposed its own sanctions. The reaction of Western countries to the events in Ukraine and Crimea, in particular the economic sanctions described above, has had an adverse impact on the Russian economy and Russia’s financial markets, increased the cost of capital and capital outflows and worsened the investment climate in Russia. During the course of 2015, international rating agencies S&P and Moody’s downgraded their foreign currency sovereign debt rating for the Russian Federation to “BB+“ and “Ba1”, respectively, with negative outlook. Currently, S&P and Moody’s foreign currency sovereign debt rating for the Russian Federation is “BB+” with positive outlook and “Ba1” with stable outlook, respectively. As the Group’s main production assets are located in the Russian Federation, if the sectoral sanctions were to be expanded to the companies in the metals and mining sector, such extension could cause difficulties in the implementation of investment projects, securing supplies of imported equipment and raising funds on EU and U.S. capital markets. Potential risks include an inability to execute new

15 contracts for the supply of equipment, machines, components and spare parts manufactured in the U.S., an inability to finance such purchases under existing contracts and a delay in the execution of the investment programs and in the development of major deposits, as a result of the failure to secure financing from EU and U.S. financial institutions. In addition, U.S. and EU sanctions apply to U.S. and EU employees, officers and directors of the Group, meaning such individuals could not approve or in any other way participate in operations with the banned organizations or enter into transactions to which sanctions apply. The Issuer and Group entities registered in the EU and U.S. are required to comply with applicable EU and U.S. sanctions with the consequence that such entities may not conduct business with any sanctioned persons in violation of EU and U.S. sanctions that apply to them. Noncompliance with applicable sanctions could result in civil and criminal liability, imposition of substantial fines, breaches of contractual undertakings, negative publicity and reputation damage. None of the proceeds of the issue of any Notes will be used to fund activities or persons in violation of sanctions introduced by the EU and U.S. Tensions between Russia and the U.S. and EU have increased recently as a result of the conflict in Syria, increasing the risk of imposition of additional sanctions on Russia. The impact of any escalation in confrontation between Ukraine and Russia or escalation of Russia's tensions with the EU and U.S. over the conflict in Syria would likely cause additional economic disruption. This, in turn, could result in a general lack of confidence among international investors in the region’s economic stability and in Russian investments generally. Such a lack of confidence could result in reduced liquidity, trading volatility and significant declines in the price of listed securities of companies with significant operations in Russia, and in the Group’s inability to raise debt or equity capital in the international capital markets, which may materially adversely affect its business, financial condition, results of operations and prospects. The conflict in Ukraine is ongoing and could continue or escalate. Hostilities between Ukraine and Russia, if such were to occur, would likely cause substantial economic disruption to both countries. There could also be calls from the West for a comprehensive sanctions regime that would seek to isolate Russia from the world economy. If no resolution of the current conflicts in eastern Ukraine is forthcoming and Russia is continued to be perceived as acting uncooperatively, there may well be further strengthening and broadening of sanctions against Russian persons. Should either the EU or U.S. expand the existing sanctions to designate existing or future customers, suppliers or other counterparties of the Group, such expansion could disrupt business with important customers, suppliers and other counterparties. The escalation of the confrontation in Ukraine, the rise in tensions between Russia and the EU and U.S. and expansion of sanctions may have a material adverse effect on the Group's business, financial condition, results of operations or prospects. Various prominent U.S. politicians have already called for a strengthening of sanctions. In January 2017, U.S. governmental agencies released a report alleging that the Russian government had covertly attempted to influence the 2016. U.S. presidential election. Investigations into these allegations are currently conducted by agencies of the U.S. Government, including the Federal Bureau of Investigations (FBI), and in May 2017, the U.S Justice Department appointed special counsel to oversee the FBI investigation. Concurrently with these investigations, the U.S. Senate, including its Judiciary Committee and Select Committee on Intelligence, are conducting their own investigations and hearings into these allegations. These allegations have already led to proposals from some prominent U.S. politicians for additional sanctions against Russian interests and in the event investigations result in any confirmation of such allegations, the U.S. may impose additional sanctions on Russia and Russian companies. Although the Group is not currently subject to any U.S. or EU sanctions, more expansive sanctions targeting metals and mining companies, including the Group and its shareholders, or a broader segment of the Russian economy could interfere with the Group’s operations. For example, the Group might become unable to deal with persons or entities bound by the relevant sanctions, including financial institutions and rating agencies, transact in U.S. dollars, raise funds from investors, or access international capital markets generally, use international settlement, clearing and/or information exchange systems, and/or the Group’s existing funds might be blocked. In these circumstances, the Company may be unable to effect payments to discharge any of its obligations under the Loan Agreement, which would result in an event of default under the Notes. The Company’s shareholders

16 and independent directors who are citizens of foreign countries, including the U.S. and EU, may be unable to participate in some or all meetings of the shareholders and Board of Directors as a result of an expansion of sanctions, which may have an adverse effect on the Company's corporate governance and limit its ability to enter into certain transactions. In addition, investors, clearing systems and other intermediaries in possession or control of the Notes, who are subject to the jurisdiction of any relevant sanctions regimes, may be required to block the Notes and may be restricted in their ability to sell, transfer or otherwise deal in or receive distributions with respect to the Notes or process such transactions, which could make such Notes partially or completely illiquid. Potential holders of the Notes may be deterred from buying the Notes for the same reason. This could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under the Notes, reduced liquidity in the trading market for the Notes and have material adverse effect on their market value.

Risks relating to political and economic developments in the Eurozone.

In 2016, 2015 and 2014, Europe was the Group’s largest market in terms of revenues, accounting for 57%, 59% and 50% of total metal sales revenues, respectively. The region comprising the Member States of the European Union that have adopted the euro (the “Eurozone”) has been affected by the general slow growth in the economies of its Member States following the global economic crisis, as well as the continued financial crisis in Greece and negotiations over its inability to repay its substantial debt. On 30 June 2015, Greece became the first developed country to miss its loan payment to the International Monetary Fund. Although the payment was finally made during a grace period, Greece remains in a difficult position and would not be able to meet its further loan repayments without further bailouts from the European Central Bank. Financial markets and the supply of credit are likely to continue to be impacted by concerns surrounding the sovereign debts of Greece and potentially other EU countries, the prospective exit of the UK from the European Union, the possibility of further credit rating downgrades of, or defaults on, such sovereign debt, concerns about a slowdown in growth in certain economies and uncertainties regarding the stability and overall standing of the European Monetary Union. If the Eurozone economy as a whole, and particularly the economies of countries, such as Greece, that continue to suffer from excessive debt levels, depressed economic conditions and high unemployment, do not improve, it may be the case that one or more countries may default on their debt. If such an event were to occur, it could result in unpredictable market volatility as customers in the region could potentially reduce purchases from the Group, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. In addition, the departure of one or more countries from the European Monetary Union may result in the imposition of, among other things, exchange controls and mandatory payment laws. The exact nature of the risks that the Group faces is difficult to predict and guard against in light of the difficulties in predicting the outcomes of the remedial measures being undertaken in Europe, the extent to which the Eurozone debt crisis, in a slowdown in growth or recession in Europe and elsewhere, will impact the global economy and the fact that the risks are outside of the Group’s control. To the extent that the economic conditions in the European Union worsen, or political developments cause a wider instability in the region, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

The Group may be unable to implement its strategy or realise its anticipated benefits.

The Group’s strategy contemplates an optimisation of the Group’s production assets, with a particular focus on Tier I production assets, including the Polar Division, as well as the adoption of specific

17 performance criteria to assess the Group’s future capital investment plans and a new product sales model (see “Business – Strategy”). Although the Group has been adhering to its strategy, no assurance can be given that the Group will be able to continue to implement its strategy or that the strategy will result in the realisation of the targets or benefits that were anticipated during its formulation including, without limitation, in relation to production plans and internal rates of return on investment projects or that the implementation of this strategy will not lead to the Group experiencing materially lower results than it anticipated or than it would have under its previous strategy. In addition, the strategy contemplates a disposal of certain non-core assets, and the Group may be unable to sell these assets at reasonable prices or at all. In the event that the Group or its management is unable to implement the strategy in an adequate manner or within the planned timeframe, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

The Group’s business could be adversely affected if it fails to obtain, maintain or renew necessary licences, including subsoil licences, and permits or fails to comply with the terms of its licences and permits.

The Group requires various licences and permits to conduct its operations, including in relation to exploration, mining, metallurgical refining and production, energy generation and supply, transportation and sales. In particular, the Group performs its exploration and mining activities pursuant to exploration and development licences and does not have property rights to the relevant deposits. Consequently, the Group’s business depends on the continuing validity of its licences, including subsoil licences for its mining operations, and the issuance of new, and renewal of existing, licences and the Group’s compliance with their terms. Regulatory authorities exercise considerable discretion in the timing of licence issuance and renewal and the monitoring of licensees’ compliance with licence terms. Requirements imposed by these authorities, which require the Group to comply with numerous industrial standards, recruit qualified personnel, maintain necessary equipment and quality control systems, monitor operations, maintain appropriate filings and, upon request, submit appropriate information to the licensing authorities, may be costly and time-consuming and may result in delays in the commencement or continuation of exploration or production operations. Private individuals and the public at large possess rights to comment on and otherwise engage in the licensing process. Accordingly, the licences and permits the Group needs may be invalidated and may not be issued or renewed, or if issued or renewed, may not be issued or renewed in a timely fashion, or may involve requirements which restrict the Group’s ability to conduct its operations or to do so profitably. The legal and regulatory basis for the licensing requirements is often unclear, and ministerial acts and instructions that attempt to clarify licensing requirements are often inconsistent with legislation, which increases the risk that the Group may be found in non-compliance. In addition, it is possible that licences applied for or issued in reliance on acts and instructions relating to subsoil rights issued by the by the Federal Agency for Subsoil Use of the Russian Federation or the Ministry of Natural Resources and Ecology of the Russian Federation could be challenged by the governmental authorities or otherwise as being invalid if they were found to be beyond the authority of that ministry. In the event that the licensing authorities discover a material violation, the Group may be required to suspend its operations or incur substantial costs in eliminating or remedying the violation, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

18 The Group’s principal operations are located in geographically remote areas with harsh climates, which in some cases requires limiting production operations to specific times of year, and the delivery of supplies to the areas where it operates may be disrupted or transportation costs may increase.

The Group’s principal operations in Russia are located in remote areas north of the Arctic Circle, which experience long, cold winters and, in relation to the Polar Division, summer periods of only two months. As a result of this remoteness and the prevailing climatic conditions, the Group faces technical challenges for its exploration, mining, processing, energy supply and transportation activities, as well as potential issues with personnel recruitment and retention (see “—The Group depends on qualified mining specialists and other personnel”). Furthermore, the Group is largely reliant on its service subsidiaries to provide the construction, maintenance and other services that it requires for those operations since it is in many cases not practicable to engage external contractors for such locations. Although the Group has developed mining and metallurgical skills and technologies for operating in these areas, the Group may be unable to overcome problems related to weather and climate at a commercially reasonable cost, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group’s Polar Division depends on its port facilities in Dudinka, the North Sea Route and other transportation infrastructure.

The Group’s Polar Division is located on the Taimyr Peninsula, which is completely isolated from Russia’s road and railroad networks. The Polar Division uses the Dudinka port and the North Sea Route (a sea shipping route along Russia’s northern coast) to receive supplies and ship out copper to end-users and high-grade mattes to the Kola Peninsula. The Group also owns, or assists with the maintenance of, airports in the Taimyr Peninsula, and owns a local air transportation service. The Group experiences periodic interruptions in transportation services as a result of natural causes. For example, severe or unexpected weather conditions may result in delays or reductions in deliveries of raw materials, supplies or products. For example, the early closure of the winter navigation route from the Polar Division to JSC Kola “GMK” in May 2013 due to above average seasonal temperatures resulted in a reduction in deliveries of high-grade matte to JSC Kola “GMK”, which contributed to the decrease of 5% in nickel production by the Group’s operations in 2013 as compared with 2012. In July and August each year, the load-carrying capacity of the river ships and barges used by the Group may be decreased as a result of decreases in the navigable depths on the Yenisei River. The Group has implemented transportation and storage strategies to mitigate the effects of these interruptions, including the acquisition of a fleet of six ice-class cargo ships. To the extent that the Group’s transportation and logistical planning is unable to avoid delays in delivery of cargo as a result of interruption to transportation routes, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

The Group’s transportation structure depends on Russian Federation-owned assets.

Some parts of the Group’s logistical infrastructure, including the quays and certain other structures in the Krasnoyarsk river port, are owned by the Russian Federation and operated by the Group under the title of gratuitous usage under one-year lease agreements, with a priority right for renewal of the lease. Any material increases in lease rates could result in non-planned expenses, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. Moreover, should the state privatise such state-owned assets, the state would normally sell the assets at public auction or similar competitive procedures, and there can be no assurances that the Group

19 would be able to acquire such assets. Should such assets be acquired by third parties, the Group may be unable to continue its logistical operations on the current scale, or at the current expense level, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group is dependent on suppliers and other third parties for its operations and a disruption in supply or services or a change in price could have a material adverse effect on its results of operations.

The Group’s operations require various raw materials and semi-products, as well as other consumables and spares, which are currently sourced from third-party suppliers. The price and availability of products sourced from third parties are subject to market conditions, and, since the price of the Group’s products depends on global commodities markets, the Group’s operating margins may be adversely affected if pricing trends for the materials it purchases do not correspond to pricing trends for the Group’s metal products. Any disruption or decrease in supply may also require the Group to reduce operating capacity utilisation rates. For example, after the sale by the Group of its stake in Tati Nickel in April 2015 and potential sale of its stake in the Nkomati Nickel Mine, the Group’s nickel refinery in Finland will largely depend on the supply of nickel concentrate and matte from the Group’s Russian operations. The Group’s operations also require a substantial supply of electricity which, with the exception of the Polar Division, is supplied by third parties. Electricity prices have been increasing in recent years in Russia following full price liberalisation, as well as in the European Union, and further price increases for electricity may also occur in the future. The Group’s operations also rely on third party services, including transportation and refining. Any significant change in the prices or terms or availability of third-party supply of raw materials and services that the Group requires for its operations could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group’s operations are subject to hazards and risks that could lead to unexpected production delays, increased costs, damage to property or injury or death to persons.

The Group’s mining operations, like those of other companies engaged in mining operations, are subject to all of the hazards and risks normally associated with the exploration, development and production of natural resources, any of which could result in production shortfalls or damage to persons or property. The Group engages primarily in underground mining, but also conducts open pit mining. Underground mining is generally more expensive than open pit mining. It is also more dangerous and requires the use of ventilation systems. Potential hazards associated with the Group’s underground mining operations include underground fires and explosions, including those caused by flammable gas, discharges of gases and toxic chemicals, geothermal control, sinkhole formation and ground subsidence, and other accidents and conditions resulting from drilling, blasting and transporting and removal of material from an underground mine. Hazards associated with the Group’s open-pit mining operations include flooding of the open pit, collapses of the open-pit wall, accidents associated with the operation of large open-pit mining and ore handling equipment, accidents associated with the preparation and ignition of large-scale open-pit blasting operations, production disruptions due to weather and hazards associated with the disposal of mineralised waste water, such as groundwater and waterway contamination. There are also hazards associated with the Group’s metallurgical processing and refinement operations, including fires or accidents at furnaces and other industrial accidents, and such operations may involve the use of hazardous materials and substances that have the potential to present risks to the health and safety of workers and neighbouring populations. The Group’s operations in Russia relating to the generation and supply of energy, including gas pipelines, electricity grids, heating stations and oil depots, are also subject to the risk of industrial accidents and other hazards.

20 The Group is at risk of experiencing any, some or all of these hazards. The occurrence of any of these hazards could result in material damage to, or the destruction of, mineral properties or production facilities, human exposure to pollution, personal injury or death, environmental or natural resource damage, delays to production or shipping, reduced sales, increased costs and losses associated with remedying the situation, as well as potential legal liability for the Group. The liabilities resulting from any of these risks may not be adequately covered by insurance, and no assurance can be given that the Group will be able to obtain additional insurance coverage at rates it considers to be reasonable. The Group may therefore incur significant costs that could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. See “—The Group’s level or scope of insurance coverage may not be adequate”.

Equipment failures or production curtailments or shutdowns could adversely affect the Group’s sales and profitability.

Interruptions in production capacities may increase production costs and reduce sales and earnings. In addition to equipment failures, the Group’s facilities are also subject to the risk of catastrophic loss or production curtailments due to unanticipated events, such as fires, explosions or adverse weather conditions. In the future, the Group may experience material plant shutdowns or periods of reduced production as a result of any equipment failures. Although the Group has insurance for equipment damage and business interruption, there can be no assurance that amounts recoverable under such insurance policies would be sufficient to compensate the Group for losses and expenses resulting from equipment failure or shutdown. Furthermore, a longer-term business disruption could result in a loss of customers. If any of these events were to occur, future sales and the Group’s profitability could be adversely affected. See “—The Group’s operations are subject to hazards and risks that could lead to unexpected production delays, increased costs, damage to property or injury or death to persons”.

New or more stringent environmental or health and safety laws and regulations or stricter enforcement of existing environmental or health and safety laws and regulations in the countries in which the Group operates may have a significant negative effect on the Group’s operating results.

The Group operates in an industry which affects the environment and requires compliance with increasingly stringent regulatory requirements. The operations of mines and metallurgical plants have potential environmental problems, including the generation of greenhouse gases, pollutants, such as sulphur dioxide, and their decontamination, as well as the storage and disposal of wastes and other hazardous materials. Pollutant emissions and discharges, as well as disposed wastes such as smelter slag, contain sulphuric acid and sludges. Pollution risks and associated clean-up costs are often impossible to assess until audits of compliance with environmental standards have been performed and the extent of liability under environmental laws can be clearly determined. Environmental laws and regulations are continually changing in the Russian Federation and elsewhere, and are generally becoming more restrictive. For example, the introduction of prospective international obligations on greenhouse gases regulations, including the Paris Agreement expected to apply from 2020, may have an adverse impact on the Group’s operations. Russia is a signatory to the Paris Agreement and a plan for its ratification in Russia is currently under development. Under the Decree of the Russian Government dated 2 April 2014, Russian companies will be obliged to report on their greenhouse gas emissions to the state authorities starting from 2017. A draft bill amending the Federal Law No. 7-FZ “On the Protection of the Environment” is under parliamentary review which will, among other things, establish certain requirements regarding the level of greenhouse gas emissions. The Group is planning to report its greenhouse gas emissions to the state authorities for 2016 during the course of the first six months of 2017. New laws and regulations, the imposition of more stringent requirements in licenses, increasingly strict enforcement or new interpretations of existing environmental laws, regulations or the terms of the Group’s licenses, or the discovery of previously unknown contamination at or near the Group’s mining or manufacturing sites, may require the Group to make significant expenditures to modify operations, install pollution control equipment or perform site

21 clean-ups; the curtailment of operations; or the payment of fees, fines and other penalties, which are being increased from time to time The terms of the Group’s subsoil licences contain extensive site clean-up, restoration and rehabilitation obligations due in the future that are mandatory for the Group, and the Group is required to have a closure plan for each mine and to allocate a budget for site rehabilitation in the event of a mine closure. The Group could also be liable for losses associated with environmental hazards and rehabilitation. In addition to its Russian operations, the Group has operations in the European Union and must comply with the environmental regulations in those regions. The Group is also subject to health and safety laws, regulations and standards, including workplace health and safety requirements. The Group’s compliance with these environmental, health and safety laws and regulations, as well as with additional targets that it may set from time to time in respect of the reduction of the environmental impact of its operations, requires a commitment of significant financial resources. For example, the Group is required under regulation issued by the authorities of Krasnoyarsk Territory to reduce the annual volume of sulphur dioxide emissions from its operations at the Polar Division from their level of 1,915 thousand tonnes to 337 thousand tonnes by 2020. See “Business – Environment”. These laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from environmental, health and safety incidents and other impacts of the Group’s past and current operations, and could lead to the imposition of substantial fines, penalties, other civil or criminal sanctions, the curtailment or cessation of operations, orders to pay compensation, orders to remedy the effects of violations or orders to take preventative steps against possible future violations. The Group may also be exposed to environmental liabilities or remediation expenses in respect of acquired businesses, arising from activities that occurred prior to the acquisition of these businesses. The Group does not currently have insurance to protect it from all financial losses associated with environmental pollution, and consequently the Group may be responsible for such liabilities that may arise and any expenses with regard to their discharge. Furthermore, evolving regulatory standards, enforcement and expectations may result in increased litigation or increased costs. Under Russian law, any company or individual violating industrial safety rules may incur administrative or civil liability, and individuals may also incur criminal liability. A company that violates safety rules that results in health problems for an individual may also be obliged to compensate the individual for lost earnings, as well as for other damages and, in certain cases, its activity may be suspended. In addition, if the operations of a company violate environmental requirements or are harmful to the environment or any individual or legal entity, the environmental authorities may suspend such operations for up to 90 days or a court action may be brought to limit or ban such operations and require the company to remedy the effects of the violation. Even though in the past Russian competent authorities have not suspended the Group’s operations, no assurance can be given that they will not do so in the future in case of even minor breaches and violations of applicable environmental, health and safety control and regulations. Any such suspension or other sanction could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Company’s principal shareholders have the ability to exert influence over the Group and its business.

As of the date of this Prospectus, UC RUSAL plc (“RUSAL”) and Olderfrey Holdings Limited (“Olderfrey”) have substantial indirect shareholdings in the Company (see “Principal Shareholders”). RUSAL, Whiteleave Holdings Limited (“Whiteleave”), a subsidiary of Olderfrey, and Crispian Investments Limited (“Crispian”), an entity associated with Mr. Roman Abramovich, Mr. Alexander Abramov and Mr. Alexander Frolov, have entered into agreements for a ten-year term expiring on 1 January 2023 pursuant to which the parties agreed provisions affecting the governance of the Company, including, among other things, the composition of the Board of Directors and the appointment of the President, rights of first refusal upon sale of its stake by any of the principal shareholders, mutual buyout rights exercisable by RUSAL and Whiteleave and, in addition, the parties agreed not to take any action with respect to specified fundamental matters without the

22 agreement of each of them, agreed on specific rules and procedures, and, subject to certain exceptions agreed to maintain at specified levels dividends and capital expenditure. To facilitate compliance with these agreements, Whiteleave and RUSAL have agreed that Crispian may exercise certain voting rights in respect of their shareholdings but only as specified in the agreements. Such voting rights amount in total to 15% of the Company’s issued share capital (comprising 7.5% shareholdings held indirectly by each of Whiteleave and RUSAL). The Company is not a party to any of these agreements. See “—The Group will require a significant amount of funding to implement its capital investment programme, pay expected dividends and re-finance current borrowings” and “Principal Shareholders”. There can be no assurance, however, that these agreements will remain in place or continue to be implemented in accordance with their terms. The shares held by the Company’s principal shareholders give them the ability to make decisions that could affect the Group’s business and accordingly the value of an investment in the Notes. In the event of any future disagreements between the Company’s principal shareholders regarding the management, direction and operations of the Group, whether as result of breaches of these agreements or following their expiration, the Group’s ability to pursue a consistent business development strategy may be affected. The Company’s principal shareholders have the ability to exert influence over certain actions in respect of the Company. To the extent that the interests of the Company’s principal shareholders were to conflict with the interests of the Noteholders, the trading price of the Notes could be materially adversely affected.

The Group’s level or scope of insurance coverage may not be adequate.

It is not always possible to obtain insurance for all exploration, development and production risks the Group may face and the Group may decide not to insure against certain risks because of high premiums or other reasons. Accordingly, the Group may incur uninsured losses of production assets and may be subject to claims not covered, or not sufficiently covered, by insurance, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Some of the Group’s cash reserves are held at Russian state-owned banks and bankruptcy or financial soundness concerns regarding any of such banks could result in a forfeiture of the Group’s cash reserves.

Some of the Group’s cash reserves are kept at leading Russian state-owned banks. Bankruptcy, revocation of banking licence, failure to meet financial soundness requirements, the impact of the U.S. and EU sanctions resulting from the Ukrainian crisis or the impact of other material adverse developments on any of such banks could lead to forfeiture of, or delays in accessing, the Group’s cash reserves or withdrawal/transactional limits or restrictions being imposed on the Group’s business, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Ore reserves and mineral resources are very difficult to estimate, may be significantly adjusted, may not prove accurate and have not been independently audited or verified.

Like any mining company, the Group depends on its reserves and resources. Estimates of ore reserves and mineral resources of any mining company are inherently imprecise and depend to some extent on statistical inferences drawn from limited drilling and other testing procedures, which may ultimately prove unreliable. Estimates of ore reserves and mineral resources are expressions of professional judgment based on knowledge, experience and industry practice. The Group cannot be certain that its estimated ore reserves and mineral resources are accurate and future production, which may not occur for many years, and rates of recovery of metals could differ materially from such estimates. An independent

23 review of ore reserves and mineral resources of the Group’s Russian operations was conducted in 2013, and no other independent review has been conducted since 2013. The information on the ore reserves and mineral resources of the Group’s Russian operations is based on the results of the analysis and conversion by the Group of its ore and metal balance reserves under the categories of the Russian classification system into the relevant categories under the JORC Code, and the estimates presented in this Prospectus have been prepared solely by the Group and have not been subject to any audit or verification by independent metals and mining engineers. If the Group’s ore reserves and mineral resources were to be subjected to a third party independent audit or verification, there can be no guarantee that the findings of such a review would not be materially different from the Group’s estimates. Should the Group’s ore and mineral reserves prove to have been incorrectly calculated in accordance with the JORC Code or should the Group encounter mineralisation or formations in any of its mines or projects different from those predicted by drilling, sampling and similar examinations, reserve and resource estimates may have to be significantly adjusted, and mining and production plans may have to be altered in a way that might materially adversely affect the Group’s operations. In 2012, for example, production of finished metals at the Group’s Russian operations decreased as compared with 2011 largely as a result of decreased ore grades extracted from the Group’s Polar Division, and, to the extent the Group is unable to expand its reserve base to compensate for such decreases in grades, its operations may be adversely affected. Declines in market prices of nickel, copper or PGMs may render the mining of the Group’s ore reserves or mineral resources uneconomic, and, as such, estimates of ore reserves and mineral resources are also affected by economic factors, such as significant changes in metal prices. Each of these potential occurrences could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. The Group’s ability to develop these reserves is subject to its ability to obtain, maintain and renew the licences to those reserves. See “—The Group’s business could be adversely affected if it fails to obtain, maintain or renew necessary licences, including subsoil licences, and permits or fails to comply with the terms of its licences and permits”.

The Group’s programme to develop its mineral resources base may not be realised.

The ratio of the Group’s mineral resources to production levels has decreased in recent years, and the Group’s long-term growth and profitability depends, in large part, on its ability to sustain and expand its mineral resource base, as well as to identify and acquire additional mineral exploration rights, mineral reserves and operating mines and on the costs and results of the Group’s continued exploration programmes. In accordance with its strategy, the Group seeks to develop deposits located close to its existing infrastructure at the Polar Division, as well as on the Kola Peninsula. The Group’s implementation of this strategy will require the construction or expansion of mining and other existing infrastructure, as well as the obtaining of new licences, and no assurance can be given that the Group will be able to develop these resources. In addition, the Group also plans to focus on various exploration programmes. Exploration activities are speculative and are often unproductive. These activities also often require substantial expenditure to:  establish the presence and to quantify the extent and grades (metal content) of mineralised material through exploration drilling;  determine appropriate metallurgical recovery processes to extract metals from the mineral reserves;  estimate mineral reserves;  undertake feasibility studies and estimate the technical and economic viability of the project; and  construct, renovate or expand mining and processing facilities.

24 Exploration programmes, including those conducted by the Group, may not result in the discovery of mineralisation, and any mineralisation discovered may not be of sufficient quantity or quality to be mined profitably. The Group’s mineral exploration rights may not contain commercially exploitable mineral reserves. Uncertainties as to the metallurgical recovery of any metal discovered may not warrant mining on the basis of available technology. In addition, once metal mineralisation is discovered, it can take several years to determine whether mineral reserves exist. During this time, the economic feasibility of production may change owing to fluctuations in factors that affect revenue and operating costs, as well as cash and financing availability. As a result of these uncertainties, the Group’s exploration programmes and acquisitions of mineral assets may not result in new mineral reserves or operations, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The development of the Group’s exploration projects may be subject to unexpected problems and delays.

The Group’s profitability will depend, in part, on the actual economic returns and the actual costs of developing mines, which may differ significantly from its current estimates. The Group’s decision to develop a mineral property is generally based on estimates of the expected or anticipated projected economic returns. These estimates are based on assumptions regarding, among other things:  future metal prices;  anticipated tonnage, grades and metallurgical characteristics of mineral reserves to be mined and processed;  anticipated recovery rates of metal from the mineral reserves;  anticipated capital expenditure and cash operating costs; and  the required return on investment. Operating costs and capital expenditure are determined by, among other things, the costs of the commodity inputs, including the cost of fuel, consumables, spares and utilities, each of which is consumed or used in mineral exploration and development activities. In addition, there are a number of uncertainties inherent in the development and construction of a new mine or an extension to an existing mine. In addition to those discussed above, these uncertainties include:  the timing and cost, which can be considerable, of the construction of mining and processing facilities;  the availability and cost of skilled labour, power, water and transportation;  the need to obtain necessary environmental and other governmental permits and the timing of those permits; and  the availability of funds to finance construction and development activities. Technical and technological decisions made during each stage of the development on the basis of the limited information available to the Group may prove to be wrong, and, as a result, lead to throughput and/or recovery and operating costs being worse than estimated by the Group. The costs, timing and complexities of mine development and construction can increase because of the remote location of many mining properties. In addition, new mining operations could experience unexpected problems and delays during development, construction and mine start-up, and delays in the commencement of mineral production could occur. Operating costs and capital expenditure estimates could fluctuate considerably as a result of fluctuations in the prices of commodities consumed in the construction and operation of a mining project. To the extent that the Group experiences any of these issues with respect to its development projects, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as

25 a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

The Group will require a significant amount of funding to implement its capital investment programme, pay expected dividends and re-finance current borrowings.

The Group’s business is and will continue to be capital-intensive, with a substantial amount of capital expenditure required to be allocated to the maintenance of depreciated production plant and projects to comply with environmental standards. In 2016, 2015 and 2014, the Group’s aggregate capital expenditures (purchases of property, plant and equipment) were U.S.$1.7 billion, U.S.$1.7 billion and U.S.$1.3 billion, respectively. The Company expects that average annual capital expenditure (including both ongoing investments and projects which remain subject to approval of the Board of Directors) through 2018 will be approximately U.S.$2.0 billion per year at the currently anticipated currency exchange rates. For 2017-2018, the Group’s development strategy contemplates that approximately 60 per cent of total capital expenditure will be allocated to development projects and the remainder to “stay-in-business” needs (i.e. maintenance and other mandatory projects). In the past, the Group has generated a substantial portion of the cash necessary for these improvements and repairs through internal operations, and the Company expects to continue to do so in the foreseeable future. If the Group’s cash flows are reduced and the Group is not able to obtain alternative sources of external financing at an acceptable cost or in the amounts required, the Group’s planned capital investments may be substantially delayed or interrupted. The Group’s capital investments are subject to a variety of other uncertainties, including changes in economic conditions, delays in completion, cost overruns and defects in design or construction, as well as the availability of funding. No assurance can be given that the Group’s capital projects will be completed on schedule or that expected operational improvements will be fully realised as currently envisioned. In addition, under agreements among the Company’s principal shareholders, it was agreed to maintain dividends at specified levels. Starting from 2017, these levels contemplate that the dividends will be determined on the basis of the ratio of the Company’s net debt to EBITDA as of 31 December of the preceding year, as follows: (i) 60% of EBITDA, if the ratio is 1.8 and less; (ii) 30% of EBITDA if the ratio is 2.2 and more; and (iii) if the ratio falls between 1.8 and 2.2, the percentage of EBITDA to be paid as dividends shall be calculated as follows: X% = 60% — (net debt/EBITDA — 1.8)/0.4*30%. The minimum amount of the annual dividends payable by the Company in 2017 was set at US$1.3 billion increased by the net proceeds received by the Company in 2017 from the sale of certain non- core assets reduced by the amount of expenses associated with the sale and taxes. If such proceeds are not paid as a dividend in 2017, the Company expects to distribute them to its shareholders as a dividend in addition to the other agreed dividends as soon as practicable after receipt. Starting from 2018, the minimum amount of the annual dividends payable by the Company was set at US$1 billion. Any dividends paid in excess of these amounts can be used to decrease the required amount of subsequent dividends. In accordance with Russian law, any dividend payments recommended by the Company’s Board of Directors in respect of a reporting period require the approval of the general meeting of the Company’s shareholders. See “Operating and Financial Review – Recent Developments”. In addition, under the agreements among the Company’s principal shareholders, the capital expenditures and/or expenses to purchase other non-current assets that can be incurred by the Company without triggering veto rights of the parties under the agreements (and excluding capital expenditures associated with Bystrinsky project and funded on the project-financing basis) are limited to U.S.$4.4 billion in aggregate in 2016-2018. In addition to this and to the capital expenditures associated with the Bystrinsky project, the following capital expenditures are excluded from the limits and can be incurred by the Company without triggering veto rights of the parties under the agreements: expenditures related to modernization of facilities of (1) Nadezhda Metallurgical Plant and (2) Copper Plant aimed to decrease emission of sulphur dioxide until relevant expenditures do not exceed U.S.$2 billion in aggregate. Such additional exemption from the scope of veto rights is applicable only if the ratio of the Company’s Net Debt to the Company’s EBITDA does not exceed

26 2.5x. See “—The Company’s principal shareholders have the ability to exert influence over the Group and its business”. Furthermore, the Group had current loans and borrowings of U.S.$578 million as at 31 December 2016 (see “Capitalisation”), and, if the Group is unable to refinance such loans and borrowings on acceptable terms, the Group may need to reprioritise the allocation of its capital resources, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group faces risks to the extent it pursues acquisitions or disposals as part of its strategic development.

As part of the implementation of its business strategy, the Group may consider further acquisitions of shares in other companies or other assets, and the Group is considering a disposal of non-core assets. See “Operating and Financial Review – Principal Factors Affecting the Group’s Business – Disposals and Holdings” and “Business – Strategy”. The acquisition and integration of new companies and businesses pose significant risks to the Group’s operations, such as the difficulty of integrating the operations and personnel of the acquired business, problems with minority shareholders in acquired companies and their material subsidiaries, the potential disruption of the Group’s own business, the assumption of liabilities, including in relation to tax and environmental matters, relating to the acquired assets or businesses, the possibility that indemnification agreements with the sellers of those assets may be unenforceable or insufficient to cover potential tax or other liabilities, the difficulty of implementing effective management, financial and accounting systems and controls over the acquired business, the imposition and maintenance of common standards, controls, procedures and policies and the impairment of relationships with employees and counterparties as a result of difficulties arising out of integration. Furthermore, the Group may incur loss to the extent that the value or, upon any subsequent disposal, the proceeds of sale from any such disposal of any business, holding or assets held or disposed of by the Group is less than the acquisition price, including, for example, as a result of a decline in the market generally, which could impact the Group’s profitability.

The mining and metals industry is competitive.

The Group faces competition from other metal mining companies in all areas of its operations, including the acquisition of licences and the search for and acquisition of properties producing or possessing the potential to produce metal. Some of these companies may have greater financial, distribution, technical, personnel, purchasing and marketing resources than the Group, any of which could provide them with a competitive advantage. Competitors may be or become able to reduce their costs and offer their products at a lower price than the Group, or demand for the Group’s products may be impacted by the production of cheaper, lower grade alternative products such as nickel pig iron in China. In addition, any alliance among the Group’s competitors may represent a threat to the Group’s operations to the extent the alliance is larger, better-capitalised, benefits from economics of scale or better relationships with governmental authorities or has access to greater resources than the Group. There is a limited supply of mining rights and desirable mining prospects available in the areas where the Group’s current projects are situated. The vagaries of the auction process may leave the Company at a disadvantage in acquiring new projects at auction, even when compared with those competitors which are less capitalised than the Company. In addition, while there are currently few large, established mining companies with substantial financial resources, the area may likely become of increasing interest, particularly to those Russian-based mining companies, but also to international mining companies. The Company could be at a competitive disadvantage in acquiring mining rights if these competitors were to have greater financial resources and larger technical staff than the Company. There can be no assurance the Company would be able to compete successfully with such other companies in acquiring new prospecting and mining rights. Existing or future competition in the mining industry could materially adversely affect the Group’s prospects for mineral exploration and success in the future.

27 If the Group is unable to compete effectively, its profitability and business prospects would be adversely affected, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Inflation may materially adversely affect the Group’s results of operations.

A substantial majority of the Group’s mining and production activities are located in Russia, and the majority of its direct costs are incurred in Russia. Russia has experienced high levels of inflation since the early 1990s. Inflation increased dramatically after the 1998 financial crisis, reaching a rate of 84.4% in that year. Inflation significantly increased in 2014 to 11.4% and in 2015 to 12.9%. While inflation moderated to 5.4% in 2016, there can be no assurance that it will not increase in the future. The Group tends to experience inflation-driven increases in some of the costs of its Russian operations, such as salaries, that are linked to, or impacted by, the general price level in Russia. In the event that the Group experiences cost increases resulting from inflation, the Group’s operating margins may decrease. In such circumstances, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected. See “—Fluctuations in currency exchange rates may have an adverse effect on the Group’s business”.

Fluctuations in currency exchange rates may have an adverse effect on the Group’s business.

The Group’s products are typically priced in U.S. dollars, while the Group’s direct costs, including labour and energy costs, are largely incurred in roubles. In addition, approximately 60-65% of the Group’s capital expenditures for 2017-2018 are denominated in roubles. Consequently, any significant and sustained appreciation of the rouble against the U.S. dollar or, to a lesser extent, the euro could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. Conversely, a depreciation of the rouble against the U.S. dollar can lead to lower operating expenses, as a substantial portion of the Group’s salaries and other operating expenses are denominated in roubles. In 2016, the average RUB/US$ exchange rate was 67.03, compared with 60.96 in 2015, representing a 10 per cent year-on-year rouble decrease, and was 60.66 at year-end. See “Presentation of Financial and Other Information – Currencies and Exchange Rates” for historic exchange rate information.

The Group’s competitive position and future prospects depend on its senior management’s experience and expertise.

The Group’s ability to maintain its competitive position and to implement its business strategy is dependent to a large degree on the services of its senior management team. Competition in Russia for personnel with relevant expertise is intense due to the limited quantity of qualified individuals, and this situation affects the Group’s ability to retain its existing senior management and attract additional qualified senior management personnel. The loss or diminution in the services of members of the Group’s senior management team or an inability to attract, retain and maintain additional senior management personnel could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

28 Wage increases may reduce the Group’s profit margins.

In 2016, the average number of employees of the Group’s Russian operations represented 98% of the total average number of Group employees. Wage costs in Russia have historically been significantly lower than wage costs in more economically developed regions such as North America and Australia for similarly skilled employees. However, if wage costs were to increase in Russia, this could result in a reduction in the Group’s profit margins. In 2016, labour costs increased by U.S.$111 million driven by the indexation of rouble-denominated salaries and wages and the headcount increase (in 2015, by U.S.$154 million). Furthermore, due to the remoteness of its main operations in Russia, the Group may be required offer increases in compensation levels which are in excess of general salary inflation in Russia in order to recruit and retain personnel. See “—The Group’s principal operations are located in geographically remote areas with harsh climates, which in some cases requires limiting production operations to specific times of year, and the delivery of supplies to the areas where it operates may be disrupted or transportation costs may increase”. Although the Group has been able in the past to increase production efficiency in order to offset cost pressures resulting from wage increases, to the extent that the Group is unable to continue to increase the efficiency and productivity of its employees, wage increases could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. See “—Inflation may materially adversely affect the Group’s results of operations”.

The Group depends on qualified mining specialists and other personnel.

The Group depends on qualified geologists and other mining specialists in order to maintain and develop its business, including the exploration and development of reserves. Only a limited number of skilled geologists and other mining specialists with adequate qualifications and experience are currently available in Russia and other countries where the Group operates, and there is an increasing demand for such qualified personnel as more companies invest in the mining industry. The Group may also face challenges in recruitment and retention of general production and other personnel due to the remoteness of its main operations, particularly at the Polar Division. In addition, in South Africa, the emigration of skilled workers may also affect the Group’s ability to attract and retain qualified employees. If the Group is unable to retain an adequate number of qualified geologists or other mining specialists or personnel, it may be unable to develop its reserves, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group’s operations could be adversely affected by labour relations.

Although the Group considers the Group’s employee relations to be good, large union representation subjects the Group’s businesses to the threat of interruptions through strikes, lockouts or delays in renegotiations of labour contracts. In the Group’s Russian operations, which accounted for 98% of the Group average total number of employees in 2016, approximately 12% of employees were represented by a trade union or employee representative body. The Group’s existing collective bargaining agreement with its main trade union in Russia expires in 2018. To the extent that the Group is not able to renew the collective bargaining agreement on terms favourable to the Group or if the Group’s operations are affected by work stoppages or labour disputes, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected. See also “—The Group is exposed to risks in respect of its operations in South Africa”.

29 The Group has significant social responsibilities in the key regions in which it operates.

The Group’s predecessor entities established most of the physical infrastructure in the Taimyr Peninsula, as this area was largely uninhabited prior to the discovery of copper-nickel ore deposits in the 1920s and the 1930s. In its areas of operations on the Taimyr and Kola Peninsulas, the Group is currently the largest employer and the largest taxpayer. Local authorities on the Taimyr and Kola Peninsulas have also traditionally appealed to the Group for additional assistance, beyond required tax payments, when local budgets have been insufficient to provide necessary public services. For instance, the Group has from time to time undertaken necessary road repairs and airport maintenance to the extent that local budgets could not provide for such activities. The Group expects this practice to continue. If the local administration faced an emergency due to a natural catastrophe or fiscal crisis or some other reason, the Group might be pressed to extend extraordinary financial assistance. In addition, as the dominant employer in its areas of operations in Russia, the Group is responsible for the social welfare of its current and retired employees. While the majority of social assets formerly owned by the Group, such as housing, hospitals and kindergartens, were transferred to the city of Norilsk in 2000 and 2001, and the city of Norilsk began financing these assets from its budget in 2002, the Group has made voluntary contributions to sustain these assets and intends to continue to do so. While the Group does not expect these social costs to increase significantly in the future, such an increase could occur. For example, local authorities could ask the Group to subsidise the cost of relocating retired or other former employees to more temperate parts of Russia. Any significant increase in the Group’s social contributions (voluntary or otherwise) could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group may become subject to higher taxes applicable to mining companies.

The amount of tax that the Group pays could substantially increase as a result of changes in, or new interpretations of, taxation laws applicable to mining companies. In 2016, 2015 and 2014, the Group incurred export customs duties expenses on the export of products from the Russian Federation of U.S.$70 million, U.S.$88 million and U.S.$225 million, respectively. Since July 2012, export duties have been levied at a flat rate of 5% for nickel and 10% for refined copper, replacing a sliding scale of duties which was based on the respective LME price and exempted duty if the price fell below a prescribed threshold. In August 2014, the Russian Government eliminated export customs duties for nickel and refined copper. However, there have been various calls to re-establish export customs duties for refined copper. In September 2016, in furtherance of the Russian Federation WTO accession package, PGM customs duties were eliminated. In addition, in recent years, there have been various calls to impose higher taxes on companies in the mining and energy sectors in response to sustained increases in commodities prices or, most recently, a growing deficit of the Russian budget. For instance, since 1 January 2017 the mineral extraction tax rate for multi-component complex ore containing copper, nickel and/or PGMs extracted from the deposits located in the Krasnoyarsk krai was increased to 730 Russian roubles per tonne. Even though this particular increase of the mineral extraction tax rate was offset by elimination of PGM customs duties in September 2016, such further changes to mineral extraction tax rates, if adopted, would significantly increase the Group’s mineral extraction tax payments. The Group is subject to the tax laws of several jurisdictions, including Russia and Finland. There can be no guarantee that any or all of these jurisdictions will not increase taxes or impose windfall taxes on mining companies, including the Group, and, in the event that such taxes were imposed, the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

30 The Group is subject to anti-monopoly laws enforced in Russia by the Federal Antimonopoly Service, which may result in certain limitations being imposed on the Group’s activities.

The Federal Law “On Protection of Competition” No. 135-FZ dated 26 July 2006, as amended (the “Competition Law”), generally prohibits any concerted action, agreement or coordination of business activities that results or may result in, among other things, fixing or maintaining of prices, discounts, surcharges or margins; coordination of auction bids; allocation of a market by territory, volume of sales or purchases, types of goods, customers or suppliers; refusal to enter into contracts with certain buyers (customers) in the absence of economic or technological justification therefor; imposing unfavourable contractual terms; fixing disparate prices for the same goods, for reasons other than economic or technological reasons; creation of barriers to entering or exiting a market; and restriction of competition in any other way. There is no uniform court practice on what concerted actions or coordination of business activity are and the regulator and courts interpret these concepts inconsistently. As a result, there is significant uncertainty as to what actions may be viewed as a violation of the Competition Law. In a number of court cases, Russian courts found concerted actions where market participants acted in a similar way within the same period of time, although, arguably, there have been legitimate economic reasons for such behaviour and the behaviour was not aimed at restriction of competition. Therefore, there is a risk that the Group can be found in violation of the Competition Law if its market behaviour vis-à-vis its customers or suppliers is viewed as being similar to behaviour of the Group’s competitors and perceived by the Federal Antimonopoly Service (the “FAS”) as a purported restriction of competition. See “Regulatory Matters – Regulation of Competition”. The Competition Law also prohibits any form of unfair competition, including, among other things, through defamation or otherwise. Such broad interpretations of the Competition Law may result in the FAS imposing behavioural limitations on the Group’s activities, may limit operational flexibility and may result in civil, administrative and even criminal liability. For some of the products that the Group sells, its market share in Russia exceeds 50%, which means that the Group is deemed to have a dominant position in those markets. Under the current Russian competition law, companies having a dominant position are subject to certain restrictions, including the restrictions on their ability to set prices for their products, which may adversely affect the Group’s results of operations. See “Regulatory Matters — Regulation of Competition”. If the Group’s activities are found to be in violation of antimonopoly legislation, the Group could be subject to penalties or requested to change its business operations in a manner that may increase the Group’s costs or reduce the Group’s profit margin and revenues. Such factors could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. In addition, the FAS may impose certain conditions on the Group in connection with any antimonopoly approvals of the Group’s transactions. For example, in January 2008, the FAS issued an approval for the acquisition by the Company of 60.15% of the fixed assets of OJSC Norilsk Kombinat. The approval prohibits the Company and JSC Kola “GMK” from decreasing or stopping the production of nickel and nickel products until the year 2028 without first obtaining the approval of the FAS. The January 2008 approval also imposes LME-based floating price caps for sales of nickel and nickel products of the Company and JSC Kola “GMK” on domestic markets until 2028. The Company believes that the Group’s operations are currently in compliance with Russian antimonopoly regulations. However, to the extent that the FAS undertakes an investigation into some aspect of the Group’s operations or transactions and decides to impose penalties or other sanctions against the Group or imposes conditions on the Group, the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes could be materially adversely affected.

31 The Company is subject to special regulation as a “natural monopoly”, which may restrict its ability to conduct its operations.

The Company’s activities are regulated under the Federal Law “On Natural Monopolies” No. 147-FZ dated 17 August 1995, as amended (the “Natural Monopolies Law”), due to provision by the Company of port services at the Dudinka sea port. Under the Natural Monopolies Law, the Company may be required, among other things, to apply for the permission of the relevant regulatory authorities to make certain investments into activities other than “natural monopoly” activities, as well as for the acquisition of stakes in other regulated entities. In addition, the regulatory authorities may issue mandatory orders requiring the Company to perform or abstain from performing certain actions which may violate the Natural Monopolies Law or general anti-monopoly laws and regulations. These limitations and orders may restrict the ability of the Company to conduct its business operations, which may have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

If transactions the Group or its predecessors have entered into are challenged for non- compliance with applicable legal requirements, the transactions could be invalidated or liabilities could be imposed on the Group.

The Group and its predecessors have taken a variety of actions relating to share issuances, share and asset disposals and acquisitions, charter capital increases and decreases, valuation of property, interested party transactions, major transactions, currency control and antimonopoly issues, in respect of which the Group, or its predecessors, may not have fully complied with applicable legal procedures and which, therefore, could be subject to legal challenges. If any such challenge against the Group for not complying with applicable legal requirements were successful, it could result in the invalidation of the relevant transaction, seizure of the relevant assets and/or the imposition of liabilities on the Group. Moreover, since many provisions of law in various jurisdictions are open to many different interpretations, the Group may not be able to successfully defend any challenge brought against similar transactions. For example, the provisions of Russian law defining which transactions must be approved as “interrelated major transactions” are subject to differing interpretations and there is no assurance that former or current minority shareholders of the Company or any other interested parties will not challenge such transactions in the future. Although the Group does not expect any past transaction to be so challenged, the invalidation of any such transactions or imposition of such liabilities may have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Legal uncertainties relating to privatisation of the Group’s assets may exist.

Many companies comprising the Group were formed on the basis of assets that had been privatised in the middle of the 1990s. Russian privatisation laws at that time were vague, inconsistent or in conflict with other laws, including conflicts between federal and regional privatisation laws, and consequently many Russian privatisations may be arguably deficient and, therefore, vulnerable to challenge. For example, a series of Presidential decrees issued in 1991 and 1992 that granted to the Moscow City government the right to adopt its own privatisation procedures were subsequently invalidated by the Constitutional Court of the Russian Federation, ruling, in part, that the Presidential decrees addressed issues that were the subject of federal law. Although the statute of limitations for challenging transactions entered into in the course of privatisations is now only three years from the time when an affected party learned of the infringement on its rights and in any event not later than 10 years from the time of an alleged infringement, a residual risk still remains that privatisation transactions of the Group may be vulnerable to challenge, including selective action by governmental authorities and inconsistent application of the statute of limitations by courts. Should the privatisation of any relevant predecessor companies be challenged in court on the grounds that these companies or any of their assets have been improperly privatised, and should the court for any reason disapply the limitation

32 periods, the Group may lose its rights to some of its assets, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group’s acquisitions or title to, or other rights in, land that it owns or leases may be challenged.

The Group companies either own or lease the land plots on which their mines and other production facilities are located. Any challenge to the validity or enforceability of the Group companies’ title to, or rights in, such land may have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Russian currency control regulations may hinder the Group’s ability to conduct business.

The Group’s operational expenses are primarily denominated in roubles. The current Russian currency control laws and regulations impose a number of limitations on banking and currency transactions. Currency control restrictions include a general prohibition on foreign currency operations between Russian residents, except for certain specified operations permitted by law, and the requirement to repatriate, subject to certain exceptions, export-related earnings in Russia. For example, should the Group wish to export PGMs, it will have to ensure that export-related earnings are repatriated to Russia. Failure to comply with this requirement may lead to the imposition of various administrative fines on the relevant member of the Group exporting the PGMs. These currency control restrictions may restrict the Group’s operational flexibility, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. RISKS RELATING TO THE RUSSIAN FEDERATION

Emerging markets are subject to greater risks than more developed markets, including significant legal, economic and political risks.

Investors in emerging markets such as Russia should be aware that these markets are subject to greater risk than more developed markets, including in some cases significant legal, economic and political risks. Moreover, financial turmoil in any emerging market country tends to adversely affect prices in debt or equity markets of all emerging market countries as investors move their money to more stable, developed markets. As has happened in the past, including during the current global economic crisis, and the developments affecting the Russian economy in 2014, 2015 and 2016, including the current political and economic crisis in Ukraine and related sanctions imposed on certain Russian individuals and legal entities by the U.S. and the EU, as well as the sharp decrease in oil prices, financial problems or an increase in the perceived risks associated with investing in emerging economies may adversely affect the level of foreign investment, which may, in turn, adversely affect the economies in those countries. In addition, during such times, companies that operate in emerging markets can face severe liquidity constraints as foreign funding sources are withdrawn. As a result, financial turmoil in Russia could seriously disrupt the Group’s business and the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under the Notes, as well as result in a decrease in the trading price of the Notes. Companies operating in emerging markets may also be exposed to political risks. Investors should also note that an emerging economy such as that of Russia is subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the

33 significance of the risks involved. Potential investors are urged to consult with their own legal and financial advisors before making an investment in the Notes.

Instability in the Russian economy could materially adversely affect the Group’s business.

The Group’s operations are located principally in Russia, and some of the Group’s metal sales revenues derived from sales to Russia and CIS. As a result, the Group’s business and results of operations are dependent on the economic conditions in Russia. Over the last two decades, the Russian economy has experienced or continues to experience at various times:  significant declines in its GDP and rate of GDP growth;  high levels of inflation;  high and fast-growing interest rates;  unstable credit conditions;  instability of the rouble;  pervasive capital flight;  high levels of government debt relative to GDP;  a weakly diversified economy which depends significantly on global prices of commodities;  a lack of reform in the banking sector and a weak banking system, providing limited liquidity to Russian enterprises;  continued operation of loss-making enterprises due to the lack of effective bankruptcy proceedings;  high levels of corruption and the penetration of organised crime into the economy;  widespread tax evasion;  significant increases in unemployment and underemployment;  ethnic and religious tensions;  low personal income levels of a significant part of the Russian population;  major deterioration of physical infrastructure; and  the imposition of international sanctions. In the past few years, the Russian economy has been characterised by significant volatility in the debt and equity markets, including the suspension of trading several times in 2014. The Russian economy has experienced significantly fluctuating growth rates over the last two decades, including recent significant declines. In 2014, Russia’s GDP growth rate slowed to 0.6 per cent; in 2015, Russia’s GDP declined by 3.7 per cent in real terms; and in 2016, Russia’s GDP declined by 0.2 per cent in real terms. As Russia produces and exports large quantities of crude oil, natural gas, petroleum products and other commodities, the Russian economy is particularly vulnerable to fluctuations in oil and gas prices, as well as other commodities prices, which historically have been subject to significant volatility over time, as illustrated by the recent decline in crude oil prices. The price of the global benchmark Brent crude has fallen from US$96 per barrel Brent in 2014 to US$57 per barrel Brent on 31 December 2016 and is widely predicted not to recover to its previous levels for some time to come. The international sanctions arising from the Ukraine crisis have also undercut confidence in the Russian economy and added to the cost of capital. The lack of confidence in the Russian economy led to a decline in the rouble/U.S. dollar exchange rate in late 2014, which continued in 2015. This has been accompanied by rising inflation and a declining trend in real average wages from 1.2 per cent growth in 2014 to 9.0 per cent decline in 2015 and 0.7% growth in 2016. There can be no assurance

34 that any measures adopted by the Russian Government to mitigate the effect of any financial and economic crisis will result in a sustainable recovery of the Russian economy. Russian banks, and the Russian economy generally, were also adversely affected by the global financial crisis. Current macroeconomic challenges, low or negative economic growth in the United States, China, Japan and/or Europe and market volatility may provoke or prolong any economic crisis. As an emerging economy, Russia remains particularly vulnerable to further external shocks. Events occurring in one geographic or financial market sometimes result in an entire region or class of investments being disfavoured by international investors – so-called “contagion effects”. Russia has been adversely affected by contagion effects in the past, and it is possible that the market for Russian investments will be similarly affected in the future by negative economic or financial developments in other countries. Economic volatility, or a future economic crisis, may undermine the confidence of investors in the Russian markets and the ability of Russian businesses, including the Group, to raise capital in international markets, which in turn could have a material adverse effect on the Russian economy and the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Some of Russia’s physical infrastructure requires significant on-going investment, and any disruption may lead to increased costs and efforts by the Russian Government to improve the country’s infrastructure, and which may result in increased costs for the Group.

Russia’s physical infrastructure largely dates back to Soviet times and has not been adequately funded and maintained since the dissolution of the Soviet Union. The rail and road networks, power generation and transmission, communications systems and building stock have been particularly affected. In the past, Russia has experienced electricity and heating shortages and blackouts, and the Russian railway system is subject to risks of disruption as a result of the declining physical condition of rail tracks and a shortage of rail cars. For example, in May 2005, an electricity blackout affected much of Moscow for one day, disrupting normal business activity, and in August 2009, an accident at the Sayano Shushenskaya hydroelectric facility resulted in power shortages for both residential and industrial consumers. The poor condition or further deterioration of the physical infrastructure in Russia may harm its national economy, disrupt the transportation of goods and supplies, increase the costs of doing business and interrupt business operations, each of which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Investments in Russia may be adversely affected by fluctuations in the global economy.

The Russian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. Since Russia is one of the world’s largest producers and exporters of oil, natural gas and metal products, the Russian economy is especially sensitive to commodity prices on the world markets. The sharp decrease in prices for natural resources in 2008 and 2014 – 2016 resulted in a significant decrease of governmental revenues, which had a negative effect on the Russian economy. Commodity prices, including gold, continue to be volatile, and future fluctuations in the global markets could substantially limit the Group’s access to capital. These developments could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Potential political or social conflicts could create an uncertain operating environment hindering the Group’s long-term planning ability and could have a material adverse effect on the value of investments in Russia, including the trading price of the Notes.

The Russian Federation is a federation of sub-federal political units, consisting of republics, territories, regions, cities of federal importance and autonomous regions and districts, some of which have the right to manage their internal affairs pursuant to agreements with the federal government and

35 in accordance with applicable laws. The delineation of authority and jurisdiction among the members of the Russian Federation and the federal government is, in some instances, unclear. In practice, the division of authority and uncertainty could hinder the Group’s long-term planning efforts and may create uncertainties in the Group’s operating environment, which may prevent it from effectively carrying out its business strategy. Emerging markets such as Russia are also subject to heightened volatility resulting from political and economic conflicts. Any disruption or reversal of the reform policies or any recurrence of political or governmental instability or significant terrorist attacks (to which Russia is potentially particularly exposed, given on-going ethnic and religious tensions, notably with peoples and regions from and in the Caucasus and Central Asia) may lead to a deterioration in Russia’s investment climate and trading volatility, which could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Notes or the trading price of the Notes. In addition, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases, acts of terrorism (principally connected with the North Caucasus region) and military conflict, including the military conflict between the Russian Federation and Georgia in 2008, recent deterioration in relations between the Russian Federation and Turkey as a result of the shooting down of the Russian military jet by Turkish Air Forces along the Syrian-Turkish border in November 2015 and on-going participation of the armed forces of the Russian Federation in the Syrian conflict. If existing conflicts, tensions or terrorist activities, or threats thereof, remain unresolved, or new disturbances or hostilities arise, this could have significant political and economic consequences and the Group may be unable to access capital, or access capital on terms reasonably acceptable to it, and its sales may be impacted, which may have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Political and governmental instability could adversely affect the value of investments in Russia, including the Notes.

Since 1991, Russia has been moving from a one-party state with a centrally planned economy to a federal republic with democratic institutions and a market-oriented economy. The Russian political system, though more stable than in the 1990s, remains vulnerable to popular dissatisfaction, including dissatisfaction with the results of privatisations in the 1990s, as well as to demands for autonomy from particular regional and ethnic groups. The course of political, economic and other reforms has in some respects been uneven, and the composition of the Russian Government has, at times, been unstable. However, over the period from 2000 to 2008, President Vladimir Putin achieved and generally maintained political and governmental stability in the country which accelerated the reform process and made the political and economic situation in Russia more conducive to investment. In March 2008, Mr. Dmitry Medvedev was elected as the President of Russia, and a significant degree of continuity has been maintained, due in large part, to the appointment by President Medvedev of Vladimir Putin as the Russian Prime Minister, and, following Mr. Putin’s election as President of Russia in March 2012, the subsequent appointment of Mr. Medvedev as Prime Minister. It is possible, however, that future presidents may take a different approach to reforms and to the state’s foreign and domestic policies in the future. Moreover, in December 2011 and 2012, there were public protests alleging voting irregularities in federal parliamentary and presidential elections and demanding political reform. Any significant further increases in political instability, including as a result of the upcoming presidential election in Russia in 2018, could have a material adverse effect on the value of investments relating to Russia and as such on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. Changes in the Russian Government, the State Duma or the presidency, major policy shifts or eventual lack of consensus between the President, the Russian Government, Russia’s parliament and powerful economic groups could lead to political instability, which could have a material adverse

36 effect on the value of investments relating to Russia and as such on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

A reversal of government reforms policies targeted at specific individuals or companies could have an adverse effect on the Group’s business as well as investments in Russia more generally.

From 2001 until 2013, the political situation in Russia became more stable and conducive to investment. Such stability, however, has been negatively affected by the global financial crisis and economic sanctions imposed in 2014 by the United States and the EU and the on-going economic recession. See “–The on-going conflict in Ukraine, the international reaction to Russia’s action in connection with Crimea resulting in the imposition of sanctions, and other disputes between Russia and other countries, could further materially adversely affect the economic environment in Russia, including the business, results of operations of the Group, and create significant political and economic uncertainty” and “–Instability in the Russian economy could materially adversely affect the Group’s business”. Any significant struggle over the direction of future reforms, or a reversal of the reform process, could lead to another deterioration in Russia’s investment climate that might constrain the Group’s ability to obtain financing in the international capital markets, limit its sales in Russia or otherwise have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. In the past, Russian authorities have prosecuted some Russian companies, their executive officers and their shareholders on tax evasion and related charges. In some cases, the result of these prosecutions has been the imposition of prison sentences for individuals and significant claims for unpaid taxes. According to some commentators, such prosecutions have called into question the security of property and contractual rights, the independence of the judiciary and the progress of the market and political reforms in Russia. Any similar actions by governmental authorities could lead to further negative effect on investor confidence in Russia’s business and legal environment and the Group’s ability to raise equity and debt capital in the international markets, as well as the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Instability of global financial markets could affect the Russian economy.

Russia’s economy was adversely affected by the global financial and economic crisis and could be adversely affected by market downturns and economic crises or slowdowns elsewhere in the world in the future. In particular, the disruptions in the global financial markets have had a severe impact on the liquidity of Russian entities, the availability of credit and the terms and cost of domestic and external funding for Russian entities. This could adversely influence the level of customer demand for various goods and services, including those provided by the Group. These developments, as well as adverse changes arising from systemic risks in global financial systems, including any tightening of the credit environment, or a decline in oil, gas or other commodities prices could slow or disrupt the Russian economy and adversely affect the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Introduction of currency restrictions may limit the Group’s ability to execute its strategy or operate its business or could otherwise adversely affect the Russian capital markets.

Despite recent liberalisation, there can be no assurance that Russia’s currency regulation and control regime will not impose new restrictions or prohibitions. Restrictions or prohibitions on hard currency payments and operations could limit the Group’s ability to invest in its capital improvement programmes, pursue attractive acquisition opportunities or purchase raw materials or sell its products

37 internationally. In addition, such restrictions or prohibitions may limit an investor’s ability to repatriate earnings from securities of Russian issuers, including the Group, or otherwise have a negative impact on the Russian capital markets. The consequences of any new restrictions or prohibitions could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Russian banking system remains under on-going development.

Russia’s banking and other financial systems are in a period of on-going development, and Russian legislation relating to banks and bank accounts is subject to interpretation and some inconsistent applications. There are currently a limited number of creditworthy Russian banks (most of which are headquartered in Moscow) with the capacity to service companies of the size of those found in the Group. Another banking crisis in Russia or globally, or the expansion of international sanctions against Russia, could place severe liquidity constraints on the Russian banking system. Although the CBR has the mandate and authority to suspend banking licences of insolvent banks, a number of insolvent banks still operate. In 2016, the CBR revoked the banking licences of 97 Russian banks. Some banks do not follow existing CBR regulations with respect to lending criteria, credit quality, loan loss reserves or diversification of exposure. Many Russian banks also do not meet international banking standards, and the transparency aspects of the disclosures of the Russian banking sector still do not follow all internationally accepted norms. The CBR’s supervisory/control mechanisms may be in certain cases insufficient to timely identify non-compliance with banking legislation. As part of a gradual consolidation process, which started in 2014, Russia’s larger banks have acquired smaller banks and increased their market share, and banks with stronger credit profiles have merged with distressed banks. The serious deficiencies in the Russian banking sector, combined with the deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to the current worldwide credit market downturn and economic slowdown. For example, the revocation of Master Bank’s banking licence (Master Bank was a major Moscow-based bank and the 41st largest bank in Russia as of 1 October 2013 by deposits according to RIA Rating) and subsequent numerous revocations of licences of banks, including Bank Russian Credit in July 2015 and Vneshprombank in January 2016, raised some concerns about the stability of the Russian banking system and the ability of the State Deposit Insurance Agency to service any further pay-outs to insured depositors should any similar bank collapses occur in the near future. It also adversely affected liquidity on the domestic market. The CBR’s orders on revocation of such licences state that the banks were in breach of banking laws and regulations and were found to have false statements in their reports. The revocations have raised some concerns about the stability of some of the smaller banks in the Russian banking system and their liquidity on the domestic market. These deficiencies in the Russian banking sector may result in the banking sector being more susceptible to a deterioration of the current global macroeconomic situation. Due to the imposition of Ukraine-related sanctions and the recent oil price weakness, among other things, Russian banks experienced difficulties in recent years with funding on international markets. As a result, credit ratings of several banks were lowered. With the Russian economy experiencing a recession in 2015 and continuing decline in 2016, the Russian banking sector has experienced renewed instability. For example, according to the United Credit Bureau, the level of non-performing loans in the Russian banking sector has increased from 15.66 per cent at the end of 2014 to 17.5 per cent at the end of 2016. The CBR’s December 2014 RUB 127 billion bail-out of Trust Bank, Russia’s 22nd largest bank by assets, the largest bank bail-out in Russian history to date, is illustrative of weaknesses in the Russian banking sector. Risk management, corporate governance and transparency and disclosure often remain below international best practices. During the 2007-2008 global financial crisis, Russian banks were faced with a number of problems simultaneously, such as withdrawal of deposits by customers, payment defaults by borrowers, deteriorating asset values and rouble depreciation and currency mismatching (foreign currency denominated liabilities against rouble denominated assets),

38 all of which could re-occur if another banking crisis were to occur. Russia’s current economic circumstances are likely to continue to put stress on the Russian banking system. In response to the situation in Ukraine and Crimea, sanctions have been imposed by a number of countries against certain Russian banks, financial institutions and companies, as well as certain Russian individuals who hold interests or positions in such entities. Among other measures, the United States and the European Union, among others, have recently imposed sectoral sanctions on certain major Russian financial institutions. These sectoral sanctions generally prohibit persons from engaging in transactions involving new equity or new debt (in the case of the United States) or transferable securities, money, market instruments, and loans or credit (in the case of the European Union) of greater than 30 days maturity with the targeted entities and entities owned and/or controlled by such entities (including Bank of Moscow, VTB Bank, Vnesheconombank, Gazprombank, Russian Agricultural Bank and Sberbank), substantially cutting off these financial institutions from the U.S. and EU debt and equity markets. It is difficult to predict the full impact of the foregoing sanctions on the Russian banking sector over time; however, there is a risk that Russian banks could be unable to refinance their existing debt or that such refinancing may become more expensive, and/or that Russian banks could be unable to issue loans in amounts necessary for borrowers, and/or that the cost of borrowing could increase significantly for borrowers. Moreover, over time, the above prohibitions could lead to a shortage of U.S. dollars or euros in the Russian markets, which may affect a borrower’s performance under contracts with settlement occurring in such currencies. The on-going development in the Russian banking sector, combined with the risk of deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to any worldwide credit market downturn and economic slowdown. A prolonged or serious banking crisis or the bankruptcy of a number of Russian banks could materially adversely affect the Group’s business and its ability to complete banking transactions in Russia.

Negative publicity could harm the Group’s business.

The local and international press have reported high levels of corruption and extortion in the Russian Federation, including selective investigations and prosecutions to further the personal or commercial interests of certain favoured companies or individuals. There is also a tendency among the local and international press to generate speculative reports that contain allegations of criminal conduct or corruption on the part of Russian companies or individuals within Russian companies or the Russian Government. In addition, the Russian press and other non-traditional media are suspected of publishing biased articles and reports in return for payment. Such negative publicity could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The on-going development of the Russian legal system and Russian legislation creates an uncertain environment for investment and for business activity.

Russia continues to develop its legal framework in accordance with international standards and the requirements of a market economy. Since 1991, new Russian domestic legislation has been put into place. Currently, this system includes the Constitution of the Russian Federation of 1993, the Civil Code of the Russian Federation and other federal laws, decrees, orders and regulations issued by the President, the Russian Government and federal ministries, which can be complemented by regional and local rules and regulations, adopted in certain spheres of regulation. Several fundamental Russian laws have only recently become effective, including laws amending procedures for approval of interested party and major transactions, and there still remain gaps and inconsistencies in regulatory infrastructure. Consequently, certain areas of judicial practice are not yet fully settled, and are therefore sometimes difficult to predict. Among the risks of the current Russian legal system are:

39  inconsistencies among federal laws; decrees, orders and regulations issued by the President, the Russian Government, federal ministries and regulatory authorities; and regional and local laws, rules and regulations;  limited judicial and administrative guidance on interpreting Russian legislation;  the relative inexperience of judges, courts and arbitration tribunals in interpreting new principles of Russian legislation, particularly business and corporate law;  a lack of judicial independence from political, social and commercial forces;  bankruptcy procedures that are still under development;

 difficulty in enforcing court judgments in practice;

 substantial gaps in the regulatory structure due to delay or absence of implementing legislation; and  a high degree of unchecked discretion on the part of governmental and regulatory authorities. Unlawful, selective or arbitrary governmental actions have reportedly included denial or withdrawal of licences, sudden and unexpected tax audits, criminal prosecutions and civil actions and the expropriation of property. The possibility of unlawful, selective or arbitrary governmental action also enhances opportunities for official corruption and extortion, as well as the penetration of organised crime into the economy, all of which is widely reported to be high in Russia. Press reports have described instances in which governmental officials have engaged in selective investigations and prosecutions to further their personal interests. The Russian Government has pursued a campaign against corruption, the results of which have not been yet achieved. Even minor or immaterial breaches and violations of Russian legislation may result in claims to be brought by the Russian state authorities. Any such claims by the Russian state authorities could have a material adverse effect on the Group’s business, results of operations and financial condition. There are also legal uncertainties relating to property rights in Russia. During Russia’s transformation to a market economy, the Russian Government has enacted legislation to protect property against expropriation and nationalisation, and, if property is expropriated or nationalised, legislation provides for fair compensation. There is, however, no assurance that such protections would be enforced. In addition, Russia is not party to any multilateral or bilateral treaties with most Western jurisdictions for the mutual enforcement of court judgments. See “Enforceability of Judgments”. Consequently, should a judgment be obtained from a court in any of such jurisdictions, it is difficult to predict whether a Russian court will give direct effect to such judgment. Russia (as successor to the Soviet Union) is a party to the New York Convention. A foreign arbitral award obtained in a state that is party to the New York Convention should be recognised and enforced by a Russian court (subject to the qualifications provided for in the New York Convention and compliance with Russian civil procedure regulations and other procedures and requirements established by Russian legislation and non-violation of Russian public policy). There is also a risk that Russian procedural legislation will be changed by way of introducing further grounds preventing foreign court judgments and arbitral awards from being recognised and enforced in Russia. In practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of Russian courts or other officials, thereby introducing delays and unpredictability into the process of enforcing any foreign judgment or any foreign arbitral award in Russia. In addition, the Russian courts may, and in certain cases must, accept jurisdiction notwithstanding the submission by the parties to arbitration (e.g., where a dispute is within the exclusive competence of the Russian courts or in insolvency of the Russian obligor). Notwithstanding recent reforms of the Russian court system, the transitional state of the Russian legal system could affect the Group’s ability to enforce its rights under contracts, or to defend itself against claims by others, which could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the

40 Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Crime and corruption could disrupt the Group’s ability to conduct its business and could materially adversely affect the Group’s financial condition and results of operations.

Organised criminal activity in Russia has reportedly increased significantly since the dissolution of the Soviet Union in 1991, particularly in large metropolitan centres. In addition, the Russian and international press have reported high levels of official corruption in Russia and other CIS countries, including the bribery of officials for the purpose of initiating investigations by state agencies, obtaining licences or other permissions or in order to obtain the right to supply goods or services to state agencies. Press reports have also described instances in which state officials have engaged in selective investigations and prosecutions to further interests of the state and individual officials. Additionally, published reports indicate that a significant number of Russian media regularly publish slanted articles in return for payment. The proliferation of organised or other crime, corruption and other illegal activities that disrupt the Group’s ability to conduct its business effectively, or any claims that it has been involved in corruption, or illegal activities (even if false) that generate negative publicity, could have a material adverse effect on the Group’s business, results of operations and financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The implementation of certain amendments to the Russian Civil Code may create an uncertain environment for business activities and investments.

The Russian parliament has recently implemented widespread amendments to the Russian Civil Code, many of which became effective in 2014 and 2015. The scope of these amendments modify existing laws governing, among other things, regulation of legal entities, certain types of transactions, pledges, mortgages, other security arrangements and property rights. As of the date of this Prospectus, the potential interpretation of these amendments by state authorities and the courts, along with their impact on the Group’s business and corporate governance, remains unclear.

The Group is subject to limitations imposed by Russian legislation which restricts the rights of foreign entities to invest in certain Russian companies and in the subsoil sector.

Under the Strategic Investment Laws of the Russian Federation, including the Foreign Investments Law (as defined in “Regulatory Matters – Investments in Russian Companies of Strategic Importance”), the acquisition by a foreign investor, or a “group” of persons, as such term is defined under Russian law, including one or more foreign investors, of 25 per cent or more of the voting shares in a company undertaking operations at subsoil plots of federal importance (a “Strategic Subsoil Company”), requires the prior approval of the Foreign Investment Commission (as defined in “Regulatory Matters”). Furthermore, if a foreign investor, or a group of persons including one or more foreign investors, already exercises direct or indirect “control” (as defined in the Foreign Investments Law) of over 25 per cent (but less than 75 per cent) of the voting shares of a Strategic Subsoil Company, each subsequent acquisition of shares of the Strategic Subsoil Company by the foreign investor, or group of persons including a foreign investor, whether directly or indirectly, requires the prior approval of the Foreign Investment Commission (with the exception of transactions that do not result in the increase of the ownership percentage of a foreign investor of a group including a foreign investor in the charter capital of a Strategic Subsoil Company or by persons that are under control of the person which controls such Strategic Subsoil Company). Additional restrictions apply to foreign states and governmental organisations and investors controlled by them, to which lower approval thresholds apply and which are generally prohibited from establishing control over strategic entities. Failure to obtain a prior approval renders the transaction void or may lead to limitations on the foreign investor’s voting rights. As at the date of this Prospectus, the Company, as well as its subsidiaries, including JSC Kola “GMK”, hold licences to subsoil plots of

41 federal importance, as defined in the Strategic Investment Laws, and, as a result, each is considered a Strategic Subsoil Company. The application of the Strategic Investment Law is subject to some uncertainty and may give rise to allegations of non-compliance. If shares are acquired in circumstances where approval under the Strategic Investment Laws is required but has not been obtained, there is a risk that action could be taken against the Company to limit its voting rights in respect of the Group’s Strategic Subsoil Companies, or seeking to invalidate the corporate decisions and transactions of such Strategic Subsoil Companies that were made following the relevant acquisition of shares without approval. For a more detailed discussion of implications of the Strategic Investment Laws, see “Regulatory Matters – Investments in Russian Companies of Strategic Importance”.

The production and sale of PGMs are subject to specific governmental regulation in Russia.

The precious metals industry in Russia is subject to specific regulation, particularly with regard to the sale of precious metals. As a result, the Group must observe various procedures in relation to the sale of its PGMs and its operations. The sales of PGMs and other transactions in precious metals are regulated primarily by the Federal Law “On Precious Metals and Gems” No. 41-FZ dated 26 March 1998, as amended (the “Precious Metals Law”), which provides the Russian state with a pre-emptive right to purchase refined precious metals from licensees and producers. This right is subject to the prior conclusion of a sale and purchase agreement (no later than one month before the purchase date) and advance payment of the purchase price, which is determined according to prices on the world market and market fluctuations on the purchase date. Consequently, refined PGMs (including platinum and palladium) offered for sale by the Group must first be offered for sale to the State Precious Metals and Gemstones Repository under the Ministry of Finance of the Russian Federation (“Gokhran”), and also to the local government on whose territory the relevant precious metals have been extracted. Neither Gokhran nor the relevant local government has exercised this right in the past with respect to the Group, although no assurance can be given that they will not exercise such right in the future. As a result, the Group may sell its refined PGMs to its customers only if it has obtained a waiver from Gokhran or the relevant local government of their rights to purchase. The Precious Metals Law also requires that extracted and processed precious metals (except for precious metal nuggets) may only be refined at a refinery approved by the Russian Government. Currently there are only eleven such refineries, including a refinery operated by the Company. In addition, any entities engaged in the geological survey, exploration, mining or production of precious metals are required to implement certain security measures both at the facilities where transactions with precious metals are performed and during the transportation of such metals. These regulations may create additional costs for the Group or limit the flexibility of its operations. To the extent that regulation of the Russian precious metals industry is extended or becomes more burdensome, including as a result of the imposition of licensing requirements on the export of platinum in the form of anodes or other technical products, the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes may be materially adversely affected. See “Regulatory Matters – Regulation of Precious Metals”.

Findings of failure to comply with existing laws or regulations, unlawful, arbitrary or selective government action or increased governmental regulation of the Russian operations of the Group could result in substantial additional compliance costs or various sanctions.

The Group’s operations and properties in Russia are subject to regulation by various government entities and agencies at both the federal and regional levels. Regulatory authorities often exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licences and permits and in monitoring licensees’ compliance with licence terms, which may lead to inconsistencies in enforcement. Russian authorities have the right to, and frequently do, conduct periodic inspections of operations and properties of

42 Russian companies throughout the year. Any such future inspections may conclude that the Group violated applicable laws, decrees or regulations. Findings that the Group failed to comply with existing laws or regulations or directions resulting from government inspections may result in the imposition of fines, penalties or more severe sanctions, including the suspension, amendment or termination of the Group’s licences or permits or in requirements that the Group suspend or cease certain business activities, or in criminal and administrative penalties being imposed on the Group’s officers. Any such decisions, requirements or sanctions, or any increase in governmental regulation of the Russian operations of the Group, could increase the Group’s costs and could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. Unlawful, arbitrary or selective government actions directed against other Russian companies (or the consequences of such actions) may generally impact the Russian economy, including the securities markets. Any such actions, decisions, requirements or sanctions, or any increase in governmental regulation of the Russian operations of the Group, could increase the Group’s costs and could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Developing corporate and securities laws and regulations in the Russian Federation could limit the Group’s ability to attract future investment.

The regulation and supervision of the securities market, financial intermediaries and issuers are considerably less developed in the Russian Federation than in the United States and Western Europe. Securities laws, including those relating to corporate governance, disclosure, insider trading and reporting requirements, are relatively new, while other laws concerning anti-fraud and fiduciary duties of directors and officers remain underdeveloped. In addition, the Russian securities market is regulated by several different authorities, which are often in competition with each other, including the FAS, the CBR and various professional self-regulating organisations. The regulations of these various authorities are not always coordinated and may be contradictory. In addition, Russian corporate and securities rules and regulations can change rapidly, which may materially adversely affect the Group’s ability to conduct capital markets transactions. While some important areas are subject to a minimal level of oversight, the regulatory requirements imposed on Russian issuers in other areas may result in delays in conducting securities offerings and in accessing the capital markets. It is often unclear whether or how regulations, decisions and letters issued by the various regulatory authorities apply to the Group. As a result, the Group may be subject to fines and/or other enforcement measures despite its best efforts at compliance, which could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

Shareholder liability under Russian legislation could cause the Company to become liable for the obligations of its subsidiaries.

Under Russian law, the Company may be primarily liable for the obligations of its Russian subsidiaries jointly and severally with such entities if: (i) the Company has the ability to make decisions for such Russian subsidiaries as a result of its ownership interest, the terms of a binding contract or in any other way; and (ii) the relevant Russian subsidiary concluded the transaction giving rise to the obligations pursuant to the Company’s instructions or with the Company’s consent. The Company, if it is viewed as having the actual ability to determine its Russian subsidiaries’ operations, may also be held liable for the losses incurred by such subsidiaries and caused by the Company. In

43 addition, the Company may have secondary liability for the obligations of its Russian subsidiaries if the subsidiary becomes insolvent or bankrupt as a result of the Company’s action. This liability could result in significant losses, and could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The Group’s “interested party” transactions, including transactions between the Company and its subsidiaries, may be challenged under Russian law.

Subject to certain exceptions, according to Federal Law “On Joint Stock Companies” No. 208-FZ dated 26 December 1995, as amended (the “Russian Joint Stock Companies Law”), any transaction the Company enters with an “interested party” must be approved by a majority vote of disinterested directors or shareholders. Russian law defines “interested party” transaction as a transaction that meets certain criteria and in which one of the following persons has an interest: a person “controlling” the company, a member of the company’s board of directors, a member of the executive body of the company, or the persons that “control”, or are “controlled” by, any of them. Although starting from 1 January 2017 many provisions of the Russian Joint Stock Companies Law for the approval of “interested party” transactions have been relaxed to some extent, it is, nonetheless, possible that in certain cases the Company’s minority shareholders may not approve transactions that are “interested party” transactions requiring shareholders’ approval or there may be an insufficient number of disinterested shareholders to constitute a quorum required for approval of “interested party” transactions. A transaction which is not so approved may be challenged in court by the Company’s director or shareholder (shareholders) holding at least 1 per cent of the voting shares of the Company or, if insolvency proceedings are commenced against the Company, by a court-appointed arbitration manager acting on behalf of its creditors. If a challenge is upheld, the relevant transaction can be invalidated. In addition, entities within the Group may be deemed “interested parties” with respect to certain transactions among themselves. As some of the Group Companies are not wholly-owned, this may limit the Group’s ability to engage in certain intra-group transactions (including financing transactions) as such transactions may be characterised as “interested party” transactions under Russian law and be required to be approved as “interested party” transactions. Moreover, the provisions of Russian law defining which transactions must be approved as “interested party” transactions are also subject to differing interpretations. The Company cannot be certain that any interested party transactions will not be free from challenge. Any such challenge could result in the invalidation of transactions that are important to the Group’s business. Failure to obtain the necessary approvals for transactions within the Group or any such challenge could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

The accession of the Russian Federation to the World Trade Organisation may lead to changes in the business and legal environment in Russia.

The Russian Federation officially became a member of the World Trade Organisation (“WTO”) on 22 August 2012. The accession may lead to significant changes in Russian legislation including, among others, the regulation of foreign investments in Russian companies and competition laws, as well as changes in the taxation system and customs regulations in Russia. In addition, implementation of the WTO rules may result in an increase in competition in the markets where the Group operates. Although during 2012 – 2015 Russia adopted certain changes to its legislation related to its accession to the WTO (for example, regulation of intellectual property), it is unclear yet if and when all expected legislative developments will take place; however, if new legislation is implemented in Russia as a result of its accession to the WTO, such legislation could have a material adverse effect on the Group’s business, results of operations, financial condition, the Company’s ability to service its payment obligations under

44 the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes.

RISKS RELATING TO TAXATION

The Russian taxation system is relatively immature.

Generally, taxes payable by Russian companies are substantial and include, amongst others: corporate income tax, value added tax (“VAT”), property tax, payroll related social security charges and other taxes. The tax laws related to these taxes, in particular the Tax Code of the Russian Federation (the “Russian Tax Code”), have been in force for a relatively short period of time compared with tax laws in more developed economies. Although the Russian Federation’s tax climate and the quality of Russian tax legislation have generally improved since the introduction of the Russian Tax Code, tax laws remain subject to frequent changes and a lack of interpretative guidance or conflicting interpretations. The Russian Government is constantly reforming the tax system by redrafting parts of the Russian Tax Code resulting in continuous changes being introduced to existing tax laws and their interpretation. In particular, a large number of changes have been introduced to various chapters of the Russian Tax Code since its adoption. For example, since 1 January 2010 the Unified Social Tax was replaced by social security charges to the Russian pension, social security and medical insurance funds. With respect to employees that are Russian tax residents the total rate of the respective social security charges for 2017 generally equals 30% on the taxable base up to certain thresholds. The amount exceeding such thresholds is taxed at 15.1%.

As of 1 January 2015 a number of amendments have been enacted introducing, among others, the concepts of controlled foreign companies, corporate tax residency and beneficial ownership (see also “―Russian anti-offshore measures may result in additional tax liabilities”). Due to the relative lack of court and administrative practice, no assurance can be currently given as to how these amendments will be applied in practice and their exact nature, their potential interpretation by the tax authorities and the possible impact on the taxpayers.

In September 2016 a draft law introducing country-by-country reporting (“CbCR”) requirements was published. Introduction of mandatory filing of CbCR is in general in line with the Organisation for Economic Co-operation and Development (“OECD”) recommendations within the Base Erosion and Profit Shifting (“BEPS”) initiative. This initiative could potentially give rise to new adjustments and interpretations of the Russian tax law on the basis of international best practice, that would cause additional tax burden for the Group’s business.

In addition, the Russian Government may impose arbitrary and/or onerous taxes and penalties in the future, which could adversely affect the Group’s business. Russia’s inefficient tax collection system increases the likelihood of such events. Furthermore, although the Constitution of the Russian Federation provides that laws that introduce new taxes or worsen a taxpayer's position cannot be applied retroactively, there have been several instances where such laws have been introduced and applied retroactively. As the Russian federal, regional and local tax laws and regulations are subject to frequent changes and some of the sections of the Russian Tax Code are relatively new, the interpretation and application of these laws and regulations are often unclear, unstable or non-existent. Contradicting interpretations of tax laws and regulations may exist at the federal, regional and local levels, increasing uncertainties and tax risks, and leading to the inconsistent enforcement of these tax laws and regulations in practice. Taxpayers, the Ministry of Finance of the Russian Federation and the Russian tax authorities often interpret tax laws and regulations differently. Private clarifications issued by the Ministry of Finance of the Russian Federation in response to specific taxpayers’ queries with respect to particular

45 situations are not binding on the Russian tax authorities and there can be no assurance that the Russian tax authorities will not take positions contrary to those set out in the private clarification letters issued by the Ministry of Finance of the Russian Federation. In some instances the Russian tax authorities have used new interpretations of tax laws retroactively, issued tax claims for periods for which the statute of limitations had expired and reviewed the same tax period several times. During the past several years, the Russian tax authorities have shown a tendency to take more assertive positions in their interpretation of tax legislation, which has led to an increased number of material tax assessments issued by them as a result of tax audits of Russian companies operating in various industries. As taxpayers and the Russian tax authorities often interpret tax laws differently, taxpayers often need to resort to court proceedings to defend their position against the Russian tax authorities. In the absence of any binding precedent or consistent case law, decisions on tax or other related matters taken by different courts relating to the same or similar circumstances may be inconsistent or contradictory. For example, the Russian tax law is unclear with respect to the deductibility of certain expenses. This uncertainty could expose the Group to significant fines and penalties and to enforcement measures, despite the Group’s best efforts at compliance, and could result in a greater than expected tax burden. The Russian tax system continues, therefore, to be characterised by frequent changes to tax laws and regulations, the absence of interpretations or contradicting interpretations of tax laws and regulations, as well as inconsistent case law, and inconsistent decisions by the Russian tax authorities and their failure to address many of the existing problems. These factors, and the possibility that arbitrary or onerous taxes and penalties could be imposed in the future, could have a material adverse effect on the Group’s business, results of operations, financial condition and the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under, or the trading price of, the Notes. The practice relating to tax audits and the statute of limitations for penalties and taxes also create significant uncertainties for Russian taxpayers. In October 2006, the Plenum of the Supreme Arbitrazh Court of the Russian Federation issued Resolution No. 53, introducing the concept of an “unjustified tax benefit”. In this context, a tax benefit means a reduction in the amount of a tax liability resulting, in particular, from a reduction of the tax base, a tax deduction, a tax concession or the application of a lower tax rate, and the receipt of a right to a refund (offset) or reimbursement of tax. Resolution No. 53 provides that where the true economic intent of the transactions is inconsistent with the manner in which they have been taken into account for tax purposes a tax benefit may be deemed to be unjustified. The same conclusion may apply when a transaction lacks a reasonable economic or business rationale. A tax benefit cannot be regarded as a business objective in its own right. On the other hand, the fact that the same economic result might have been obtained with a lesser tax benefit accruing to the taxpayer does not constitute grounds for declaring a tax benefit to be unjustified. Based on the public court decisions, it is apparent that the Russian tax authorities have actively sought to apply this concept when challenging tax positions taken by taxpayers in court. Although the explicit intention of Resolution No. 53 was to combat tax law abuses, the cases relating to Resolution No. 53 that have been brought to courts show that the Russian tax authorities have started to apply this concept more broadly than may have been intended by the Supreme Arbitrazh Court. Importantly, there are some cases where this concept has been applied by the Russian tax authorities in order to disallow benefits granted by double tax treaties. Furthermore, Resolution No. 64 of the Plenum of the Supreme Court of the Russian Federation of 28 December 2006 “Concerning the Practical Application by Courts of Criminal Legislation Concerning Liability for Tax Crimes” is indicative of the trend to broaden the application of criminal sanctions for tax violations. As a result of these rules, it is possible that despite the best efforts of the Group to comply with Russian tax laws and regulations, certain transactions and activities of the Group that have not been challenged in the past may be challenged in the future, resulting in a greater than expected tax burden, exposure to significant fines and penalties and potentially severe enforcement measures for the Group, which could have a material adverse effect on the Group’s business, results of operations, financial

46 condition, the Company’s ability to service payment obligations under the Loan Agreement or the trading price of the Notes.

It is expected that some initiatives of the Ministry of Finance of the Russian Federation, such as acceding to the OECD Multilateral Agreement for amending double tax treaties, and automatic information exchange with foreign tax authorities, will also be adopted in the near term. These new initiatives may result in significant changes of tax treaties’ provisions and application practice that potentially may result in higher tax burden for the Group’s business.

Such evolving tax conditions create tax risks in the Russian Federation that are greater than the tax risks typically found in countries with more developed taxation, legislative and judicial systems. These tax risks impose additional burdens and costs on the Group’s operations, including management’s resources. Furthermore, these risks and uncertainties complicate the Group’s tax planning and related business decisions, potentially exposing the Group to significant fines, penalties and enforcement measures, and could materially adversely affect the Group’s business, results of operations, financial condition and the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence, the Issuer’s ability to make payments under, or the trading price, of the Notes. Furthermore, Russian tax legislation is consistently becoming more sophisticated. It is possible that new revenue raising measures could be introduced. Although it is unclear how any new measures would operate, the introduction of such measures may affect the Group’s overall tax efficiency and may result in significant additional taxes becoming payable. No assurance can be given that no additional tax exposures will arise. Additional tax exposures could have a material adverse effect on the Group’s business, results of operations, financial condition and the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence, the Issuer’s ability to make payments under, or the trading price of, the Notes.

Russian anti-offshore measures may result in additional tax liabilities.

The Russian Federation, like a number of other countries in the world, is actively involved in discussion on measures against tax evasion through the use of low tax jurisdictions as well as aggressive cross-border tax planning structures. Tax rules for “controlled foreign companies” (the “CFC Rules”), the concept of “beneficial ownership” for tax treaty purposes were introduced. Moreover, starting from 1 January 2017, obtaining a confirmation that the income recipient is its beneficial owner is mandatory for applying a reduced withholding tax rate.

Taking the above into account, it cannot be excluded that the Group might be subject to additional tax liabilities because of these changes being introduced and applied to transactions carried out by the Group which could have a material adverse effect on the Group’s business, financial condition and results of operations.

The Russian Federation joined the Convention on Mutual Administrative Assistance in Tax Matters developed by the Council of Europe and the Organisation for Economic Co-operation and Development. Ratification of this Convention enables the Russian tax authorities to obtain certain information relating to tax matters from a number of countries, including certain offshore jurisdictions. The provisions of the Convention came into force for Russia starting from 1 July 2015. This Convention gives Russian tax authorities an effective mechanism for obtaining financial and tax information about foreign companies and there is a risk that certain information may potentially be interpreted negatively raising additional tax burden for the Group. At the moment it is unclear how the above measures will be applied in practice by the Russian tax authorities and the courts. The Group operates in various jurisdictions and includes companies incorporated outside of Russia. It is possible that with the introduction of these rules and changes in the interpretation and application of these rules and changes by the Russian tax authorities and/or

47 courts the Group might become subject to additional taxation in Russia in respect of its operations outside Russia.

Tax audits may result in additional tax liabilities.

Tax audits or inspections may result in additional costs to the Group, in particular if the relevant tax authorities conclude that the Group did not satisfy its tax obligations in any given year. Such audits or inspections may also impose additional burdens on the Group by diverting management resources. The outcome of these audits or inspections could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group’s transfer prices may be challenged by the Russian tax authorities.

The Russian transfer pricing rules may have a potential impact on the Group’s tax costs arising from the pricing mechanisms used in controlled transactions and, in particular, transactions with related parties in and outside of the Russian Federation. The Russian tax authorities will be entitled to accrue additional tax liabilities if prices of the “controlled transactions” differ from those which independent counterparties in similar conditions would have applied. The Russian tax authorities have conducted a number of transfer pricing audits and accrued additional taxes to the relevant taxpayers. Moreover, in certain instances the Russian tax authorities have applied the transfer pricing rules and methods in cases, where the rules have formally not been applicable, claiming additional tax charges calculated using the transfer pricing rules but based on other tax concepts (e.g. unjustified tax benefit, lack of economic justification of expenses, etc.).

Due to uncertainties in the interpretations of transfer pricing legislation, no assurance can be given that the Russian tax authorities will not challenge the prices applied by the Group and make adjustments, which could affect the Group’s tax position. Unless such tax adjustments are successfully contested in court, the Group could become liable for increases in its taxes payable. The Russian transfer pricing law, including the possible tax adjustments outlined above, could have a material adverse effect on the Group’s business, results of operations and financial condition.

Payments on the Loan may be subject to Russian withholding tax.

In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity having no permanent establishment in Russia are subject to Russian withholding tax at a rate of 20%. This tax rate can be reduced or eliminated under the terms of an applicable double tax treaty. No Russian withholding tax obligations should arise for Russian companies in Eurobond structures, including the transaction described in this Prospectus, by virtue of the release from tax agent obligations envisaged by the Russian Tax Code which provides that Russian borrowers should be fully released from the obligation to withhold Russian income tax from interest payments made on debt obligations provided that the following conditions are all simultaneously met: (a) interest is paid on debt obligations of Russian entities that arose in connection with the placement by foreign entities of “issued bonds”, defined as bonds or other debt obligations (i) listed and/or admitted to trading on one of the specified foreign exchanges, and/or (ii) that have been registered in the specified foreign depository/clearing organisations. The lists of qualifying foreign exchanges and foreign depositary/clearing organisations were approved by Order No. 12-91/pz-n of the Federal Financial Markets Service dated 25 October 2012 (the “List”). The Irish Stock Exchange, Euroclear and Clearstream are included in the above-mentioned lists. While Clearstream and some legal entities that are members of Clearstream group are mentioned in the List, the List does not explicitly mention Clearstream, Luxembourg. According to the shareholding structure of Clearstream group, Clearstream, Luxembourg is a member entity of Clearstream group, and, therefore, is part of Clearstream. However, there is a residual risk that the Russian tax authorities

48 may apply a formalistic approach and take a position that Clearstream, Luxembourg is not included in the List based on the fact that it is not explicitly mentioned in the List. (b) there is a double tax treaty between Russia and the jurisdiction of tax residence of the recipient of interest of the loan (i.e., the Issuer) which can be confirmed by a tax residency certificate issued by the competent authorities of its country of residence for tax purposes and effective as at the time of income payment. Further, currently there is no mechanism or requirement for foreign income recipients that are legal entities to self-assess and pay Russian tax. However, there can be no assurance that such mechanism will not be introduced in the future or that the Russian tax authorities will not attempt to collect the tax from foreign income recipients. See “Taxation—Certain Russian Tax Considerations”. The Company, based on professional advice received, believes that it should be released from the obligation to withhold the Russian withholding tax from interest payments made to the Issuer under the Loan Agreement provided that the Issuer duly confirms its tax residence. However, as described above there is some uncertainty in this respect. If the Notes are simultaneously (i) delisted from the Irish Stock Exchange and (ii) exchanged for duly executed and authenticated registered Notes in definitive form in the limited circumstances specified in the Global Note Certificate, the above exemption related to “traded bonds” will not apply and the Company will be required to withhold Russian income tax on interest payments made by the Company to the Issuer. Besides that, if the Notes are delisted from the Irish Stock Exchange and deposited with a common depository for, and registered in the name of a nominee of, Clearstream, Luxembourg only, the Notes may potentially not fall within the definition of “traded bonds” under the Russian Tax Code and, therefore, there is a residual risk that the Company may be required to withhold Russian tax from interest payments made by the Company to the Issuer. If interest payments under the Loan are subject to Russian withholding tax (as a result of which the Issuer would reduce payments made under the corresponding Notes by the amount of the tax withheld), the Company will be obliged under the terms of the Loan Agreement to increase the amounts payable as may be necessary to ensure that the Issuer receives a net amount equal to the amount it would have received in the absence of such withholding taxes. It is currently unclear whether the provisions obliging the Company to gross-up payments will be enforceable in the Russian Federation. There is a risk that a gross up for withholding tax will not take place and that interest payments made by the Company under the Loan Agreement will be reduced by Russian tax withheld by the Company at the rate of 20 per cent, or, potentially, with respect to Non- Resident Noteholders – Individuals Russian personal income tax at a rate of 30%. See “Taxation— Certain Russian Tax Considerations”. If the Company is obliged to pay additional amounts under the Loan Agreement, it may (without premium or penalty), subject to certain conditions, prepay the Loan in full. In such case, all outstanding Notes would be redeemable at par together with accrued and unpaid interest and additional amounts, if any, to the date of the redemption.

Tax might be imposed on disposals of the Notes by Noteholders who are individuals in the Russian Federation, thereby reducing their value.

Proceeds from the disposal of Notes received from a source within the Russian Federation by a Noteholder that is an individual not qualifying as a Russian tax resident for the purpose of Russian personal income tax would be subject to a personal Russian income tax at a rate of 30% (or such other tax rate as may be effective at the time of such sale or other disposal). The tax would apply to the gross proceeds from such disposal of the Notes less any available duly documented costs (including the acquisition cost of the Notes and other expenses relating to the acquisition holding and sale or other disposal of the Notes) provided that the duly executed supporting documentation is available to the person obliged to calculate and withhold Russian personal income tax in a timely manner. Furthermore, sales or other disposal proceeds attributable to accrued interest, if deemed to be received by such Noteholders from the Russian sources, can be subject to Russian personal income tax at the

49 rate of 30% (or such other tax rate as could be effective at the time of such sale or other disposal), even if the sale or other disposal results in a loss. Russian personal income tax rate may technically be reduced or eliminated under provisions of an applicable double tax treaty concluded between Russia and the country of tax residency of a particular Noteholder, subject in practice to timely compliance by that Noteholder with the respective treaty clearance formalities. In order to apply for tax exemption or payment of tax at a reduced tax rate under the respective double tax treaty a Non-Resident Noteholder–Individual which has the actual right to receive income should confirm his/ her tax residency status to the tax agent. For these purposes a Non-Resident Noteholder– Individual resident in a country that has a double tax treaty with Russia can provide to the tax agent a passport of a foreign citizen or other document that is deemed to be an identification document under the federal law or an applicable international treaty. If this document is not sufficient to prove the residency status, the tax agent will request the Non-Resident Noteholder–Individual to provide a tax residency certificate issued by the competent authorities in his/ her country of residence for tax purposes. The imposition or possibility of imposition of the withholding tax could adversely affect the value of the Notes. See “Taxation—Certain Russian Tax Considerations”.

RISKS RELATING TO THE NOTES AND THE TRADING MARKET

Payments under the Notes are limited to the amount of certain payments received by the Issuer from the Company under the Loan Agreement.

The Issuer has an obligation under the Terms and Conditions of the Notes and the Trust Deed to pay such amounts of principal, interest, and additional amounts (if any) as are due in respect of the Notes. However, the Issuer’s obligation to pay is limited to the amount of principal, interest, and additional amounts (if any) actually received and retained (net of tax) by, or for the account of, the Issuer pursuant to the Loan Agreement. Consequently, if the Company fails to meet its payment obligations under the Loan Agreement, this will result in the Noteholders receiving less than the scheduled amount of principal or interest or any other amounts, if any, on the relevant due date. Moreover, except as otherwise expressly provided in the “Terms and Conditions of the Notes” and in the Trust Deed, the Noteholders will not have any proprietary or other direct interest in the Issuer’s rights under, or in respect of, the Loan Agreement. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any of the provisions of the Loan Agreement, or have direct recourse to the Company, except through action by the Trustee under the Charge (as defined in the “Terms and Conditions of the Notes”) or any assignment of rights under the Loan Agreement, including the Assigned Rights (as defined in the “Terms and Conditions of the Notes”). Furthermore, Noteholders should be aware that neither the Issuer nor the Trustee accepts any responsibility for the performance by the Company of its obligations under the Loan Agreement (see “Terms and Conditions of the Notes”).

The right of the Issuer to receive payments under the Loan (and therefore its ability to make payments under the Notes as they fall due) is structurally subordinated to any liabilities of the Company’s subsidiaries, and the ability of Noteholders to recover in full could be adversely affected if the Company, or any of its subsidiaries, declares bankruptcy, liquidates or reorganises.

Some of the Group’s operations are conducted through the Company’s subsidiaries, and, to a certain extent, the Company depends on the earnings and cash flows of these subsidiaries to meet its debt obligations, including its obligations under the Loan Agreement. Some of the Company’s subsidiaries have material liabilities, and many of those liabilities are secured. Since the Company’s subsidiaries do not guarantee its payment obligations under the Loan Agreement or the Issuer’s payment obligations under the Notes, neither the Issuer nor Noteholders will have any direct claim on the Company’s subsidiaries’ cash flows or assets. In the event of a bankruptcy, liquidation or

50 reorganisation of any of the Company’s subsidiaries, their creditors will generally be entitled to payment of their claims from the cash flows and assets of those subsidiaries before any cash flows or assets are made available for distribution to the Company as a shareholder. This may adversely affect the Company’s ability to service its payment obligations under the Loan Agreement and as a consequence the Issuer’s ability to make payments under or the trading price of the Notes. In addition, a Noteholder’s claims in the currency of the Notes (U.S. dollars) may be converted into roubles in any Russian bankruptcy proceedings and, therefore, in addition to the general risks of less than full recovery associated with any bankruptcy (or similar) proceedings, Noteholders may be adversely affected by movements in the currency exchange rates between the rouble and the U.S. dollar. The protection afforded by the negative pledge contained in the Loan Agreement is limited, which may adversely affect the value of investments in the Notes. The Company has agreed in clause 9.1 of the Loan Agreement (a) not to, and to procure that no Material Subsidiary (as defined therein) will, create or permit to subsist any Security Interest (as defined therein) other than a Permitted Security Interest (as defined therein) upon or in respect of any of its undertakings, property, income, assets or revenues, present or future, to secure for the benefit of the holders of any Relevant Indebtedness (as defined therein) (i) payment of any sum due in respect of any such Relevant Indebtedness; (ii) any payment under any guarantee of any such Relevant Indebtedness; or (iii) any payment under any indemnity or other like obligation relating to any such Relevant Indebtedness and (b) procure that no person gives any guarantee of, or indemnity in respect of, any of the Company’s Relevant Indebtedness to the holder thereof (other than a Permitted Security Interest); without in any such case at the same time or prior thereto procuring that the Company’s obligations under the Loan Agreement (x) are secured equally and rateably with such Relevant Indebtedness for so long as such Relevant Indebtedness is so secured or (y) have the benefit of such other guarantee, indemnity or other like obligations or such other security (in each case) as the Issuer as lender in its reasonable opinion shall deem to be not materially less beneficial. The application of this negative pledge and the protection that it affords to holders of the Notes is limited. For example, the definition of Relevant Indebtedness is limited to the Company’s and Material Subsidiaries present or future Indebtedness in the form of, or represented by, notes, debentures, bonds or other securities (but for the avoidance of doubt, excluding term loans, credit facilities, credit agreements and other similar facilities and evidence of indebtedness under such loans, facilities or agreements) which either are by their terms payable, or confer a right to payment, in any currency, and are for the time being, or ordinarily are quoted, listed or ordinarily dealt in or traded on any stock exchange, over-the-counter or other securities market. In addition, pursuant to an exemption from the negative pledge, the Company and its Material Subsidiaries will be permitted to secure an aggregate amount of Relevant Indebtedness not exceeding 20% of Consolidated Assets (as defined in the Loan Agreement), without any obligation to afford any equal and rateable security to the Issuer as lender or holders of the Notes. As a result, the Company and its Material Subsidiaries will be permitted to secure a range of other forms of indebtedness and may also create security in respect of a significant amount of Relevant Indebtedness without, at the same time, being obliged to grant equal and rateable security in respect of the Loan, as the case may be, which may adversely affect the value of the Notes and/or effectively cause holders of Notes to rank in terms of priority behind such secured creditors.

The trading price of the Notes may be volatile.

The trading price of the Notes could be subject to significant fluctuations in response to actual or anticipated variations in the Group’s or its competitors’ operating results, adverse business developments, changes to the regulatory environment in which the Group operates, changes in financial estimates by securities analysts, and the actual or expected sale of a large number of debt securities similar to the Notes, as well as other factors. Any such disruptions may harm Noteholders. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations that, if repeated in the future, could adversely affect the trading price of the Notes without regard to the Group’s results of operations, prospects or financial condition.

51 The lack of a public market for the Notes could reduce the value of an investment in the Notes.

There may not be an existing market for the Notes at the time they are issued. The Notes are expected to be listed and admitted to trading on the Main Securities Market of the Irish Stock Exchange. However, there can be no assurance that a liquid market will develop for the Notes, that Noteholders will be able to sell their Notes or that such holders will be able to sell their Notes for a price that reflects their value.

The Company may be unable to repay its obligations under the Loan Agreement.

At maturity, the Company may not have the funds to fulfil its obligations under the Loan Agreement and it may not be able to arrange for additional financing. If the maturity date or prepayment of the Loan occurs at a time when other arrangements prohibit the Company from repaying or prepaying the Loan, the Company may try to obtain waivers of such prohibitions from the lenders under those arrangements, or it could attempt to refinance the borrowings that contain the restrictions. If the Company is not able in such circumstances to obtain the waivers or refinance these borrowings, it may be unable to repay the Loan.

Changes to the Company’s credit rating or that of the Russian Federation may adversely affect the trading price of the Notes.

It is expected that the Notes will be rated “BBB-“ (outlook negative) by S&P and “BBB-“ (outlook stable) by Fitch. Any changes in the credit ratings of the Company or the sovereign rating of the Russian Federation could adversely affect the trading price of the Notes. During the course of 2015, international rating agencies S&P and Moody’s downgraded their foreign currency sovereign debt rating for the Russian Federation to “BB+“ and “Ba1”, respectively, with negative outlook. Currently, S&P and Moody’s foreign currency sovereign debt rating for the Russian Federation is “BB+” with positive outlook and “Ba1” with stable outlook, respectively. A change in the credit rating of one or more other Russian corporate borrowers or banks could also adversely affect the trading price of the Notes. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organisation.

Noteholders’ rights will be limited so long as interests in the Notes are held in book-entry form.

Owners of book-entry interests will not be considered owners or holders of Notes unless and until definitive notes are issued in exchange for book-entry interests. Instead, Euroclear or Clearstream, Luxembourg or their nominees, will be the sole holders of the Notes. Payments of principal, interest and other amounts owing on or in respect of the Notes in global form will be made as described in “Summary of the Provisions Relating to the Notes in Global Form” and none of the Issuer, the Trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments of interest, principal or other amounts to Euroclear or Clearstream, Luxembourg, or to owners of book-entry interests. Owners of book-entry interests will not have the direct right to act upon any solicitation for consents or requests for waivers or other actions from holders of the Notes, including enforcement of security for the Notes. Instead, Noteholders who own a book-entry interest will be reliant on the nominees for the common depositary or custodian (as registered holder of the Notes) to act on their instructions and/or will be permitted to act directly only to the extent such holders have received appropriate proxies to do so from Euroclear or Clearstream, Luxembourg or, if applicable, from a participant. There can be no assurances that procedures implemented for the granting of such proxies will be sufficient to enable the Noteholders to vote on any requested actions or to take any other action on a timely basis.

52 Examiners, Preferred Creditors under Irish Law and Floating Charges May Impose Additional Risks on the Notes.

COMI

The Issuer has its registered office in Ireland. As a result there is a rebuttable presumption that its centre of main interest (“COMI”) is in Ireland and consequently that any main insolvency proceedings applicable to it would be governed by Irish law. In the decision by the European Court of Justice (“ECJ”) in relation to Eurofood IFSC Limited, the ECJ restated the presumption in Council Regulation (EC) No. 1346/2000 of 29 May 2000 on Insolvency Proceedings, that the place of a company’s registered office is presumed to be the company’s COMI and stated that the presumption can only be rebutted if “factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at the registered office is deemed to reflect”. As the Issuer has its registered office in Ireland, has Irish directors, is registered for tax in Ireland and has an Irish corporate services provider, the Issuer does not believe that factors exist that would rebut this presumption, although this would ultimately be a matter for the relevant court to decide, based on the circumstances existing at the time when it was asked to make that decision. If the Issuer’s COMI is not located in Ireland, and is held to be in a different jurisdiction within the European Union, Irish insolvency proceedings would not be applicable to the Issuer.

Examinership

Examinership is a court moratorium/protection procedure which is available under Irish company law to facilitate the survival of Irish companies in financial difficulties. Where a company, which has its COMI in Ireland is, or is likely to be, unable to pay its debts an examiner may be appointed on a petition to the relevant Irish court under Section 509 of the Companies Act 2014. The Issuer, the directors of the Issuer, a contingent, prospective or actual creditor of the Issuer, or shareholders of the Issuer holding, at the date of presentation of the petition, not less than one-tenth of the voting share capital of the Issuer are each entitled to petition the court for the appointment of an examiner. The examiner, once appointed, has the power to halt, prevent or rectify acts or omissions, by or on behalf of the company after his appointment and, in certain circumstances, negative pledges given by the company prior to his appointment will not be binding on the company. Furthermore, where proposals for a scheme of arrangement are to be formulated, the company may, subject to the approval of the court, affirm or repudiate any contract under which some element of performance other than the payment remains to be rendered both by the company and the other contracting party or parties. During the period of protection, the examiner will compile proposals for a compromise or scheme of arrangement to assist in the survival of the company or the whole or any part of its undertaking as a going concern. A scheme of arrangement may be approved by the relevant Irish court when a minimum of one class of creditors, whose interests are impaired under the proposals, has voted in favour of the proposals and the relevant Irish court is satisfied that such proposals are fair and equitable in relation to any class of members or creditors who have not accepted the proposals and whose interests would be impaired by implementation of the scheme of arrangement and the proposals are not unfairly prejudicial to any interested party. The fact that the Issuer is a special purpose entity and that all its liabilities are of a limited recourse nature means that it is unlikely that an examiner would be appointed to the Issuer. If however, for any reason, an examiner were appointed while any amounts due by the Issuer under the Notes were unpaid, the primary risks to the holders of Notes would be as follows:  the Trustee, acting on behalf of Noteholders, would not be able to enforce rights against the Issuer during the period of examinership; and  a scheme of arrangement may be approved involving the writing down of the debt due by the Issuer to the Noteholders irrespective of the Noteholders’ views.

53 Preferred Creditors

If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditors that are treated under Irish law as creditors that are senior relative to the Noteholders, the Noteholders may suffer losses as a result of their subordinated status during such insolvency proceedings. In particular:  under the terms of the Trust Deed, the Issuer will charge to the Trustee on behalf of Noteholders by way of first fixed charge (the “Charge”) as security for its payment obligations in respect of the Notes certain rights under the Loan Agreement and to the Account. Under Irish law, the claims of creditors holding fixed charges may rank behind other creditors (namely fees, costs and expenses of any examiner appointed and certain capital gains tax liabilities) and, in the case of fixed charges over book debts, may rank behind claims of the Irish Revenue Commissioners for PAYE, local property tax and VAT;  under Irish law, for a charge to be characterised as a fixed charge, the charge holder is required to exercise the requisite level of control over the assets purported to be charged and the proceeds of such assets including any bank account into which such proceeds are paid. There is a risk therefore that even a charge which purports to be taken as a fixed charge may take effect as a floating charge if a court deems that the requisite level of control was not exercised; and  in an insolvency of the Issuer, the claims of certain other creditors (including the Irish Revenue Commissioners for certain unpaid taxes), as well as those of creditors mentioned above, will rank in priority to claims of unsecured creditors and claims of creditors holding floating charges.

54 USE OF PROCEEDS

The Issuer will use the proceeds received from the issue and sale of the Notes for the sole purpose of making the Loan. The Company intends to use the proceeds of the Loan for general corporate purposes and capital investments. The commissions, costs and expenses in connection with the issuance and offering of the Notes and the admission to trading thereof will be paid by the Company.

55 CAPITALISATION

The following table sets forth the Company’s consolidated capitalisation as of 31 December 2016, comprising total non-current loans and borrowings and equity attributable to shareholders of the parent company, derived from the 2016 Consolidated Financial Statements included elsewhere in this Prospectus. The following table should be read in conjunction with “Selected Consolidated Financial Information”, “Operating and Financial Review” and the Annual Consolidated Financial Statements included elsewhere in this Prospectus. As of 31 December 2016 (Amounts in millions of U.S. dollars)

Cash and cash equivalents 3,301

Current loans and borrowings 578

CAPITALISATION:

Non-current loans and borrowings 7,274

Capital and reserves Share capital 6 Share premium 1,254 Treasury shares – Translation reserve (4,778) Retained earnings 7,340 Equity attributable to shareholders of the parent company 3,822 Non-controlling interests 74

Total non-current loans and borrowings and equity attributable to shareholders of the parent company 11,096 On 24 March 2017, the VTB facility agreement in the amount of RUB 20 billion (or U.S.$348 million at the exchange rate on 24 March 2017 of RUB 57.52 per 1 U.S. Dollar) was fully repaid in advance of the final maturity date. In May 2016, the Group’s subsidiary GRK Bystrinskoye LLC (as borrower) and Sberbank of Russia (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$800 million with a maturity period of eight years to finance the construction of Bystrinsky mining and concentration facility (Bystrinsky project) in the Zabaikalsk region. See “Borrowings”. As of 31 December 2016, the amount outstanding was U.S.$165 million. In 2017, the borrower continued to drawdown the facility increasing the amount outstanding to U.S.$ 287 million by the date of this Prospectus. On 11 April 2017, the Group received gross proceeds of U.S.$1 billion under 4.10 per cent loan participation notes due 2023. The proceeds were used for general corporate purposes and capital investments. On 12 May 2017, Highland Fund increased its stake in Bystrinsky project to 13.33% for approximately U.S.$ 20 million. The Company expects to prepay in full the RUB 40 billion facility agreement with Sberbank on 7 June 2017. See “Borrowings” On 9 June 2017, the annual general meeting of shareholders of the Company will consider approval of a dividend for the year ended 31 December 2016 in the aggregate amount of RUB 70.6 billion (approximately U.S.$1.2 billion).

56 The Group expects to receive net proceeds from the offering of the Notes of approximately U.S.$496,500,000 (taking into account the estimated total commissions and expenses payable in relation to the offering of the Notes and the admission to trading of the Notes, which are expected to be approximately U.S.$3,500,000). See “Use of Proceeds”.

57 SELECTED CONSOLIDATED FINANCIAL INFORMATION

The tables set forth below show certain selected historical consolidated financial information of the Group. The consolidated financial information of the Group set forth below:

 as at and for the year ended 31 December 2016 has been derived from the 2016 Consolidated Financial Statements; and

 as at and for the year ended 31 December 2015 and 31 December 2014 has, except for certain reclassified amounts as described in “Presentation of Financial and Other Information – Reclassification”, been derived from the 2015 Consolidated Financial Statements.

The selected historical consolidated financial information should be read in conjunction with “Operating and Financial Review” and the Annual Consolidated Financial Statements included elsewhere in this Prospectus. Year ended 31 December Selected Consolidated Statement of Income Data 2016 2015 2014 (Amounts in millions of U.S. dollars unless otherwise indicated) Revenue Metal sales ...... 7,646 7,883 10,896 Other sales ...... 613 659 973 Total revenue...... 8,259 8,542 11,869 Cost of metal sales ...... (3,651) (3,165) (4,805) Cost of other sales...... (508) (616) (921) Gross profit...... 4,100 4,761 6,195

General and administrative expenses...... (581) (554) (812)

Selling and distribution expenses ...... (93) (129) (283)

Impairment of non-financial assets...... (61) (284) (130) Other net operating expenses (84) (288) (172) Operating profit ...... 3,281 3,506 4,746 Foreign exchange gain/(loss), net ...... 485 (865) (1,594) Finance costs...... (453) (326) (179) Impairment of available for sale investments including impairment losses reclassified from other comprehensive income ...... (153) – (244) Loss from disposal of subsidiaries and assets classified as held for sale ...... (4) (302) (213) Income from investments, net...... 114 215 94 Share of profits of associates ...... 6 16 50 Profit before tax ...... 3,276 2,244 2,660 Income tax expense...... (745) (528) (660) Profit for the year ...... 2,531 1,716 2,000 Attributable to: Shareholders of the parent company...... 2,536 1,734 2,003 Non-controlling interests ...... (5) (18) (3)

58 As of 31 December Selected Consolidated Statement of Financial Position Data 2016 2015 2014 (Amounts in millions of U.S. dollars) Non-current assets 10,451 6,746 7,464 Current assets 5,800 6,408 5,249 Assets classified as held for sale 206 217 436 Total Assets 16,457 13,371 13,149 Non-current liabilities 8,585 7,734 6,174 Current liabilities 3,974 3,352 2,099 Liabilities classified as held for sale 2 24 83 Total Liabilities 12,561 11,110 8,356 Equity 3,896 2,261 4,793 Total Equity and Liabilities 16,457 13,371 13,149

Year ended 31 December Selected Cash Flow Statement Data 2016 2015 2014 (Amounts in millions of U.S. dollars unless otherwise indicated) Net cash generated from operating activities 3,492 3,705 5,947

Net cash used in investing activities (1,901) (1,300) (1,222)

Net cash used in financing activities (2,399) (998) (2,979) Net (decrease)/ increase in cash and cash equivalents (808) 1,407 1,746 Cash and cash equivalents at the end of the period 3,301 4,054 2,793

As of and for the year ended 31 December Non-IFRS Measures 2016 2015 2014 (Amounts in millions of U.S. dollars unless otherwise indicated) EBITDA(1) 3,899 4,296 5,681 EBITDA margin (%)(2) 47.2 50.3 47.9 Net debt (3) 4,551 4,212 3,537 Net debt to EBITDA(4) 1.2 1.0 0.6 Debt to equity(5) 2.0 3.7 1.3 Debt to capitalisation(6) 0.7 0.9 0.6 Return on invested capital (%)(7) 30 35 29 Free cash flow(8) 1,591 2,405 4,725

(1) The Group’s EBITDA for all periods presented was calculated as shown in the reconciliation below. The Company presents EBITDA because it considers it an important supplemental measure of the Group’s operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Group’s industry. EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS. Some of these limitations are as follows:  EBITDA does not reflect the impact of depreciation and amortisation on the Group’s operating performance. The assets of the Group’s businesses which are being depreciated and/or amortised will have to be replaced in the future and such depreciation and amortisation expense may approximate the cost to replace these assets in the future. By excluding this expense from

59 EBITDA, EBITDA does not reflect the Group’s future cash requirements for these replacements. EBITDA also does not reflect the impact of impairment of non-financial assets or changes in provision for onerous contracts.  Other companies in the Group’s industry calculate EBITDA differently or may use it for different purposes as compared with the Company, limiting its usefulness as a comparative measure. The Company compensates for these limitations by relying primarily on its IFRS operating results and using EBITDA only supplementally. See the Group’s consolidated statements of income and consolidated statements of cash flows included in the Annual Consolidated Financial Statements.

The following table shows a reconciliation of EBITDA to net income for the periods indicated:

Year ended 31 December (Amounts in millions of U.S. dollars) 2016 2015 2014 Operating profit 3,281 3,506 4,746 Adjustments for: Depreciation and amortisation 557 506 805 Impairment of non- financial assets 61 284 130 EBITDA 3,899 4,296 5,681

EBITDA is a measure of the Group’s operating performance that is not required by, or presented in accordance with, IFRS and should not be considered as an alternative to net income, operating income or any other performance measures presented in accordance with IFRS or as an alternative to cash flow from operating activities or as a measure of the Group’s liquidity. In particular, EBITDA should not be considered as a measure of discretionary cash available to the Group to invest in the growth of its business. (2) EBITDA margin is calculated as a percentage of revenue for the relevant period. (3) Net debt is calculated as the sum of non-current and current loans and borrowings less cash and cash equivalents (less restricted cash) at the end of the relevant period. If, at the end of the relevant period, total non-current and current loans and borrowings is less than cash and cash equivalents (less restricted cash), it is referred to as “net cash”. Net debt is not a measure specifically defined by IFRS, is not a measure of financial condition, position or liquidity and should not be considered as an alternative to non-current and current loans and borrowings or other line items determined in accordance with IFRS. Additionally, net debt is not intended to be a vary from other companies in its industry due to differences in accounting policies or in calculation methodology. Net debt has limitations and should not be considered in isolation, or as substitutes measure of free cash flow for management’s discretionary use. The Group’s use of the term “net debt” may for financial information as reported under IFRS or as an alternative to any performance measures derived in accordance with IFRS.

The following table shows a reconciliation of net debt/(net cash) to non-current and current loans and borrowings as of the end of the periods indicated: As of 31 December 2016 2015 2014 (Amounts in millions of U.S. dollars) Total non-current and current loans and borrowings 7,852 8,266 6,330 less cash and cash equivalents (3,301) (4,054) (2,793) Net debt 4,551 4,212 3,537

(4) Net debt to EBITDA as of and for the years ended 31 December 2014, 2015 and 2016 is calculated as net debt as at the end of the relevant period divided by EBITDA for the relevant period.

60 (5) Debt to equity is calculated as total current and non-current loans and borrowings as at the end of the relevant period divided by total equity as at the end of the relevant period. (6) Debt to capitalisation is calculated as total current and non-current loans and borrowings as at the end of the relevant period divided by total non-current loans and borrowings and equity attributable to shareholders of the parent company as at the end of the relevant period. (7) Return on invested capital is calculated as the product of (i) operating profit adjusted for impairment of property, plant and equipment, multiplied by (1 minus the effective tax rate for the relevant period (adjusted for gain/loss from investing)) and divided by (ii) invested capital. Invested capital is calculated as the sum of non-current assets, assets held for sale, net operating working capital and operating cash (2% of revenue), less non-current financial assets and investments in associates, weighted by two reporting dates within last twelve months. (8) The Group calculates free cash flow as the sum of net of cash generated from operating activities and net cash used in investing activities. This item is not an IFRS measure. Free cash flow presented by the Group has been calculated by the management based on the information derived from the Annual Consolidated Financial Statements. The item is presented in this Prospectus, because the Group believes it provides a measure for analysing the Group’s ability to generate cash. Free cash flow is not defined by the IFRS and should not be considered in isolation or as an alternative to net income.

The following table shows a reconciliation of free cash flow to the consolidated statement of cash flows.

Year ended 31 December (Amounts in millions of U.S. dollars) 2016 2015 2014 Net cash generated from operating activities 3,492 3,705 5,947 Net cash used in investing activities (1,901) (1,300) (1,222) Free cash flow 1,591 2,405 4,725

See “Presentation of Financial and Other Information”.

61 OPERATING AND FINANCIAL REVIEW

The following review of the Group’s financial condition and results of operations as of and for the years ended 31 December 2016, 2015 and 2014 includes forward-looking statements that involve risks and uncertainties. See “Risk Factors” and “Forward-Looking Statements” for a discussion of important factors that could cause the actual results to differ materially from the results described in the forward-looking statements contained in this Prospectus.

The selected consolidated financial information in this section has been derived from the Annual Consolidated Financial Statements. The following should be read in conjunction with the Annual Consolidated Financial Statements and the related notes included in this Prospectus. Investors should not rely solely on the information contained in this section.

Overview

The Group is the leading metals and mining company, the world’s largest producer of refined nickel and palladium and a major producer of platinum and copper. The Group’s production of nickel and palladium in 2016 represented 12% and 40%, respectively, of total global primary production of those metals according to Company estimates. The Company is the world’s largest producer of platinum outside South Africa and a major copper producer according to Company estimates. In addition, the Group produces various other joint products such as cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium and sulphur. The Group’s principal mining and metallurgical facilities are located in Russia and Finland, and it has sales and distribution offices in all key markets, such as Europe, Asia and North America. In 2016, the Group’s total revenue amounted to U.S.$8,259 million with EBITDA of U.S.$3,899 million and EBITDA margin of 47.2% (total revenue of U.S.$8,542 million, EBITDA of U.S.$4,296 million and EBITDA margin of 50.3% in 2015). In 2016, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 77.2%, 97.3%, 97.6% and 96.6% of total Group production of those metals, respectively. The Group’s principal operations in Russia comprise its Polar Division, which is located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. Its activities include mining at three sulphide copper and nickel ore deposits and enrichment and smelting of ores. Since the Taimyr Peninsula is not connected to Russia’s rail and road network or national electricity grid, the Group operates various transportation and energy generation infrastructure which service and supply the Polar Division, as well as industrial and residential customers in that region. In addition to its main Polar Division operations, the Group operates through its subsidiary JSC Kola “GMK” in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts underground and open pit mining operations at four deposits containing sulphide copper and nickel ores and operates an enrichment plant and refinery.

The Group also currently operates a nickel refinery in Finland operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of 66,000 tonnes of refined nickel products. Since the approval of its current strategy focusing on Tier I assets (see “Business – Strategy”), the Group has disposed of almost all of its production assets in Australia and Africa, except for a 50% participation interest in the Nkomati Nickel Mine in Africa (which was expected to be sold during the second quarter of 2015, but the actual sale was delayed due to voluntary liquidation of the purchaser commenced in October 2016) and the Honeymoon Well deposit in Australia. In addition, the Company conducted a strategic review of the Group’s asset portfolio which identified a number of undercapitalised ”legacy assets” that do not meet the Tier I criteria but have been historically owned and operated by the Group. These assets include Southern Cluster “tail assets” in the Polar division (the outdated Norilsk Enrichment Plant, as well as two assets with declining production – the Zapolyarny mine and the Medvezhy Ruchey open pit), upstream gas assets and certain non-core transportation assets.

62 In 2016, the Group (excluding metals produced by Nkomati Nickel Mine) sold 271 thousand tonnes of nickel, 374 thousand tonnes of copper, 2,779 thousand troy ounces of palladium and 669 thousand troy ounces of platinum, as compared with 240 thousand tonnes of nickel, 343 thousand tonnes of copper, 2,464 thousand troy ounces of palladium and 590 thousand ounces of platinum in 2015. In 2016, nickel, copper, palladium and platinum accounted for 34%, 24%, 25% and 9%, respectively, of total metal sales revenues of the Group.

Principal Factors Affecting the Group’s Business

Principal factors affecting the Group’s results of operations during the periods under review (and those which are expected to affect the Group’s results of operations in the future) are: changes in commodity prices, particularly the price of nickel; factors affecting the cost of labour and the raw materials that the Group requires for its operations; and movements in exchange rates. In the periods under review, the Group’s results have also been affected by the disposal of subsidiaries.

Commodity prices

The Group derives substantially all its revenues from the sale of metals, primarily nickel, PGMs and copper. Nickel is the single largest component of metals sales revenue, comprising 34%, 38% and 43% of total metal sales revenue in 2016, 2015 and 2014, respectively. The Group generally sells its products by reference to market prices, including through sales under long-term contracts. Consequently, the price of commodities is the most important factor influencing the Group’s results of operations. Commodity prices are significantly affected by changes in global economic conditions and related industry cycles. Prices of commodity products, including the nickel, copper, palladium and platinum produced by the Group, can vary significantly in response to fluctuations in worldwide supply and demand, as well as various other factors including general economic conditions and speculative activities. The demand and price for metals is also influenced by the availability and price of secondary metal or metal containing scrap materials, and the availability and price of substitute commodity products. The global economic downturn which began in 2008 has had an extensive adverse impact on the global commodities markets, resulting in significant price volatility, and the effects of the downturn continued to some degree into the periods under review. Most recently, negative economic developments in China and in the Eurozone, including the continuing Greek debt crisis, pushed commodity prices to their lowest in 6 years.

The following table sets out indicative average market prices in U.S. dollars for nickel, copper, palladium and platinum over the periods indicated:

Year ended 31 December 2016 2015 2014 Nickel (U.S. dollar per tonne) 9,609 11,807 16,867 Copper (U.S. dollar per tonne) 4,863 5,494 6,862 Palladium (U.S. dollar per troy ounce) 613 691 803 Platinum (U.S. dollar per troy ounce) 989 1,053 1,385

Source: LME (nickel and copper); LPPM (palladium and platinum) Although signs of recovery emerged in the second quarter of 2009 and gained momentum through 2010 and 2011 as fiscal stimulus packages were introduced in most major economies in 2011, commodity prices began to decrease in the second half of 2011 and into 2012 and 2013 as a result of weakening macroeconomic conditions. Between December 2013 and May 2014, the nickel market experienced steady price growth due to expectations surrounding a positive effect from the ban imposed on nickel ore exports from Indonesia. During that period, the price of nickel increased from a minimum level of U.S.$13,445 per tonne to a maximum value of 2014 at U.S.$21,200 per tonne. The price trend reversed during the second half of 2014 due to fundamental weakness in the nickel market, as well significant investment outflow from commodities, and the nickel price continued to decrease

63 in the first half of 2015, falling below U.S.$10,000 per tonne in August 2015, the lowest level since 2008. In the first quarter of 2016, the nickel price on LME reached its 12-year low of U.S.$7,710 per tonne, but then recovered strongly towards the year end reaching U.S.$11,700 per tonne in November 2016. The average price of nickel (LME) was U.S.$9,609 per tonne in 2016, as compared with U.S.$11,807 per tonne in 2015. The copper price has also generally declined in 2016, following a decrease in oil prices, with which copper prices have traditionally had a high correlation. The average price of copper (LME) was U.S.$4,863 per tonne in 2016, as compared with U.S.$5,494 per tonne in 2015. The Group’s metal sales revenue in 2016 decreased by 3%, as compared with 2015, largely as a result of fluctuations in the price of nickel and other metals. The pricing environment in 2017 may be affected by changes in regulation of mining activities in Indonesia and Philippines. See “— Volatility of metal prices may materially adversely affect the Group’s financial condition and results of operations”.

Production costs and efficiency

The Group, in common with other producers of base and precious metals, is dependent on market commodity prices, and its operating profits are therefore largely dependent upon its ability to control costs. The principal costs associated with mining and metal production include labour costs, costs of raw materials and consumables, transportation and energy. In the periods under review, the Group gradually decreased its cash operating costs primarily as a result of the rouble depreciation against the U.S. dollar and various cost optimization initiatives. Labour costs comprise one of the single largest components of the Group’s cash operating costs, representing approximately 39% in 2016 and 38% in 2015. Approximately 98% of the Group’s workforce is based in Russia. After a 26% decrease in 2015 resulting primarily from depreciation of the rouble, labour costs increased by 1% in 2016 primarily due to indexation of rouble-denominated salaries and wages and the headcount increase, which was almost compensated by the effect of RUB depreciation. Production costs are also influenced by variation in ore grades and processing technology, as well as the impact of exchange rate fluctuations. See “—Currency exchange fluctuations”. The Group has achieved a substantial degree of vertical integration of energy supplies and transportation in its Polar Division, which insulates it to some extent from rising transportation and energy costs.

Currency exchange fluctuations

The functional currency of the Company and some of its non-Russian subsidiaries is the rouble, while the Group uses the U.S. dollar as the reporting currency in its consolidated financial statements in accordance with common practice among global mining companies. The Group generates a substantial majority of its revenues from sales to customers outside of Russia, while its largest production units are located in Russia. In 2016 and 2015, for example, the Group generated 90% and 94%, respectively, of its metal sales revenue from sales outside of Russia while sales of nickel, copper, palladium and platinum produced at the Group’s Russian operations represented substantially all of the Group’s total volume of sales (excluding Nkomati Nickel Mine) of those metals in those periods (representing 34%, 24%, 25% and 9%, respectively, in 2016 and 38%, 24%, 23% and 8%, respectively, in 2015). Consequently, the Group is exposed to currency exchange rate fluctuations, particularly between the U.S. dollar, in which its products are typically priced, and the rouble, in which it incurs many of its cash operating costs, including labour. In 2014, the rouble depreciated significantly relative to the U.S. dollar as a result of economic pressures in Russia following declines in oil prices and Ukraine-related sanctions, from 32.73 roubles per U.S. dollar as of 31 December 2013 to 56.26 rouble per U.S. dollar as of 31 December 2014. In 2015, the rouble further decreased and was 72.88 as of 31 December 2015. The rouble has subsequently strengthened, and was 60.66 roubles per U.S. dollar as of 31 December 2016. The table below shows the average exchange rate of the rouble against the U.S. dollar for the periods indicated.

64 Year ended 31 December 2016 2015 2014 Average exchange rate (roubles per U.S. dollar) 67.03 60.96 38.42 Source: CBR See “— Quantitative and Qualitative Disclosures about Market Risk — Foreign currency exchange rate risk”.

Seasonality

Seasonal effects have a relatively limited impact on the Group’s results, and the prices of most of the Group’s raw materials are not subject to seasonal variations. The Group’s costs of transporting, unloading and storing raw materials and products in the winter months are generally higher. In particular, the Group’s Polar Division is reliant on sea transportation by the Group’s fleet of reinforced ice class vessels in the period from October to mid-June, in which river transportation on the Yenisei River is unavailable. Furthermore, the working capital requirements of the Group’s operations at its Polar Division increase as a result of the stock-piling of inventories prior to the seasonal interruption of the operations of the Dudinka Sea Port in late May and the first part of June as a result of flooding of the quays. In addition, consumption of energy during the winter months is higher than during the rest of the year.

Disposals and holdings

As part of its strategy to dispose non-core assets, in the periods under review, the Group has completed or is in process of the disposal of the following significant entities.

Disposal of Western Australian assets

On 7 May 2014, the Group sold goldfields assets in Western Australia held by North Eastern Goldfields Operations, a subsidiary of the Group, for a cash consideration of U.S.$19 million. The carrying value of assets including decommissioning obligations at the date of disposal was negative in the amount of U.S.$28 million. A gain on disposal in the amount of U.S.$47 million was recognised in the consolidated income statement. During the year ended 31 December 2016, the Group received deferred consideration in the amount of U.S.$2 million related to North Eastern Goldfields Operations (“NEGO”). During the year ended 31 December 2016, the Group sold certain royalty rights related to previously disposed assets in Western Australia, for U.S.$7 million. On 12 November 2014, the Group sold the Lake Johnston Nickel Project in Western Australia held by Lake Johnston Pty Ltd and Lake Johnston Operations Pty Ltd, subsidiaries of the Group. A gain on disposal in the amount of U.S.$81 million, primarily due to write down of decommissioning obligations was recognised in the consolidated income statement. On 17 December 2014, the Group sold the nickel assets Avalon and Cawse (“A&C”) in Western Australia held by Norilsk Nickel Avalon Pty Ltd and Norilsk Nickel Cawse, subsidiaries of the Group. A gain on disposal in the amount of U.S.$158 million, primarily due to write down of decommissioning obligations was recognised in the consolidated income statement. On 27 March 2015, the Group sold its nickel assets Black Swan and Silver Swan in Western Australia held by MPI Nickel Pty Ltd and Black Swan Nickel Pty Ltd, subsidiaries of the Group. The Group recognised the disposal of assets in the consolidated financial statements for the year ended 31 December 2014. A gain on disposal in the amount of U.S.$48 million, primarily due to write down of decommissioning obligations, was recognised in the consolidated income statement.

65 Disposal of African assets

Disposal of Russian assets

On 29 November 2016, the Group sold its 74.8% share in OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian Federation, for a consideration of U.S.$7 million. The carrying value of net assets at the date of disposal amounted to U.S.$8 million. Loss on disposal in the amount of U.S.$1 million was recognised in the Group’s consolidated income statements. On 15 April 2016, the Group sold its air company assets comprising a 96.8% share in CJSC “Nordavia – Regional Airlines” (“Nordavia”), a subsidiary of the Group located in the Russian Federation and related to Nordavia aircrafts and infrastructure, for a consideration of U.S.$10 million. The carrying value of net assets at the date of disposal amounted to U.S.$14 million. Loss on disposal in the amount of U.S.$4 million was recognised in the Group’s consolidated income statements.

Other transactions

During the year ended 31 December 2015, the Group sold its 12.35% stake in PJSC Inter RAO for the total consideration in the amount of U.S.$204 million. Gain on disposal in the amount of U.S.$75 million was recognised in the consolidated income statement. In July 2016, the Group sold a 10.67% stake in Bystrinsky project to a Chinese investor Highland Fund. On 12 May 2017, Highland Fund increased its stake in Bystrinsky project to 13.33%. In January 2017, the Board of Directors of the Company approved the sale of up to 39.32% interest in the Bystrinsky project to CIS Natural Resources Fund, a Russia-focused natural resources fund, where all limited partnership interests are held, directly or indirectly, by Olderfrey and ESN Group. Subject to compliance with various conditions and receipt of regulatory approvals, the transaction is expected to be completed during 2017. Upon completion of the transaction the Company will retain a greater- than 50% interest in the Bystrinsky project and remain the operator of the project. In March 2017, the time for exercising a right of first refusal in respect of the 39.32% interest in the Bystrinsky project granted to Highland Fund expired. During the year ended 31 December 2016, the Group sold 1,250,075 treasury shares to Crispian Investments Limited, a noncontrolling shareholder, for a cash consideration in the amount of U.S.$158 million. Barclays Bank PLC, acting through its investment bank, provided a fairness opinion to the Audit Committee and the Board of Directors of the Company in connection with the sale of 1,250,075 ordinary shares in the Company to Crispian Investments Limited.

66 In November 2016, the Company signed an engineering, procurement and construction contract on development of sulphur dioxide capture project for Nadezhda Metallurgical Plant with SNC-Lavalin, an engineering company, with a total consideration of approximately U.S.$1.7 billion (exclusive of Russian value added tax). The project targets a significant reduction of sulphur dioxide emissions at Nadezhda Metallurgical Plant through implementation of efficient technical solutions. In December 2016, the Company entered into a contract for the purchase of 1.5 million tonnes of copper concentrate from the Russia state-controlled corporation, Rostec, for approximately 67.5 billion roubles.

Recent Developments

On 28 April 2017, the Board of Directors of the Company resolved to call the annual general meeting of shareholders of the Company on 9 June 2017. The annual general meeting of shareholders of the Company will consider, among other things, distribution of a dividend for the year ended 31 December 2016 in the aggregate amount of RUB 70.6 billion (approximately U.S.$1.2 billion), adoption of a new version of the Company’s charter in order to bring it in compliance with recent legislative developments and election of the Company’s Board of Directors members. On 14 April 2017, the Group entered into an agreement for the reconstruction of one of the Group’s thermal power plants for a total consideration of approximately RUB 18.9 billion. See “—Other Operations – Energy”

Consolidated Financial Results Overview

Components of Revenues and Expenses

The following descriptions set forth the main components of the Group’s revenues and expenses: Revenue from metal sales The Group derives revenue from the sale of joint product metals, including nickel, copper, palladium, platinum, gold, rhodium, silver and cobalt. Revenue from metal sales represents the invoiced value for all joint product metal supplied to customers, net of value added tax. Metal sales revenue comprised 93%, 92% and 92% in the years ended 31 December 2016, 2015 and 2014, respectively. Other sales revenue Other sales revenue includes revenue from the sales to third parties of transportation and energy and utilities services. Energy and utilities services are provided by the Company’s subsidiaries JSC Kola “GMK” and AO NTEK. Cost of metal sales Cost of metal sales comprises:  cash operating costs, of which labour costs, purchases of metals for resale, raw materials and semi-products (refined metal, copper cake and nickel concentrate) and cost of materials and supplies have comprised the largest components in the periods under review;  depreciation and amortisation of operating assets; and  change in metal inventories. Costs of other sales Costs of other sales mainly comprises cost of sales of transportation and energy and utilities services. Selling and distribution expenses Selling and distribution expenses include export customs duties, marketing, transportation expenses and staff costs. In 2016, 2015 and 2014, export customs duties comprised U.S.$61 million, U.S.$78 million and U.S.$173 million, respectively, representing 66%, 60% and 61% of total selling and

67 distribution expenses for those respective periods. Since July 2012, export duties have been levied at a flat rate of 5% for nickel and 10% for refined copper, replacing a sliding scale of duties which was based on the respective LME price and exempted duty if the price fell below a prescribed threshold. In August 2014, the Russian Government eliminated export customs duties for nickel and unrefined copper. From June 2015, PGM alloys and salts have been levied at a rate of 6.5%. In September 2016, as part of the Russian Federation WTO accession package, PGM customs duties were eliminated. General and administrative expenses General and administrative expenses include staff costs, taxes other than mineral extraction tax and income tax, third party services (including consulting and other professional services), depreciation and amortisation, rent, transportation and other expenses. Other net operating expenses Other net operating expenses include social expenses, change in provision for reconfiguration of production facilities, change in allowance for doubtful debts, change in allowance for obsolete and slow-moving inventory, change in allowance for value added tax recoverable and other expenses.

Finance costs

Finance costs include interest expense on borrowings net of amounts capitalised and unwinding of discount on provisions.

Taxation The principal liability of the Group, as shown in the consolidated financial statements for the periods under review, consists of income taxes of the Russian Federation, as well as income taxes of the Company’s subsidiaries in Australia, Botswana, Finland, Switzerland and Cyprus. The Group recently sold its subsidiaries in Botswana and most of subsidiaries in Australia. See “—Principal Factors Affecting the Group’s Business – Disposals and holdings”. The charge for taxation is based on the taxable profit for each period and takes account of deferred tax attributable to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Profit for the period Profit for the period is profit from continuing operations.

Results of Operations for the Years ended 31 December 2016 and 2015

The following table sets forth a summary of the Group’s consolidated financial results for the years ended 31 December 2016 and 2015.

68 Year ended 31 December 2016 2015 Change (%) (Amounts in millions of U.S. dollars) Revenue Metal sales 7,646 7,883 (3) Other sales 613 659 (7) Total revenue 8,259 8,542 (3) Cost of metal sales (3,651) (3,165) 15 Cost of other sales (508) (616) (18) Gross profit 4,100 4,761 (14) General and administrative expenses (581) (554) 5 Selling and distribution expenses (93) (129) (28) Impairment of non-financial assets (61) (284) (79) Other net operating expenses (84) (288) (71) Operating profit 3,281 3,506 (6) Foreign exchange gain/ (loss), net 485 (865) (156) Finance costs (453) (326) 39 Impairment of available for sale investments including impairment losses reclassified from other comprehensive income (153) – (100) (Loss)/gain from disposal of subsidiaries and assets classified as held for sale (4) (302) (99) Income from investments, net 114 215 (47) Share of profit of associates 6 16 (63) Profit before tax 3,276 2,244 46 Income tax expense (745) (528) 41 Profit for the year 2,531 1,716 47 Shareholders of the parent company 2,536 1,734 46 Non-controlling interest (5) (18) (72)

Revenue

In 2016, total revenue decreased by U.S.$283 million, or 3%, to U.S.$8,259 million from U.S.$8,542 million in 2015. The decrease was primarily attributable to lower realised prices, as more fully described below.

Revenue from metal sales

In 2016, revenue from metal sales decreased by U.S.$237 million, or 3%, to U.S.$7,646 million from U.S.$7,883 million in 2015. The decrease was primarily attributable to lower realised prices of the Group’s metal products partly offset by the higher volume of sales from metal stock accumulated in the fourth quarter of 2015. The table below shows a breakdown of revenue from metal sales for the periods indicated.

69 Year ended 31 December 2016 2015 Change (%) (Amounts in millions of U.S. dollars) Nickel 2,625 3,010 (13) Copper 1,839 1,916 (4) Palladium 1,888 1,807 4 Platinum 654 631 4 Semi-products 216 193 12 Other metals 424 326 30 Total 7,646 7,883 (3) In 2016, revenue from sales of nickel, copper, palladium and platinum decreased U.S.$358 million, or 5%, to U.S.$7,006 million from U.S.$7,364 million in 2015. Revenue from sales of semi-products (copper cake and nickel concentrate) increased by U.S.$23 million, or 12%, to U.S.$216 million from U.S.$193 million in 2015. Revenue from sales of other metals increased by U.S.$98 million, or 30%, to U.S.$424 million from U.S.$326 million in 2015. The table below shows the average sales price of nickel, copper, palladium and platinum produced by the Group’s Russian entities from its own feed in the periods indicated. Year ended 31 December 2016 2015 Change (%)

Nickel (U.S.$ per tonne) 9,720 11,962 (19) Copper (U.S.$ per tonne) 4,912 5,585 (12) Palladium (U.S.$ per troy ounce) 614 695 (12) Platinum (U.S.$ per troy ounce) 977 1,057 (8) The table below shows for the periods indicated the volume of sales of nickel, copper, palladium and platinum of Group (presented on the basis of 100% ownership of subsidiaries and excluding sales of metals purchased from third parties).

70 Year ended 31 December Change 2016 2015 (%) Finished products Russian entities and Finland Nickel (thousand tonnes), comprising 271 240 13 Russian entities (thousand tonnes) 218 197 11 Finland (thousand tonnes) 53 43 23 Copper (thousand tonnes) 374 343 9 Palladium (thousand troy ounces) 2,779 2,464 13 Platinum (thousand troy ounces) 669 590 13

Semi-products Finland Copper cake, copper, thousand tonnes(1) 10 13 (23) Botswana Nickel concentrate, nickel, thousand tonnes(1) – 1 (100) Nickel concentrate, copper, thousand tonnes(1) – 1 (100) South Africa Nickel concentrate, nickel, thousand tonnes(1) 13 4 225 Nickel concentrate, copper, thousand tonnes(1) 5 2 150

Total Group Nickel (thousand tonnes) 271 240 13 Copper (thousand tonnes) 374 343 9 Palladium (thousand troy ounces) 2,779 2,464 13 Platinum (thousand troy ounces) 669 590 13 Semi-products, nickel, thousand tonnes(1) 13 5 160 Semi-products, copper, thousand tonnes(1) 15 16 (6)

(1) Metal volumes are given in respect of metals contained in semi-products.

Nickel

Revenue from nickel sales comprised 34% of total revenue from metal sales of the Group in 2016, as compared with 38% in 2015. Revenue from nickel sales decreased by U.S.$385 million, or 13%, to U.S.$2,625 million from U.S.$3,010 million in 2015. The decrease was mainly attributable to a decrease of 19% in the average sales price for nickel sold by the Russian entities of the Group to U.S.$9,720 per tonne from U.S.$11,962 per tonne in 2015 which was partly offset by higher sales volumes of nickel produced from own feed. In 2016, the total volume of sales of nickel produced by the Group’s Russian entities from its own feedstock increased by 10% to 215 thousand tonnes. The increase in sales volume was primarily driven by the sale of metal from a temporary stock accumulated by the Group in the fourth quarter of 2015. The total volume of sales of nickel produced at Norilsk Nickel Harjavalta increased in 2016 by 23% to 53 thousand tonnes, as compared with 43 thousand tonnes in 2015, as Norilsk Nickel Harjavalta started to process the Company’s own Russian feed in line with downstream reconfiguration. The sales volume of purchased semi-products produced by the Group’s foreign entities increased by 1 thousand tonnes in 2016 to 3 thousand tonnes, as compared with 2 thousand tonnes in 2015.

Copper

Revenue from copper sales comprised 24% of total revenue from metal sales of the Group in 2016, unchanged as compared with 24% in 2015.

71 Revenue from copper sales decreased in 2016 by U.S.$77 million, or 4%, to U.S.$1,839 million from U.S.$1,916 million in 2015. The decrease was mainly attributable to a decrease of 12% in 2016 in the average sales price for copper sold by the Group’s Russian entities to U.S.$4,912 per tonne in 2016 from U.S.$5,585 per tonne in 2015, which was partly offset by higher sales volume of copper produced from own feed. In 2016, the volume of sales of copper produced by the Group Russian entities increased by 31 thousand tonnes, or 9%, to 374 thousand tonnes from 343 thousand tonnes in 2015 due to sale of metal from the temporary stock, which was built up in the fourth quarter 2015. In 2016, the total volume of sales of copper produced by the Group’s Russian entities from its own feedstock increased by 9% to 369 thousand tonnes. The sales volume of tolling metal increased from 2 to 5 thousand tonnes.

Palladium

Revenue from palladium sales comprised 25% of total revenue from metal sales of the Group in 2016, as compared with 23% in 2015. Revenue from palladium sales increased in 2016 by U.S.$81 million, or 4%, to U.S.$1,888 million from U.S.$1,807 million in 2015. The negative impact of lower realised price was partly offset by the increased sales volumes and additional revenue in from higher re-sale of metal purchased in the open market. In 2016, the total volume of sales of palladium produced by the Group’s Russian entities from its own feedstock increased by 13% to 2,758 thousand ounces. The sales volume of palladium from third party feedstock decreased by 38% from 34 to 21 thousand ounces.

Platinum

Revenue from platinum sales comprised 9% of total revenue from metal sales of the Group in 2016, as compared with 8% in 2015. In 2016, revenue from platinum sales increased by U.S.$23 million, or 4%, to U.S.$654 million from U.S.$631 million in 2015. The increase in revenue from platinum sales was primarily attributable to increased sales volumes, which was partly negatively offset by both lower realised platinum prices and lower re-sale of platinum purchased from third parties to meet contractual obligations. In 2016, the total volume of sales of platinum produced by the Group’s Russian entities from its own feedstock increased by 15% to 661 thousand ounces. The sales volume of platinum from third party feedstock decreased by 43% from 14 to 8 thousand ounces.

Semi-products

In 2016, semi-products revenue increased by U.S.$23 million, or 12%, to U.S.$216 million, and accounted for 3% of the Group’s total metal revenue. The increase was mainly driven by higher physical sales to third parties instead of intragroup sales for further processing.

Other metals

Revenue from sales of other metals increased to 5% of metal sales of the Group in 2016 from 4% in 2015. In 2016, revenue from sales of other metals increased by U.S.$98 million, or 30%, to U.S.$424 million from U.S.$326 million in 2015, driven by higher sales volumes owing to stock sales (U.S.$103 million), which was partly offset by lower realised prices (down by U.S.$5 million).

72 Other sales

In 2016, other sales revenue decreased by U.S.$46 million, or 7%, to U.S.$613 million from U.S.$659 million in 2015, primarily due to the Russian rouble depreciation against the U.S. dollar (negative effect of U.S.$51 million) and divestiture of non-core assets (negative effect of U.S.$73 million), which was partly positively offset by the increase of prices of services provided to third parties (positive effect of U.S.$16 million). In addition, other sales increased in real terms by U.S.$62 million primarily as a result of higher revenue from the Company’s transport subsidiaries.

Cost of Metal Sales

Cost of metal sales increased in 2016 by U.S.$486 million, or 15%, to U.S.$3,651 million from U.S.$3,165 million in 2015. The increase was primarily attributable to:  a reduction of cash operating costs by 3% (U.S.$92 million);  a decrease in depreciation charges by 4% (U.S.$20 million); and  a change in metal inventories year-on-year (cost increase by U.S.$598 million) due to the sale of temporary metal stock. The table below shows a breakdown of cost of metal sales for the periods indicated.

Year ended 31 December 2016 Year ended 31 December 2015 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Total cash operating costs 2,905 86 2,997 86 Depreciation and amortisation 456 14 476 14 Total production costs 3,361 100 3,473 100 Decrease in metal inventories 290 (308) Cost of metal sales 3,651 3,165

Cash operating costs

In 2016, cash operating costs of the Group decreased by U.S.$92 million, or 3%, to U.S.$2,905 million in 2016 from U.S.$2,997 million in 2015, primarily as a result of the Russian rouble depreciation against the U.S. Dollar (U.S.$175 million in terms of cost reduction). Inflationary growth of cash operating costs (U.S.$169 million) was partly offset by cost reduction due to the sale of foreign assets in 2015 (U.S.$27 million) and other factors (U.S.$59 million), including decreases of purchases of metals for resale, raw materials and semi-products. In 2016, 89% of the Group’s total cash operating costs were attributable to the operations of its Russian entities, as compared with 86% in 2015. The table below shows a breakdown of cash operating costs for the periods indicated. Year ended Year ended 31 December 2016 31 December 2015 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Labour 1,145 39 1,131 38 Purchases of metals for resale, raw materials and semi-products 555 19 718 24 Materials and supplies 520 18 459 15 Third party services 170 6 186 6

73 Mineral extraction tax and other levies 122 4 128 4 Electricity and heat energy 101 4 108 4 Transportation expenses 89 3 75 3 Fuel 60 2 66 2 Sundry costs 143 5 126 4 Total cash operating costs 2,905 100 2,997 100

Labour

In 2016, labour costs comprised 39% of total cash operating costs, as compared with 38% in 2015. In 2016, labour costs increased by U.S.$14 million, or 1%, to U.S.$1,145 million from U.S.$1,131 million in 2015, as a result of the following factors:  U.S.$97 million cost reduction due to the Russian rouble depreciation against the U.S. Dollar; and  U.S.$111 million costs increase driven by the indexation of rouble-denominated salaries and wages and the headcount increase primarily at JSC Kola “GMK” owing to the ongoing downstream reconfiguration program.

Metals for resale, raw materials and semi-product

In 2016, expenses on purchases of metals for resale, raw materials and semi-products comprised 19% of total cash operating costs, as compared with 24% in 2015. In 2016, expenses on purchases of metals for resale, raw materials and semi-products decreased by U.S.$163 million, or 23%, to U.S.$555 million in 2016 from U.S.$718 million in 2015, as a result of the following factors:  a decrease in purchased concentrates and matte, driven by lower metal prices (U.S.$45 million) and lower volume of semi-products purchased by Norilsk Nickel Harjavalta for further processing (U.S.$158 million) owing to increased processing of the Group’s own Russian feed;  an increase in the volume of semi-products purchased by NN Harjavalta (cost increase by U.S.$37 million) owing to the replacement of a tolling contract with Boliden AB (“Boliden”) with a sale and purchase agreement; and  an increase in expenses for metals purchased for re-sale to fulfil contractual obligations by U.S.$11 million.

Materials and supplies

In 2016, expenses on materials and supplies comprised 18% of total cash operating costs, as compared with 15% in 2015. In 2016, expenses on materials and supplies increased by U.S.$61 million, or 13%, to U.S.$520 million from U.S.$459 million in 2015, driven by:  the positive effect of the Russian rouble depreciation against the U.S. Dollar (cost reduction by U.S.$26 million); and  an increase in the cost of materials and supplies in real terms, which was driven by local- currency inflation (U.S.$38 million) and other factors (U.S.$49 million) owing to repairs of mining equipment, as well as the equipment at Nadezhda Metallurgical Plant and JSC Kola “GMK”.

74 Third party services

In 2016, third party services decreased by U.S.$16 million, or 9%, to U.S.$170 million from U.S.$186 million in 2015. The main reasons for the decrease included:  the positive effect of the Russian rouble depreciation against the U.S. Dollar (cost reduction by U.S.$13 million); and  other changes in third party services in real terms, which were driven by cash cost reductions due to the divestiture of Tati Nickel in April 2015 (U.S.$19 million); decreases in tolling expenses due to the replacement of a tolling contract with Boliden with a semi-products sale and purchase agreement at Norilsk Nickel Harjavalta (U.S.$10 million); an increase in other services, primarily due to inflation (U.S.$26 million).

Mineral extraction tax and other levies

In 2016, mineral extraction tax and other levies decreased by U.S.$6 million, or 5%, to U.S.$122 million from U.S.$128 million in 2015. The decrease was attributable to the positive effect of the Russian rouble depreciation against the U.S. Dollar, which amounted to a cost reduction of U.S.$11 million, and an increase in cash cost in real terms (U.S.$5 million) due to the higher cost of mined ore, partly offset by a decrease in pollution levies.

Electricity and heat energy

In 2016, expenses on electricity and heat energy decreased by U.S.$7 million, or 6%, to U.S.$101 million from U.S.$108 million in 2015. The decrease was attributable to the following factors:  the positive effect of the Russian rouble depreciation against the U.S. Dollar (cost reduction by U.S.$8 million); and  an increase in the cost of materials and supplies in real terms driven by increases in energy tariffs owing to domestic inflation (U.S.$4 million) and a decrease in expenses primarily due to the sale of Tati Nickel in April 2015 (U.S.$3 million).

Fuel

In 2016, fuel expenses decreased by U.S.$6 million, or 9%, to U.S.$60 million from U.S.$66 million in 2015. The decrease was primarily attributable to the Russian rouble depreciation against the U.S. Dollar.

Transportation expenses

In 2016, transportation expenses increased by U.S.$14 million, or 19%, to U.S.$89 million from U.S.$75 million in 2015, mainly due to increases in metal and semi-products shipment volumes.

Sundry costs

In 2016, sundry costs increased by U.S.$17 million, or 13%, to U.S.$143 million from U.S.$126 million in 2015. The increase was largely due to domestic inflation, which was partly compensated by the positive effect of the Russian rouble depreciation against the U.S. Dollar (cost reduction by U.S.$10 million).

Depreciation and amortisation

In 2016, depreciation and amortisation decreased by U.S.$20 million, or 4%, to U.S.$456 million from U.S.$476 million in 2015, as a result of the following factors:

75  the positive effect of Russian rouble depreciation against the U.S. Dollar (cost reduction by U.S.$40 million); and  an increase in depreciation charges in real terms (U.S.$20 million) mainly due to the additions of mining and refining assets in 2016, which was partly offset by a decrease in depreciation due to impairment of gas producing assets at the end of 2015.

Decrease/(increase) in metal inventories

The comparative effect of change in metal inventory amounted to U.S.$598 million in terms of an increase in cost of metal sales. This resulted mainly from the accumulation of metal in a temporary stock in 2015 and its consequent sale in 2016.

Cost of other sales

In 2016, cost of other sales decreased by U.S.$108 million, or 18%, to U.S.$508 million from U.S.$616 million in 2015, primarily as a result of the following factors:  the positive effect of the Russian rouble depreciation against the U.S. Dollar (U.S.$52 million in terms of cost reduction); and  a decrease in cost of other sales in real terms (by U.S.$56 million) driven by cost reduction (U.S.$65 million) due to the sale of non-core assets (primarily Nordavia); an increase in transportation companies expenditures owing to business expansion (U.S.$22 million); cost reduction due to other factors (U.S.$13 million).

Selling and distribution expenses

In 2016, selling and distribution expenses decreased by U.S.$36 million, or 28%, to U.S.$93 million from U.S.$129 million in 2015. The decrease resulted primarily from:  a decrease of export duties by 22% (or by U.S.$17 million) owing to the cancellation of PGM export duties in September 2016 as part of the Russian Federation WTO accession package; and  further cost reductions owing to the Russian rouble depreciation against the U.S. dollar (U.S.$6 million) and a decrease in marketing expenses driven by the reduced marketing campaigns in Asia and Europe (U.S.$8 million). The table below shows a breakdown of selling and distribution expenses for the periods indicated. Year ended 31 December 2016 2015 Change (%) (Amounts in millions of U.S. dollars) Export duties 61 78 (22) Staff costs 13 19 (32) Marketing expenses 7 15 (53) Transportation expenses 5 8 (38) Other 7 9 (22) Total 93 129 (28)

General and administrative expenses

In 2016, general and administrative expenses increased by U.S.$27 million, or 5%, to U.S.$581 million from U.S.$554 million in 2015, driven primarily by salary revisions in line with domestic inflation and higher property tax and property tax, which was up by 7%, or U.S.$4 million, owing to the increase of the property, plant and equipment balance. The table below shows a breakdown of general and administrative expenses for the periods indicated.

76 Year ended 31 December 2016 2015 Change (%) (Amounts in millions of U.S. dollars) Staff costs 376 352 7 Taxes other than mineral extraction tax and income tax 58 54 7 Third party services 55 55 - Depreciation and amortisation 20 19 5 Rent expenses 19 19 - Transportation expenses 6 4 50 Other 47 51 (8) Total 581 554 5

Impairment of non-financial assets

In 2016, impairment of non-financial assets amounted to U.S.$61 million, as compared with U.S.$284 million in 2015. The result in 2016 was largely attributable to impairment of property, plant and equipment of gas producing assets.

Other net operating expenses

In 2016, other net operating expenses decreased by U.S.$204 million, or 71%, to U.S.$84 million from U.S.$288 million in 2015. The decrease was driven by the change in the provision for reconfiguration of production facilities.

Foreign exchange gain/(loss), net

In 2016, foreign exchange gain was driven by the Russian rouble appreciation against the U.S. Dollar as at 31 December 2016 as compared with 31 December 2015. In 2015, foreign exchange loss was driven by the Russian rouble depreciation against the U.S. Dollar as at 31 December 2015 as compared with 31 December 2014.

Finance costs

In 2016, finance costs increased by U.S.$127 million, or 39%, to U.S.$453 million from U.S.$326 million in 2015. The table below shows a breakdown of finance costs for the periods indicated. Year ended 31 December 2016 2015 Change (%) (Amounts in millions of U.S. dollars) Interest expense on borrowings net of amounts capitalised 403 281 43 Unwinding of discount on provisions 46 44 5 Other 4 1 4x Total 453 326 39

Impairment of available for sale investments including impairment losses reclassified from other comprehensive income

During the year ended 31 December 2016, the Group fully impaired an interest in a related party which owns various real estate properties.

77 Income tax

In 2016, income tax expense increased by U.S.$217 million, or 41%, to U.S.$745 million, as compared with U.S.$528 million in 2015. The increase in income tax expense was primarily due to the comparative effect of the Russian rouble appreciation against the U.S. Dollar as of 31 December 2016 as compared with the Russian rouble depreciation as of 31 December 2015. This effect was partly offset by the decline of revenue. The Group’s effective tax rate in 2016 was 22.7%, as compared with 23.5% in 2015. The Group’s effective tax rate in 2016 was higher than the statutory tax rate of 20%, mainly due to non-deductible social expenses, impairment of financial and non-financial assets, write-offs and allowance for deferred tax assets. These factors were partly offset by the effect of varying tax rates applied on international subsidiaries of the Group.

Results of Operations for the Years ended 31 December 2015 and 2014

The following table sets forth a summary of the Group’s consolidated financial results for the years ended 31 December 2015 and 2014. Year ended 31 December 2015 2014 Change (%) (Amounts in millions of U.S. dollars) Revenue Metal sales 7,883 10,896 (28) Other sales 659 973 (32) Total revenue 8,542 11,869 (28) Cost of metal sales (3,165) (4,805) (34) Cost of other sales (616) (921) (33) Gross profit 4,761 6,143 (22) General and administrative expenses (554) (812) (32) Selling and distribution expenses (129) (283) (54) Impairment of property, plant and equipment (284) (130) 118 Other net operating expenses (288) (172) 67 Operating profit 3,506 4,746 (26) Finance costs (326) (179) 82 Impairment of available for sale investments including impairment losses reclassified from other comprehensive income – (244) (100) (Loss)/gain from disposal of subsidiaries and assets classified as held for sale (302) (213) 42 Income from investments, net 215 94 >100 Foreign exchange loss, net (865) (1,594) (46) Share of profit of associates 16 50 (68) Profit before tax 2,244 2,660 (16) Income tax expense (528) (660) (20) Profit for the year 1,716 2,000 (14) Shareholders of the parent company 1,734 2,003 (13) Non-controlling interest (18) (3) >100

78 Revenue

In 2015, total revenue decreased by U.S.$3,327 million, or 28%, to U.S.$8,542 million from U.S.$11,869 million in 2014. The decrease was primarily attributable to lower metal prices, the divestiture of international assets and one-off logistical and operational preparations for the shutdown of the nickel plant in Norilsk in 2016.

Revenue from metal sales

In 2015, revenue from metal sales decreased by U.S.$3,013 million, or 28%, to U.S.$7,883 million from U.S.$10,896 million in 2014. The decrease was primarily attributable to lower metal prices, the divestiture of international assets and one-off logistical and accumulation of temporary metal stock to smooth out the transition to the new configuration of smelting and refining capacities in 2016. The table below shows a breakdown of revenue from metal sales for the periods indicated. Year ended 31 December 2015 2014 Change (%) (Amounts in millions of U.S. dollars) Nickel 3,010 4,636 (35) Copper 1,916 2,468 (22) Palladium 1,807 2,221 (19) Platinum 631 869 (27) Semi-products 193 221 (13) Other metals 326 481 (32) Total 7,883 10,896 (28)

In 2015, revenue from sales of base metals (nickel and copper) decreased by U.S.$2,178 million, or 31%, to U.S.$4,926 million from U.S.$7,104 million in 2014, while revenue from platinum, palladium and other metals decreased by U.S.$807 million, or 23%, to U.S.$2,764 million from U.S.$3,571 million over the same period. Revenue from sales of semi-products (copper cake and nickel concentrate) decreased by U.S.$28 million, or 13%, to U.S.$193 million from U.S.$221 million in 2014. The table below shows the average sales price of nickel, copper, palladium and platinum produced by the Group’s Russian entities from their own feed in the periods indicated. Year ended 31 December 2015 2014 Change (%)

Nickel (U.S.$ per tonne) 11,962 17,072 (30) Copper (U.S.$ per tonne) 5,585 6,931 (19) Palladium (U.S.$ per troy ounce) 695 804 (14) Platinum (U.S.$ per troy ounce) 1,057 1,388 (24) The table below shows for the periods indicated the volume of sales of nickel, copper, palladium and platinum of the Group (presented on the basis of 100% ownership of subsidiaries and excluding sales of metals purchased from third parties).

79 Year ended 31 December Change 2015 2014 (%) Finished products Russian entities and Finland Nickel (thousand tonnes), comprising 240 270 (11) Russian entities (thousand tonnes) 197 228 (14) Finland (thousand tonnes) 43 42 2 Copper (thousand tonnes) 343 356 (4) Palladium (thousand troy ounces) 2,464 2,667 (8) Platinum (thousand troy ounces) 590 629 (6) Semi-products Finland Copper (thousand tonnes)(1) 13 11 18 Botswana Nickel (thousand tonnes)(1) 1 3 (67) Copper (thousand tonnes)(1) 1 2 (50)

South Africa Nickel concentrate, nickel, thousand tonnes(1) 4 - 100 Nickel concentrate, copper, thousand tonnes(1) 2 - 100 Total Group, excluding South Africa Nickel (thousand tonnes) 240 270 (11) Copper (thousand tonnes) 343 356 (4) Palladium (thousand troy ounces) 2,464 2,667 (8) Platinum (thousand troy ounces) 590 629 (6) Semi-products, nickel, thousand tonnes(1) 5 3 67 Semi-products, copper, thousand tonnes(1) 16 13 23

(1) Metal volumes are given in respect of metals contained in semi-products.

Nickel

Revenue from nickel sales comprised 38% of total revenue from metal sales of the Group in 2015, as compared with 43% in 2014. Revenue from nickel sales decreased by U.S.$1,626 million, or 35%, to U.S.$3,010 million from U.S.$4,636 million in 2014. The decrease was mainly attributable to lower nickel prices (decrease by U.S.$1,325 million) and a decrease in nickel sales volumes (decrease by U.S.$372 million). Additional revenue of U.S.$71 million came from the sale of nickel purchased from third parties to meet contractual obligations with strategic customers. The average realised nickel price of metal produced in Russia from the Group’s own feed decreased by 30% as compared with 2014, from U.S.$17,072 per tonne to U.S.$11,962 per tonne. In 2015, the total volume of sales of nickel produced by the Group’s Russian entities from its own feedstock decreased by 12% to 195 thousand tonnes. The decrease in sales was driven by lower production (decrease by 3 thousand tonnes) and accumulation of temporary metal stock to smooth the transition to the new configuration of smelting and refining capacities in 2016 (the shutdown of the Norilsk Nickel Plant and increased shipments of nickel matte for processing to JSC Kola “GMK” and to Norilsk Nickel Harjavalta). The total volume of sales of nickel produced at Norilsk Nickel Harjavalta increased in 2015 by 2% to 43 thousand tonnes, as compared with 42 thousand tonnes in 2014, primarily as a result of a marginal increase in third party nickel concentrate processing under tolling arrangements and processing of Russian feed. The amount of nickel sales from purchased semi-products was down by 4 thousand tonnes following the reduction of low-margin tolling operations at JSC Kola “GMK”.

80 Copper

Revenue from copper sales comprised 24% of total revenue from metal sales of the Group in 2015, as compared with 23% in 2014. Revenue from copper sales decreased in 2015 by U.S.$552 million, or 22%, to U.S.$1,916 million from U.S.$2,468 million in 2014. The average realised copper price decreased by 19% as compared with 2014, from U.S.$6,931 per tonne to U.S.$5,585 per tonne. The physical volume of copper sales from Russian feed decreased by 7 thousand tonnes to 340 thousand tonnes in 2015, while copper production was up 2% that year. The decrease in sales volumes was driven primarily by the one-off allocation of saleable metal into metal reserves, created to smooth out the transition to the new configuration of smelting and refining capacities (shutdown of the Norilsk Nickel Plant, increased shipments of nickel matte for processing to JSC Kola “GMK” and to Norilsk Nickel Harjavalta in Finland) in 2016, which resulted in a one-off increase in work-in- progress in transit and lower output of saleable metals. Sales volume of tolling metal decreased by 67% from 9 thousand tonnes in 2014 to 3 thousand tonnes in 2015. This was primarily driven by a reduction of low-margin tolling operations at JSC Kola “GMK”.

Palladium

Revenue from palladium sales comprised 23% of total revenue from metal sales of the Group in 2015, as compared with 20% in 2014. Revenue from palladium sales decreased in 2015 by U.S.$414 million, or 19%, to U.S.$1,807 million from U.S.$2,221 million in 2014. This was driven by both the decrease in palladium sales volumes (by U.S.$141 million) and lower realised palladium price (by U.S.$289 million). An additional U.S.$95 million of palladium revenue in 2015 came from the re-sale of metal purchased in the open market to fulfil the Company’s contractual obligations as compared with U.S.$79 million in 2014. Sales of palladium produced in Russia decreased by 19% from U.S.$2,084 million to U.S.$1,691 million. The decline was driven by both lower realised palladium price (down 14%) from U.S.$804 per troy ounce in 2014 to U.S.$695 per troy ounce in 2015 and reduced sales volumes of palladium (down 6%) in 2015 primarily as a result of one-off allocation of saleable metal into metal reserves.

Platinum

Revenue from platinum sales comprised 8% of total revenue from metal sales of the Group in 2015 and in 2014. In 2015, revenue from platinum sales decreased by U.S.$238 million, or 27%, to U.S.$631 million from U.S.$869 million in 2014. The decrease in revenue from platinum sales was primarily attributable to a reduction of platinum sales volume (by U.S.$41 million) and the platinum price (by U.S.$205 million). In 2015, in order to fulfil its contractual obligations, the Company realised platinum purchased from third parties for consideration of U.S.$8 million. In 2015, revenue from platinum produced in Russia decreased by U.S.$218 million, or 26%, to U.S.$609 million from U.S.$827 million in 2014. The reduction was driven by a decline in the average realised platinum selling price from U.S.$1,388 per troy ounce in 2014 to U.S.$1,057 per troy ounce in 2015, as well as the one-off allocation of saleable metal into metals reserve.

Semi-products

In 2015, revenue from the sales of semi-products (copper cake and nickel concentrate) decreased by 13% (or U.S.$28 million) to U.S.$193 million, as compared with 2014, and accounted for 2% of the

81 Group’s total metal sales revenue. The decrease was mainly driven by lower realised prices and the divestiture of Tati Nickel.

Other metals

In 2015, revenue from sales of other metals remained unchanged at 4% of metal sales of the Group, as compared with 2014. In 2015, revenue from sales of other metals decreased by U.S.$155 million, or 32%, to U.S.$326 million from U.S.$481 million in 2014, largely as a result of decline in revenue from sales of gold, cobalt, rhodium and silver driven by lower physical volumes (U.S.$77 million) and lower realised prices (U.S.$78 million).

Other sales

In 2015, other sales decreased by U.S.$314 million, or 32%, to U.S.$659 million from U.S.$973 million in 2014, primarily as a result of the rouble depreciation against the U.S. dollar, as a major part of these operations were denominated in roubles. The decrease in other sales was additionally driven by lower sales in non-core operations, of which largest negative factor was a U.S.$36 million reduction in revenue from fuel and gas condensate sales on the back of lower market prices.

Cost of Metal Sales

Cost of metal sales decreased in 2015 by U.S.$1,640 million, or 34%, to U.S.$3,165 million from U.S.$4,805 million in 2014. The decrease was primarily attributable to a decrease of U.S.$1,070 million in cash operating costs, lower depreciation charges and the comparative effect of change in metal inventories (by U.S.$348 million). The table below shows a breakdown of cost of metal sales for the periods indicated.

Year ended 31 December 2015 Year ended 31 December 2014 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Total cash operating costs 2,997 86 4,067 85 Depreciation and amortisation 476 14 698 15 Total production costs 3,473 100 4,765 100 Decrease in metal inventories (308) 40 Cost of metal sales 3,165 4,805

Cash operating costs

In 2015, cash operating costs of the Group decreased by U.S.$1,070 million, or 26%, to U.S.$2,997 million in 2015 from U.S.$4,067 million in 2014, primarily as a result of the following factors:  the U.S.$1,109 million effect of the rouble depreciation against the U.S. dollar; and  a decrease of U.S.$111 million in the costs of metals for resale, raw materials and semi- products. These savings were negatively offset by an increase of U.S.$131 million in cash operation costs in local currency due to inflation and an increase of U.S.$19 million in other expenses. In 2015, 99% of the Group’s total cash operating costs were attributable to the operations of its Russian entities and Norilsk Nickel Harjavalta, as compared with 96% in 2014. The table below shows a breakdown of cash operating costs for the periods indicated.

82 Year ended Year ended 31 December 2015 31 December 2014 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Labour 1,131 38 1,536 38 Purchases of metals for resale, raw materials and semi-products 718 24 829 20 Materials and supplies 459 15 537 13 Third party services 186 6 403 10 Mineral extraction tax and other levies 128 4 194 5 Electricity and heat energy 108 4 191 5 Transportation expenses 75 3 87 2 Fuel 66 2 128 3 Sundry costs 126 4 162 4 Total cash operating costs 2,997 100 4,067 100

Labour

In 2015, the share of labour costs of total cash operating costs remained unchanged at 38%, as compared with 2014. In 2015, labour costs decreased by U.S.$405 million, or 26%, to U.S.$1,131 million from U.S.$1,536 million in 2014, as a result of a decrease of U.S.$559 million due to the rouble depreciation against the U.S. dollar. The decrease was partly offset by a U.S.$154 million increase due to the indexation of wages and salaries of production employees in Russia, as well as by the growth in headcount by 2%.

Metals for resale, raw materials and semi-product

In 2015, expenses on purchases of metals for resale, raw materials and semi-products comprised 24% of total cash operating costs, as compared with 20% in 2014. In 2015, expenses on purchases of metals for resale, raw materials and semi-products decreased by U.S.$111 million, or 13%, to U.S.$718 million in 2015 from U.S.$829 million in 2014, as a result of the following factors:  lower metal prices and changes in the structure of the purchased raw materials (reducing by U.S.$258 million);  higher volume of raw materials purchased from third parties for refining at Norilsk Nickel Harjavalta and BCL Limited (increase by U.S.$59 million); and  an increase of U.S.$88 million in metals purchased for resale driven by the allocation of saleable metal into metal reserves to smooth the transition to the new downstream configuration in 2016.

Materials and supplies

In 2015, expenses on materials and supplies comprised 15% of total cash operating costs, as compared with 13% in 2014. In 2015, expenses on materials and supplies decreased by U.S.$78 million, or 15%, to U.S.$459 million from U.S.$537 million in 2014, as a result of the following factors:  a decrease of U.S.$196 million due to rouble depreciation against the U.S. dollar; and  an increase of U.S.$118 million in cash costs at Russian operations, mainly due to the price inflation of U.S.$32 million and an increase in expenses related to the modernization of

83 Nadezhda Metallurgical Plant (purchases of spare parts for hydrometallurgy equipment), as well as purchases of spare parts for mining equipment.

Third party services

In 2015, third party services decreased by U.S.$217 million, or 54%, to U.S.$186 million from U.S.$403 million in 2014. The main reasons for the decrease included the following:  U.S.$110 million decrease due to the rouble depreciation against the U.S. dollar;  a decrease of U.S.$79 million due to divestiture of Tati Nickel in April 2015;  a decrease of U.S.$37 million in expenses related to tolling services following the termination of concentrate processing contract with Boliden on 1 July 2015; and  an increase of U.S.$9 million in expenses related to other services.

Mineral extraction tax and other levies

In 2015, mineral extraction tax and other levies decreased by U.S.$66 million, or 34%, to U.S.$128 million from U.S.$194 million in 2014. The decrease was largely attributable to the rouble depreciation against the U.S. dollar.

Electricity and heat energy

In 2015, expenses on electricity and heat energy decreased by U.S.$83 million, or 43%, to U.S.$108 million from U.S.$191 million in 2014. The decrease was primarily attributable to the effect of the rouble depreciation against the U.S. dollar.

Fuel

In 2015, fuel expenses decreased by U.S.$62 million, or 48%, to U.S.$66 million from U.S.$128 million in 2014. The decrease was primarily driven by the effect of the rouble depreciation against the U.S. dollar (a decrease of U.S.$46 million) and a U.S.$16 million decrease in fuel expense at Russian production assets, mainly due to the reduction in oil prices.

Transportation expenses

In 2015, transportation expenses decreased by U.S.$12 million, or 14%, to U.S.$75 million from U.S.$87 million in 2014, mainly due to the effect of the rouble depreciation against the U.S. dollar.

Sundry costs

In 2015, sundry costs decreased by U.S.$36 million, or 22%, to U.S.$126 million from U.S.$162 million in 2014. The decrease was largely due to the effect of the rouble depreciation against the U.S. dollar, as well as the general decrease in sundry costs in absolute terms.

Depreciation and amortisation

In 2015, depreciation and amortisation decreased by U.S.$222 million, or 32%, to U.S.$476 million from U.S.$698 million in 2014, as a result of the following factors:  a decrease of U.S.$253 million attributable to the rouble devaluation against the U.S. dollar; and  an increase of U.S.$29 million in depreciation charges mainly due to increased additions of mining assets in 2014-2015, which was partly offset by the sale of Tati Nickel in April 2015.

84 Change in metal inventories

Metal inventories held by the Group in 2015 increased by U.S.$308 million, primarily as a result of the following:  an increase of U.S.$297 million in refined metals owing to the one-off allocation of saleable metals into metal reserves to smooth the transition to the new configuration of smelting and refining capacities in 2016 (the shutdown of the Norilsk Nickel Plant and increased shipments of nickel matte for processing to JSC Kola “GMK” and Norilsk Nickel Harjavalta in Finland), which is expected to result in a on-off increase in work-in-progress transit and lower output of saleable metals; and  an increase of U.S.$11 million in work-in-progress materials.

Cost of other sales

In 2015, cost of other sales decreased by U.S.$305 million, or 33%, to U.S.$616 million from U.S.$921 million in 2014, primarily as a result of a U.S.$321 million decrease owing to the rouble depreciation against the U.S. dollar and a U.S.$16 million increase in costs, primarily due to the indexation of wages and salaries in Russia.

Selling and distribution expenses

In 2015, selling and distribution expenses decreased by U.S.$154 million, or 54%, to U.S.$129 million from U.S.$283 million in 2014, primarily as a result of the following factors:  a U.S.$18 million decrease due to the depreciation of the rouble against the U.S. dollar;  a U.S.$95 million decrease in export duties primarily driven by the cancellation of nickel and copper export duties in Russia from 21 August 2014; and  a U.S.$51 million decrease in marketing and advertising expenses due to cost reductions related to global marketing campaigns. The table below shows a breakdown of selling and distribution expenses for the periods indicated. Year ended 31 December 2015 2014 Change (%) (Amounts in millions of U.S. dollars) Export customs duties 78 173 (55) Labour 19 23 (17) Marketing 15 66 (77) Transportation expenses 8 15 (47) Other 9 6 50 Total 129 283 (54)

General and administrative expenses

In 2015, general and administrative expenses decreased by U.S.$258 million, or 32%, to U.S.$554 million from U.S.$812 million in 2014, primarily as a result of the rouble depreciation against the U.S. dollar. Labour costs decreased by U.S.$113 million, or 24%, to U.S.$352 million from U.S.$465 million in 2014, primarily as a result of the rouble depreciation against the U.S. dollar. Rental expenses increased by U.S.$9 million in 2015, primarily due to the relocation of the Company’s head office from its own premises to a leased building. Taxes other than mineral extraction and income tax decreased by U.S.$44 million in 2015, primarily as a result of the rouble depreciation against the U.S. dollar.

85 The table below shows a breakdown of general and administrative expenses for the periods indicated. Year ended 31 December 2015 2014 Change (%) (Amounts in millions of U.S. dollars) Labour 352 465 (24) Third party services 55 111 (50) Taxes other than those directly attributable to cost of goods sold and income taxes 54 98 (45) Depreciation and amortisation 19 27 (30) Rental expenses 19 10 90 Transportation expenses 4 16 (75) Other 51 85 (40) Total 554 812 (32)

Impairment of property, plant and equipment and intangible assets

In 2015, loss from impairment of property, plant and equipment amounted to U.S.$284 million, as compared with U.S.$130 million in 2014. The impairment in 2015 was largely attributable to specific individual assets, primarily construction-in-progress and related equipment for installation.

Other net operating expenses

In 2015, other net operating expenses increased by U.S.$116 million, or 67%, to U.S.$288 million from U.S.$172 million in 2014. The increase was primarily attributable to a change in provision for reconfiguration of production facilities, as well as by the increase in social expenses and partly compensated by the decrease of expenses related to a change in allowance for doubtful debts.

Finance costs

In 2015, finance costs increased by U.S.$147 million, or 82%, to U.S.$326 million from U.S.$179 million in 2014. The table below shows a breakdown of finance costs for the periods indicated. Year ended 31 December 2015 2014 Change (%) (Amounts in millions of U.S. dollars) Interest expense on borrowings net of amounts capitalised 281 135 108 Unwinding of discount on provisions 44 43 2 Other 1 1 - Total 326 179 (82) The increase in finance costs in 2015 was mostly driven by higher interest expense on borrowings net of amounts capitalised due to new borrowings made by the Company in 2014-2015.

Income tax

In 2015, income tax expense decreased by U.S.$132 million, or 20%, to U.S.$528 million, as compared with U.S.$660 million in 2014. The increase in income tax expense was primarily due to lower revenue, depreciation of the rouble against the U.S. dollar and accumulated taxable loss on investments in shares of PJSC Inter RAO. The Group’s effective tax rate in 2015 was 24%, as compared with 25% in 2014, which was higher than the statutory tax rate of 20% as a result of the

86 cumulative effect of different tax rates of subsidiaries operating in other jurisdictions. These effects were partly offset by the utilization of a previously unrecognised deferred tax asset.

87 Consolidated Statement of Financial Position

The tables below show the consolidated statement of financial position as of the dates indicated.

Change from 31 31 December % of % of December 2016 total 31 December 2015 total 2015 (%)

(Amounts in millions of U.S. dollars, except percentages) ASSETS Non-current assets Property, plant and equipment 9,006 55 6,392 48 41 Intangible assets 94 1 50 - 88 Investment property 93 1 83 1 12 Other financial assets 187 1 62 - 202 Other taxes receivable 2 - - - 100 Deferred tax assets 56 - 42 - 33 Other non-current assets 1,013 6 117 1 9x 10,451 64 6,746 50 55 Current assets Inventories 1,895 12 1,698 13 12 Trade and other receivables 170 1 167 1 2 Advances paid and prepaid expenses 68 - 55 - 24 Other financial assets 8 - 1 - 8x Income tax receivable 82 - 234 2 (65) Other taxes receivable 276 2 199 2 39 Cash and cash equivalents 3,301 20 4,054 30 (19) 5,800 35 6,408 48 (9) Assets classified as held for sale 206 1 217 2 (5) 6,006 36 6,625 50 (9) TOTAL ASSETS 16,457 100 13,371 100 23

EQUITY AND LIABILITIES Equity 3,896 24 2,261 17 72 Non-current liabilities Loans and borrowings 7,274 44 7,142 53 2 Provisions 435 3 357 3 22 Trade and other long-term payables 514 3 - 100 Deferred tax liabilities 303 2 205 2 48 Other long-term liabilities 59 - 30 - 97 8,585 52 7,734 58 11 Current liabilities Loans and borrowings 578 3 1,124 8 (49) Trade and other payables 1,610 10 1,008 8 59 Dividends payable 1,164 7 698 5 67 Employee benefit obligations 299 2 215 2 39 Derivative financial instruments - - 2 - (100) Provisions 183 1 205 1 (11) Income tax payable 2 - 5 - (60) Other taxes payable 138 1 95 1 45 3,974 24 3,352 25 19

88 Liabilities associated with assets classified as held for sale 2 - 24 - (92) 3,976 24 3,376 25 18 TOTAL LIABILITIES 12,561 76 11,110 83 13

TOTAL EQUITY AND LIABILITIES 16,457 100 13,371 100 23

Change from 31 31 December % of % of December 2015 total 31 December 2014 total 2014 (%) (Amounts in millions of U.S. dollars, except percentages) ASSETS Non-current assets Property, plant and equipment 6,392 48 7,011 53 (9) Intangible assets 50 - 43 - 16 Investment property 83 1 - - 100 Investments in associates - - 17 - (100) Other financial assets 62 - 204 2 (70) Other taxes receivable - - 6 - (100) Deferred tax assets 42 - 53 1 (21) Other non-current assets 117 1 130 1 (10) 6,746 50 7,464 57 (10) Current assets Inventories 1,698 13 1,726 13 (2) Trade and other receivables 167 1 275 2 (39) Advances paid and prepaid expenses 55 - 63 1 (13) Other financial assets 1 - 87 1 (99) Income tax receivable 234 2 127 1 84 Other taxes receivable 199 2 178 1 12 Cash and cash equivalents 4,054 30 2,793 21 45 6,408 48 5,249 40 22 Assets classified as held for sale 217 2 436 3 (50) 6,625 50 5,685 43 17 TOTAL ASSETS 13,371 100 13,149 100 2

EQUITY AND LIABILITIES Equity 2,261 17 4,793 36 (53) Non-current liabilities Loans and borrowings 7,142 53 5,678 43 26 Provisions 357 3 274 2 30 Deferred tax liabilities 205 2 216 2 (5) Other long-term liabilities 30 - 6 - 400 7,734 58 6,174 47 25 Current liabilities Loans and borrowings 1,124 8 652 5 72 Trade and other payables 1,008 8 908 7 11 Dividends payable 698 5 4 - 175х Employee benefit obligations 215 2 252 2 (15) Provisions 205 1 156 1 31 Derivative financial instruments 2 - 5 - (60)

89 Income tax payable 5 - 23 - (78) Other taxes payable 95 1 99 1 (4) 3,352 25 2,099 16 60 Liabilities associated with assets classified as held for sale 24 - 83 1 (71) 3,376 25 2,182 17 55 TOTAL LIABILITIES 11,110 83 8,356 64 33

TOTAL EQUITY AND LIABILITIES 13,371 100 13,149 100 2

Property, plant and equipment

As at 31 December 2016, property, plant and equipment amounted to U.S.$9,006 million, as compared with U.S.$6,392 million as at 31 December 2015. In 2016, the value of property, plant and equipment increased by U.S.$2,614 million, or 41%, primarily as a result of additions and the Russian rouble appreciation, partly compensated by the depreciation charge for 2016. As at 31 December 2015, property, plant and equipment amounted to U.S.$6,392 million, as compared with U.S.$7,011 million as at 31 December 2014. In 2016, the value of property, plant and equipment decreased by U.S.$619 million, or 9%, primarily as a result of the Russian rouble depreciation in 2015 supported by the depreciation charge for 2015, partly compensated by additions in 2015.

Other financial assets (current and non-current)

As at 31 December 2016, current and non-current other financial assets amounted to U.S.$195 million, as compared with U.S.$63 million as at 31 December 2015. The increase was largely attributable to loans given in 2016. As at 31 December 2015, current and non-current other financial assets amounted to U.S.$63 million, as compared with U.S.$291 million as at 31 December 2014. The decrease was largely attributable to an exit from non-core assets and a decrease in bank deposits.

Inventories

As at 31 December 2016, inventory balance amounted to U.S.$1,895 million, as compared with U.S.$1,698 million as at 31 December 2015. The increase by U.S.$197 million, or 12%, was primarily attributable to the effect of the Russian rouble appreciation in 2016, an increase in raw materials for future repairs, the purchase of copper concentrate from Rostec and a rise of CPU of work-in-progress and finished goods. These factors were partly compensated by the decrease of accumulated metal stock. As at 31 December 2015, inventory balance amounted to U.S.$1,698 million, as compared with U.S.$1,726 million as at 31 December 2014. The decrease by U.S.$28 million, or 2%, was primarily attributable to the Russian rouble depreciation in 2015, which was compensated by an accumulation of temporary metal stock and other factors.

Cash and cash equivalents

Cash and cash equivalents amounted to U.S.$3,301 million as at 31 December 2016, as compared with U.S.$4,054 million as at 31 December 2015 and U.S.$2,793 million as at 31 December 2014. See “—Liquidity and Capital Resources − Cash Flows”.

90 Equity

As at 31 December 2016, capital and reserves (equity) amounted to U.S.$3,896 million (including non-controlling interests in the amount of U.S.$74 million), as compared with U.S.$2,261 million (including non-controlling interests in the amount of U.S.$22 million) as at 31 December 2015, representing an increase of U.S.$1,635 million, or 72%. The increase in equity was primarily attributable to profit and other comprehensive income for 2016, partly compensated by the declaration of interim dividends for the nine months ended 30 September 2016. As at 31 December 2015, capital and reserves (equity) amounted to U.S.$2,261 million (including non-controlling interests in the amount of U.S.$22 million), as compared with U.S.$4,793 million (including non-controlling interests in the amount of U.S.$25 million) as at 31 December 2014, representing a decrease of U.S.$2,532 million, or 53%. The decrease in equity was primarily attributable to dividends declared for the nine months ended 30 September 2015 and the six months ended 30 June 2015 and for the year ended 31 December 2014, as well as by other comprehensive loss for 2015, which was partly compensated by profit in 2015.

Current and non-current loans and borrowings

Loans and borrowings amounted to U.S.$7,852 million as at 31 December 2016, as compared with U.S.$8,266 million as at 31 December 2015, representing a decrease of U.S.$414 million, or 5%. Total amounts of loans and borrowings as at 31 December 2016, comprised non-current loans and borrowings of U.S.$7,274 million (93% of the total) and current loans and borrowings of U.S.$578 million (7% of the total). Loans and borrowings amounted to U.S.$8,266 million as at 31 December 2015, as compared with U.S.$6,330 million as at 31 December 2014, representing an increase of U.S.$1,936 million, or 31%. Total amounts of loans and borrowings as at 31 December 2015, comprised non-current loans and borrowings of U.S.$7,142 million (86% of the total) and current loans and borrowings of U.S.$1,124 million (14% of the total).

Provisions

In the periods under review, provisions have comprised provisions for decommissioning obligations, social commitments, tax and other. Provisions (current and non-current) amounted to U.S.$618 million as at 31 December 2016, as compared with U.S.$562 million as at 31 December 2015. The increase of U.S.$56 million, or 10%, was primarily attributable to the Russian rouble appreciation in 2016 and unwinding of discount in provisions, partly compensated by settlements during 2016 and a change in estimations. Provisions (current and non-current) amounted to U.S.$562 million as at 31 December 2015, as compared with U.S.$430 million as at 31 December 2014. The increase of U.S.$132 million, or 31%, was primarily attributable to the Russian rouble depreciation in 2015, offset by provisions accrued in 2015, a change in estimations and unwinding of discount.

Liquidity and Capital Resources

Historically, the Group’s major source of cash has been cash provided by operating activities, and the Company expects that this will continue to be the Group’s principal source of cash in the future. As of 31 December 2016, the Group had cash and cash equivalents of U.S.$3,301 million and total current and non-current loans and borrowings of U.S.$7,852 million (as of 31 December 2015: U.S.$4,054 million and U.S.$8,266 million, respectively). See “— Liquidity”.

Capital requirements

The Group’s principal financing requirements have been, and will continue to be, to finance mining operations and exploration and the production of base and precious metals, and to fund capital

91 expenditures, including the purchase of equipment and modernisation of facilities, as well as acquisitions. The Company may also be allocating an increasing proportion of its funds to dividend payments. See “Risk Factors – Risks Associated with the Group’s Business and Industry – The Group will require a significant amount of funding to implement its capital investment programme, pay expected dividends and re-finance current borrowings”. Historically, funding of the Group’s capital requirements has come from cash flows from operating activities. The Company intends to continue to fund the Group’s capital expenditures primarily from these cash flows, as well as, if necessary, external sources of financing.

Capital expenditures

The Group’s business is heavily dependent on plant and machinery for mining and the production of metals. Investments to maintain, expand and increase the efficiency of production facilities are, accordingly, an important priority and have a significant effect on the Group’s cash flows and future results of operations. The Group’s capital investments (purchases of property, plant and equipment and intangible assets) in 2016 totalled U.S.$1,695 million, as compared with U.S.$1,654 million in 2015 and U.S.$1,298 million in 2014. See “Business − Capital Expenditure” for a summary of the principal investments in the periods under review.

Cash flows

The table below sets forth the Group’s summarised cash flows for the periods indicated:

Year ended 31 December Selected Cash Flow Statement Data 2016 2015 2014 (Amounts in millions of U.S. dollars unless otherwise indicated) Net cash generated from operating activities 3,492 3,705 5,947 Net cash used in investing activities (1,901) (1,300) (1,222) Net cash used in financing activities (2,399) (998) (2,979) Net increase/(decrease) in cash and cash equivalents (808) 1,407 1,746 Effect of foreign exchange differences of cash and cash equivalents 37 (113) (578) Cash and cash equivalents at the end of the period 3,301 4,054 2,793 In 2016, free cash flow decreased by 34% (or U.S.$814 million) to U.S.$1,591 million as a result of a decrease in operating cash flow by U.S.$213 million and an increase in investing cash flow by U.S.$601 million. In 2015, free cash flow decreased by 49% (or U.S.$2,320 million) to U.S.$2,405 million as a result of a decrease in operating cash flow by U.S.$2,242 million and an increase in investing cash flow U.S.$78 million.

Operating activities

Cash provided by operating activities primarily consists of profit before tax adjusted for certain non- cash items, including depreciation, amortisation and other items, and the effect of changes in working capital.

92 Movements in working capital are derived from the consolidated statement of cash flows and represents the cumulative effect from changes in inventories, trade and other receivables, advances paid and prepaid expenses, other taxes receivable, employee benefit obligations, trade and other payables, provisions and other taxes payable. In 2016, net cash generated from operating activities decreased by U.S.$213 million to U.S.$3,492 million, as compared with U.S.$3,705 million in 2015. The decrease was primarily due to the decline in EBITDA by U.S.$397 million and the effect of a decrease of working capital in 2016 as compared to respective increase in 2015 due to the realization of temporary metal stock accumulated in 2015. In 2015, net cash generated from operating activities decreased by U.S.$2,242 million to U.S.$3,705 million, as compared with U.S.$5,947 million in 2014. The decrease was primarily attributable to the accelerated reduction of working capital in 2014 in the amount of U.S.$1.0 billion as compared with a U.S.$112 million increase in working capital in 2015, and to decline in EBITDA by U.S.$1,385 million as a result of lower realised metal prices.

Investing activities

In 2016, net cash used in investing activities was U.S.$1,901 million, as compared with net cash used in investing activities of U.S.$1,300 million in 2015. The key changes in net cash used in investing activities in 2016 included the purchase of other financial assets, an increase in loans issued, a decrease of proceeds from the sale of financial assets and negative comparative dynamics in net change in deposits placed. In 2015, net cash used in investing activities was U.S.$1,300 million, as compared with net cash used in investing activities of U.S.$1,222 million in 2014. The key changes in net cash used in investing activities in 2015 included the effect of increased capital expenditures, compensated by an increased amount of proceeds from the sale of other financial assets and positive comparative dynamics in net change in deposits placed.

Financing activities

In 2016, net cash used in financing activities was U.S.$2,399 million, as compared with net cash used in financing activities of U.S.$998 million in 2015. The main factor which contributed to the increase in net cash in financing activities in 2016 was the increase of repayments and decrease of proceeds of loans and borrowings in 2016, partly compensated by the decrease in dividend payments. In 2015, net cash used in financing activities amounted to U.S.$998 million, as compared with net cash used in financing activities of U.S.$2,979 million in 2014. The decrease of cash used in financing activities in 2015 was driven by the decrease of repayments and an increase of proceeds of loans and borrowings in 2015, partly compensated by the decrease in dividend payments.

Liquidity

Historically, the Group has relied on cash from operating activities as the main source of liquidity. The Group had cash and cash equivalents of U.S.$3,301 million as of 31 December 2016 (U.S.$4,054 million as of 31 December 2015). This amount included:  current accounts in a total amount of U.S.$430 million, of which U.S.$372 million was held in U.S. dollars and other foreign currencies and U.S.$58 million was held in roubles;  bank deposits in a total amount of U.S.$2,858 million, of which U.S.$1,739 million was held in U.S. dollars and other foreign currencies and U.S.$1,119 million was held in roubles; and  other cash and cash equivalents of U.S.$13 million. On 16 December 2016, the extraordinary general meeting of shareholders of the Company declared interim dividends in respect of the nine months ended 30 September 2016 in the amount of RUB 444.25 (U.S.$7.21) per share with the total amount of U.S.$1,141 million. The dividends were paid to

93 the shareholders in January 2017 in the amount of U.S.$1,169 million using the prevailing RUB/USD exchange rates on the payments dates. On 10 June 2016, the annual general meeting of shareholders of the Company declared dividends for the year ended 31 December 2015 in the amount of RUB 230.14 (U.S.$3.61) per share with the total amount of U.S.$571 million (including U.S.$4 million in respect of treasury shares). The dividends were paid to the shareholders in July 2016 in the amount of U.S.$567 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payments dates. On 19 December 2015, the extraordinary general meeting of shareholders of the Company declared interim dividends in respect of the nine months ended 30 September 2015 in the amount of RUB 321.95 (U.S.$4.51) per share with the total amount of U.S.$714 million (including U.S.$6 million in respect of treasury shares). The dividends were paid to the shareholders in January 2016 in the amount of U.S.$665 million using prevailing RUB/USD rates on the payment dates. On 14 September 2015, the extraordinary general meeting of shareholders of the Company declared interim dividends in respect of the six months ended 30 June 2015 in the amount of RUB 305.07 (U.S.$4.49) per share with the total amount of U.S.$710 million (including U.S.$4 million in respect of treasury shares). The dividends were paid to the shareholders from September to December 2015 in the amount of U.S.$731 million, recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates. On 13 May 2015, the annual general meeting of shareholders of the Company declared dividends for the year ended 31 December 2014 in the amount of RUB 670.04 (U.S.$13.2) per share with the total amount of U.S.$2,083 million. The dividends were paid to the shareholders in May and June 2015 in the amount of U.S.$2,126 million recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates. On 11 December 2014, the extraordinary general meeting of shareholders of the Company declared interim dividends in respect of the nine months ended 30 September 2014 in the amount of RUB 762.34 (U.S.$14.05) per share with the total amount of U.S.$2,222 million. The dividends were paid to the shareholders in December 2014 in the amount of U.S.$2,135 million recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates. On 6 June 2014, the annual general meeting of shareholders of the Company declared dividends for the year ended 31 December 2013 in the amount of RUB 248.48 (U.S.$7.1) per share with the total amount of U.S.$1,127 million. The dividends were paid to the shareholders in June and July 2014 in the amount of U.S.$1,146 million recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates.

Borrowings

As of 31 December 2016, the Group had total current and non-current loans and borrowings of U.S.$7,852 million (U.S.$8,266 million as of 31 December 2015). The table below shows a breakdown of the Group’s loans and borrowings as of 31 December 2016. Amount as of Fixed or Average 31 December floating nominal rate 2016 (U.S.$ Type Currency interest Rate in 2016 (%) Maturity million) Unsecured loans: U.S. dollar floating 3.04 2018-2025 2,704 rouble fixed 12.52 2019-2021 1,990 Total unsecured loans: 4,694 Secured loans: U.S. dollar floating 7.37 2024 165 Corporate bonds U.S. dollar fixed 5.62 2018-2022 2,715 rouble fixed 11.60 2026 247 Total corporate bonds 2,962 Finance leasing Euro fixed 7.10 2026 24 U.S. dollar fixed 4.20 2019 7

94 Total finance leasing 31 Total 7,852 Less: current portion due within twelve months and presented as short term loans and borrowings (578) Long-term loans and borrowings 7,274

The table below shows the maturity profile of the Group’s bank borrowings, based on contractual undiscounted payments, excluding interest as of 31 December 2016: Due in Three More One to to than Type of One three twelve Second Third Fourth Fifth five bank loan Total month months months year year year year years (Amounts in millions of U.S. dollars) Fixed rate Principal 4,996 - - 5 741 668 1,348 976 1,258 Floating rate Principal 2,899 11 134 431 445 553 222 609 494 TOTAL (principal amounts) 7,895 11 134 436 1,186 1,221 1,570 1,585 1,752

A summary of the Group’s principal outstanding borrowings is set out below. UniCredit Bank Facilities. In April 2014, the Company (as borrower) and AO UniCredit Bank (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$400 million with a maturity period of five years. The principal amount outstanding under the loan bears interest at a floating rate based on LIBOR plus a spread. In December 2016 the Company amended the terms of the facility agreement to extend the final maturity date. As of 31 December 2016, the amount outstanding was U.S.$400 million. In December 2014, the Company (as borrower) and UniCredit Bank Austria AG (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$250 million with a maturity period of five years. The principal amount outstanding under the loan bears interest at a floating rate based on LIBOR plus a spread. In August 2016, the Company amended terms of the facility agreement to extend the final maturity date and reduce the interest rate. As of 31 December 2016, the amount outstanding was U.S.$250 million. Nordea Bank Facility Agreement. In December 2014 the Company (as borrower) and OJSC Nordea Bank (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$220 million with maturity periods of five years. The principal amounts under the loans bear interest at a floating rate based on LIBOR plus a spread. In August 2016 the Company amended the terms of the facility agreement to extend the final maturity date and reduce the interest rate. As of 31 December 2016, the amount outstanding was U.S.$220 million. Raiffeisenbank Facility Agreement. In April 2014, the Company (as borrower) and AO Raiffeisenbank (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$350 million with a maturity period of five years. The principal amount under the loan bears interest at a floating rate based on LIBOR plus a spread. In December 2015, the Company amended the terms of the facility agreement to reduce the principal amount of the loan. As of 31 December 2016, the amount outstanding was U.S$280 million.

95 Sberbank Facilities. In December 2014 the Company (as borrower) and Sberbank of Russia (as lender) entered into a non-revolving credit facility agreement in the aggregate principal amount of up to RUB 40 billion with a maturity period of five years. The principal amount under the loan bears interest at a fixed rate. As of 31 December 2016, the amount outstanding was RUB 40 billion. The Company expects to prepay in full the RUB 40 billion facility agreement with Sberbank on 7 June 2017. In July 2015, the Company (as borrower) and Sberbank of Russia (as lender) entered into non- revolving credit facility agreement in the aggregate principal amount of up to RUB 60 billion with maturity period of six years. The principal amount under the loan bears interest at a fixed rate. As of 31 December 2016, the amount outstanding was RUB 60 billion. In October 2015, the Company (as borrower) and Sberbank of Russia (as lender) entered into a non-revolving credit facility agreement in the aggregate principal amount of up to U.S.$1.2 billion with a maturity period of ten years. The facility has two tranches: U.S.$400 million (Tranche 1) and U.S.$800 million (Tranche 2). The principal amount under the loan bears interest at a floating rate based on LIBOR plus a spread. In November 2016, the Company amended the terms of the facility agreement reducing the interest rate of Tranche 1 and terminating the availability period of Tranche 2. As of 31 December 2016, the amount outstanding was U.S.$400 million. In November 2016 the Company (as borrower) and Sberbank of Russia (as lender) entered into a committed non-revolving facility agreement in the aggregate principal amount of U.S.$800 million to substitute the terminated Tranche 2 with a maturity period of nine years. As of 31 December 2016, the facility was unutilized. Sberbank project financing. In May 2016, the Group subsidiary GRK Bystrinskoye LLC (as borrower) and Sberbank of Russia (as lender) entered into a facility agreement in the aggregate principal amount of up to U.S.$800 million with a maturity period of eight years to finance the construction of Bystrinsky mining and concentration complex (Bystrinsky project) in the Zabaikalsk region. The facility was structured as a project financing with no recourse to the Company based on a stand-alone assessment by the lender of the future financial performance of Bystrinsky project. The principal amount under the loan bears interest at a floating rate based on LIBOR plus a spread. As of the date of this Prospectus, the amount outstanding was U.S.$ 287 million. VTB Facility Agreement. In September 2015, the Company (as borrower) and JSC VTB Bank (as lender) entered into a facility agreement in the aggregate principal amount of RUB 20 billion with a maturity period of five years. The principal amount under this loan bears interest at a fixed rate. As of 31 December 2016, the amount outstanding was RUB 20 billion. On 24 March 2017, the facility was fully repaid in advance of the final maturity date. ING Facilities. In May 2014, the Company (as borrower) and ING Bank Eurasia (as lender) entered into a credit agreement in the aggregate principal amount of U.S.$200 million with a maturity period of 5 years. The principal amount under the loan bears interest at a floating rate based on LIBOR plus a spread. As of 31 December 2016, the amount outstanding was U.S.$200 million. In January 2016, the Company (as borrower) and ING Bank Eurasia (as lender) entered into a credit agreement in the aggregate principal amount of U.S.$100 million with a maturity period of 5 years. The principal amount under the loan bears interest at a floating rate based on LIBOR plus a spread. In July 2016, the Company amended terms of the facility agreement reducing the interest rate. As of 31 December 2016, the amount outstanding was U.S.$100 million. Commerzbank ECA-Backed Financing. In September 2016, the Company (as borrower) and Commerzbank AG (as lender) entered into a facility agreement in the aggregate principal amount of up to EUR37.8 million with a maturity period of up to thirteen years. The loan was guaranteed by Euler Hermes Aktiengesellschaft. As of 31 December 2016, the facility was unutilized. ECA-Backed Financing. In November 2008, the Company entered into a facility agreement with a syndicate of banks (as lenders) for a loan in aggregate the principal amount of up to €279 million with a maturity period of ten years. The principal amount outstanding under the facility is denominated in U.S. dollars and bears interest at a floating rate based on LIBOR plus a spread. The loan was guaranteed by Euler Hermes Kreditversicherungs-AG, Hamburg, Germany. As of 31 December 2016, the amount outstanding was U.S.$80 million. Syndicated Facility. On 13 June 2013, the Company (as borrower) entered into a facility agreement with a principal amount of US$2.1 billion with a maturity period of 5 years with a syndicate of banks

96 including Bank of America, N.A., Barclays Bank PLC, BNP Paribas (Suisse) SA, BMTU (Europe) Limited, Commerzbank Aktiengesellschaft, Crédit Agricole Corporate and Investment Bank, Deutsche Bank Luxembourg S.A., HSBC Bank plc, ING Bank N.V., Morgan Stanley Bank International Limited, Mizuho Corporate Bank Nederland B.V., OJSC Nordea Bank, Joint Stock Commercial Bank “ROSBANK” (Open joint-stock company), Sumitomo Mitsui Finance Dublin Limited, Société Générale and ZAO UniCredit Bank. The facility consists of a US$1,575 million amortising term loan and a US$525 million revolving facility. The facility bears interest at a floating rate based on LIBOR plus a spread. In September 2013, the principal amount of the syndicated facility was increased to U.S.$2,325 million following a general syndication. As of 31 December 2016, the amount outstanding was U.S.$805 million. Committed back-stop facility. In January 2016, the Company (as borrower) entered into a facility agreement for a committed revolving back-stop credit line with a principal amount of up to 4,800 million yuan (equivalent to approximately U.S.$691 million as of 31 December 2016) with a maturity period of up to 5 years with Industrial and Commercial Bank of China Limited, Bank of China Limited, Shanghai Branch and China Construction Bank, Beijing Branch. As of 31 December 2016, the facility was unutilized. Committed back-stop facility. In September 2016, the Company (as borrower) entered into a facility agreement for a committed revolving back-stop credit line in a principal amount of up to U.S.$500 million with a maturity period of 5 years with a syndicate of banks including Commerzbank AG, HSBC Bank plc, Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation and UniCredit Bank. As of 31 December 2016, the facility was unutilized. RUB denominated commercial paper. In February 2016, the Company issued rouble-denominated commercial bonds in a total amount of RUB 15 billion (U.S.$247 million as of 31 December 2016) maturing in 2026 with a coupon rate of 11.60% per annum. U.S.$750 million Notes due 2018. On 29 April 2013, the Company received gross proceeds of U.S.$750 million under a loan granted by the Issuer following the issuance by the Issuer of U.S.$750 million 4.375 per cent. loan participation notes due 2018. The proceeds were used for general corporate purposes and refinancing indebtedness. U.S.$1 billion Notes due 2020. On 28 October 2013, the Company received gross proceeds of U.S.$1 billion under a loan granted by the Issuer following the issuance by the Issuer of U.S.$1 billion 5.55 per cent. loan participation notes due 2020. The proceeds were used for general corporate purposes and capital investments. U.S.$1 billion Notes due 2022. On 14 October 2015, the Company received gross proceeds of U.S.$1 billion under a loan granted by the Issuer following the issuance by the Issuer of U.S.$1 billion 6.625 per cent. loan participation notes due 2022. The proceeds were used for general corporate purposes and capital investments. U.S.$1 billion Notes due 2023. On 11 April 2017, the Company received gross proceeds of U.S.$1 billion under a loan granted by the Issuer following the issuance by the Issuer of U.S.$1 billion 4.10 per cent. loan participation notes due 2023. The proceeds are to be used for general corporate purposes and capital investments.

Capital Commitments, Operating Lease Obligations and Contingencies

The Group had total contractual capital commitments of U.S.$1,138 million as of 31 December 2016 (U.S.$798 million as of 31 December 2015). Most land plots in the Russian Federation where the Group’s key production facilities are located are owned by the state. The Group leases land through operating lease agreements, which expire in various years through 2065. According to the terms of lease agreements the rent rate is revised annually subject to the decision of the relevant local authorities. The Group entities have a renewal option at the end of the lease period and an option to buy land at any time, at a price established by the local authorities.

97 At 31 December 2016, ten aircraft lease agreements (as at 31 December 2015: nine) were in effect. The lease agreements have an average life of five years (as at 31 December 2015: eight years) with a renewal option at the end of the term and place no restrictions on the lessees by entering into these agreements. The table below shows future minimum lease payments due under non-cancellable operating lease agreements for land and buildings as of the dates indicated: As of 31 December As of 31 December 2016 2015 (Amounts in millions of U.S. dollars) Due within one year 29 31 Due within one to five years 95 128 Due in more than five years 92 79 Total 216 238

Future minimum lease payments due under non-cancellable operating lease agreements for aircrafts were as follows: As of 31 December As of 31 December 2016 2015 (Amounts in millions of U.S. dollars) Due within one year 43 37 Due within one to five years 70 89 Total 113 126 The Group does not currently have any off-balance sheet obligations.

Significant Accounting Policies and Critical Accounting Estimates

The selected significant accounting policies and critical accounting estimates should be read in conjunction with the 2016 Consolidated Financial Statements.

Use of estimates

Preparation of the consolidated financial statements in accordance with IFRS requires the Group’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires judgements which are based on historical experience, current and expected economic conditions and all other available information. Actual results could differ from these estimates. The most significant areas requiring the use of management estimates and assumptions relate to:  useful economic lives of property, plant and equipment;  impairment of assets, including fair value of assets held for sale;  provisions;  decommissioning obligations;  income taxes; and  contingencies.

98 Revenue recognition

Metal sales revenue

Revenue from metal sales is recognised when the significant risks and rewards of ownership are transferred to the buyer and represents invoiced value of all metal products shipped to customers, net of value added tax. Revenue from contracts that are entered into and continue to meet the Group’s expected sale requirements designated for that purpose at their inception, and are expected to be settled by physical delivery, are recognised in the consolidated financial statements as and when they are delivered. Certain contracts are provisionally priced so that price is not settled until a predetermined future date based on the market price at that time. Revenue from these transactions is initially recognised at the current market price. Provisionally priced metal sales are marked-to-market at each reporting date using the forward price for the period equivalent to that outlined in the contract. This mark-to-market adjustment is recorded in revenue.

Other revenue

Revenue from sale of goods, other than metals, is recognised when significant risks and rewards of ownership are transferred to the buyer in accordance with the shipping terms specified in the sales agreements. Revenue from service contracts is recognised when the services are rendered and the outcome can be reliably measured.

Dividends and interest income

Dividends from investments are recognised when the Group’s right to receive payment has been established. Interest income is accrued based on the effective interest method.

Income tax expense

Income tax expense represents the sum of the tax currently payable and deferred tax. Income tax is recognised as an expense or income in the consolidated income statement, except when it relates to other items recognised directly in other comprehensive income, in which case the tax is also recognised directly in other comprehensive income. Where current or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Current tax

Current tax is based on taxable profit for the year. Taxable profit differs from profit for the year as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences, and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if a temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit.

99 Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each statement of financial position date and adjusted to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. The measurement of deferred tax liabilities and assets reflects the tax consequences of the manner in which the Group expects at the reporting date to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority. The Group offsets deferred tax assets and liabilities for the subsidiaries which entered into the tax consolidation group.

Property, plant and equipment

Mining assets

Mine development costs are capitalised and comprise expenditures directly related to:  acquiring mining and exploration licences;  developing new mining operations;  estimating revised content of minerals in the existing ore bodies; and  expanding capacity of a mine. Mine development costs include interest capitalised during the construction period, when financed by borrowings. Mine development costs are transferred to mining assets and start to be depreciated when a new mine reaches commercial production quantities. Mining assets are recorded at cost less accumulated amortisation and impairment losses. Mining assets include cost of acquiring and developing mining properties, pre-production expenditure, mine infrastructure, plant and equipment that process extracted ore, mining and exploration licenses and present value of future decommissioning costs. Depreciation of mining assets is charged from the date on which a new mine reaches commercial production quantities and is included in the cost of production. The carrying value of mining assets is depreciated on a straight-line basis over the lesser of their remaining economic useful lives or remaining life of the mine that they relate to, calculated on the basis of the amount of proven and probable ore reserves. When determining the life of a mine, assumptions valid at the time of estimation may change if new information becomes available. Useful lives in average vary from 2 to 45 years.

Non-mining assets

Non-mining assets include metallurgical processing plants, buildings, infrastructure, machinery and equipment and other non-mining assets. Non-mining assets are stated at cost less accumulated depreciation and impairment losses. Non-mining assets are depreciated on a straight-line basis over their economic useful lives. Depreciation is calculated over the following economic useful lives:

100  buildings, structures and utilities 5 – 50 years  machinery, equipment and transport 3 – 30 years  other non-mining assets 2 – 20 years

Capital construction-in-progress

Capital construction-in-progress comprises costs directly related to construction of buildings, processing plant, infrastructure, machinery and equipment, it also includes amounts of irrecoverable letters of credit opened for fixed assets supply deposited in banks. Cost also includes finance charges capitalised during construction period where such costs are financed by borrowings. Depreciation of these assets commences when the assets are put into production. Capital construction-in-progress comprises costs directly related to construction of buildings, processing plant, infrastructure, machinery and equipment, including:  advances given for purchases of property, plant and equipment and materials acquired for construction of buildings, processing plant, infrastructure, machinery and equipment;  irrevocable letters of credit opened for future fixed assets deliveries and secured with deposits placed in banks; and  finance charges capitalised during the construction period where such costs are financed by borrowings. Depreciation of these assets commences when the assets are put into production.

Inventories

Refined metals

In 2014, the Group revised the classification of main- and by-products in order to align with management accounting and reporting. Main produced metals include nickel, copper, palladium, platinum; by-products include gold, rhodium, silver and other minor metals. Main products are measured at the lower of net cost of production or net realisable value. The net cost of production of main products is determined as total production cost, allocated to each joint product by reference to their relative sales value. By-products are measured at net realisable value, through a mark-to-market valuation.

Work-in-progress

Work-in-process includes all costs incurred in the normal course of business including direct material and direct labour costs and allocation of production overheads, depreciation and amortisation and other costs incurred for producing each product, given its percentage of completion.

Materials and supplies

Materials and supplies are valued at the weighted average cost less allowance for obsolete and slow- moving items.

Decommissioning obligations

Decommissioning obligations include direct asset decommissioning costs as well as related land restoration costs. Future decommissioning and other related obligations, discounted to net present value, are recognised at the moment when the legal or constructive obligation in relation to such costs arises (generally when the related asset is put into operation) and the future cost can be reliably estimated. This cost is

101 capitalised as part of the initial cost of the related asset (i.e. a mine) and is depreciated over the useful life of the asset. The unwinding of the discount on decommissioning obligations is included in the consolidated income statement as finance costs. Decommissioning obligations are periodically reviewed in light of current laws and regulations, and adjustments are made as necessary.

Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, the Group’s financial position is routinely subject to a variety of market risks. The Group is exposed to market risks associated with interest rates, foreign currency exchange rates and commodity prices.

Interest rate risk

The risk of changes in market interest rates relates primarily to the Group’s short-term and long-term borrowings with floating interest rates. To manage this risk the Group analyses interest rate risks on a regular basis. The table below shows the additional interest expense that the Group would have incurred for the periods indicated in respect of its borrowings with a floating interest rate as a result of an increase in LIBOR of two percentage points. The sensitivity analysis has been prepared on the assumption that the amount of liabilities at floating rates outstanding at the balance sheet date was outstanding for the whole year. Year ended 31 December 2016 2015 (Amounts in millions of U.S. dollars) Loss 57 68

Foreign currency exchange rate risk

The functional currency of the Company and the majority of its subsidiaries is the rouble. The Group’s reporting currency is the U.S. dollar. The major part of the Group’s revenue and related trade accounts receivable is denominated in U.S. dollars and therefore the Group is exposed primarily to U.S. dollar currency risk. The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than functional currencies of the individual Group entities at 31 December 2016 were as follows: Assets Liabilities Currency (Amounts in millions of U.S. dollars) U.S. dollar 1,355 5,857 HKD 1,014 - Other 135 90 Total 2,504 5,947 Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if a risk for a potential loss is at an acceptable level. The Group calculates the financial impact of exchange rate fluctuations on U.S. dollar-denominated monetary assets and liabilities in respect of Group entities with a functional currency other than the U.S. dollar. The following table shows the decrease in the Group’s profit before tax for the periods indicated which would have been resulted from a 20% weakening of the rouble against the U.S. dollar.

102 Year ended 31 December 2016 2015 (Amounts in millions of U.S. dollars) Loss 900 816

Commodity price risk

In the normal course of business, the Group is exposed to market risk of price fluctuations in the commodities that it sells, particularly nickel, copper, palladium and platinum. The Group uses commodity derivatives, as well as long-term sales or supply agreements to manage commodity price risks.

103 INDUSTRY OVERVIEW

The Group’s main products are nickel, copper, palladium and platinum, which accounted for 38%, 24%, 23% and 8%, respectively, of total metal sales revenues in 2015 and 34%, 24%, 25% and 9%, respectively, in 2016.

NICKEL

Global Overview

Nickel has a wide range of applications since it is very rust-resistant and retains its mechanical and physical properties in alloys with other metals in extreme temperatures. Nickel is primarily used in the manufacture of stainless and special steel, which represented 80% of global consumption of nickel in 2016. The addition of nickel makes steel stronger and more resistant to corrosion and to the environment. Nickel is also used to produce special alloys, for electroplating, in the chemical industry and in the manufacture of rechargeable power cells. In 2016, the fundamentals of the nickel market improved as surplus production dissolved. In 2016, the market was balanced with a marginal deficit of ten thousand tonnes, as compared to 150 thousand tonnes of surplus in 2015. Most of the surplus was high-quality nickel accumulated as inventory in LME-monitored warehouses. In addition, the growth of commodity exchange inventories was due to transfer of nickel stockpiles from Chinese ports to LME warehouses, mostly in Malaysia and Singapore. In 2016, the average annual nickel price decreased by 19% as compared with 2015. In recent years the global nickel market has principally been affected by the continuing reduction in the production of nickel from sulphide ores, which tend to be larger in scale and higher grade. These deposits are depleting and there are high costs associated with the launch of new nickel mining operations, typically with lower nickel grades. Historically, nickel production operations have been highly integrated. As a result of the nature of the process of production of nickel from sulphide ores, and to a large extent from laterite ores, all operations are generally located within one area and the full cycle of ore production and processing through the sale of the final product is carried out by the same company. Although this integrated business model continues to operate to a large extent in the global nickel industry, with less than a dozen of producers accounting for more than 75% of the global production of refined nickel extracted from these two types of ore, the industry underwent substantial changes in the 2000s. In particular, sulphide ore resources and average nickel grades continued to decrease, leading smelters to seek external sources of concentrates in order to enable economically feasible production of nickel at minor sulphide ore deposits. As regards production of nickel from laterite ores, there has been an increase in direct sales of ore or production and sale of semi-products to third-party smelters which are able to fill production capacities by acquiring these products from a number of different suppliers.

Overview of global reserves and production

The principal nickel producing regions in 2016 were the Philippines, Russia, Canada, Australia, Indonesia, New Caledonia, Brazil and China. The table below sets out the volumes of nickel mine production of each of these regions for the periods indicated together with their nickel reserves as of December 2016: Nickel mine production (‘000 tonnes) Reserves and resources (in million Country 2016 2015 tonnes) Philippines 346 483 1.4 Russia 225 227 7.3 Canada 233 234 6.1 Australia 162 192 5.7

104 Indonesia 224 145 7.7 New Caledonia 209 184 1.8 Brazil 87 117 3.5 China 98 98 2.1 Cuba 53 56 1.4 Colombia 41 41 0.5 South Africa 55 52 0.3 Botswana 11 24 0.3 Dominican Republic 5 0 0.9 Madagascar 49 55 1.5 Other Countries 202 208 3.2 TOTAL (rounded) 2,001 2,117 43.7

Source: Wood Mackenzie.

The supply of mined nickel in 2016 decreased by 116 thousand tonnes, or 5.5%, to 2,001 thousand tonnes from 2,117 thousand tonnes in 2015. The principal refined nickel producing countries in 2016 were China, Russia, Japan, Canada, Australia, and Norway. The table below sets out the volumes of refined nickel production of each of these countries: Refined nickel production (‘000 tonnes) Country 2016 2015 China 594 625 Russia 192 233 Japan 179 186 Canada 151 144 Australia 119 132 Norway 92 93 Brazil 76 78 New Caledonia 64 56 Finland 54 43 South Korea 69 62 Colombia 37 39 UK 47 41 South Africa 41 42 Other Countries 280 231 TOTAL (rounded) 1,995 2,005

Source: Company data. In 2016, global refined nickel production decreased to 1,995 thousand tonnes, as compared to 2,005 thousand tonnes in 2015. The decrease in global production mainly resulted from a lower output of refined nickel and NPI in China due to a lack of nickel ore and concentrate, closure of a number of marginal loss-making plants and production assets reconfiguration at Norilsk Nickel and Eramet’s Sandouville Refinery in France. On the other hand, most of these lost volumes were offset by expanding nickel pig iron production in Indonesia. Global refined nickel production is expected to steadily increase in 2017 driven by a ramp-up of new NPI projects in Indonesia

Consumption

The principal consumers of nickel are located in China, Japan, the United States, Germany, South Korea, Italy and India. The table below sets out the volumes of consumption in China, other Asia, regions, the EU and the United States:

105 Consumption (‘000 tonnes) Country 2016 2015 China 1,128 1,018 Other Asia 386 362 Europe 336 332 USA 149 143 TOTAL (rounded) 2,000 1,855

Source: Company data The table below shows a breakdown of primary nickel consumption by application in 2016. Application Percentage of Total Stainless steel 72% Alloys 9% Plating 7% Other industries 12% Total 100

Source: Company data According to the Company’s estimates, primary nickel consumption increased by 145 thousand tonnes, or 8%, to 2,000 thousand tonnes in 2016 from 1,855 thousand tonnes in 2015, largely driven by an increase in stainless steel output. In 2016, nickel was primarily used for the production of stainless steel (72%), alloys (9%) and plating (7%).

Supply

The Group is the world’s largest producer of refined nickel. Other major producers are located in China, Canada, Japan, Australia, Norway and Brazil. Primary nickel production comprises two main types of product:  High-grade nickel (cathodes, briquettes, carbonyl nickel and chemical solutions containing nickel): this type of product possesses the broadest range of applications. The main producers of type of nickel are the Group, Vale and Jinchuan;  Low-grade nickel (nickel pig iron, ferronickel and utility nickel): this type of product is consumed mainly in the stainless steel industry. The main producers of type of nickel include Tsingshan Group, BHP Billiton, Eramet and Sumitomo Metal Mining. The table below shows a breakdown by producer of primary nickel production in 2016: Producer Percentage of Total Vale 14% Norilsk Nickel 12% Jinchuan 8% Glencore 8% BHP Billiton 3% Sumitomo Metal Mining 5% Eramet 3% Nickel pig iron 23% Others 24% Total 100

Source: Wood Mackenzie, CRU, Company data and companies’ reports

Pricing

The table below shows the average nickel price for the periods indicated.

106 Year ended 31 December 2016 2015 2014 2013 2012 Nickel (U.S.$ per tonne) 9,609 11,807 16,867 15,003 17,526

Source: LME The average nickel price in 2016 was U.S.$9,609 per tonne, a decrease of 19%, as compared with 2015. In the first quarter of 2016, the decrease in price resulted primarily from a number of negative macroeconomic factors affecting commodities, including the strengthening of the U.S. dollar in which commodity prices are denominated, and concerns about the slowdown of the Chinese economy. In the second and third quarters of 2016, the nickel price has strengthened due to the decrease in production caused by the governmental audit of the mining companies in the Philippines, as well as the growth of the primary nickel consumption in China. At the beginning of the fourth quarter of 2016, the effect of an environmental audit in the Philippines was balanced out by the expectations of a potential ease of an export ban in Indonesia. In November 2016, the market reacted to the promises of a newly elected U.S. President Donald Trump to boost infrastructure spending, and the price of nickel reached U.S.$11,735 per tonne. However, by the end of 2016 the price fell to U.S.$10,000 per tonne on the news of an increased export quota in New Caledonia, postponed release of the audit result in the Philippines and no signs of a significant decline in nickel exchange stocks.

Overview of key production processes

Ore Mining

Global nickel production is derived from two principal types of ores: silicates found in laterite ore deposits formed from the weathering of ultrabasic rocks (examples of such deposits are found in Australia and the South Urals region of Russia), and sulphide copper-nickel ores found in mafic intrusive rocks (examples of such deposits include the Group’s deposits in Russia and Sudbury in Canada). Laterite ore deposits are close to the surface and are principally mined by open-pit. Sulphide copper-nickel deposits are mined, depending on the position of the ore, either by open-pit or by underground mining. The precise mining methods employed depend on specific mining and geological conditions and are largely similar to methods employed for the extraction of other minerals.

Concentration

Rich copper-nickel sulphides with a nickel content of more than 1%, a proportion of nickel to copper of at least 1:1 and low content of iron (less than 25%) are subjected directly to smelting. If the iron content is greater than 25% and the content of sulphur is greater than 20%, rich ores first undergo concentration, generally by flotation. The concentration process begins with gravity separation followed by further flotation of gravity tailings in order to separate base metals and extract precious metals from the ores. The result of this process is the production of mixed copper-nickel or separate nickel and copper concentrates. Nickel silicates are not subjected to concentration.

Metallurgy

The concentrates produced by treatment of sulphide copper-nickel ores undergo pyrometallurgical processing, including pelletising, smelting, roasting and conversion, to recover nickel. Crude nickel produced by pyrometallurgical processing is electrolytically refined for production of market grade nickel. Nickel silicate ores undergo direct metallurgical treatment and are subjected to either hydrometallurgical or pyrometallurgical treatment depending on the level of magnesium contained in the ore.

107 Production processes may differ significantly depending on the quality of the nickel-containing ore or concentrate. The finished product (nickel) can be produced in various forms from powder to nickel plated cathodes.

COPPER

Global overview

Copper possesses unique electrical conductivity properties, and approximately three-quarters of the total copper produced worldwide is used in various applications related to electricity, from industrial and building cables to wires used in electric motors and transformer coils. Pure copper, as well as copper alloys such as bronze and brass, is also used to make products with special physical properties, including copper pipes, which are widely used in sewerage and heating systems, as well as in air conditioning. In 2016, the global copper market was in a state of quasi-equilibrium. The global refined copper surplus in 2016 amounted to 380 thousand tonnes, as compared to a surplus of 60 thousand tonnes in 2015. The excess of copper in the market was mainly accumulated in off-exchange inventories, both in and outside of China. Inventories continued to rise during 2016 as a result of production exceeding demand. The key factors affecting the production of copper in recent years included the decreasing grades and quality of both operational deposits and new deposits. With increased production of copper in Africa and Asia, an increasing portion of global supply is shifting to regions with perceived high levels of political risk. While key copper producers are continuing to increase investment in new copper mining projects (such as Oyu Tolgoi in Mongolia), as well as the expansion and development of existing deposits, the market has seen a substantial increase in the sale of copper concentrates rather than finished products from countries with traditionally high copper production (Chile, Peru, Australia, Indonesia) to countries with substantial refining capabilities (China, Japan, German, South Korea). The principal producers of copper are located in Chile, China, Peru, the United States, Australia, Zambia, Russia, Democratic Republic of Congo, Mexico and Kazakhstan. There have been no significant merger transactions in recent years following an earlier period of consolidation in the industry which included the Vale and Inco merger in 2006 and the Freeport and Phelps Dodge merger in 2007. Vertical integration in the copper industry is not as pronounced as in the nickel industry, and the production of copper concentrates and copper refining and the manufacture of copper products have traditionally been carried out by separate companies in the market.

Overview of global reserves and production

The table below sets out the volumes of production of the main copper-producing countries together with their copper reserves as of January 2017:

Copper mine production (‘000 tonnes) Reserves Country 2016 2015 (mln tonnes) Chile 5,733 5,818 210 Peru 2,256 1,641 81 China 1,476 1,546 28 USA 1,463 1,445 35 Democratic Republic of Congo 1,053 1,101 20 Australia 920 955 89 Zambia 757 723 20

108 Indonesia 744 585 NA Mexico 735 575 46 Canada 716 714 11 Russia 709 689 30 Poland 427 430 NA Kazakhstan 509 452 NA Other Countries 2,577 2,492 150 TOTAL (rounded) 20,075 19,166 720

Source: Company data, Wood Mackenzie, USGS.

Consumption

The principal consumers of copper are located in China, the United States, Germany, Japan, South Korea, Italy, India, Taiwan, Brazil and Turkey. The table below sets out the volumes of consumption of each of these countries:

Consumption (‘000 tonnes)

Country 2016 2015 China 10,610 10,196 USA 1,838 1,847 Germany 1,286 1,249 Japan 979 1,008 South Korea 648 675 Italy 570 592 India 490 460 Taiwan 447 470 Brazil 288 338 Turkey 478 460

Source: Company data The table below shows a breakdown of final use of refined copper in 2016: Percentage of Total Application Electronics 23% Construction 31% Transport and Machinery 22% Consumer goods 24% Total 100

Source: Company data Global consumption of refined copper increased by 0.5 million tonnes, or 2%, to 22.4 million tonnes in 2016 from 21.9 million tonnes in 2015. The increase resulted mainly from raising metal consumption in the production of cables and wires.

Supply

Major copper producers are located in Chile, China, Japan, the United States and Russia. The table below shows a breakdown by producer of mined copper production in 2016:

109 Producer Percentage of Total Codelco 9.3% Freeport 8.7% BHP Billiton 5.8% Glencore 6.4% Anglo American 2.1% Antofagasta 2.4% Southern Copper 4.5% Rio Tinto 2.7% KGHM 2.9% First Quantum 2.4% Vale 2.1% Norilsk Nickel 1.7% Teck Resources 1.5% Others 47.5% Total 100

Source: Company data, companies’ reports Mined copper output increased in 2016, as compared with 2015 largely as a result of investments made in greenfield and brownfield development projects. In 2016, the global output of refined copper increased by 0.8 million tonnes, or 3.6%, to 22.8 million tonnes from 21.9 million tonnes in 2015, mainly as a result of an increase in production in Peru, Mexico, Indonesia, while the output in Chile, Africa and other regions decreased.

Pricing

The table below shows the average copper price for the periods indicated: Year ended 31 December 2016 2015 2014 2013 2012 Copper (U.S.$ per tonne) 4,863 5,494 6,862 7,322 7,950

Source: LME.

The average copper price in 2016 was U.S.$4,863 per tonne, a decrease of 11%, as compared with 2015. In January 2016, the prices for copper (as well as for many other commodities) reached seven- year lows as a result of investment outflows due to concerns regarding future prospects of the Chinese economic growth and lack of supply elasticity to low prices. Since February 2016, the market sentiment improved as a result of an announced fiscal stimulus in China, growing copper imports into China and lower supply in Chile. The Trump win on 9 November 2016 pushed copper prices to annual highs of U.S.$5,936 per tonne on the back of expected large-scale investments in US infrastructure.

Overview of key production processes

Copper Ore Mining

The majority of the copper mined in the world is mined from porphyry copper, molybdenum copper porphyry, copper pyrite, copper zinc pyrite, cupriferous sandstone and slate and copper-nickel deposits. Copper deposits are predominantly developed by open-pit, comprising approximately 65% of the total, or underground mining. In additional, a small percentage of copper is mined through in- situ leaching (ISL) in which a chemical solution is pumped into boreholes at the deposit to recover the minerals. The most common method of production of copper from mined ore is summarised below.

110 Concentration

All mixed ores, often containing nickel, zinc, lead and other metals, undergo concentration prior to smelting. Run-of-mine and ores with low copper contents are processed by froth flotation. Prior to froth flotation, the ore is crushed and ground to produce particles of 0.05 - 0.5 mm. The crushed ore is then mixed with water, oil, surfactant and a foaming agent and placed into a flotation tank. Sulphide particle are conducted to the surface and are skimmed off, while the rock, containing no copper, sinks to the bottom. The concentrate produced by flotation usually has a copper content of approximately 20 - 30%.

Metallurgy

The concentrate produced by flotation is mixed with fluxes (silica or calcium carbonate) and is smelted to form copper matte – a mixture of copper and iron sulphides with a copper content of up to 60%. A portion of iron is removed in the process in the form of iron silicate and as sulphur oxides (producing sulphuric acid). The molten copper matte is then fed to a converter and air is blown through it. The blistered copper metal which remains after the sulphur has oxidised is cast into ingots, with a copper content of approximately 98%.

Refining

The blistered copper is typically refined in two stages, comprising furnace reduction and electro- refining. The blistered copper is first put into a reverberatory furnace to deoxidise the copper through the removal by oxidisation of other minerals and dissolved gases. The copper is then fed to the casting machines to cast anodes (square slabs with shackles for suspending them in the electrolysis bath). The anodes are placed into acidated solution of copper sulphate to purify the copper and dissolve any other base metals, which settle as slime containing silver, gold and other base metals. The treated cathode is left with pure copper of more than 99.9%. The finished copper product can be produced in various forms from powder to copper plated cathodes and other products. As an alternative to the method described above, hydrometallurgical processing can also be used for the production of copper, although it is used rarely in practice. Crushed oxide ores are leached by sulphuric acid to produce copper sulphate in solution. The copper sulphate solution is then stripped of copper in an electrowinning plant in which copper in the solution attaches to cathodes placed into the solution. Copper ores can also be leached using a bacterial oxidation process to facilitate quick production of copper acid solution.

PLATINUM AND PALLADIUM

Global overview

The primary use of palladium is in catalytic converters in the automotive sector, mainly in gasoline- powered vehicles. Platinum is also used in catalytic converters, particularly in diesel-powered vehicles, as well as in jewellery. In 2016, the palladium market recorded a substantial growth in the deficit of palladium in terms of supply and demand as a result of high growth in demand for palladium in the automobile industry and a decrease of production due to underinvestment in South Africa. The global palladium market deficit in 2016 amounted to 9 tonnes, as compared to a deficit of 4 tonnes in 2015. In 2016, as a result of a 2% decrease in the production of platinum in South Africa due to insufficient investments, as well as growth in demand for platinum in the automobile industry and financial investments sector, the global platinum market recorded a substantial growth in the deficit from 4 tonnes in 2015 up to 6 tonnes in 2016.

111 The key factors affecting the production of PGMs, including palladium and platinum, are the concentration of substantially all major PGM deposits in 5 countries - South Africa, Russia, Canada, the United States and Zimbabwe and the high per-unit cost of production in South Africa and North America. Production costs of PGMs over recent years have grown faster than inflation as a result of decreasing ore grades, deeper mining horizons and regular disruptions to production in South Africa as a result of prolonged industrial action. In addition, the production of PGMs in Zimbabwe has been influenced by frequently changing and unpredictable taxation laws. PGMs in Russia and Canada are often found in predominantly base metal deposits. As a result, volumes of PGMs produced in Russia and Canada are determined by mining plans relating to base metals, and the Company does not currently expect that production of base metals will change substantially in the coming years. Due to the high geographic concentration of PGM reserves in South Africa, Russia, Canada, the United States and Zimbabwe, the PGM market is principally dominated by seven companies (Anglo Platinum, the Company, Impala Platinum, Lonmin and Northam), which together account for more than 90% of global production of primary platinum and palladium. Although major market participants are vertically integrated, the market continues to include a range of companies producing small quantities of PGM ores and concentrates.

Overview of global reserves and production

The principal producers of palladium and platinum are located in South Africa, Russia, Canada and the United States. The table below sets out the volumes of production of each of these countries together with their PGM reserves as of January 2017:

Production of refined metal (tonnes) Reserves Palladium Platinum PGM Country 2016 2015 2016 2015 (tonnes) South Africa 77 80 136 139 63,000,000 Russia 79 81 21 22 1,100,000 Canada 20 22 8 8 310,000 USA 13 13 4 4 900,000 Other countries 16 12 18 16 NA TOTAL (rounded) 206 209 188 189 67,000,000

Source: Company data, USGS.

Consumption

The principal consumers of platinum and palladium are located in the European Union, China, Japan and the United States. The table below sets out the volumes of consumption of each of these territories: Consumption (tonnes) Palladium Platinum Country 2016 2015 2016 2015 European Union 65 66 74 73 China 72 64 60 67 Japan 37 38 29 28 North America 94 93 34 33 Other countries 46 46 47 42

Source: Company data. The table below shows a breakdown of primary palladium consumption by application in 2016:

112 Application Percentage of Total Automotives 78% Electronics 9% Healthcare 4% Jewellery 2% Catalyst 4% Other 3% Total 100

Source: Company data In 2016, the overall industrial consumption of palladium increased by 8 tonnes, or 3%, to 316 tonnes from 308 tonnes in 2015. At the same time, in 2016 primary palladium consumption increased by 10 tonnes, or 5%. The table below shows a breakdown of primary platinum consumption by application in 2016: Application Percentage of Total Automotives 46% Jewellery 30% Catalyst 8% Glass 3% Electronics 3% Other 10% Total 100

Source: Company data In 2016, overall industrial consumption of platinum increased by 4 tonnes, or 2%, to 251 tonnes from 247 tonnes in 2015. Primary platinum consumption decreased by 9 tonnes, or 6%, to 134 tonnes in 2016.

Supply

The Group is the world’s largest producer of palladium, accounting for 40% of global primary production in 2016. In addition to Russia, other major palladium producers include South Africa, Canada, the United States and Zimbabwe. The table below shows a breakdown by producer of primary palladium production in 2016: Producer Percentage of Total Norilsk Nickel 40% Anglo Platinum 23% Impala Platinum 14% Stillwater Mining 6% Lonmin 5% Vale 5% Others 7% Total 100

Source: Company data and companies’ reports published before 1 April 2017. In 2016, the global supply of primary palladium decreased by 3 tonnes, or 1%, to 206 tonnes, as compared to 209 tonnes in 2015. Major platinum producers include South Africa, Russia, Zimbabwe, Canada and the United States. The table below shows a breakdown by producer of primary platinum production in 2016.

113 Producer Percentage of Total Anglo Platinum 39% Impala Platinum 25% Norilsk Nickel 11% Lonmin 12% Northam 5% Others 8% Total 100

Source: Company data and companies’ reports published before 1 April 2017. In 2016, production of primary platinum decreased by 1 tonne, or 1%, to 188 tonnes from 189 tonnes in 2015.

Pricing

The table below shows the respective average prices of palladium and platinum for the periods indicated. Year ended 31 December 2016 2015 2014 2013 2012 Palladium (U.S.$ per ounce) 613 691 803 725 643 Platinum (U.S.$ per ounce) 989 1,053 1,385 1,486 1,552

Source: LPPM (fixing a.m. and p.m.) The average palladium price in 2016 was U.S.$613 per troy ounce, a decrease of 11%, as compared with 2015. In 2015, the level of the palladium price declined as a result of the downward pressure from ETF holdings, which recorded significant outflows, and the strengthening of the U.S. dollar. In 2016, the palladium price has slightly recovered, which was driven by both loosen monetary policies and delays on the expected U.S. Federal rate increase and the positive vehicle production statistics in China. The outflow of metal from ETFs slowed down substantially in the first half of 2016, thus removing the selling pressure. The average platinum price in 2016 was U.S.$989 per troy ounce, a decrease of 6%, as compared with 2015. The decrease primarily resulted from the fears over China’s potential hard landing, a weak Sound African Rand and expectations for a drop in the demand for diesel cars, as well as the demand for the jewellery industry in China.

Overview of global reserves and production

Mining

Platinum and palladium is mined from primary ore deposits, primarily by underground mining. Platinum and palladium are also found in alluvial deposits, which are developed by dredging, earth- moving scrapers and bulldozers or hydraulic mining. In addition, platinum and palladium is also a by- product of the development of copper-nickel sulphide deposits such as the deposits mined by the Group in Russia.

Concentration

The concentration of sulphide platinum or palladium ores includes crushing and grinding and concentration of platinum group metals by gravity separation. Platinum group metals not recovered by gravity washing are separated in concentrates of base metals by flotation and are extracted as slime following electrolytic extraction of the base metals. The platinum and palladium containing slime is then processed at refining plants.

114 Ore mined at alluvial platinum and palladium deposits is concentrated by gravity washing. This produces washing, which is a platinum or palladium concentrate with a platinum metal content of approximately 70-90%, with the remainder comprised of other heavy metals. Once obtained, the concentrate undergoes aftertreatment and then refining.

Refining

Platinum and platinum group metals are refined in mineral acids to remove slimes and concentrates. The individual PGMs are then separated using various chemical agents.

115 BUSINESS

Overview The Group is the leading metals and mining company, the world’s largest producer of refined nickel and palladium and a major producer of platinum and copper. The Group’s production of nickel and palladium in 2016 represented 12% and 40%, respectively, of total global primary production of those metals according to Company estimates. The Company is the world’s largest producer of platinum outside South Africa and a major copper producer according to Company estimates. In addition, the Group produces various other joint products such as cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium and sulphur. The Group’s principal mining and metallurgical facilities are located in Russia and Finland, and it has sales and distribution offices in all key markets, such as Europe, Asia and North America. In 2016, the Group’s total revenue amounted to U.S.$8,259 million with EBITDA of U.S.$3,899 million and EBITDA margin of 47.2% (total revenue of U.S.$8,542 million, EBITDA of U.S.$4,296 million and EBITDA margin of 50.3% in 2015). In 2016, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 77.2%, 97.3%, 97.6% and 96.6% of total Group production of those metals, respectively. The Group’s principal operations in Russia comprise its Polar Division, which is located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. The Polar Division operates fully integrated metal production cycle, including mining, concentration, metallurgy and refining of metals and operates a number of supporting activities. At the Polar Division three sulphide copper-nickel ore deposits, Norilsk-1, Talnakh and Oktyabrskoye (which jointly with Talnakh deposit comprises the Talnakh ore field), are developed. As at 31 December 2016, the total proven and probable reserves of these deposits comprised 695,052 thousand tonnes of ore, containing 6,380 thousand tonnes of nickel, 11,756 thousand tonnes of copper, 93,341 thousand ounces of palladium and 24,903 thousand ounces of platinum. The Company believes that the geology of the Talnakh ore field in its Polar Division is unique as it comprises a single large deposit with high grades of multiple metals, including nickel, copper, platinum group metals (“PGMs”), gold, silver and cobalt. According to Wood Mackenzie estimates, the Company is the world’s lowest cost producer of nickel as the presence of other valuable joint metals reduce the Group’s overall production costs. The Group’s strategic development is focused primarily on operations at the Polar Division. Since the Taimyr Peninsula is not connected to Russia’s rail and road network or national electricity grid, the Group operates various transportation and energy generation infrastructure which service and supply the Polar Division, as well as industrial and residential customers in that region. In addition to its main Polar Division operations, the Group operates through its subsidiary JSC Kola “GMK” in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts underground and open pit mining operations at four deposits containing sulphide copper and nickel ores and operates enrichment plant, metallurgical facilities and a nickel refinery. In addition to processing its own mined materials, JSC Kola “GMK” also refines high grade nickel matte supplied by the Polar Division. As at 31 December 2016, the total proven and probable reserves of the deposits of JSC Kola “GMK” comprised 132,647 thousand tonnes of ore, containing 769 thousand tonnes of nickel, 378 thousand tonnes of copper, 130 thousand ounces of palladium and 93 thousand ounces of platinum. The Group also currently operates a nickel refinery in Finland operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of 66,000 tonnes of refined nickel products, and holds a licence for development of the Honeymoon Well Deposit, a sulphide nickel deposit in Australia. In accordance with the Group’s strategy with its focus on Tier I assets, the Group is considering a disposal of the Honeymoon Well Deposit. The table below shows the mineral reserves and resources (in terms of metal content) of the Group as at 31 December 2016, prepared by the Group according to the JORC Code (but not independently verified). See “Presentation of Financial and Other Information – Presentation of Ore Reserves and Mineral Resources”. The palladium and platinum reserves and resources do not include reserves and resources of the Group’s operations outside of Russia.

116 Metal Content Nickel Copper Palladium Platinum Classification Categories (‘000 tonnes) (‘000 tonnes) (‘000 ounces) (‘000 ounces) Reserves Proven and probable Polar Division 6,380 11,756 93,341 24,903 JSC Kola “GMK” 769 378 130 93 Honeymoon Well – – – – Total 7,149 12,134 93,471 24,996 Resources Measured and Indicated Polar Division 11,990 22,339 196,028 55,467 JSC Kola 2,328 1,124 506 330 “GMK” Honeymoon 1,181 – – – Well Total 15,499 23,463 196,534 55,797 Inferred Polar Division 3,942 8,160 62,718 15,922 JSC Kola 874 432 178 119 “GMK” Honeymoon 2,827 – – – Well Total 7,643 8,592 62,896 16,041 The Company believes there is significant potential to develop new reserves around the areas of its current operations on the Taimyr Peninsula and plans to continue geological exploration at those sites. Since 2007, the Group has also been undertaking geological explorations in the Zabaikalsk region, primarily at the Bystrinskoye gold-iron-copper deposit. The Group maintains a global network of representative and marketing offices located in Russia and its principal export markets in Asia, Europe and North America. In 2016, the Group derived 57% and 23% of its total metal sales revenues from sales to Europe and Asia, respectively, with North America and Russia each accounting for 10%, with sales to those regions representing 59%, 27%, 8% and 6%, respectively, of total metal sales revenues in the 2015.

Competitive Strengths The Group is the world’s leading producer of refined nickel and palladium, and the largest producer of platinum outside South Africa. Based on publicly available information, in 2016, the Company believes that the Group’s share of global primary nickel production was 12% and the Group’s share of global primary palladium production was approximately 40%. The Company believes that it has a number of key strengths that distinguish it from its competitors:  Significant Resources and Reserves. The Company estimates that under the JORC Code, as at 31 December 2016, the Group had proven and probable reserves in Russia of 827.7 million tonnes of ore, with a metal content of 7.1 million tonnes of nickel (comprising approximately 14% of global nickel reserves, according to publicly available information), 12.1 million tonnes of copper, 93.5 million ounces of palladium and 25.0 million ounces of platinum, and measured and indicated resources (inclusive of proven and probable reserves) of 2,058 million tonnes of ore in Russia, with a metal content of 14.3 million tonnes of nickel, 23.5 million tonnes of copper, 196.5 million ounces of palladium and 55.8 million ounces of platinum. At current production levels, the Company believes, on the basis of its calculations, that proven and probable reserves of the Group in Russia should have a life of approximately 30 years, and the measured and indicated mineral resources, a life of approximately 60 years.

117 In addition, the Company believes that it has lower resource replacement costs (calculated by reference to the amount of exploration costs incurred in finding new mineral resources) than its principal competitors.  Unique Ore Body. Based on Wood Mackenzie estimates, the Company believes that the Talnakh ore field in its Polar Division has a unique geology because it is a single large deposit with high grades of multiple metals, including nickel, copper, PGMs, gold, silver and cobalt. The Company believes that the grades of nickel and copper in the Talnakh ore field are higher on average than the grades of deposits mined by its competitors and that, consequently, the value per tonne of the ore reserves of its Polar Division (calculated by reference to ore metal grades and using an assumed long-term price for the relevant metals) is higher as compared with the Group’s competitors.  The Lowest Production Costs of all Major Nickel Producers. Based on Wood Mackenzie estimates, the Company believes that the Group has the lowest nickel production costs of all major nickel producers (taking into account the revenues from the copper and PGM products that it derives from the ores that it extracts at its Russian operations), and the cash production costs for all the metals it produces are substantially below current and recent historical market prices. The Group’s labour and energy costs are also relatively low compared with those of many of its competitors, partially as a result of the Group’s significant degree of vertical integration, and the Group is implementing various measures with a view to achieving additional cost savings. Consequently, the Company believes that the Group is better positioned to maintain a positive operating margin in a relatively depressed pricing environment, such as the period since the second half of 2014, than many of its competitors. According to the Company’s estimates, the Group has the leading positions in EBITDA margin compared with other nickel producers in the industry.  Global Distribution Network and Customer Base. The Group operates a global distribution network with sales offices in Russia, Europe, Asia and North America, the areas of largest demand for its products. The Group has a diversified customer base, comprising industrial end users of its products, and, with respect to a significant part of its sales, has direct relations with its customers under long-term sales contracts. See “Business – Sales and Distribution – Product Sales”.  Strong Financial Profile and Credit Rating. The Company believes that its control over its energy supplies and its transportation and distribution network enables it to achieve a high level of operating and financial performance. As at 31 December 2016, the Group’s net debt to EBITDA ratio was 1.2x. As part of its financial strategy, the Group seeks to maintain its credit metrics in accordance with “investment grade” standards. The Group is rated BBB- by both S&P and Fitch, which is currently the highest rating level attainable for Russian corporations. In particular, the Group’s S&P rating stands one notch above the Russian long term sovereign credit rating in foreign currency.  Experienced Management. The Company believes that its senior management team, led by President and Chairman of the Management Board, Mr. Vladimir Potanin, has the technical, financial and strategic expertise necessary for the development of the Group’s assets. The Group’s senior managers have extensive experience in the mining, finance, distribution, sales, transportation and energy sectors. See “Management and Corporate Governance”.

118 In order to reach this objective, the Group’s strategy focuses on the following steps:

Finding new project opportunities based on undeveloped resources The Group seeks to sustain and expand the Group’s mineral resource base primarily through the development of existing deposits located close to its existing infrastructure at its Polar Division, as well as conducting exploration to identify other potential greenfield projects in the Taimyr Peninsula. See “Business – Mining and Metals Operations – Mining, Ore Enrichment, Smelting and Refined Metal Production – Group Metal Production”. The Group also plans to search for additional ore reserves at JSC Kola “GMK” close to its production sites with the aim of increasing mined ore grades. In addition, the Group is developing the Bystrinsky project, which might become a Tier I asset upon reaching its full capacity. The target commissioning date for the concentration facilities at the Bystrinsky project is the fourth quarter of 2017. When completed, the project would bring the Group’s operations closer to key customers in Asia, as well as increase the share of copper in the Group’s total output. The Group will also seek to optimise its licence portfolio, through the extension of existing licences and obtaining new licences for geological research, exploration and mining, particularly at sites adjoining existing mining allotments. The Group may also consider disposal of licences for non- core assets.

119 resources for development based on an analysis of each project in accordance with growth and efficiency parameters and applying a minimum required investment rate of return of 20%, calculated under a base case scenario and using stress tests.

History and Development The Norilsk Mining and Steel Works were founded in 1938 and development of the processing plants and mines of the steel works continued throughout the Soviet era during which the steel works were a state-run enterprise. On 4 November 1989, the USSR Council of Ministries adopted Resolution “On Establishment of the State Concern for Production of Non-ferrous Metals, “Norilsk Nickel”. The established concern consisted of several enterprises including the Norilsk Metal and Steel Works, “Pechenganickel” and “Severonickel”. In 1993, the state concern was transformed into the “Russian Joint Stock Company for Production of Precious and Non-ferrous Metals “Norilsk Nickel” (RAO Norilsk Nickel). The concern was privatised in 1994. The Norilsk Mining Company OJSC was organised as an open joint stock company in 1997 as a result of a corporate reorganisation through the separation from the Zavenyagin Norilsk Mining and Steel Works OJSC that formed part of the RAO Norilsk Nickel group. In 2001, Norilsk Mining Company OJSC was renamed OJSC Mining and Metallurgic Company Norilsk Nickel and increased its charter capital by an additional share issue for limited subscription by shareholders of RAO Norilsk Nickel against payment with shares in RAO Norilsk Nickel. As a result of the restructuring in 2001, holders of 96.9% of the shares in RAO Norilsk Nickel had their shares exchanged for those of the Company. Since 2001, shares in the Company have been traded on the RTS Stock Exchange Non-profit Partnership and on MICEX CJSC (now OJSC MICEX RTS). In addition, in 2001 the Company established a sponsored Level I ADR programme. In 2003, following amendments made to the Russian Law “On Official Secrets” in 2002, the Company disclosed information regarding its operational ore reserves and other mineral resources for

120 the first time. The amendments declassified information regarding non-ferrous metal reserves and enabled the Company to conduct independent audits of the Taimyr and Kola deposits in accordance with the JORC Code. In 2006, the Company spun off OJSC Polyus Gold, a newly-formed Russian open joint stock company holding its gold-mining subsidiaries, to shareholders of the Company. Following this spin- off, the Group continued to mine gold through its Polar Divisions and at JSC Kola “GMK” as a joint metal. In 2010, the Group sold its interest in Stillwater Mining Company, a PGM mining company located in the United States that it had acquired in 2003, for cash consideration of U.S.$881 million. On 18 March 2011, the Company exchanged its 82.7% stake in OGK-3 for shares of Inter RAO at an exchange ratio of 35 shares of Inter RAO per 1 share of OGK-3. The Company disposed of its minority stake in Inter RAO in December 2015. In accordance with the strategy focusing on Tier I assets, starting from May 2014, the Group sold almost all of its production assets in Australia and Africa, except for a 50% participation interest in the Nkomati Nickel Mine in Africa (which was expected to be sold during the second quarter of 2015, but the actual sale was delayed due to voluntary liquidation of the purchaser commenced in October 2016) and the Honeymoon Well deposit in Australia. The Australian and African assets were acquired by the Group in 2007 and included a 85% stake in Tati Nickel in Botswana, a 50% stake in Nkomati Nickel Mine in South Africa and 100% stakes in Australia-based Black Swan, Silver Swan, North Eastern Goldfields Operations, Lake Johnston, Avalon and Cawse. See “Operating and Financial Review – Principal Factors Affecting the Group’s Business – Disposals and holdings”. In 2014, the Group sold goldfields assets North Eastern Goldfields Operations (“NEGO”), nickel assets Black Swan, Silver Swan, Lake Johnston Nickel Project, Avalon and Cawse, located in Western Australia. During the year ended 31 December 2016, the Group received deferred consideration in the amount of U.S.$2 million related to NEGO. During the year ended 31 December 2016, the Group sold certain royalty rights related to previously disposed assets in Western Australia, for U.S.$7 million. In December 2015, the Company entered into an agreement for the sale of up to 13.33% interest in Bystrinsky project to Highland Fund, a consortium of Chinese investors, for a total consideration up to U.S.$100 million. In July 2016, the Company sold 10.67% interest to Highland Fund for U.S.$80 million. In March 2016, the Group established Global Palladium Fund L.P. with a total commitment of up to U.S.$200 million. The strategic objective of the fund is to enhance market liquidity through purchases of third party palladium stockpiles, promote industrial demand for the metal, and strengthen the Group’s leading position in the global palladium industry. On 15 April 2016, the Group sold its aircompany assets comprising 96.8% shares in CJSC “Nordavia – Regional Airlines” (“Nordavia”), a subsidiary of the Group located in the Russian Federation and related to Nordavia aircrafts and infrastructure, for a consideration of U.S.$10 million. The carrying value of net assets at the date of disposal amounted to U.S.$14 million. In April 2016, the Board of Directors of the Company decided to support the Olympic ski resort Rosa Khutor in Sochi, Russia, by approving a 3-year financing programme via acquisition of shares of Belfund Investments Limited for a total consideration of U.S.$250.5 million. The acquisition of the shares was made in several instalments during 2016-2017. In November 2016, the Company acceded to the United Nations Global Compact, the UN framework corporate social responsibility initiative promoting sustainability of businesses. In November 2016, the Company signed an engineering, procurement and construction contract on development of sulphur dioxide capture project for Nadezhda Metallurgical Plant with SNC-Lavalin, an engineering company, with a total consideration of approximately U.S.$1.7 billion (exclusive of Russian value added tax). The project targets a significant reduction of sulphur dioxide emissions at Nadezhda Metallurgical Plant through implementation of efficient technical solutions.

121 On 29 November 2016, the Group sold its 74.8% share in OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian Federation, for a consideration of U.S.$7 million. The carrying value of net assets at the date of disposal amounted to U.S.$8 million. In December 2016, the Company entered into a contract for the purchase of 1.5 million tonnes of copper concentrate from the Russia state-controlled corporation, Rostec, for approximately 67.5 billion roubles. In January 2017, the Board of Directors of the Company approved the sale of up to 39.32% interest in Bystrinsky project to CIS Natural Resources Fund, a Russia-focused natural resources fund, where all limited partnership interests are held, directly or indirectly, by Olderfrey and ESN Group. Subject to compliance with various conditions and receipt of regulatory approvals, the transaction is expected to be completed during 2017. Upon completion of the transaction the Company will retain a greater-than 50% interest in the Bystrinsky project and remain the operator of the project. In March 2017, the time for exercising a right of first refusal in respect of the 39.32% interest in the Bystrinsky project granted to Highland Fund expired. On 12 May 2017, Highland Fund increased its stake in Bystrinsky project to 13.33%. In April 2017, the Company sold its subsidiary holding the shares in LLC Legion TI being the owner of an office building in Moscow to RCP Investments II Ltd, the company of UFG Real Estate, for total consideration of approximately U.S.$100 million.

Organisational Structure and Location of Principal Operations The Group’s business is divided into seven Business Units, comprising the Mining and Metals Business Unit, Sales Business Unit, Geological Business Unit, Energy Business Unit, Transportation and Logistics Business Unit, Research and Development Business Unit and Support Business Unit. The following map shows the location of the principal mining and metallurgical operations of the Group, as well as the Group’s sales offices and exploration projects.

.5 MINING AND METALS OPERATIONS The Group’s operations in Russia mainly comprise the Polar Division, as well as the operations of its subsidiary JSC Kola “GMK”. In 2016, production of nickel, copper, palladium and platinum at the

122 Group’s Russian operations represented 77.2%, 97.3%, 97.6% and 96.6% of total Group production of those respective metals. In addition, the Group has a nickel refinery in Finland operated by its wholly-owned subsidiary Norilsk Nickel Harjavalta.

Mining, Ore Enrichment, Smelting and Refined Metal Production The Group extracts and processes ores in Russia and in Finland to produce nickel, copper and PGMs.

Group Ore Extraction In 2016, the Group extracted 27.6 million tonnes of ore, of which 89.9% was extracted by the Group’s operations in Russia (31.5 million tonnes of ore, of which 80.3% was extracted by the Group’s operations in Russia in 2015). The following table sets out the total amount of ore extracted by the Group’s operations, together with the average ore grades, for the periods indicated: Year ended 31 December 2016 2015 Ore Nickel Copper PGM Ore Nickel Copper PGM Change (mt)(1) (%) (%) (g/t) (mt)(1) (%) (%) (g/t) (%)(2) Russia: Polar Division 17.2 1.23 2.09 6.81 17.3 1.27 2.06 6.85 (0.6) JSC Kola “GMK” 7.6 0.53 0.22 0.08 8.0 0.62 0.25 0.07 (5.0) Total Russia 24.8 25.3 (2.0) Botswana(3) − − − − 2.0 0.15 0.11 − (100.0) South Africa 2.8 0.37 0.13 − 4.2 0.34 0.14 − (33.3) TOTAL 27.6 31.5 (12.4)

Year ended 31 December 2014 Ore Nickel Copper PGM (mt)(1) (%) (%) (g/t) Russia: Polar Division 17.0 1.29 2.08 6.77 JSC Kola “GMK” 8.1 0.65 0.27 0.08 Total Russia 25.1 Australia(4) − − − − Botswana(3) 9.2 0.15 0.11 − South Africa 3.7 0.36 0.13 − TOTAL 38.0 (1) Ore is presented in million tonnes. All data provided is presented on the basis of 100% ownership of the entity which has rights to the relevant deposit, with the exception of the Nkomati deposit, which is presented on the basis of the Group’s 50% interest in Nkomati Nickel Mine. (2) Refers to the change in volumes of ore extraction on a period-to-period basis. (3) Results for the Group’s operations in Botswana comprise the results of Tati Nickel. The Group disposed of assets in Botswana and its stake in Tati Nickel in April 2015. (4) All Group operations at the Australian facilities were suspended in April 2013 and remained suspended until completion of the disposal of most of the Australian assets in March 2015.

Group Ore Enrichment and Smelting The following table sets out for the periods indicated: (i) the percentage of nickel, copper and PGMs recovered by the Group during the enrichment stage of ore processing at its enrichment plants in Russia, Australia, Botswana and South Africa; and (ii) the percentage of nickel, copper and PGMs recovered by the Group during the smelting stage of ore processing at its refinery plants in Russia and Finland:

123 Year ended 31 December 2016 2015 Enrichment Smelting Enrichment Smelting Ni Cu PGM Ni Cu PGM Ni Cu PGM Ni Cu PGM (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Russia: Polar Division(1) 77.1 94.2 79.3 93.4 94.1 95.0 81.3 95.5 79.3 93.1 94.2 93.8 JSC Kola “GMK”(2) 69.0 73.6 − 96.8 96.6 91.9 72.7 76.0 − 97.8 97.3 95.9 Botswana(3) − − − − − − 44.9 45.0 − − − − Finland(4) − − − 98.3 99.7 99.4 − − − 97.1 97.4 97.0 South Africa 70.6 89.5 − − − − 74.1 86.1 − − − −

Year ended 31 December 2014 Enrichment Smelting Ni (%) Cu (%) PGM (%) Ni (%) Cu (%) PGM (%) Russia: Polar Division(1) 82.0 95.8 81.4 92.4 94.8 93.3 JSC Kola “GMK”(2) 72.4 75.2 − 97.8 97.2 95.1 Australia(5) − − − − − − Botswana(3) 44.9 45.0 − − − − Finland(4) − − − 97.1 97.1 97.0 South Africa 75.9 89.0 − − − − (1) PGM recovery rates for the Polar Division are presented on the basis of finished products (PGM concentrates and nickel matte). (2) PGM recovery rates for JSC Kola “GMK” are presented on the basis of saleable PGM products (concentrates, copper slime and copper selenide). (3) Results for the Group’s operations in Botswana comprise the results of Tati Nickel. The Group disposed of assets in Botswana and its stake in Tati Nickel in April 2015. (4) Includes recovery data from the smelter operated by Boliden. (5) All Group operations at the Australian facilities were suspended in April 2013 and remained suspended until completion of the disposal of most of the Australian assets in March 2015.

Group Metal Production In 2016, the Group produced 235.7 thousand tonnes of nickel, 360.2 thousand tonnes of copper, 2,618 thousand ounces of palladium and 644 thousand ounces of platinum, as compared with 266.4 thousand tonnes of nickel, 369.4 thousand tonnes of copper, 2,689 thousand ounces of palladium and 656 thousand ounces of platinum in 2015 and 274.2 thousand tonnes of nickel, 368.0 thousand tonnes of copper, 2,749 thousand ounces of palladium and 657 thousand ounces of platinum in 2014. In the three months ended 31 March 2017, the Group produced 53.5 thousand tonnes of nickel, 94.2 thousand tonnes of copper, 553 thousand ounces of palladium and 130 thousand ounces of platinum, as compared with 63.6 thousand tonnes of nickel, 87.3 thousand tonnes of copper, 643 thousand ounces of palladium and 171 thousand ounces of platinum in the three months ended 31 March 2016 and 67.4 thousand tonnes of nickel, 89.5 thousand tonnes of copper, 633 thousand ounces of palladium and 164 thousand ounces of platinum in the three months ended 31 March 2015. The following table sets out the total commercial metal production of the Group’s operations for the periods indicated: Three months ended 31 March Change (Tonnes or as stated)(1) 2017(1) 2016(1) (%) Russia Nickel 37,423 51,764 (28) Copper 90,882 85,660 6

124 Palladium (‘000 ounces) 534 634 (16) Platinum (‘000 ounces) 125 167 (25) Finland (6) Nickel 16,064 11,867 35 Copper 3,309 1,593 108 Palladium (‘000 ounces) 19 9 111 Platinum (‘000 ounces) 5 4 25 South Africa Nickel in concentrate 2,384 2,900 (18) Copper in concentrate 1,109 1,339 (17) Palladium in concentrate (‘000 ounces) 12 13 (8) Platinum in concentrate (‘000 ounces) 5 5 (0) TOTAL Nickel 53,487 63,631 (16) Copper 94,191 87,253 8 Palladium (‘000 ounces) 553 643 (14) Platinum (‘000 ounces) 130 171 (24)

(1) The information for the three months ended 31 March 2017 and 2016 has been derived from the preliminary production results of the Group for the three months ended 31 March 2017, as published on 27 April 2017.

Three months ended 31 March Change (Tonnes or as stated)(1) 2016(1) 2015(1) (%) Russia Nickel 51,764 55,078 (6) Copper 85,660 86,346 (1) Palladium (‘000 ounces) 633 610 4 Platinum (‘000 ounces) 167 156 7 Finland (6) Nickel 11,867 11,448 4 Copper 1,595 2,515 (37) Palladium (‘000 ounces) 9 18 (51) Platinum (‘000 ounces) 4 7 (46) South Africa Nickel in concentrate 2,900 2,539 14 Copper in concentrate 1,339 1,260 6 Palladium in concentrate (‘000 ounces) 13 13 0 Platinum in concentrate (‘000 ounces) 5 5 0 TOTAL Nickel 63,631 67,437 (6) Copper 87,255 89,532 (3) Palladium (‘000 ounces) 642 633 1 Platinum (‘000 ounces) 171 164 4

(1) The information for the three months ended 31 March 2016 and 2015 has been derived from the preliminary production results of the Group for the three months ended 31 March 2016, as published on 29 April 2016.

Year ended 31 December Change (Tonnes or as stated)(1) 2016 2015 (%) Russia Nickel 182,095 222,016 (18) Copper 350,619 355,707 (1) Palladium (‘000 ounces) 2,554 2,606 (2)

125 Platinum (‘000 ounces) 622 622 - Finland (2) (3) Nickel 53,654 43,479 23 Copper 9,598 13,048 (26) Palladium (‘000 ounces) 64 78 (18) Platinum (‘000 ounces) 22 33 (33) Botswana(4) Nickel in concentrate 0 911 (100) Copper in concentrate 0 671 (100) Palladium in concentrate (‘000 ounces) 0 5 (100) Platinum in concentrate (‘000 ounces) 0 1 (100) South Africa(3) Nickel in concentrate 8,486 11,350 (25) Copper in concentrate 4,007 5,301 (24) Palladium in concentrate (‘000 ounces) 40 53 (25) Platinum in concentrate (‘000 ounces) 15 20 (25) TOTAL Nickel 235,749 266,406 (12) Copper 360,217 369,426 (2) Palladium (‘000 ounces) 2,618 2,689 (3) Platinum (‘000 ounces) 644 656 (2)

Year ended 31 December Change (Tonnes or as stated)(1) 2015 2014 (%) Russia Nickel 222,016 228,438 (3) Copper 355,707 354,944 - Palladium (‘000 ounces) 2,606 2,660 (2) Platinum (‘000 ounces) 622 625 - Australia (5) Nickel in concentrate 0 0 - Finland (2) (3) Nickel 43,479 42,602 2 Copper 13,048 10,598 23 Palladium (‘000 ounces) 78 71 10 Platinum (‘000 ounces) 33 29 14 Botswana(4) Nickel in concentrate 911 3,207 (72) Copper in concentrate 971 2,475 (61) Palladium in concentrate (‘000 ounces) 5 18 (72) Platinum in concentrate (‘000 ounces) 1 3 (67) South Africa(3) Nickel in concentrate 11,350 11,359 - Copper in concentrate 5,301 4,958 7

Palladium in concentrate (‘000 ounces) 53 48 10

Platinum in concentrate (‘000 ounces) 20 19 5 TOTAL Nickel 266,406 274,247 (3) Copper 369,426 368,017 0

126 Palladium (‘000 ounces) 2,689 2,749 (2) Platinum (‘000 ounces) 656 657 -

(1) All data provided is based on 100% ownership, with the exception of Nkomati Nickel Mine, which is presented on the basis of the Group’s 50% interest in this entity. (2) Data in respect of commercial products (metals in copper cake) intended for third parties, net of copper cake intended for processing at JSC Kola “GMK”. (3) The Group’s share of the metal concentrate produced at the Group’s Nkomati Nickel Mine in South Africa is processed at Norilsk Nickel Harjavalta’s refinery in Finland and is included in the results of that entity. (4) Data in respect of commercial products (concentrates) intended for third parties, net of concentrates intended for processing by the Group. (5) All Group operations at the Australian facilities were suspended in April 2013 and remained suspended until completion of the disposal of most of the Australian assets in March 2015. (6) Production results include processing of nickel concentrate from Russian feed and purchased materials. Group metal production targets In 2013, the Company developed a five-year production target in conjunction with the adoption of its strategy (see “—Strategy”), with an increased focus on production of copper and PGMs. The table below shows the Group’s total commercial production for 2013 for its four main metals together with the targets (expressed as a range) for annual production and by 2018, respectively: Metal(1) 2013 2018

Nickel (‘000 tonnes) 219 215-220 Copper (‘000 tonnes) 346 420-440(2) Platinum (‘000 ounces) 604 665-690 Palladium (‘000 ounces) 2,529 2,730-2,840

(1) Only production from Russian feedstock, including production at Norilsk Nickel Harjavalta from Russian feedstock. (2) This target range assumes the launch of operations at the Bystrinsky deposit. The targeted range without production at Bystrinsky is 380-400 thousand tonnes.

Mining and Metals Operations at Norilsk Nickel Russia The Group’s operations in Russia mainly comprise the Polar Division, as well as its JSC Kola “GMK” subsidiary. In 2016, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 77.2%, 97.3%, 97.6% and 96.6% of total Group production of those respective metals, as compared with 83.3%, 96.3%, 96.9% and 94.8%, respectively, in 2015 and 83%, 96%, 97% and 95%, respectively, in 2014.

Polar Division The Group’s Polar Division is located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. The Polar Division conducts underground and open pit mining operations at three deposits containing sulphide copper and nickel ores. The ore extracted from these deposits is processed at the Polar Division’s two enrichment plants and three metallurgical facilities. As the Taimyr Peninsula is not connected to Russia’s rail and road network or national electricity grid, the Group owns and operates various energy generation and transportation infrastructure in that region. See “—Other Operations – Transport and Logistics” and “—Other Operations – Energy”. In accordance with the Group’s strategy, the Polar Division is classified as a Tier I asset. See “— Strategy”.

Ore mining The Group’s Polar Division conducts mining operations at the Talnakh ore field, comprising the Oktyabrskoye deposit and the Talnakh deposit, as well as at the Zapolyarny mine at the Norilsk-1 deposit. These deposits contain sulphide copper-nickel ores from which the Polar Division extracts nickel, copper, palladium and platinum, as well as cobalt, gold and other joint metals.

127 The following table sets forth the different types of copper-nickel sulphide ores found at the deposits that the Polar Division mines, together with an indication of the method of ore extraction. Deposit and pit/mine Type of pit/mine Type of sulphide copper-nickel ore Oktyabrskoye deposit Oktyabrsky mine Underground Rich, cuprous and disseminated Taimyrsky mine Underground Rich Komsomolskaya mine Komsomolsky Underground Rich, cuprous and disseminated shaft Talnakh deposit Mayak mine Underground Rich, disseminated Komsomolskaya mine, including: Komsomolsky shaft Underground Cuprous and disseminated Skalisty shaft Underground Rich Norilsk-1 Deposit Zapolyarnaya mine, including: Zapolyarny open pit Open Disseminated Zapolyarny shaft Underground Disseminated Underground development at the Polar Division is conducted by a system of floor forced failure of mined rock with a one-stage excavation. During the mining process, layer and chamber systems of development with backfilling are used. The following table sets out the total volumes of ore mined at the Polar Division for the periods indicated: Year ended 31 December 2016-2015 2015-2014 Total ore mined (‘000 tonnes) 2016 2015 2014 Change (%) Change (%) Rich 6,192 6,542 6,548 (5.4) (0.1) Cuprous 7,080 5,404 5,422 31.0 (0.3) Disseminated 3,972 5,382 5,074 (26.2) 6.1 Total 17,244 17,328 17,044 (0.5) 1.7 In 2016, the Polar Division extracted 17,244 thousand tonnes of ore, a decrease of 0.5% in comparison to 2015 when the Polar Division extracted 17,328 thousand tonnes of ore. Extraction of rich and cuprous ore amounted to 6,192 thousand tonnes and 7,080 thousand tonnes, respectively, a decrease of 5.4% and an increase of 31%, respectively, as compared with 6,542 thousand tonnes and 5,404 thousand tonnes, respectively, extracted in 2015. Extraction of disseminated ore decreased by 1,410 thousand tonnes in 2016, representing a decrease of 26%, as compared with 2015. The decrease resulted from a decrease in ores mined at the Zapolyarny mine (by 472 thousand tonnes). In 2015, the Polar Division extracted 17,328 thousand tonnes of ore, largely unchanged in comparison with 17,044 thousand tonnes in 2014. Cuprous ore extraction remained largely unchanged in 2015 at 5,404 thousand tonnes, as compared with 5,422 thousand tonnes in 2014. Extraction of disseminated ore increased by 308 thousand tonnes in 2015, representing an increase of 6.1%, as compared with 2014, largely as a result of increased output of cuprous ore at the Oktyabrsky mine. During 2015, extraction of rich ores remained largely unchanged at 6,542 thousand tonnes as compared with 6,548 thousand tonnes in 2014.

Enrichment Ores extracted from the deposits mined by the Polar Division are enriched at the Group’s Talnakh and Norilsk Enrichment Plants, which are located in the Norilsk industrial district. The Talnakh Enrichment Plant processes rich and cuprous ores mined at the Oktyabrskoye deposit to produce nickel, copper and pyrrhotite concentrates, and has an annual capacity to process 7,650 thousand tonnes of ore. The Norilsk Enrichment Plant processes the entire volume of disseminated and cuprous ores from the Talnakh and Oktyabrskoye deposits to produce nickel and copper concentrates. The Norilsk Enrichment Plant has an annual capacity to process 9,300 thousand tonnes of ore. Thickened

128 concentrates from the Talnakh and Norilsk Enrichment Plants are transferred by river for further processing at the Polar Division’s metallurgical facilities. The Group is currently upgrading the Talnakh Enrichment Plant. See “—Capital Expenditure”. In 2016, the Polar Division’s enrichment plants processed in aggregate 16.7 million tonnes of extracted ores, a decrease of 0.2 million tonnes, as compared with 16.9 million tonnes of extracted ores processed in 2015. In 2016, at the Norilsk Enrichment Plant, the recovery rate of nickel and copper decreased by 5.30% and 3.04%, to 53.24% and 70.76%, respectively. At the Talnakh Enrichment Plant, the recovery rate of nickel in nickel concentrate decreased by 3.52%, to 68.25% and the recovery rate of copper in copper concentrate increased by 3.24%, to 82.19%, respectively. In 2016, production of nickel concentrate at the Talnakh Enrichment Plant decreased by 122.6 thousand tonnes, as compared with 2015. The decrease resulted largely due to construction and installation of new equipment, lower volumes of ores and a planned increase of metal content in concentrate. In 2015, the Polar Division’s enrichment plants processed in aggregate 16.9 million tonnes of extracted ores, an increase of 400 thousand tonnes, as compared with 16.5 million tonnes of extracted ores processed in 2014. In 2015, at the Norilsk Enrichment Plant, the recovery rate of nickel in nickel concentrate decreased by 0.96%, to 71.77%, and the recovery rate of copper in copper concentrate increased by 1.96%, to 78.95%. At the Talnakh Enrichment Plant, the recovery rate of nickel in nickel concentrate and the recovery rate of copper in copper concentrate was largely unchanged from 2014. In 2015, production of nickel concentrate at the Talnakh Enrichment Plant decreased by 64.4 thousand tonnes, as compared with 2014. The decrease resulted largely from lower volumes of nickel in ores and improvement in concentrate quality. In 2014, the Polar Division’s enrichment plants processed in aggregate 16.5 million tonnes of extracted ores, a decrease of 0.1 million tonnes, as compared with 16.6 million tonnes of extracted ores processed in 2013. In 2014, at the Norilsk Enrichment Plant, the recovery rate of nickel and copper increased by 0.65% and 0.19%, to 72.75% and 91.92%, respectively. At the Talnakh Enrichment Plant, the recovery rate of nickel in nickel concentrate and the recovery rate of copper in copper concentrate was largely unchanged from 2013. In 2014, production of nickel concentrate at the Talnakh Enrichment Plant decreased by 0.2 million tonnes, as compared with 2013. The decrease resulted largely due to lower volumes of rich ores and higher volumes of disseminated ores produced at the mines. In 2013, the Group launched the Talnakh enrichment plant’s start-up facility I at full capacity. The facility is designed to utilise ore tailings enabling the Group to use approximately 250 thousand m3 of enrichment waste per year from worked out pits.

Smelting The metallurgical facilities of the Polar Division include the Nadezhda Metallurgical Plant, as well as the Copper Plant. The Group decommissioned the Norilsk Nickel Plant in August 2016 to concentrate nickel smelting facilities at the Nadezhda Metallurgical Plant. See “—Capital Expenditure”. The Nadezhda Metallurgical Plant processes all the nickel and pyrrhotite concentrates produced by the Talnakh Enrichment Plant, a portion of pyrrhotite concentrate stockpiled at the Kayerkanskoye coal mine and, until August 2016, all copper concentrate from the high-grade matte separation area of the Norilsk Nickel Plant in order to produce high-grade matte, copper anodes and elemental sulphur. In November 2016, the Company signed an engineering, procurement and construction contract on development of sulphur dioxide capture project for Nadezhda Metallurgical Plant with SNC-Lavalin, an engineering company, with a total consideration of approximately U.S.$1.7 billion (exclusive of Russian value added tax). The project targets a significant reduction of sulphur dioxide emissions at Nadezhda Metallurgical Plant through implementation of efficient technical solutions. The Copper Plant processes the entire volume of copper concentrates produced by the Talnakh Enrichment Plant and copper anodes from the Nadezhda Metallurgical Plant to produce commercial copper. The process also produces elementary sulphur and sulphuric acid for technical needs of the Polar Division. The Copper Plant includes a metallurgical shop, which recycles sludge from the copper and nickel electrolysis shops to produce precious metals concentrate, metallic silver, selenium and tellurium.

129 The Group outsources the refining of precious metals concentrates from the Polar Division under tolling agreements with OJSC Krascvetmet, a third-party precious metals refinery located in Krasnoyarsk. The following table sets out the capacity utilisation levels at the Nadezhda Metallurgical Plant, Norilsk Nickel Plant and Copper Plant for the periods indicated: Year ended 31 December Capacity utilisation levels (%) 2016 2015 2014 Nadezhda Metallurgical Plant 100 99 100 Norilsk Nickel Plant(1) Ore thermal furnace 20 99 100 Nickel electrolysis shop 98 78 97.9 Copper Plant Vanukov furnace 60 59 73.2 Copper electrolysis shop 80 86 70.5

(1) Norilsk Nickel Plant was decommissioned in August 2016. The table above reflects capacity utilisation level to that time. In 2016, the average recovery rate for nickel, copper and PGMs at the Group’s metallurgical plants at the Polar Division were 93.4%, 94.1%, and 95.0%, respectively, as compared with 93.1%, 94.2% and 93.8%, respectively, in 2015. In 2014, the average recovery rates for nickel, copper and PGMs at the Group’s metallurgical plants at the Polar Division were 92.4%, 94.7%, and 93.3%, respectively. JSC Kola “GMK” JSC Kola “GMK” conducts mining, enrichment and smelting operations on the Kola Peninsula in North West Russia to produce nickel, copper and PGMs. JSC Kola “GMK” forms the largest industrial complex in that region.

Ore mining JSC Kola “GMK” conducts underground and open pit mining operations at four deposits containing disseminated sulphide copper and nickel ores. The following table shows the deposits that JSC Kola “GMK” mines, together with an indication of the method of extraction. Type of sulphide copper Deposit and pit/mine Type of pit/mine and nickel ore Zhdanovskoye deposit Severny mine, open pit mine section Open Disseminated Severny mine, underground mine section Underground Disseminated Zapolyarnoye deposit Severny mine, underground mine section Underground Disseminated Kotselvaara and Semiletka deposits Kaula-Kotselvaara mine Underground Disseminated In 2016, JSC Kola “GMK” extracted 7,615 thousand tonnes of ore, a decrease of 347 thousand tonnes, or 4.3%, as compared with 7,962 thousand tonnes of ore extracted in 2015.

Enrichment The ore extracted from the deposits mined by JSC Kola “GMK” is processed at its Kola Enrichment Plant to produce copper and nickel concentrate. The concentrate is then transferred to the roasting section of the smelting shop for further processing into high-grade matte. The Kola Enrichment Plant has the capacity to process 7,500 thousand tonnes of ore per year, and, in 2016, 2015 and 2014, the Kola Enrichment Plant operated at full capacity. In 2016, the average recovery rates for nickel and copper at the Kola Enrichment Plant were 69.0% and 73.6%, respectively, as compared with 72.7% and 76.0%, respectively, in 2015 and 72.4% and 75.2%, respectively, in 2014.

130 Smelting JSC Kola “GMK”’s refining capacities at Monchegorsk process high-grade matte produced by JSC Kola “GMK”, as well as high-grade matte received from the Polar Division, using the same technologies as those used at the Copper Plant of the Polar Division. The main products produced at the Monchegorsk refinery are electrolytic nickel and copper, carbonyl nickel, cobalt concentrate and precious metals concentrates. The refining process also produces sulphuric acid. In 2016, the average recovery rates for nickel, copper and PGMs at the Monchegorsk refinery were 98.04%, 97.1% and 96.25%, respectively, as compared with 97.8%, 97.3% and 97.13%, respectively, in 2015 and 97.8%, 97.2% and 95.1%, respectively, in 2014. The Group outsources the refining of precious metals concentrates produced by JSC Kola “GMK” under tolling agreements to OJSC Krascvetmet. The following table sets out the capacity utilisation levels at the production facilities of JSC Kola “GMK” for the periods indicated: Year ended 31 December Capacity utilisation levels (%) 2016 2015 2014 Nickel ore smelting furnace 62.2 72.2 93.1 Nickel electrolysis shop 88.86 99.28 82.6 Carbonyl nickel division 37.50 23.81 19.6 Copper metallurgical shop 81.71 73.34 63.6 In 2016, the Group continued to upgrade smelting facilities of JSC Kola “GMK”, which involved streamlining the production processes and improving maintenance of the process equipment. Metal Production – Russian Operations The following table sets out the total volumes of production of nickel, copper, palladium and platinum of the Polar Division and JSC Kola “GMK” for the periods indicated:

Three months ended 31 March Amount (tonnes unless indicated) 2017(1) 2016(1) Change (%) Polar Division Nickel 0 23,650 (100) Copper 71,160 72,763 (2) Palladium (‘000 ounces) 169 405 (58) Platinum (‘000 ounces) 44 119 (63) JSC Kola “GMK” Nickel 37,423 28,114 33 Copper 19,722 12,897 53 Palladium (‘000 ounces) 365 229 59 Platinum (‘000 ounces) 81 48 68 TOTAL Nickel 37,423 51,764 (28) Copper 90,882 85,660 6 Palladium (‘000 ounces) 534 634 (16) Platinum (‘000 ounces) 125 167 (25)

Year ended 31 December

Amount (tonnes unless 2016-2015 2015-2014 indicated) 2016 2015 2014 Change (%) Change (%) Polar Division Nickel 50,860 96,916 122,390 (48) (21) Copper 280,347 292,632 297,552 (4) (2)

131 Year ended 31 December

Amount (tonnes unless 2016-2015 2015-2014 indicated) 2016 2015 2014 Change (%) Change (%)

Palladium (‘000 ounces) 1,703 1,935 2,065 (12) (6)

Platinum (‘000 ounces) 449 488 499 (8) (2) JSC Kola “GMK” Nickel 131,235 125,100 106,048 5 18 Copper 70,272 63,075 57,392 11 10

Palladium (‘000 ounces) 851 671 595 27 13

Platinum (‘000 ounces) 173 134 126 29 6 TOTAL Nickel 182,095 222,016 228,438 (18) (3) Copper 350,619 355,707 354,944 (1) 0

Palladium (‘000 ounces) 2,554 2,606 2,660 (2) (2)

Platinum (‘000 ounces) 622 622 625 0 (1)

In the three months ended 31 March 2017, the Group’s Russian operations produced 37,423 tonnes of nickel, a decrease of 28% as compared with 51,764 tonnes of nickel produced in the three months ended 31 March 2016, largely as a result of the decommissioning of the Norilsk Nickel Plant in 2016, an increase of work-in-progress inventories and an increase of shipments of the Company’s Russian feed to Norilsk Nickel Harjavalta for processing in line with the reconfiguration of downstream production facilities. The Group’s Russian operations amounted to 90,882 tonnes of copper in the three months ended 31 March 2017, an increase of 6% as compared with 85,660 tonnes of copper in the three months ended 31 March 2016, mainly as a result of higher copper feed grades and the launch of processing of concentrate purchased from Rostec. Palladium and platinum production decreased by 16% and 25%, respectively, to 534 thousand ounces of palladium and 125 thousand ounces of platinum in the three months ended 31 March 2017 as compared with 634 thousand ounces of palladium and 167 thousand ounces of platinum in the three months ended 31 March 2016. The decrease of palladium and platinum production was primarily due to an increase of work-in-progress materials in transit from the Polar Division to JSC Kola “GMK”, depletion of stored pyrrhotite concentrate feed and a longer refining processing time of precious metal concentrate produced from the slag of Copper Plant, at Krasnoyarsk precious metals refinery. In 2016, the Group’s Russian operations produced 182,095 tonnes of nickel, a decrease of 18% as compared with 222,016 tonnes of nickel produced in 2015, largely as a result of decommissioning of Norilsk Nickel Plant in 2016 and the roll-out of new downstream configuration resulting in a built up of work-in-progress metals inventory. The Group’s Russian operations produced 350,619 tonnes of copper in 2016, a decrease of 1% as compared with 355,707 tonnes of copper produced in 2015, largely as a result of calibration of upgraded Talnakh Concentrator and lower copper content in mined ore. The Group’s Russian operations produced 2,554 thousand ounces of palladium in 2016, a decrease of 2% as compared with 2,606 thousand ounces of palladium produced in 2015. Platinum production amounted to 622 thousand ounces in 2016 resulting in no change as compared with platinum produced in 2015. In 2015, the Group’s Russian operations produced 222,016 tonnes of nickel, a decrease of 3% as compared with 228,438 tonnes of nickel produced in 2014, largely as a result of reconfiguration of production facilities at the Polar Division and the reduction of low-margin tolling operations at JSC Kola “GMK”. The Group’s Russian operations produced 355,707 tonnes of copper in 2015 and stayed almost flat as compared with 354,944 tonnes of copper produced in 2014. The Group’s Russian operations produced 2,606 thousand ounces of palladium in 2015, a decrease of 2% as compared with

132 2,660 thousand ounces of palladium produced in 2014. Platinum production decreased by 1% to 622 thousand ounces in 2015.

Metals and mining operations outside of Russia Following the recent sale of Australian and African assets, the Group continues to hold outside of Russia a nickel refinery in Finland operated by Norilsk Nickel Harjavalta, as well as two assets that the Group is planning to sell (including a 50% participation interest in the Nkomati Nickel Mine in Africa which was expected to be sold during the second quarter of 2015, but the actual sale was delayed due to voluntary liquidation of the purchaser commenced in October 2016) and the Honeymoon Well deposit in Australia. See “Operating and Financial Review – Principal Factors Affecting the Group’s Business – Disposals and Holdings”. Finland The Group operates the Norilsk Nickel Harjavalta refinery, which is the only nickel refinery in Finland. The refinery is located at the Suurteollisuuspuisto Industrial Park in Harjavalta, approximately 220 kilometres north of Helsinki. The refinery processes nickel feedstock from third- party suppliers. It has the capacity to produce 66,000 tonnes of nickel per year. The refinery uses the sulphuric acid leaching process, which results in high nickel recovery rates. The Harjavalta refinery produces nickel cathodes, briquettes and salts, as well as semi-products such as copper cake containing precious metals and cobalt solution, which are further processed by third parties. In the three months ended 31 March 2017, Norilsk Nickel Harjavalta produced 16,064 tonnes of nickel, 3,309 tonnes of copper, 19 thousand ounces of palladium and 5 thousand ounces of platinum, as compared with 11,867 tonnes of nickel, 1,593 tonnes of copper, 9 thousand ounces of palladium and 4 thousand ounces of platinum in the three months ended 31 March 2016. The increase in production of nickel, copper, palladium and platinum was primarily the result of an increase in processing of Russian feed supplied by the Group’s Russian operations to Norilsk Nickel Harjavalta as part of the ongoing downstream reconfiguration. In 2016, Norilsk Nickel Harjavalta produced 53,654 tonnes of nickel, 9,598 tonnes of copper, 64 thousand ounces of palladium and 22 thousand ounces of platinum, as compared with 43,479 tonnes of nickel, 13,048 tonnes of copper, 78 thousand ounces of palladium and 33 thousand ounces of platinum in 2015 and 42,602 tonnes of nickel, 10,598 tonnes of copper, 71 thousand ounces of palladium and 29 thousand ounces of platinum in 2014. Capacity utilisation level at Harjavalta was 82% in 2016, as compared with 67% in 2015 and 66% in 2014. The increase in nickel production levels in 2016 as compared with 2015 was the result of increase in processing of Russian feed supplied by the Group’s Russian operations to Norilsk Nickel Harjavalta as part of ongoing downstream reconfiguration and additional processing volumes of concentrate purchased from third parties. The decrease in production of copper, palladium and platinum in 2016 as compared with 2015 was primarily the result of shipment of copper cake for processing to JSC Kola “GMK”. Australia The Group holds an exploration licence for four nickel-sulphide ore deposits at Honeymoon Well in Western Australia. As at 31 December 2016, the Group has estimated that the total mineral base of the Honeymoon Well project, stated in accordance with the JORC Code (but not independently verified), comprised 173.3 million tonnes of sulphide nickel ores with an average nickel content of 0.68%.

Ore Reserves and Mineral Resources The table below shows the mineral reserves and resources (in terms of metal content) of the Group, prepared by the Group according to the JORC Code (but not independently verified) as at 31 December 2016. The palladium and platinum reserves and resources do not include reserves and resources of the Group’s operations outside of Russia.

133 Metal Content Nickel Copper Palladium Platinum (‘000 Classification Categories (‘000 tonnes) (‘000 tonnes) (‘000 ounces) ounces) Reserves Proven and probable 7,149 12,134 93,471 24,996 Resources Measured and Indicated 15,499 23,463 196,534 55,797 Inferred 7,643 8,592 62,896 16,041 The section below sets out a summary of the reserves and resources of the Group’s operations in Russia and Australia. Russia The reserves and resources of the Polar Division are contained within the Talnakh ore field (comprising the Talnakh and Oktyabrskoye deposits), which includes rich, cuprous and disseminated ores, and part of the Norilsk-1 Deposit (excluding the southern section), which contains disseminated ores. As at 31 December 2016, the total proven and probable reserves of these deposits comprised 695,052 thousand tonnes of ore, containing 6,380 thousand tonnes of nickel, 11,756 thousand tonnes of copper, 93,341 thousand ounces of palladium and 24,903 thousand ounces of platinum. The reserves and resources of JSC Kola “GMK” are contained within four main deposits of disseminated ores. As at 31 December 2016, the total proven and probable reserves of these deposits comprised 132,647 thousand tonnes of ore, containing 769 thousand tonnes of nickel, 378 thousand tonnes of copper, 130 thousand ounces of palladium and 93 thousand ounces of platinum. The following table sets out a breakdown of the mineral reserves and resources of the Group in Russia in mining lease boundaries of active mines in accordance with the JORC Code as at 31 December 2016. Mineral resources are presented inclusive of proven and probable reserves.

134 Metal Grade Contained Metal Ore tonnage Nickel Copper Palladium Platinum Gold 6 PGM Nickel Copper Palladium Platinum Gold 6 PGM (‘000 (‘000 (‘000 (‘000 (‘000 (‘000 (‘000 tonnes) (%) (%) (g/t) (g/t) (g/t) (g/t) tonnes) tonnes) ounces) ounces) ounces) ounces) POLAR DIVISION Proven ore reserves Talnakh ore field Rich 44,903 2.54 3.22 5.38 1.03 0.10 6.75 1,141 1,444 7,763 1,483 150 9,750 Cuprous 25,535 0.98 3.99 9.48 2.28 0.52 11.89 251 1,020 7,786 1,870 429 9,762 Disseminated 264,733 0.43 1.05 2.95 0.90 0.20 4.03 1,146 2,791 25,143 7,630 1,675 34,316 Total Talnakh ore field (combined ore types) 335,171 0.76 1.57 3.78 1.02 0.21 5.00 2,538 5,255 40,692 10,983 2,254 53,828 Norilsk-1 Deposit (disseminated ore) 23,025 0.35 0.50 4.01 1.61 0.18 5.91 80 116 2,966 1,194 135 4,379 Probable ore reserves Talnakh ore field Rich 87,406 2.85 3.37 6.79 1.40 0.27 8.70 2,491 2,943 19,082 3,932 752 24.456 Cuprous 55,794 0.76 3.33 7.34 1.91 0.60 9.46 425 1,857 13,172 3,432 1,072 16,971 Disseminated 171,155 0.46 0.88 2.60 0.75 0.18 3.56 783 1,503 14,322 4,115 999 19,564 Total Talnakh ore field (combined ore types) 314,355 1.18 2.01 4.61 1.14 0.28 6.03 3,699 6,303 46,576 11,479 2,823 60,991 Norilsk-1 Deposit (disseminated ore) 22,501 0.28 0.36 4.30 1.72 0.18 6.35 63 82 3,107 1,247 131 4,590 Total proven and probable ore reserves 695,052 0.92 1.69 4.18 1.11 0.24 5.54 6,380 11,756 93,341 24,903 5,343 123,788 Measured and indicated mineral resources Talnakh ore field Rich 114,695 3.23 3.90 7.42 1.50 0.25 9.45 3,700 4,471 27, 352 5,517 920 34,853 Cuprous 68,798 1.01 4.32 9.77 2.47 0.70 12.47 698 2,969 21,617 5,467 1,549 27,576 Disseminated 1,386,376 0.52 1.03 2.90 0.84 0.19 3.92 7,148 14,329 129,245 37,539 8,375 174,637 Total Talnakh ore field (combined ore types) 1,569,869 0.74 1.39 3.53 0.96 0.21 4.70 11,546 21,769 178,214 48,523 10,844 237,066 Norilsk-1 Deposit (disseminated ore) 149,268 0.30 0.38 3.71 1.45 0.10 5.35 444 570 17,814 6,944 458 25,561 Total measured and indicated mineral resources 1,719,137 0.70 1.30 3.55 1.00 0.20 4.75 11,990 22,339 196,028 55,467 11,302 262,717 Total inferred mineral resources 449,474 0.88 1.82 4.35 1.11 0.28 5.73 3,942 8,160 62,718 15,922 3,743 82,018

JSC KOLA “GMK” (Disseminated ore) Proven ore reserves 54,939 0.56 0.24 0.03 0.02 0.01 0.05 310 133 51 37 15 89 Probable ore reserves 77,708 0.59 0.32 0.03 0.02 0.01 0.06 459 245 79 56 29 143 Total proven and probable ore reserves 132,647 0.58 0.28 0.03 0.02 0.01 0.05 769 378 130 93 44 232 Total measured and indicated mineral resources 339,644 0.69 0.33 0.05 0.03 0.02 0.08 2,328 1,124 506 330 182 896 Total inferred mineral resources 137,636 0.60 0.31 0.04 0.03 0.01 0.07 874 432 178 119 57 312

135 Based on its own provisional estimates, the Company believes that it may be possible to increase the resource base of the Polar Division through further exploration on the Taimyr Peninsula.

Australia The following table sets out the mineral reserves and resources of the Group in Australia calculated by the Group in accordance with the JORC Code (but not independently verified) as at 31 December 2016. Mineral resources are presented inclusive of proven and probable reserves. Metal Grade Contained Metal Ore tonnage Nickel Copper 4 PGM Nickel Copper 4 PGM (‘000 (‘000 (‘000 (‘000 tonnes) (%) (%) (g/t) tonnes) tonnes) ounces) Sulphide Nickel Honeymoon Well Measured and indicated resources 173,300 0.68 0 0 1,181 0 0 Inferred mineral resources 11,900 0.68 0 0 81 0 0

Lateritic Nickel Honeymoon Well Inferred mineral resources 339,000 0.81 0 0 2,746 0 0

Capital Expenditure

Capital Expenditure Policy In accordance with its strategy adopted in 2013, the Group seeks to implement a uniform investment framework and broader management culture focused on return on invested capital. This investment governance system contemplates the allocation of resources for development based on an analysis of each project in accordance with growth and efficiency parameters and applying a minimum required investment rate of return of 20%, which is calculated on the basis of internal Group estimates under a base case scenario and using stress tests. In 2013, the Group implemented a centralised system of investment governance under the supervision of an investment committee with sub-committees and commissions at central management level and branch or subsidiary level, respectively. The Company expects average annual investment levels of approximately U.S.$2.0 billion (at the currently anticipated currency exchange rates) through 2018. For 2017-2018, the Group’s development strategy contemplates that approximately 60 per cent of total capital expenditure will be allocated to development projects and the remainder to “stay-in-business” needs (i.e. maintenance and other mandatory projects). Any capital expenditure activities for the acquisition of equipment, development or modernisation of existing assets or construction of new facilities in excess of RUB 1 billion must be approved by the Company’s investment committee.

Ongoing and Prospective Investment Projects The Group seeks to align its investment projects with its overall strategic goals, and, consequently, the focus of the Group’s investment is the Polar Division with the aim of the sustained and increased exploitation of the potential of these Tier I mining and metallurgical assets. These investment projects primarily comprise brownfield development, including projects to remove bottlenecks, together with two main greenfield projects located close to existing facilities. The Group’s main brownfield and greenfield projects at the Polar Division are summarised below. Although some of these projects are currently being implemented, others remain in the design and feasibility stage. Furthermore, some of these projects remain, in whole or in part, subject to the approval of the Board of Directors and estimates of the relevant budgets are based on management calculations. Management has estimated that all these projects at the Polar Division offer a potential internal rate of return in excess of the

136 Group’s threshold rate of 20%, in many cases with a substantial excess margin, and, with only a few exceptions, would still meet that threshold rate under applicable stress test scenarios.

Brownfield projects The main brownfield projects at the Polar Division include:  At the Oktyabrsky pit: four projects, currently in the construction phase, to maintain the current annual extraction volume of 5.0-5.2 million tonnes of ore by 2023 at an estimated total cost of U.S.$138 million from 2017 to 2020. In 2016, capital expenditures amounted to U.S.$59 million.  At the Taimyrsky pit: eight projects, currently in the construction phase, to increase annual extraction of rich ore from 3.5 million tonnes to 3.9 million tonnes by 2022 at an estimated total cost of U.S.$455 million from 2017 to 2022. In 2016, capital expenditures amounted to U.S.$68 million.  At the Komsomolsky pit: seven projects, currently in the construction phase, to maintain the current annual extraction volume of 3.8-4.1 million tonnes of ore by 2020 at an estimated total cost of U.S.$267 million from 2017 to 2020. In 2016, capital expenditures amounted to U.S.$40 million.

Greenfield projects The main greenfield projects at the Polar Division comprise the Skalisty mine and the upgrade and expansion of the Talnakh Enrichment Plant. The Skalisty mine is in the process of construction, with approximately 45% of the works completed. The estimated total cost (between 2017 and 2025) of the project is 68 billion roubles (which is equivalent to U.S.$1.1 billion as at 31 December 2016). The first phase of construction was completed in 2014. In the fourth quarter of 2015 and in December 2016, two start-up facilities were commissioned with an annual extraction volume of 0.8 million tonnes of ore. The Group’s project to upgrade the concentration facilities at the Talnakh Enrichment Plant aims to remove a bottleneck for mining projects, as well as improving performance through economies of scale and increased efficiency. The project contemplates an increase in annual capacity of the plant to 10.2 million tonnes of ore. The Company also expects that the project will result in reduced smelting costs as a result of the anticipated increase in the nickel content to approximately 13% in the concentrate produced at the plant, as well as reducing the volume of sulphur emitted during the smelting process. The estimated total cost of the project is approximately U.S.$864 million. The construction commenced in 2014 following completion of the design works and grinding and floatation shop was commissioned in the fourth quarter of 2016. All works are expected to be completed in the second quarter of 2017.

Maslovskoye deposit The Maslovskoye deposit is located within the Norilsk industrial district, approximately 12 kilometres south of the Medvezhy Ruchey open pit of the Norilsk-1 Deposit. Following geological exploration carried out by the Group between 2006 and 2009, the rich vein-disseminated ore reserves of the Maslovskoye deposit were recorded in the government registers by the Government Reserve Commission of the Federal Subsurface Management Agency of the Russian Federation. The Group has provisionally estimated the ore reserves of this deposit at approximately 217 million tonnes.

Exploration and Development In accordance with the Group’s strategy, its exploration and development activities are currently focused in and around the Group’s Polar Division, as well as on the Kola Peninsula and in the Zabaikalsk region.

137 Taimyr Peninsula The geological exploration carried out on the Taimyr Peninsula is aimed at replacing nickel, copper, PGMs and other mineral reserves existing in the area of the Polar Division in order to maintain the uninterrupted operation of the Group’s metals and mining complex in the Norilsk industrial district. The exploration is primarily carried out at the following sites: deep horizons and flanks of the Oktyabrskoye and Talnakh deposits. In 2014, the Company started the prospecting in the Lebyazhninskaya, Razvedochnaya, Mogenskaya, Khalilskaya, Nizhne-Khalilskaya and Nirungdinskaya areas in the Norilsk industrial district.

Zabaikalsk region Since 2007, the Group has been participating in a combined public-private investment project, the key parameters of which were outlined in an order of the government of the Russian Federation issued in 2006, involving, amongst other things, geological exploration at two sites in the southeast of the Zabaikalsk region. In addition to field development and construction of mining-and-processing works, the investment project includes the construction of railroad infrastructure in order to facilitate the development of the mineral resource potential of the southeast of the Zabaikalsk region, which is in high degree of readiness and 220kv power line construction pursuant to an agreement reached with Federal Grid Company, which is expected to be commissioned by the fourth quarter of 2017. The project, if implemented, is expected to result in the development of a major mining complex in the Zabaikalsk region, based around the Bystrinskoye gold-iron-copper deposit and the Bugdainskoye molybdenum deposit. The Bystrinskoye deposit is located in the Gazimur-Zavodsky district of the Zabaikalsky region. The Group expects the Bystrinsky project to become a Tier I upon reaching its full capacity, scheduled for 2017. In 2016, a U.S.$800 million 8-year facility agreement was entered into to finance the project. The facility was structured as a project financing with no recourse to the Company based on a stand- alone assessment of the project future financial performance. In the same year, the Group sold a 10.67% share in the Bystrinsky project to Highland Fund for U.S.$80 million. The remaining capital expenditures on the project are estimated to be U.S.$500 million. On 12 May 2017, Highland Fund increased its stake in Bystrinsky project to 13.33%. The Bugdainskoye molybdenum deposit is located in the Alexandrov-Zavodsky district of the Zabaikalsk region. In 2013, the Group started development of the deposit but in 2014, due to unfavourable market prices for molybdenum, the right to use the deposit was suspended for three years at the request of the Group. In 2015, the Company started prospecting in the Zapadno-Shakhtaminskaya, Tsentralno- Shakhtaminskaya and Chingitayskaya areas.

Historical Capital Expenditure In 2016, 2015 and 2014, the aggregate capital investments (purchases of property, plant and equipment) of the Group amounted to U.S.$1.7 billion, U.S.$1.7 billion and U.S.$1.3 billion, respectively. In 2016, the Group invested U.S.$634 million in the development of mining operations, including U.S.$361 million relating to the construction, revamping and upgrading of mining facilities at the Polar Division, U.S.$269 million relating to the implementation of the Bystrinsky project and U.S.$8 million relating to the construction and upgrade of mining operations at JSC Kola “GMK”. The Group’s investments in the development of enrichment operations in the Polar Division and at JSC Kola “GMK” in 2016 were U.S.$264 million, primarily including investments in upgrading facilities at the Talnakh Enrichment Plant. In 2016, the Group also invested U.S.$58 million in development of smelting operations in the Polar Division and at JSC Kola “GMK” and U.S.$172 million in development of power generating

138 facilities. The remainder of the Group’s capital expenditures in 2016 was primarily allocated to sales and logistics facilities, major repair works and non-industrial facilities.

Licences The Group’s key ore deposits are located within the Russian Federation. The Group’s research, exploration and production activities at these deposits are dependent upon the issue, renewal or continuance in force of appropriate subsoil licences. See “Regulatory Matters” for further discussion of the licensing regime for the use of subsoil in the Russian Federation. Production licences in Russia The table below summarises certain information relating to the Group’s main metals mining and production licences in Russia, as well as licences for the development project in Zabaikalsk region: Type of ore / Geographic Issuance Expiration Licence holder resource Name of deposit(s) Location date date Company Sulphide Maslovskoye deposit Krasnoyarsk 19.05.2015 01.06.2035 copper- nickel region ores Company Refinement Tailing storage No.1 Krasnoyarsk 12.12.2016 31.12.2018 tailings of of Norilsk Enrichment region sulphide Plant copper- nickel ores Company Copper- nickel Oktyabrskoye deposit Krasnoyarsk 01.11.2016 31.12.2033 ores region Company Copper- nickel Talnakh deposit Krasnoyarsk 01.11.2016 31.12.2033 ores region Company Copper- nickel Norilsk-1 Deposit Krasnoyarsk 20.09.2016 31.12.2029 ores region JSC Kola “GMK” Non-ferrous Zhdanovskoye deposit Murmansk 30.12.1998 30.12.2031 metals ores region JSC Kola “GMK” Sulphide Kaula, Kotselvaara- Murmansk 08.02.2017 31.12.2024 copper- nickel Kammikivy and region ores Semiletka deposits JSC Kola “GMK” Non-ferrous Zapolyarnoye deposit Murmansk 30.12.1998 31.12.2030 metals ores region JSC Kola “GMK” Sulphide Tundrovoye, Murmansk 18.08.2016 31.12.2031 copper- nickel Bystrinskoye, region ores Verkhnee and Sputnik deposits LLC Bystrinskoye Gold-iron- Bystrinskoye area Zabaikalsk 14.02.2005 20.02.2030 GRK copper ores region LLC Bugdainskiy Molybdenum Bugdainskoye deposit Zabaikalsk 06.02.2006 31.12.2032 Rudnik and associated region components LLC Shirinskoye Gold and silver Bystrinsko-Shyrinskoe Zabaikalsk 05.06.2006 31.05.2025 from primary occurrence region deposits All of the Group’s current production licences are due to expire between 2018 and 2035. The Group estimates that the economic life of the Group’s key deposits extends beyond the current licence expiration dates. Under Russian law, the Group is entitled to apply for an extension of the licences to the end of the economic life of the deposits, provided that there have been no violations of the terms of the licences. Each production licence held by the Group has corresponding licence conditions for the use of subsoil resources, which contains the principal terms of that licence. The licence conditions of the Group generally follow the same format and impose various obligations on the Group. See “Regulatory Matters”.

139 Geological research licences in Russia The table below summarises certain information relating to the Group’s principal research licences in Russia. Under these licences, the Group may conduct only geological research, and, to the extent this research indicates that it may be feasible to develop commercially the relevant deposit, the Group would be required to apply for a further licence for the exploration and production stages. Geographic location and Size of the Expiration Licence holder Ores studied name of deposit site (km2) Issuance date date Company Sulphide Krasnoyarsk 99 14.11.2014 15.11.2021 copper- nickel region, ores Razvedochnaya area Company Sulphide Krasnoyarsk 99 14.11.2014 15.11.2021 copper- nickel region, ores Mogenskaya area Company Sulphide Krasnoyarsk 99 14.11.2014 15.11.2021 copper- nickel region, ores Lebyazhninskaya area LLC Sulphide Krasnoyarsk 100 14.11.2014 15.11.2021 Norilskgeology copper- nickel region, ores Khalilskaya area LLC Sulphide Krasnoyarsk 100 14.11.2014 15.11.2021 Norilskgeology copper- nickel region, ores Nirungdinskaya area LLC Sulphide Krasnoyarsk 100 14.11.2014 15.11.2021 Norilskgeology copper- nickel region, ores Nizhne- Khalilskaya area LLC Copper, gold, Zabaikalsk region, 93 21.01.2015 31.01.2020 Vostokgeology iron and Chingitayskaya associated area components LLC Copper, gold Zabaikalsk region, 89 18.03.2015 31.03.2020 Vostokgeology and associated Tsentralno- components Shakhtaminskaya area LLC Copper, gold, Zabaikalsk region, 97 18.03.2015 31.03.2020 Vostokgeology molybdenum Zapadno- and associated Shakhtaminskaya components area Each research licence held by the Group has corresponding licence conditions for the use of subsoil resources, which contains the principal terms of such licence. The licence conditions of the Group generally follow the same format and impose various obligations on the Group. See “Regulatory Matters”.

Other Operations Transportation and Logistics The Group’s Transport and Logistics division provides shipping services for the Group in Russia by sea, river, rail, road and air, and also offers cargo handling for transhipment at sea and river ports, warehousing, customs clearance of cargoes, airport services and passenger air services. The Polar Division operates in the remote Taimyr Peninsula in northern Siberia, which is completely isolated from Russia’s road and railroad networks. As a result, a substantial majority of the raw materials and other supplies required by the Polar Division, as well as all its products (other than

140 PGMs), are shipped using sea or river transportation, and the Group owns a number of key transportation assets needed to service the Polar Division. The Polar Division’s main transportation facility is its wholly-owned Dudinka Sea Port on the Yenisey River. The port is located approximately 100 kilometres from the Norilsk industrial district, where the Group’s mining and production facilities are located, and the two sites are linked by a railway owned by the Group. The Dudinka Sea Port has a processing capacity of seven million tonnes of cargo a year. It operates 61 cranes, including one floating crane, and has loading facilities for cargoes ranging from packaged freight to large objects weighing up to 150 tonnes. From Dudinka, the Group has access to the Northern Sea Route, primarily in a westerly direction towards the ports of Arkhangelsk, Murmansk and the Kola Peninsula (including for transportation of high-grade mattes to the Kola Peninsula) and ultimately to the North Sea. The Group is developing its own transhipment terminal in Murmansk. The Group’s fleet, which consists of 6 reinforced ice class vessels (ARC7 in the RMRS classification), enables it to carry a year-round service between sea ports such as Dudinka, Murmansk, Arkhangelsk, Rotterdam and Hamburg. The vessels’ capabilities allow them to navigate through arctic ice up to 1.5 metres thick without ice-breakers. The operating load carrying capacity of each vessel exceeds 15 thousand tonnes. The Group also uses transportation on the Yenisey River. The navigation period for river transportation lasts an average of 130 days per year from late June to September. Transportation services are provided by the Yenisey River Shipping Company, in which the Group holds a 100% stake in interest. The Group uses air transportation services at its Polar Division, in particular to transport personnel and critical supplies to the Polar Division, as well as to transport PGMs concentrate produced by the Polar Division to Krasnoyarsk for further processing at a third party refinery. The Group manages and maintains Alykel airport, which is located close to the city of Norilsk, through its wholly-owned subsidiary LLC “Airport Norilsk”. The Group also owns 100% in JSC NordStar Airlines (trademark – NordStar), which conducts passenger and freight transportation between Norilsk and Krasnoyarsk, Moscow, St. Petersburg and other regional destinations, as well as passenger and freight transportation along local air routes in the Taimyr region. In addition, the Group owns 100% in JSC Norilsk Avia, which conducts helicopter passenger services and freight transportation in the Taimyr region. The Group’s total air fleet in operation comprises 31 units, including 16 helicopters and 15 aircrafts. In 2016, the total waterborne cargo turnover of Dudinka Port was 3.9 million tonnes, including 1.2 million tonnes of cargo shipped via the Northern Sea Route and more than 2.7 million tonnes via the Yenisei River. The Company's dry cargo fleet provides year-round transportation between Dudinka, Murmansk, Arkhangelsk, Rotterdam and Hamburg sea ports. In 2016, the Company's ships transported 1,262 million tonnes of cargo. In total, 69 voyages were made from Dudinka, including 11 direct voyages to ports of Europe (carrying metal products slated for export). The Yenisei tanker exports gas condensate to ports of Europe from the Pelyatkinskoye gas condensate field. In 2016, the Yenisei tanker made 15 voyages from Dudinka and transported 114.5 thousand tonnes of cargo for the Group (gas condensate) and 79.5 thousand of tonnes of third-party cargos. Energy The Taimyr Peninsula, on which the Group’s Polar Division is located, is not connected to Russia’s national power grid. In order to meet the Polar Division’s electricity requirements, the Group owns and operates three thermal power plants and two hydroelectric plants, which provide all of the Polar Division’s electricity needs. The plants also supply energy to third party industrial and residential consumers in the Norilsk industrial district and Taimyr municipal regions. The three thermal power plants are gas-fired and currently receive their gas supplies from three gas condensate fields (Pelyatkinskoye, Severo-Soleninskoye and Yuzhno-Soleninskoye), as well as the Messoyakhskoye gas field. Gas produced at these fields is also sold directly to the Polar Division for use at its plants,

141 while gas condensate are sold for export to Europe. On 14 April 2017, the Group entered into an agreement for the reconstruction of one of the Group’s thermal power plants for a total consideration of approximately RUB 18.9 billion. The Group’s other operations, including the JSC Kola “GMK”’s facilities (which have access to Russian’s national power grid), obtain their energy requirements from third party suppliers. Support Services and Purchases of Raw Material and Equipment The Group’s Support Business Unit is responsible for providing various support services to the Group’s operations, including construction, mining and development, as well as drilling and blasting operations at the Group’s mining sites. The Support Business Unit is also responsible for the provision of the Group’s employees with meals and the distribution of food in the Norilsk industrial district. The Group purchases mining, drilling and smelting equipment and vehicles for its Russian operations from a number of suppliers, primarily in Western Europe and North America, with purchases made through a centralised purchases department. The Group retains local independent contractors to perform the majority of repairs and maintenance works at its Russian operations.

Research and Development The Group’s Research and Development Business Unit provides engineering services for the Group, including the development and oversight of the Group’s production and technical development strategy. It also carries out experimental construction works and research aimed at improving the efficiency of the Group’s mining operations and reducing its operating costs. The Research and Development Business Unit is comprised of Gipronickel, which operates the Research and Development Institute in St. Petersburg; the Norilskproject Institute in Norilsk; and the Centre for Engineering Production Support at Monchegorsk on the Kola Peninsula. In addition to conducting research on behalf of the Group, Gipronickel also provides research and development services to third parties, primarily in the metallurgical and chemical industries. The Norilskproject Institute is the general design contractor for the Company’s operations in Russia. The Norilskproject Institute’s primary activities include designing and engineering the Company’s industrial and auxiliary assets and residential areas of the Norilsk industrial district and Taimyr. The Centre for Engineering Production Support is an experiment and research centre whose work focuses on research into non- ferrous metals for the Group’s Polar Division.

Quality Control The Group has implemented a comprehensive set of measures to enhance the quality of its production processes, which it continually develops in order to improve production efficiency and the quality of its products. The Group’s quality control system spans the Polar Division, JSC Kola “GMK”, the Transportation and Logistics and the Research and Development Business Units and the Group’s head office in Moscow. It is integrated with the Group’s ecological management system and aims to decrease negative impacts that the Group’s operations may have on the environment. The Group’s quality control system operates in accordance with the requirements of the ISO 9001 and ISO 14001 international standards. In 2016, the Group confirmed the compliance of its quality control system with the ISO 9001 and ISO 14001 international standards by carrying out the third re- certification audit performed by Bureau Veritas. The Group is certified for production, project management, storage, transportation (including shipping) and distribution in respect of metals, including nickel, copper, cobalt, precious metals, selenium and tellurium. The Group’s compliance with these international standards has also been accredited by UKAS (United Kingdom) and ANAB (USA). The Group’s quality control systems for its production facilities at JSC Kola “GMK” and Norilsk Nickel Harjavalta are certified as compliant with ISO 9001:2008, ISO 14001:2004 and ISO 18001: 2007, for “ore mining and concentration, production of nickel, copper, cobalt and their compounds, precious metal concentrates and sulphuric acid” at JSC Kola “GMK” and “production of metallic

142 nickel and nickel chemical products” at Norilsk Nickel Harjavalta. The Group’s quality control system for its research and development operations conducted by Gipronickel is certified as compliant with ISO 9001:2008 by the Swiss SGS certification authority.

Sales and Distribution

Sales and Marketing The Group’s marketing and sales operations are conducted by the Group’s Sales Business Unit, which comprises five divisions located in Russia, Europe, Asia and North America:  CJSC Normetimpex (Russia), which sells the Group’s products in the Russian Federation and exports base metals for sale through Metal Trade Overseas A.G.;  Metal Trade Overseas A.G. (Switzerland), which sells the Group’s products directly in Europe and in other regions through a sales distribution network, including sales companies operating in specific regional markets;  Norilsk Nickel Asia Ltd. and Norilsk Nickel Marketing (Shanghai), which sells the Group’s metal products in Asia; and  Norilsk Nickel USA Inc. (United States), which sells the Group’s metal products in the United States. The Group’s primary sales and distribution objectives are to promote a stable and liquid market for its products, keeping supply and demand in balance as much as possible, while also increasing the proportion of its sales accounted for by long-term sales contracts and sales directly to end-users of its products, including medium and small industrial customers. The diagram below sets out the Group’s sales process and production flow:

143 The Company develops general guidelines and policies and oversees all of the Group’s sales and marketing operations.

Product sales The Group’s principal products are nickel, copper, palladium and platinum. The Group also sells gold, cobalt, rhodium, silver, iridium, ruthenium, chromium and other joint metals, although their contribution to the Group’s revenues is not material. The Group generally sells its entire annual production during the year, subject to market conditions, and seeks to keep inventories of refined metals to a minimum, subject to distribution constraints. The Group generally prices its sales on the basis of LME monthly market averages, and, in 2016, 2015 and 2014 the Group achieved an average premium for sales of nickel exceeding the corresponding average LME price for the relevant period by 1.87%, 1.61% and 1.2%, respectively. The Group’s sales strategy focuses on concluding sales contracts directly with end users and local distributors, which account for more than 80% of total sales. The long-term contracts with a term of at least one year represented approximately 42%, 43%, 66% and 37% of the Group’s sale contracts with end-users in 2016 for nickel, copper, palladium and platinum, respectively. The Group’s products are sold in over 36 countries in Europe, Asia, North America and the CIS, to more than 436 customers. In 2016, the Group concluded over 1.5 thousand delivery contracts and made over 7.4 thousand deliveries. The Company believes that the Group’s customers include entities which together account for a substantial majority of total global demand for nickel and palladium. In 2016, 57% of the Group’s metal sales revenues derived from sales to Europe, with 23%,10% and 10% from Asia, North America and Russia and CIS, respectively, as compared with 59%, 27%, 8%

144 and 6% from these respective regions in 2015 and 50%, 32%, 9% and 9% from these respective regions in 2014. The Group’s international metal sales generated U.S.$6,854 million in revenues, representing 90% of the Group’s total metal sales revenue in 2016, as compared with international metal sales revenues of U.S.$7,421 million, representing 94% of the Group’s total metal sales revenue, in 2015 and international metal sales revenues of U.S.$9,934 million, representing 91% of the Group’s total metal sales revenue, in 2014. The table below shows the average sale prices of the Group’s Russian operations from it’s own feed for the periods indicated. The prices of nickel and copper are presented as U.S. dollar per tonne, and prices of palladium and platinum are presented as U.S. dollar per ounce.

Year ended 31 December

2016-2015 2015-2014 2016 2015 2014 Change (%) Change (%)

Nickel 9,720 11,962 17,072 (19) (30) Copper 4,912 5,585 6,931 (12) (19) Palladium 614 695 804 (12) (14) Platinum 977 1,057 1,388 (8) (24) The table below shows a breakdown by geographical region of the revenues from metal sales of the Group for the periods indicated: Revenues from sales by Semi- Other geographical region Total Nickel Copper Palladium Platinum products metals

Year ended 31 December 2016 Europe 4,394 1,143 1,544 821 420 123 343 Asia 1,723 1,104 1 478 26 92 22 South and North America 737 222 - 488 - 1 26 Russian Federation and CIS 792 156 294 101 208 - 33 Total revenues 7,646 2,625 1,839 1,888 654 216 424

Year ended 31 December 2015 Europe 4,698 1,453 1,448 1,182 327 72 216 Asia 2,110 1,153 249 384 180 109 35 North America 613 232 22 209 76 12 62 Russian Federation and CIS 462 172 197 32 48 - 13 Total revenues 7,883 3,010 1,916 1,807 631 193 326

Year ended 31 December 2014 Europe 5,469 2,025 1,623 1,206 371 49 195 Asia 3,508 1,963 400 703 310 97 35 North America 957 402 13 292 127 75 48 Russian Federation and CIS 962 246 432 20 61 - 203 Total revenues 10,896 4,636 2,468 2,221 869 221 481

145 The table below shows the Group’s sales by metals produced by the Group for the periods indicated: Year ended 31 December 2016-2015 2015-2014 Change Metal 2016 2015 2014 Change (%) (%) FINISHED PRODUCTS Polar Division and JSC Kola “GMK” Nickel (‘000 tonnes) 218 197 228 11 (14) Copper (‘000 tonnes) 374 343 356 9 (4) Palladium (‘000 ounces) 2,779 2,464 2,667 13 (8) Platinum (‘000 ounces) 669 590 629 13 (6) Finland Nickel (‘000 tonnes) 53 43 42 23 2 TOTAL FINISHED PRODUCTS Nickel (‘000 tonnes) 271 240 270 13 (11) Copper (‘000 tonnes) 374 343 356 9 (4) Palladium (‘000 ounces) 2,779 2,464 2,667 13 (8) Platinum (‘000 ounces) 669 590 629 13 (6)

SEMI-PRODUCTS1 Finland (Copper cake)) Copper (‘000 tonnes) 10 13 11 (23) 18 Botswana (Nickel concentrate) Nickel (‘000 tonnes) – 1 3 (100) (67) Copper (‘000 tonnes) – 1 2 (100) (50) South Africa (Nickel concentrate) Nickel (‘000 tonnes) 13 4 – 225 100 Copper (‘000 tonnes) 5 2 – 150 100 GROUP TOTAL Nickel (‘000 tonnes) 271 240 270 13 (11) Copper (‘000 tonnes) 374 343 356 9 (4) Palladium (‘000 ounces) 2,779 2,464 2,667 13 (8) Platinum (‘000 ounces) 669 590 629 13 (6) Semi-products, nickel (‘000 tonnes)1 13 5 3 160 67 Semi-products, copper, (‘000 tonnes)1 15 16 13 (6) 23 Semi-products, palladium, (‘000 ounces)1 115 100 78 15 28 Semi-products, platinum, (‘000 ounces)1 43 39 31 10 26

(1) Metal volumes are given in respect of metals contained in semi-products. In 2016, the Group’s largest customer accounted for 12% of the Group’s total revenue, and the Group’s next nine largest customers together accounted for 31% of its total revenue for that period. In 2016, 0% of the Group’s total revenue were attributable to sales through the LME.

146 In 2015, the Group’s largest customer accounted for 12% of the Group’s total revenue, and the Group’s next nine largest customers together accounted for 39% of its total revenue for that period. In 2015, 0% of the Group’s total revenue were attributable to sales through the LME. In 2014, the Group’s largest customer accounted for 9% of the Group’s total revenue, and the Group’s next nine largest customers together accounted for 35% of its total revenue for that period. In 2014, 0.63% of the Group’s total revenue were attributable to sales through the LME. Nickel The Group is one of the world’s leading supplier of nickel. The main component of global nickel demand is the production of stainless steel (accounting for 69% of primary nickel consumption in 2016), and, consequently, the Group’s main customers include stainless steel producers. In 2016, 44% of the Group’s nickel sales, in terms of revenue, were in Europe, 42% in Asia, 8% in North America and 6% in Russia and CIS, as compared with 48%, 38%, 8% and 6% in these respective regions in 2015 and 44%, 42%, 9% and 5% in these respective regions in 2014. Sales to stainless steel producers and other specialty steel producers accounted for 69% of the total sales volume of nickel in 2016, producers of alloys 23%, producers of coating 4% and other customers 4%. Copper In 2016, 84% of the Group’s copper sales, in terms of revenue, were in Europe, 16% in Russia and CIS, 0% were in Asia and 0% were in North America, as compared with 76%, 10%, 13% and 1% in these respective regions in 2015 and 66%, 18%, 16% and 0% in these respective regions in 2014. Sales to producers of cables and rolled copper alloys accounted for 58% of the total sales volume of copper in 2016 and other customers 42%. PGMs In 2016, 44% of the Group’s palladium sales, in terms of revenue, were in Europe, 25% in Asia, 26% in North America and 5% in Russia and CIS, as compared with 65%, 21%, 12% and 2% in these respective regions in 2015 and 54%, 32%, 13% and 1% in these respective regions in 2014. In 2016, 70% of the Group’s total sales volumes of palladium was sold to automobile manufacturers, 8% to manufacturers in the chemical industry, 5% for use in dentistry, 1% for use in jewellery, 8% to producers of electronics and 8% to other customers. In 2016, 64% of the Group’s platinum sales, in terms of revenue, were in Europe, 4% in Asia, 0% in North America and 32% in Russia and CIS, as compared with 52%, 28%, 12% and 8% in these respective regions in 2015 and 43%, 36%, 14% and 7% in these respective regions in 2014. In 2016, 41% of the Group’s total sales volumes of platinum was sold to automobile manufacturers, 31% to manufacturers in the chemical and petrochemical industry, 4% to jewellery producers, 1% to electronics producers, 1% to manufacturers in the medical appliances industry and 22% to other customers. See “Regulatory Matters – Sale of PGMs” for a summary of certain regulations applicable to the sale of PGMs by producers in the Russian Federation.

Environment The Company targets the gradual reduction, and, where possible, the prevention of the effect of its production activities on the environment. The Group’s metallurgical operations generate substantial amounts of sulphur dioxide, as a result of a high content of sulphur in sulphide ore mined by the Group. For example, actual sulphur dioxide emissions from the Group’s operation at the Polar Division amounted to 1,758 thousand tonnes in 2016. The Group is required under a regulation issued by the authorities of Krasnoyarsk Territory to reduce these emissions to 337 thousand tonnes by 2020 (see “Risk Factors – Risks Associated with the Group’s Business and Industry – New or more stringent environmental or health and safety laws and regulations or stricter enforcement of existing environmental or health and safety laws and regulations in the countries in which the Group operates may have a significant negative effect on the Group’s operating results”). The Group’s environmental policy, which forms part of the Group’s development strategy, focuses on four principal areas:

147  the phased reduction of pollutant emissions, with priority attention given to sulphur dioxide and solid particles;  the reduction of polluted wastewater discharges into water bodies;  the arrangement of waste disposal sites in order to reduce the environmental footprint of the Group’s operations; and  the prevention of pollution from cargo shipping by sea and vessel operation. The Group’s projects to reduce sulphur dioxide emissions include:  the renovation of concentration capacities, including implementation of modern technologies, to reduce the chemical concentration and prevent losses of base metals;  the decommissioning of the Norilsk Nickel Plant in 2016 and the increase in the smelting capacity of the Nadezhda Metallurgical Plant, which the Company believes will allow it to channel the large quantities of sulphur dioxide produced during the enrichment and smelting processes into off-gases, which can be recycled; and  the construction and modernisation of sulphur recycling facilities at the Copper Plant and the Nadezhda Metallurgical Plant, with the aim to achieve a sulphur extraction rate of 90-95% from off-gases. The Company has developed and implemented an Environmental Management System (“EMS”) within the framework of its Integrated Quality and Environmental Management System (“IQEMS”). The EMS is designed to enable the group to achieve the goals set out in its environmental policy and to minimise and prevent adverse environmental impacts. The system’s compliance with ISO 14001:2004 international standard has been confirmed on a regular basis by an independent certification body conducting annual surveillance audits. In October 2016, Bureau Veritas Certification (“BVC”), an international certification body, ran a compliance audit of the IQEMS under ISO 9001:2008 and ISO 14001:2004 standards. In addition to the audit conducted by BVC, during 2015 and 2016, the Company conducted internal audits within the framework of the IQEMS. In accordance with the requirements of ISO 9001:2008 and 14001:2004 standards and the Group’s own regulations, more than 30 internal audits were carried out at the various businesses of the Group over the course of 2016. The Group monitors on an on-going basis changes to legislative and other requirements related to environmental issues which may have a significant impact on the Group’s environmental management performance. The Group carries out internal audits to assess and verify compliance with statutory environmental requirements and operations of the Group. As part of its environmental policy, the Group conducts, on a regular basis, activities aimed at raising awareness of environmental protection issues among Group personnel and training them in managing such issues, including with regard to the Group’s IQEMS and environmental policy. In 2014, 2015 and 2016, the Company used the services of both external and internal training providers for personnel development and training.

Insurance The Group has the following insurance coverage for its Russian operations:  third party liability insurance for damages caused by the Group;  cargo insurance, which provides cover during transportation and storage, specifically shipments of semi-finished and finished goods in Russia, export of finished goods from Russia and shipments of equipment under import-export contracts;  property, plant and equipment insurance, including buildings insurance, covering all risks including fire and natural disasters, and insurance covering breakage or damage to equipment; and

148  business interruption insurance, which includes the reimbursement of fixed costs (except for coverage of loss of profits, which is not widely available in the Russian insurance market). The Group’s Russian operations also maintain various insurance policies in accordance with the requirements of Russian law, including third-party liability insurance for hazardous facilities. Norilsk Nickel Harjavalta maintains operational, project and corporate insurance programmes, including for business interruption. See “Risk Factors—The Group’s level or scope of insurance coverage may not be adequate”.

Employees The table below shows the average number of employees of the Group for the periods indicated. Year ended 31 December Number of employees 2016 2015 2014 Russia 81,081 81,637 79,897 USA 10 10 10 Europe 311 307 290 Asia 13 12 12 Australia 5 6 15 South Africa 586 870 883 Botswana 0 780 748 Other 0 2 - TOTAL 82,006 83,624 81,855 In 2016, the average number of employees of the Group was 82,006, of which 99% was employed at its Russian operations. The number of employees in 2016 decreased as compared with 2015 by approximately 1,618 people, largely as a result of disposal of the Group’s assets in Botswana and the shutdown of the Norilsk Nickel Plant. The average monthly salary of the Group’s employees in Russia in 2016 was U.S.$1,404, as compared with U.S.$1,392 in 2015. In addition to the salaries earned by the Group’s employees in Russia, the employees also receive additional statutory compensation and benefits as well as benefits under the Group’s collective bargaining agreements. These additional benefits account for approximately 7% of the total compensation received by the Group’s employees in Russia. The Group has a Health and Safety Policy, which sets the safety of its employees as its key priority. The policy sets out targets for achieving healthy and safe working conditions for all employees, including improvements to production processes and training of employees on health and safety issues. In 2016, there were 53 industrial accidents at the Group’s operations, including 13 fatalities, and its Lost Time Injury Frequency Rate (“LTIFR”) was 0.33, as compared with 87 industrial accidents at the Group’s operations, including 14 fatalities, and its LTIFR of 0.61 in 2015. In 2014, there were 64 industrial accidents at the Group’s operations, including 8 fatalities, and its LTIFR was 0.48. In 2016, the Group conducted 37 internal audits of occupational safety and health management, and 4,344 of its employees with less than three years of work experience received additional safety training. In the beginning of 2017, Dupont Science and Technologies LLC conducted an independent assessment of occupational safety culture at the Group’s operations in 2016 and assigned an integral score of 2.5, an improvement from 2.3 in 2015.

Litigation The Group has been and continues to be the subject of legal proceedings and adjudications from time to time, as well as regulatory and administrative investigations, inquiries and actions regarding tax, labour, environmental and other matters, which, in the past, have resulted in damage awards, settlements or administrative sanctions, including fines.

149 The Group is not, nor has it been, involved in any governmental, legal or arbitration proceedings, including any such proceedings which are pending or threatened of which it is aware, during the twelve months preceding the date of this Prospectus that have had in the recent past significant effects on the financial position or profitability of the Group or may have significant effects on its financial position or profitability. In 2014, the Group and Botswana-based BCL Investments entered into a binding agreement for the sale of the Group’s African assets to BCL, an entity controlled by the Botswana government. Upon successful completion of all conditions precedent to closing of this transaction, BCL failed to deliver on its obligations under the agreement. In October 2016, the Group learned from the press that BCL was put into a voluntary liquidation. In November 2016, the Group filed lawsuits against BCL group to enforce the sale. The request for arbitration has been submitted to the London Court of International Arbitration (LCIA). The Group is seeking to obtain an unconditional and enforceable execution of the sale and purchase agreement for a 100 per cent interest in Norilsk Nickel Africa (which holds 50 per cent in Nkomati), or, alternatively, damages to be recovered from BCL. In addition, the Group has filed a lawsuit in the court of Botswana to obtain an authorization for the legal prosecution of BCL, currently in the process of liquidation, in the LCIA, and for interim relief to protect the Group’s position in the liquidation. Irrespective of the ongoing court proceedings, Nkomati remains a commercially viable asset and a going concern. The Group does not believe that legal or arbitration proceedings related to the sale of the Group’s 50 per cent stake in Nkomati have had in the recent past significant effects on the financial position or profitability of the Group or may have significant effects on its financial position or profitability. Due to uncertainties in the legal and regulatory process, there can be no assurance that the Group will not become subject to proceedings or adjudications in the future that could have a material adverse effect on the Group, its results of operations or its financial condition. See “Risk Factors – Risks Relating to the Russian Federation – The on-going development in the Russian legal system and Russian legislation creates an uncertain environment for investment and for business activity”.

150 MANAGEMENT AND CORPORATE GOVERNANCE

Board of Directors

The Board of Directors is responsible for general management matters, with the exception of those matters designated by law and the Company’s charter as being the exclusive responsibility of the General Meeting of Shareholders. The Board of Directors currently consists of 13 members. Five members of the Board of Directors are independent directors in accordance with the criteria set out in the Russian Joint Stock Companies Law and the Company’s own criteria, which differ in certain respects from the criteria for independent directors that are set out in the U.K. Corporate Governance Code. Those directors are referred to as independent directors. Since December 2012, the Group’s principal shareholders have entered into several agreements which, among other things, regulate the governance of the Company, including provisions relating to voting on the composition of the Board of Directors and the appointment of the President of the Company (the sole executive body). The current Board of Directors was elected at the annual general meeting of the Company’s shareholders held on 10 June 2016. The current terms of appointment of the members of the Board of Directors expire on the date of the next annual general meeting of the Company’s shareholders, which has been convened for 9 June 2017 (see also “Operating and Financial Review – Recent Developments”). The table below shows the current members of the Board of Directors. The business address for all directors is 1st Krasnogvardeyskiy proezd, 15, Moscow, 123100, Russian Federation.

Name Year of Birth Position Gareth Peter Penny 1962 Chairman of the Board of Directors Independent Non-Executive Director Andrei Bougrov 1952 Deputy Chairman of the Board of Directors Executive Director Sergey Barbashev 1962 Non-Executive Director Alexey Bashkirov 1977 Non-Executive Director Rushan Bogaudinov 1977 Non-Executive Director Sergey Bratukhin 1971 Independent Non-Executive Director Robert Edwards 1966 Independent Non-Executive Director Andrey Korobov 1969 Independent Non-Executive Director Stalbek Mishakov 1970 Non-Executive Director Gerhardus Prinsloo 1965 Independent Non-Executive Director Maxim Sokov 1979 Non-Executive Director Vladislav Soloviev 1973 Non-Executive Director Marianna Zakharova 1976 Executive Director Mr. Gareth Peter Penny. Chairman and member of the Board of Directors since March 2013. From 2016, Mr. Penny has been Non-Executive Chairman of the Board of Directors of Pangolin Diamonds Corp., and from 2017, Mr. Penny has been Non-Executive Chairman of the Board of Directors of Edcon Holdings Limited. From 2012 to 2016, Mr. Penny was the Executive Chairman of New World Resources plc, Executive Director of New World Resources NV and member of the Board of Directors of OKD. From 2011 to 2012, Mr. Penny served as the CEO of AMG Mining. From 2007, Mr. Penny has been the Director of Julius Bar Holding Ltd. Mr. Penny received a Master’s degree in philosophy, politics and economics from Oxford, where he was a Rhodes Scholar in 1984. Mr. Andrei Bougrov. Deputy Chairman of the Board of Directors since March 2013 and a member of the Board of Directors since 2002. Since 2016, he has also served as the Senior Vice-President. Earlier in 2015, Mr. Bougrov was the Vice-President and, from 2013 to 2015, Deputy CEO of the

151 Company. In addition, Mr. Bougrov is a member of several bodies, including: the Governing Board of the Russian Union of Industrialists and Entrepreneurs, the Presidential Anti-Corruption Department Advisory Board and the Russian Federation Council for Foreign and Defence Policy, Expert Council for Corporate Governance of the CBR, Share Issuers Committee of the Moscow Exchange. Since 2014, he has been a member of the Board of Directors of PJSC Inter RAO UES. From 2013 to 2014, Mr. Bougrov was a member of the Board of Directors of PJSC Rushydro. From 2010 to 2015, Mr. Bougrov served as the Deputy CEO and member of the Management Board of CJSC Interros Holding Company (now LLC Interros Holding Company). Since 2013, he has been the Vice-President of LLC Interros Holding Company. Mr. Bougrov graduated with First Class Honours from the Moscow State Institute of International Relations (MGIMO) with an M.A. in international economics and holds a candidate of sciences in economics degree (PhD equivalent). Mr. Sergey Barbashev. Member of the Board of Directors since 2011. Since 2008, Mr. Barbashev has been the General Director and the Chairman of the Management Board at LLC Interros Holding Company and member of the Board of non-profit charitable organisation “Vladimir Potanin Charity Fund”. Since 2011, Mr. Barbashev has also served as the Chairman of the Board of Directors of Rosa Khutor Ski Resort Development Company LLC. Since 2015, Mr. Barbashev has also been the Director of the Branch Office of Olderfrey Holdings Limited and, since 2016, the Director of Olderfrey Holdings Limited. Mr. Barbashev received his M.A. in law from the Moscow Higher Police School of the Ministry of Internal Affairs of the USSR. Mr. Alexey Bashkirov. Member of the Board of Directors since March 2013. From 2009 to 2015, Mr. Bashkirov was the Deputy CEO for Investments of CJSC Interros Holding Company (now LLC Interros Holding Company), where he also served as Director of the Investment Department and the Executive Director, and, from 2011, as member of the Management Board. Since 2015, Mr. Bashkirov has been Deputy CEO and member of the Management Board of LLC Interros Holding Company. Since 2014, Mr. Bashkirov has served as a member of the Board of Directors of NPO Petrovax Pharm LLC and Zaodno LLC. From 2012 to 2014, he served as a member of the Board of Directors of CJSC Cinema Park and CJSC SP Holding. From 2009 to 2014, Mr. Bashkirov served as a member of the Board of Directors of Prof-Media Management LLC. Mr. Bashkirov graduated from the Moscow State Institute of International Relations (MGIMO) in 1999 with a degree in international economic relations. Rushan Bogaudinov. Member of the Board of Directors since 2015. Mr. Bogaudinov is the Head of Practice at CJSC Rusal Global Management B.V. since 2015. From 2012 to May 2015, Mr. Bogaudinov was the Director of the Department for Control and Audit at CJSC Rusal Global Management B.V. From 2012 to 2016, Mr. Bogaudinov has also served as a member of the Board of Directors of Aughinish Alumina Ltd and Limerick Alumina Refining Ltd. Prior to then, from 2011 to 2012, Mr. Bogaudinov was the Head of Internal Audit Department at OJSC “Rospechat” and at Pony Express (Freightlink LLC). From 2008 to 2011, he served as the Director for Internal Audit at LLC Military-Industrial Company. Mr. Bogaudinov graduated from the Moscow State University of Technology “Stankin”, Physico-Technical Faculty and from a postgraduate school. Mr. Sergey Bratukhin. Member of the Board of Directors since March 2013. From 2014 to 2016, Mr. Bratukhin served as a member of the Board of Directors of OJSC International Financial Club. Since 2011, Mr. Bratukhin has been the President of Invest AG (CIS Investment Advisers LLC). Prior to then, from 2009 to 2011, Mr. Bratukhin served as Director, and then as Managing Director, for Strategic Investments of the division of Renaissance Partners Advisors Limited LLC. From 2007 to 2014, Mr. Bratukhin served as a member of the Board of Directors of OJSC Amur Shipping Company. Mr. Bratukhin graduated from D.I. Mendeleev Russian Chemical and Technological University in 1996 with a degree in engineering. In 1998, Mr. Bratukhin graduated from the Financial Academy under the Government of the Russian Federation with a degree in banking and insurance. In 2008, Mr. Bratukhin graduated from Warwick Business School with a degree in business management. Mr. Robert Edwards. Member of the Board of Directors since June 2013. In 2016, Mr. Edwards also served as a Non-executive Chairman of Sierra Rutile Limited. Since 2014, Mr. Edwards has been a

152 Non-executive Director of GB Minerals Ltd. Since 2013, Mr. Edwards has been the Principal of Highcross Resources Ltd. From 2013 to 2014, he served as the Senior advisor of Royal Bank of Canada (Europe) Capital Markets. From 2002 to 2011, Mr. Edwards was the Head of Metals and Mining Research at Renaissance Capital Ltd, and, from January to October 2012, he was the Chairman of Global Metals and Mining Research at Renaissance Capital Ltd. Mr. Edwards graduated from the Camborne School of Mines in 1992 with a degree in mining engineering. Mr. Andrey Korobov. Member of the Board of Directors since 2015. From 2012 to 2015, Mr. Korobov has been an Adviser to CEO at the State Corporation for Assistance to Development, Production and Export of Advanced Technology Industrial Product “Rostec”. Mr. Korobov has also been a member of the Board of Directors at Baikal Mining Company from 2014 to 2016 and at Three Arc Mining from 2013 to 2015. Mr. Korobov has also been the Chief Executive Officer of RT-Global Resources (a subsidiary of Rostec) from 2013 to 2015 and RT-Business Development (a subsidiary of Rostec) from 2015 to 2016. Prior to then, from 2008 to 2013, Mr. Korobov was the CEO of Dighton Capital Management. Mr. Korobov graduated from the St. Petersburg State Electrotechnical University in 1992 and from the Northwest Academy of Public Service (as economist) in 2002. Mr. Stalbek Mishakov. Member of the Board of Directors since June 2012. Since 2013, Mr. Mishakov has also served as the Deputy General Director of En+ Management LLC. From 2013 to 2016, Mr. Mishakov served as member of the Board of Directors of United Company RUSAL Plc. Since 2010, Mr. Mishakov has been an advisor to the General Director of CJSC RUSAL Global Management B.V. Mr. Mishakov graduated from the Moscow State Institute of International Relations (MGIMO) with a degree in international law in 1993, and, in 1996, he received an M.A. from the University of Notre Dame. In 2002, Mr. Mishakov received a PhD in economics from the Russian Foreign Ministry Diplomatic Academy. Mr. Gerhardus Prinsloo. Member of the Board of Directors since June 2012. He is the majority owner and Director of Natural Resource Partnership. From 2008 to 2012, he was Partner and Director at Bain and Company Russia, LLC. Mr. Prinsloo received his bachelor’s degree with honours in commerce from the Pretoria University in 1989. Mr. Maxim Sokov. Member of the Board of Directors since December 2008. From 2013 to 2014 Mr. Sokov was the First Deputy General Director of En+ Group Limited. Since 2013, Mr. Sokov has served as the General Director of En+ Management LLC and, since 2014, as the General Director of En+ Group Limited and, since 2013, as a member of the Board of Directors of En+ Group Limited and EurosibEnergo Plc. Since 2012, Mr. Sokov has served as a member of the Board of Directors of United Company RUSAL Plc. Prior to then, from 2011 to 2012, he worked as the Director for Strategy of CJSC RUSAL Global Management B.V. Between 2009 and 2011, Mr. Sokov served as a member of the Board of Directors of OGK-3. From 2008 to 2013, Mr. Sokov was the CEO of UC RUSAL-Investments Management LLC. From 2012 to 2013, Mr. Sokov was the Director for Strategic Investment Management, and from 2013 to 2014, Mr. Sokov was the Advisor for Strategic Investment Management of CJSC Rusal Global Management B.V. Mr. Sokov graduated from the Russian State Tax Academy with a degree in law in 2000, and in 2002 he received a Master of Laws and Letters (LL.M.) from New York University School of Law. Mr. Vladislav Soloviev. Member of the Board of Directors since March 2013. Since 2014, Mr. Soloviev has also served as the General Director of CJSC Rusal Global Management B.V. From 2010 to 2014, Mr. Soloviev was the First Deputy Director of CJSC RUSAL Global Management B.V. Mr. Soloviev graduated from the Higher School of Management of the State Management Academy in 1995. In 1996, Mr. Soloviev graduated from the Moscow State University of Technology “Stankin”. Mr. Soloviev obtained an MBA in 2004. Ms. Marianna Zakharova. Member of the Board of Directors since June 2010. Since 2016, Ms. Zakharova has also served as a member of the Management Board of the Company and, since 2015, as the First Vice-President – General Counsel. From 2010 to 2015, Ms. Zakharova was a member of the Board of Directors of ProfEstate CJSC and Deputy CEO for Legal Issues and served as a member of the Management Board of CJSC Interros Holding Company (now LLC Interros Holding

153 Company). Ms. Zakharova graduated with honours from the Peoples’ Friendship University of Russia with a Master of Law degree in 2000. On 9 June 2017, the annual general shareholders’ meeting will consider election of a new composition of the Company’s Board of Directors. Mr. Sergey Skvortsov, a new candidate, is expected to be elected to the Board of Directors of the Company. Biographic information for Mr. Skvortsov is below. Mr. Sergey Skvortsov. Candidate to the Board of Directors of the Company. In 2014 and 2015, Mr. Skvortsov was a member of the Board of Directors of the Company. From 2009 to 2013, Mr. Skvortsov served as the Managing Director of Troika Dialog. In 2013 and 2014, Mr. Skvortsov served as the Managing Director for Investments of State Corporation Rostec, and, from 2014 to 2016, as the Deputy CEO of State Corporation Rostec. Since 2014, Mr. Skvortsov has been the Advisor to the CEO of State Corporation Rostec and the Chairman of the Board of Directors of LLC RT-Invest. Since 2014, Mr. Skvortsov has also been a member of the Board of Directors of JSC Russian Helicopters and JSC OPK Oboronprom. From 2008 to 2016, Mr. Skvortsov was a member of the Board of Directors of PJSC Avtovaz, and, since 2016, he has been the Chairman of the Board of Directors of PJSC Avtovaz. Since 2016, Mr. Skvortsov has also been a member of the Board of non-profit partnership Association of Russian Automakers and a member of the Board of Directors of Allians Rostec B.V. Since 2006, Mr. Skvortsov has been a member of the Board of Directors of PJSC Kamaz. Mr. Skvortsov graduated from the Moscow State Institute of International Relations (MGIMO) with a degree in international economic relations in 1986.

Management Board

The Management Board is the Company’s collective executive body and is appointed by the Board of Directors. The Management Board is principally responsible for the day-to-day management of the Group’s business. The President (Chairman of the Management Board) exercises executive authority over all activities, except for issues assigned to the exclusive competence of the General Meeting of Shareholders or the Board of Directors. The table below shows the current members of the Management Board. The business address for all members of the Management Board is 1st Krasnogvardeyskiy proezd, 15, Moscow, 123100, Russian Federation. Year of Name Birth Position Vladimir Potanin 1961 President Chairman of the Management Board Onik Aznauryan 1970 Senior Vice-President Non-industrial Assets and Energy Supply Sergey Batekhin 1965 Senior Vice-President Sales, Commerce and Logistics Elena Bezdenezhnykh 1973 Vice-President State Secretary, GR Andrey Bougrov 1952 Senior Vice-President

Sergey Dyachenko 1962 First Vice-President Chief Operating Officer Vladislav Gasumyanov 1959 Vice-President Corporate Security Elena Kondratova 1972 Vice-President Chief of Staff Sergey Malyshev 1969 Senior Vice-President Chief Financial Officer Nina Plastinina 1961 Vice-President Internal Audit Alexander Ryumin 1956 Vice-President

154 Year of Name Birth Position Head of Polar Division Marianna Zakharova 1976 First Vice-President General Counsel Larisa Zelkova 1969 Senior Vice-President HR, Social Policy and Public Relations Mr. Vladimir Potanin. President, Chairman of Management Board since 2015, and, from 2012 to 2015, CEO, Chairman of the Management Board of the Company. Mr. Potanin has been the President of LLC Interros Holding Company since 2013. From 2013 to 2014, Mr. Potanin served as a member of the Board of Directors of PJSC Inter RAO UES. In addition, Mr. Potanin is a member of various bodies, including: the Governing Board of the LLC Russian Union of Industrialists and Entrepreneurs, non-profit charitable organisation “Vladimir Potanin Charity Fund”, non-profit partnership National Board on Corporate Governance, Supervisory Boards of Saint Petersburg State University, Moscow State Institute of International Relations (MGIMO), State Hermitage. Mr. Potanin was awarded a commemorative award for philanthropy and charity from the Russian Ministry of Education in September 2002. In 2007, Mr. Potanin was honoured by the French Ministry of Culture and Communications with the title of Officer in the Order of Arts and Letters and was awarded the Order of Merit for the Motherland fourth degree, by the decree of the President of the Russian Federation, for active participation in the successful promotion of the Sochi bid for the XXII Olympic Winter Games held in 2014. Mr. Potanin graduated in 1983 from the Moscow State Institute of International Relations (MGIMO) with a degree in international economics. Mr. Onik Aznauryan. Senior Vice-President - Non-industrial Assets and Energy Supply since 2016, and, from 2015 to 2016, Vice-President - Non-industrial Assets and Energy Supply, and, from 2013 to 2015, Deputy CEO for Non-Productive Assets and Energy Supply Management. Since 2013, Mr. Aznauryan has been a member of the Management Board of the Company. In 2013, Mr. Aznauryan served as a member of the Board of Directors of Norilskgazprom and, from 2013 to 2016, as Chairman of the Board of Directors of Norilskgazprom. Since 2013, Mr. Aznauryan has also served as the Head of the Branch Office of Norilskenergo OJSC and the Chairman of the Board of Directors of Norilskgazprom OJSC. In 2012, Mr. Aznauryan was the General Director of OJSC Energostroyinvest Holding. From 2011 to 2012, Mr. Aznauryan was the General Director of OJSC North Port and, from 2009 to 2012, the Deputy CEO, Head of the President’s Office, and member of the Management Board at Rosgosstrakh. From 2006 to 2011, Mr. Aznauryan was the General Director of MC LITER management company. Mr. Aznauryan graduated in 1992 from the Yerevan State Polytechnic University majoring in automatic control systems. He also holds an MBA degree from Pittsburgh University in the United States. Mr. Sergey Batekhin. Senior Vice-President - Sales, Commerce and Logistics since 2016, and, from 2015 to 2016, Vice-President - Sales, Commerce and Logistics, and from 2013 to 2015, Deputy CEO and Head of Sales, Commerce and Logistics Unit. Member of the Management Board since January 2013. Mr. Batekhin has been the Chairman of the Board of Directors of Interport from 2012 to 2015, a member of the Board of Directors of the LLC Continental Hockey League from 2009 to 2015. From 2013 to 2015, Mr. Batekhin served as a member of the Board of Directors of Metal Trade Overseas SA, Norilsk Nickel Marketing (Shanghai) Co., Ltd. From 2013 to 2014, Mr. Batekhin served as a member of the Board of Directors and Chairman of the Board of Directors of OJSC Yenisey River Shipping Company and as a member of the Board of Directors of Norilsk Nickel (Asia) Limited. Prior to then, from 2009 to 2011, Mr. Batekhin served as the Chairman of the Board of Directors of Rosa Khutor. In 2003, Mr. Batekhin was awarded the Order of St. Sergiy Radonezhsky of the 3rd degree by the Russian Orthodox Church. Mr. Batekhin graduated from the Krasnoznamenny Military Institute of the USSR Ministry of Defence and the Plekhanov Russian Academy of Economics with a major in finance and credits. Mr. Batekhin holds an MBA and a PhD in economics. Ms. Elena Bezdenezhnykh. Vice-President – State Secretary, GR since October 2015. Earlier in 2015, Ms. Bezdenezhnykh was the Vice-President – Corporate Governance, Asset Management and

155 Legal Affairs, and, from 2012 to 2015, Deputy CEO and Head of Corporate Governance, Asset Management and Legal Affairs Unit. Member of the Management Board since March 2012. From 2008 to 2012, she was the Director of Legal Department of the Company and the Head of Legal Department OJSC RAO Norilsk Nickel. From 2009 to 2012, Ms. Bezdenezhnykh was a member of the Board of Directors of OJSC RAO Norilsk Nickel. From 2011 to 2013, Ms. Bezdenezhnykh served as a member of the Board of Directors of LLC Sport Projects Management Company and the Chairman of the Board of non-profit organization Norilsk Nickel Non-state Pension Fund and as the Chairman of the Board of Directors of OJSC RAO Norilsk Nickel. Ms. Bezdenezhnykh graduated from the Krasnoyarsk State University with a degree in law. Mr. Andrey Bougrov. Senior Vice-President since 2016 and, from 2015 to 2016, Vice-President. Earlier in 2015, Mr. Bougrov was the Vice-President – Government and Investor Relations, and, from 2013 to 2015, Deputy CEO for Government and Investor Relations. Please refer to “Board of Directors” for a brief biography of Mr. Bougrov. Mr. Sergey Dyachenko. First Vice-President - Chief Operating Officer since 2015, and, from 2013 to 2014, Deputy CEO – Head of Operations Unit of the Company, and from 2014 to 2015, First Deputy CEO – Chief Operating Officer. Mr. Dyachenko has been a member of the Management Board of the Company since 2013. From 2010 to 2013, Mr. Dyachenko was the Chief Operating Officer of the Kazakhmys Group of companies. Mr. Dyachenko graduated from the Plekhanov Leningrad Mining Institute with a major in mining engineering in 1984, and, in 2004, he was awarded a Master’s degree by the University of Pretoria (South Africa). Mr. Vladislav Gasumyanov. Vice-President – Corporate Security since 2015, and, from 2012 to 2015, Head of the Security in Corporate Security Directorate of the Company. Mr. Gasumyanov has been a member of the Management Board of the Company since 2014. From 2014 to 2016, Mr. Gasumyanov also served as a member of the Board of Directors of OJSC Yenisei River Shipping Company. In 2015 Mr. Gasumyanov served as Vice-President, Director for Corporate Security – Head of Security. From 2009 to 2012, Mr. Gasumyanov served as the Deputy Head of the Department for Interregional and Cultural Relations with Foreign States of the President of the Russian Federation. He graduated in 1983 from the Kiev Civil Aviation Engineering Institute (KCAEI), and in 1985, he finished Higher Courses of KGB USSR. Mr. Gasumyanov graduated from the North-West State Service Academy in 2012. Ms. Elena Kondratova. Vice-President – Chief of Staff since October 2015, and from 2013 to 2015, Chief of Staff at the Company and Advisor to President of CJSC Interros Holding Company (now LLC Interros Holding Company) (on a part-time basis). Since 2015, Ms. Kondrashova has been Advisor to President of LLC Interros Holding Company (on a part-time basis). Ms. Kondratova has been a member of the Management Board of the Company since 2014. From 2009 to 2013, Ms. Kondratova held an office of the Chief of Staff of the President of CJSC Interros Holding Company (now LLC Interros Holding Company). She graduated from the Moscow Pedagogical State University with a major in psychology. Mr. Sergey Malyshev. Senior Vice-President - Chief Financial Officer since 2016 and, from 2015 to 2016, Vice-President - Chief Financial Officer and, from 2013 to 2015, Deputy CEO - Chief Financial Officer. Member of the Management Board from March 2013. From 2009 to 2013, Mr. Malyshev was the Deputy General Director for Economics and Finance and then the First Deputy General Director at OJSC Energostroyinvest-Holding. Mr. Malyshev graduated in 1993 from the Moscow State Textile Academy (degree in mechanical engineering), in 1998 from the Finance Academy under the Government of the Russian Federation (mastering finance and credit) and in 2007 from the Russian Academy of the Presidential State Service (mastering in State and Municipal management). Ms. Nina Plastinina. Vice-President – Internal Audit, Vice-President – Internal Control and Risk Management since 2015, and, from 2013 to 2015, Director of Internal Control Department. Member of the Management Board since January 2013. From 2008 to 2013, Ms. Plastinina was the Director of the Financial Department of CJSC Interros Holding Company (now LLC Interros Holding Company). From 2010 to 2011, she was a member of the Board of Directors of Stavropol Broiler and, from 2009 to 2011, a member of the Board of Directors of Argos and Rosa Khutor. From 2008 to 2013, Ms.

156 Plastinina served as a Deputy Head of the Finance Unit at CJSC Interros Holding Company (now LLC Interros Holding Company). Ms. Plastinina graduated from the Moscow Chemical Machinery Construction Institute with a degree of a mechanical engineer. Ms. Plastinina also holds a postgraduate degree from the Bauman Moscow Technical Institute in economics and organisation of production operations. Mr. Alexander Ryumin. Vice-President, Head of the Polar Division since 2015, and, from 2012 to 2015, Head of the Polar Division. Member of the Management Board since January 2013. From 2008 to 2013, Mr. Ryumin served as the Deputy Director of the Production Management. Mr. Ryumin joined Nadezhda Metallurgical Plant of Zvenyagin Norilsk Mining and Metallurgical Enterprise (now part of the Group) after graduation and assumed various positions, including the Head of Smelting Shop and the Deputy Chief Engineer. Mr. Ryumin graduated from the Urals Polytechnic Institute in 1978 with a degree in engineering and metallurgy (non-ferrous metals). Ms. Marianna Zakharova. First Vice-President – General Counsel. Member of the Management Board since 2016. Please refer to “Board of Directors” for a brief biography of Ms. Zakharova. Ms. Larisa Zelkova. Senior Vice-President – HR, Social Policy and Public Relations since 2016, and, from 2015 to 2016, Vice-President - Head of Social Policy and Public Relations Unit of the Company. From 2013 to 2015, Ms. Zelkova served as the Deputy CEO on Social Policy and Public Relations. Ms. Zelkova has been a member of the Management Board of the Company since 2013. From 2011 to 2013, she was a member of the Board of Directors of the Company. Ms. Zelkova is a member of the Management Board of the Hermitage Endowment Fund, General Director of the non-profit charitable organisation “Vladimir Potanin Charity Fund”. She is also the Chairman of the Board of Directors of the MGIMO Endowment Fund. From 2011 to 2013, Ms. Zelkova served as the Chairman and, from 2013 to 2014, as a member of the Board of Directors of Prof-Media Management LLC. Since 2011, Ms. Zelkova has been a member of the Board of Directors of LLC Rosa Khutor Ski Resort Development Company. She worked at CJSC Interros Holding Company (now LLC Interros Holding Company) from 1998 to 2013. During her tenure with CJSC Interros Holding Company, she worked as the Deputy General Director – Director for Public Relations and a member of the Management Board of CJSC Interros Holding Company. From 1999 to 2014 Ms. Zelkova was the CEO and, since 2014, has been the President and the Chairman of Board of the non-profit charitable organisation “Vladimir Potanin Charity Fund”. Ms. Zelkova graduated with a degree in journalism from the Lomonosov Moscow State University in 1991.

See also “Related Party Transactions – Compensation of Key Management Personnel”.

Interests of the Board of Directors and the Management Board Olderfrey (see “Principal Shareholders”) is wholly owned by Mr. Vladimir Potanin, the President and Chairman of the Management Board of the Company. Several members of the Board of Directors have been nominated by the Company’s principal shareholders or hold other positions with the principal shareholders or with companies under the control of those principal shareholders, including, with respect to Olderfrey, Messrs. Bougrov, Barbashev, Bashkirov and Ms. Zakharova, and, with respect to RUSAL, Messrs. Bogaudinov, Mishakov, Sokov and Soloviev. As a result, although such persons do not have a conflicting interest from the standpoint of Russian legislation, there is potential for there to be a conflict of interest in the broader sense for Messrs. Potanin, Barbashev, Bashkirov, Bougrov, Bogaudinov, Mishakov, Sokov, Soloviev and Ms. Zakharova between their respective duties as members of the Board of Directors or Management Board of the Company and their other interests or duties. Other than as disclosed in this paragraph, no other conflicts of interest exist between the private interests or duties of the members of the Board of Directors and Management Board of the Company and their duties to the Company.

Corporate Governance

As a public company, the Company consistently strives to improve its standards of corporate governance, to improve management efficiency and to support the sustainability of it business model

157 and long-term economic growth. The Company complies with the corporate governance regime of the Russian Federation, although many concepts of corporate governance that are prevalent in Western Europe and the United States are considerably less developed in Russia. The Company considers five of the current Directors of the Company (the Chairman of the Board, Gareth Penny, as well as Sergey Bratukhin, Robert Edwards, Andrey Korobov and Gerhardus Prinsloo) to be independent. The Company uses what it considers to be more conservative criteria than required under Russian law for Russian listed companies to determine the independence of members of the Board of Directors, although these criteria may differ in certain respects from Western European and U.S. standards, including under the U.K. Corporate Governance Code. The Company is also implementing measures to improve communications with investors, including the targeted release of periodic financial reporting within a shorter timeframe. As part of the Company’s corporate governance measures, the Board of Directors has established the following committees:

Audit Committee

The Audit Committee is chaired by Gerhardus Prinsloo, an Independent Non-Executive Director of the Company, and includes Messrs. Bashkirov, Bogaudinov, Bratukhin and Edwards. The Audit Committee assists the Board of Directors in discharging its responsibilities regarding financial reporting, external and internal audits and controls, as well as reviewing the Group’s annual financial statements. The Committee also assists the Board by reviewing and monitoring the extent of non-audit work undertaken by independent auditors, and reviewing the effectiveness of the Group’s internal audit activities.

Corporate Governance, Nomination and Remuneration Committee

The Corporate Governance, Nomination and Remuneration Committee is chaired by Sergey Bratukhin and includes Messrs. Barbashev, Mishakov, Prinsloo and Edwards. The Committee was established for the purpose of assisting the Board of Directors with the preliminary review of matters related to corporate governance and other matters under the competence of the Board of Directors affecting the corporate interests of the Company and rights of its shareholders, including transactions with shares of the Company, nominations to the Board and levels of executive remuneration, as well as preparation of recommendations for the Board of Directors for making decisions on such matters.

Strategy Committee

The Strategy Committee is chaired by Maxim Sokov, a Non-Executive Director of the Company, and includes Messrs. Bashkirov, Bratukhin, Penny and Prinsloo. Members of the Board of Directors of the Company who also occupy managerial positions in the Company are not permitted to serve on this Committee. The Strategy Committee was created for the purpose of assisting the Board of Directors with forming a preliminary review of strategic goals, developing business priorities, evaluating long- term efficiency and developing recommendations for the Board of Directors on fine-tuning the current strategy of the Company, including recommendations on optimisation of the Group’s operational processes and production efficiencies.

Budget Committee

The Budget Committee is chaired by Alexey Bashkirov, a Non-Executive Director of the Company, and includes Messrs. Barbashev, Bratukhin, Mishakov and Prinsloo. The Budget Committee’s duties are to assist the Board of Directors in its review of the Company’s annual budget, by conducting and overseeing the preliminary review of the budget. The Budget Committee is also responsible for the development of recommendations and for defining the Company’s finance, budgeting and business planning policies.

158 PRINCIPAL SHAREHOLDERS

The following table shows the name and shareholding of each registered shareholder of the Company holding 5% or more of its share capital. Name of the registered shareholder Percentage share in share capital (%) Olderfrey Holdings Limited(1) 30.4 United Company RUSAL Plc(2) 27.8 Other 41.8 Total 100

(1) Indirect holding through controlled entities. (2) Direct and indirect holding through controlled entities. At the end of 2016, Crispian, an entity associated with Mr. Roman Abramovich, Mr. Alexander Abramov and Mr. Alexander Frolov, informed the Company that its shareholding in the Company decreased below 5%. Based on the information available to the Company, the reduction resulted from reallocation of a portion of Crispian’s shareholding to its associated companies. As of 31 December 2016, the shareholding of Crispian in the Company was 4.242%. RUSAL, Whiteleave (a subsidiary of Olderfrey) and Crispian have entered into agreements for a ten- year term expiring on 1 January 2023, pursuant to which the parties agreed provisions affecting the governance of the Company, including, among other things, the composition of the Board of Directors and the appointment of the President, rights of first refusal upon sale of its stake by any of the principal shareholders, mutual buyout rights exercisable by RUSAL and Whiteleave and, in addition, the parties agreed not to take any action with respect to specified fundamental matters without the agreement of each of them, agreed on specific rules and procedures, and, subject to certain exceptions agreed to maintain at specified levels dividends and capital expenditure. The Company is not a party to these agreements. See “Risk Factors – Risks Associated with the Group’s Business and Industry – The Company’s principal shareholders have the ability to exert influence over the Group and its business” and “Management and Corporate Governance – Board of Directors”. The Company is not aware of any arrangements in existence as of the date of this Prospectus which could reasonably be expected to result in a change of control of the Company.

159 RELATED PARTY TRANSACTIONS

The following is a summary of the Group’s transactions with related parties (as determined under IFRS) for the years ended 31 December 2016, 2015 and 2014. For further details, see Note 29 to the 2016 Consolidated Financial Statements and Note 28 to the 2015 Consolidated Financial Statements. In the periods under review, the Group’s transactions with related parties have comprised primarily transactions with associates, as well as, to a lesser extent, transactions with entities under common ownership and control of the Group’s major shareholders and key management personnel. The Group defines an “associate” as an entity over which the Group exercises significant influence, but not control, through participation in financing and operating policy decisions, in which it normally owns between 20% and 50% of the voting equity. In the years ended 31 December 2016, 2015 and 2014, the Group’s associates comprised Nkomati Nickel Mine. In April 2016, the Board of Directors of the Company decided to support the Olympic skiing resort Rosa Khutor in Sochi, Russia, by approving a three-year financing programme via acquisition of shares of Belfund Investments Limited for a total consideration of U.S.$250.5 million. The acquisition of the shares was made in several instalments during 2016-2017.

Sale and Purchase of Goods and Services

Sales and purchases of goods and services with related parties in the years ended 31 December 2016, 2015 and 2014 have primarily comprised the sale and purchase of gas, electricity and heat energy and were made at prices established by regulatory authorities (the Russian Federal Tariff Service, the Russian Federal Antimonopoly Service and Regional Energy Commission of the Krasnoyarsk region). In addition, purchases from related parties also included the purchase of nickel concentrate from Nkomati Nickel Mine for further processing at the Group’s nickel refinery in Finland and starting from 2016 at Kola Division. In 2016, revenue from sale of goods and services to related parties was U.S.$15 million (including U.S.$2 million of sales to associates), as compared with U.S.$6 million in 2015 (comprising U.S.$6 million of sales to associates) and U.S.$3 million in 2014 (including U.S.$1 million of sales to associates). In 2016, expenditures on purchases of goods and services and financial assets from related parties were U.S.$346 million (including U.S.$169 million of purchases from associates), as compared with U.S.$261 million in 2015 (including U.S.$242 million of purchases from associates) and U.S.$420 million in 2014 (including U.S.$398 million of purchases from associates).

Compensation of Key Management Personnel

In 2016, remuneration of key management personnel was U.S.$62 million, comprising salary and performance bonuses. In 2015, remuneration of key management personnel was U.S.$61 million, comprising salary and performance bonuses. In 2014, remuneration of key management personnel was U.S.$37 million.

160 REGULATORY MATTERS

Below is a summary of certain Russian regulatory matters that are applicable to the Group’s operations in the Russian Federation.

Overview The Group’s operations in Russia are regulated by a number of laws relating to mining operations, precious metals, including PGMs, quality standards, industrial safety, environmental regulation and other matters. The relevant legislation includes the following laws:  the Constitution of the Russian Federation dated 12 December 1993, as amended;  the Civil Code of the Russian Federation, as amended (the “Civil Code”);  the Land Code of the Russian Federation dated 25 October 2001, as amended (the “Land Code”);  the Law of the Russian Federation “On Subsoil” No. 2395-1 dated 21 February 1992, as amended (the “Subsoil Law”);  the Federal Law “On Precious Metals and Precious Stones” No. 41-FZ dated 26 March 1998, as amended (the “Precious Metals Law”);  the Federal Law “On Technical Regulation” No. 184-FZ dated 27 December 2002, as amended (the “Technical Regulation Law”);  the Federal Law “On Licensing of Certain Types of Activities” No. 128-FZ dated 8 August 2001 (the “Old Licensing Law”);  the Federal Law “On Licensing of Certain Types of Activities” No. 99-FZ dated 4 May 2011, as amended (the “Licensing Law”);  the Federal Law “On Environmental Protection” No. 7-FZ dated 10 January 2002, as amended (the “Environmental Protection Law”);  the Federal Law “On Industrial Safety of Hazardous Industrial Facilities” No. 116-FZ dated 21 July 1997, as amended (the “Safety Law”);  the Federal Law “On Currency Regulation and Currency Control” No. 173-FZ dated 10 December 2003, as amended (the “Russian Currency Law”); and  the Federal Law “On Procedure of Foreign Investments in Commercial Entities Having Strategic Importance for the Defence of the Country and the Security of State” No. 57-FZ dated 29 April 2008, as amended (the “Foreign Investments Law”), and rules and regulations adopted in accordance therewith. Regulation of Mining Operations in Russia Subsoil Licences The licensing regime for use of subsoil for geological research, exploration and production of mineral resources, in particular nickel, copper or PGMs, is established primarily by the Subsoil Law, the Precious Metals Law and the regulations issued thereunder. Licensing of subsoil plots is carried out in accordance with the Subsoil Law, pursuant to which there are several types of subsoil licences granted in relation to geological research and exploration and production of natural resources, including: (i) licences for geological research and exploration of a subsoil plot (“exploration licences”); (ii) licences for production of natural resources (“production licences”); and (iii) so- called combined licences for geological research, exploration and production of natural resources (“exploration and production licences”).

161 Issuance of Licences In general, production licences and combined licences are currently issued by tender or auction. The tenders (auctions) for licences in respect of subsoil deposits are conducted by special commissions of the Russian Federal Agency for Subsoil Use (the “Rosnedra”). While the auction or tender commission formed by Rosnedra must include a representative of the relevant region, the separate approval of regional authorities is generally not required in order to issue subsoil licences. The Subsoil Law provides that, in a tender, the licence should be awarded to the bidder which has submitted the most technically competent, financially attractive and socially and environmentally sound proposal that meets the relevant, published tender terms and conditions; and, in an auction, to the bidder which has offered the largest one-off payment for the use of the subsoil plot. In limited circumstances defined by law, production licences may also be issued without holding an auction or tender, including, for instance, to holders of exploration licences that discover natural resource deposits through exploration work at their own expense. Regional authorities may also issue production licences for “common” mineral resources, such as clay, sand or limestone. An auction in respect of subsoil plots of federal importance (as defined by Article 2.1 of the Subsoil Law) and in certain other cases is arranged by the Russian Government, and the Russian Government may set forth limitations for Russian legal entities with foreign shareholders to participate in the auctions in respect of subsoil plots of federal importance. The Federal Law “On Amending Certain Legislative Acts of the Russian Federation and Deeming Inoperative Certain Legislative Acts of the Russian Federation in Connection with the Adoption of the Federal Law on Procedure of Foreign Investment in Commercial Entities Having Strategic Importance for the Defence of the Country and the Security of the State” No. 58-FZ dated 29 April 2008 (the “Amending Law”, together with the Foreign Investments Law, the “Strategic Investment Laws”) introduced certain further amendments to the Subsoil Law, including the concept of subsoil plots of federal importance. Subsoil plots of federal importance include, among other things, subsoil plots with nickel and PGMs reserves. Pursuant to the Amending Law, if geological survey conducted at a subsoil site has identified a deposit falling under the classification of a subsoil plot of federal importance, in the interests of national defence and security, the Russian Government may decide to deny a Russian legal entity with foreign participation the right to conduct exploration and production (even if a combined licence has already been issued to such subsoil user, which would entail the revocation of the licence subject to payment of compensation to the subsoil user for expenses incurred in conducting the geological survey and reimbursement of the lump sum payment upon issue of the licence). The transfer for any reason of subsoil use rights to subsoil plots of federal importance to Russian legal entities controlled by foreign investors is prohibited, other than the transfer of rights in exceptional cases at the discretion of the Russian Government. In respect of subsoil plots of federal importance, only production licences and combined licences may be issued. A licence for subsoil plot of federal importance can be issued by Rosnedra only on the basis of a relevant decision of the Russian Government taken either upon the results of a tender or auction, or upon the discovery of such subsoil plot. Under a combined licence, advanced exploration and mining operations on a subsoil plot of federal importance may only commence after the geological studies of the subsoil plot are fully completed, in contrast to the general rule applicable to combined licences, in accordance with which advanced exploration and mining operations may be conducted simultaneously with geological study. Exploration licences are generally awarded, without a tender or auction process, by a special commission formed by Rosnedra, which includes representatives of the relevant regional executive authority. The Ministry of Natural Resources and Ecology of the Russian Federation maintains an official list of deposits in respect of which exploration licences can be issued. A company may obtain a licence for geological exploration (to be conducted at the company’s own expense) of a deposit included in the above-mentioned list by filing an application with Rosnedra (or its regional department). The special commission decides whether to grant the licence based upon the merits of the application, unless there is more than one application with respect to the same deposit (in which case Rosnedra sets up an auction for an exploration and production licence for the deposit).

162 Extension of Licences Until January 2000, the Russian Government’s Committee for Geology and Subsoil Use typically granted geological survey licences for up to five years, production licences for up to 20 years and licences for combined activities for up to 25 years. Under the Subsoil Law, as currently in effect, the maximum term of a regular geological research licence is five years, although the maximum term of a licence for geological research of subsoil plots fully or partially located in certain regions (the Republic of Sakha, the Kamchatka Krai, the Krasnoyarsk Krai, the Khabarovsk Krai, the Irkutsk Region, the Magadan Region, the Sakhalin Region, the Nenets Autonomous District, the Chukotka Autonomous District, the Yamalo-Nenets Autonomous District) is 7 years, and the maximum term of a licence for geological research of subsoil plots under inland sea waters, territorial waters and continental shelf of the Russian Federation is 10 years, and the Rosnedra may issue a production licence and combined licence for the useful life of a mineral reserves field, calculated on the basis of a feasibility study for exploration and production that ensures rational use and protection of the subsoil. The term of a licence runs from the date the licence is registered with the Rosnedra. The Subsoil Law permits a subsoil licensee to request an extension of a production licence in order to complete production or vacate the land once the use of the subsoil is complete. In order to amend any condition of a subsoil licence, including extension of its term, a company should file a relevant application with the federal authorities. In practice, the factors that may affect a company’s ability to obtain approval for the amendment of a licence include its compliance with the terms and conditions of the licence and its management’s experience and expertise relating to subsoil issues, including experience in amending licences. The Group intends to extend its licences for each of the fields in Russia that is expected to continue to produce subsequent to the end of its current period. However, if it will be determined that the Group has not complied with the terms of the relevant licence, the Group may not be able to extend the licence upon the expiration of its current period. Transfer of Licences Licences may be transferred only under certain limited circumstances that are identified in the Subsoil Law, including the reorganisation of the licence holder or in the event that an initial licence holder transfers its licence to a legal entity that has been established for the purpose of continuing operations at the relevant subsoil site and in which the initial licence holder has an ownership interest of at least 50%. Licences can also be transferred from a parent company to its subsidiary, from a subsidiary to its parent company, between two subsidiaries of the same parent company (provided that a transferee is a Russian company), as well as in the case of the acquisition of the property complex of the previous subsoil user in the course of bankruptcy proceedings. In any of the above instances, a licence may be transferred (by way of cancellation and reissuance by Rosnedra) only if the transferee possesses the equipment and authorisations necessary to conduct the exploration or production activity that is covered by the transferred licence. A subsoil licence may also be transferred in the event of a reorganisation of the relevant licence holder to a successor of such licence holder. Generally, the Subsoil Law prohibits the transfer of rights of subsoil use over the subsoil plots of federal importance to a Russian legal entity in which a foreign investor or a group of persons including a foreign investor hold an interest if such foreign investor or such group of persons including a foreign investor: (i) directly or indirectly possess more than 10% of the total number of votes conferred by voting shares in the share capital of that entity; or (ii) have the right, on the basis of a contract or another ground, to issue binding instructions to that entity, including control over the business operations; or (iii) have the right to appoint chief executive officer and/or more than 10% of the members of the collective executive body, and/or have an unconditional right to elect more than 10% of the board of directors or another collective management body of that entity. Such entities may obtain a subsoil use right over the subsoil plots of federal importance in exceptional cases at the discretion of the Russian Government.

163 Maintenance of Licences A licence granted under the Subsoil Law is generally accompanied by a licensing agreement. The licensing agreement sets out the terms and conditions for the use of the subsoil licence. Currently, Rosnedra and the licensee are the only parties to licence agreements. Licensing agreements for subsoil use identify the terms and conditions for the use of the subsoil, the rights and obligations of the licensee and amounts of payments to be made by the licensee on the terms of the licence. Although most of the conditions set out in a licence are based on mandatory rules, the parties may negotiate a number of provisions in a licensing agreement. A licence holder has the right to develop and to use (including to sell) resources extracted from the licence area. The Russian Federation, however, retains ownership of all unextracted subsoil resources at all times. Licences generally require the licence holder to make various commitments, including:  extracting an agreed target amount of reserves per annum;  complying with specified requirements, including in relation to the use of technology;  conducting agreed mining and other exploratory and development activities;  protecting the environment in the licence areas from damage;  providing geological information and data to the relevant authorities;  submitting, on a regular basis, formal progress reports to regional authorities;  making all obligatory payments when due; and  participating in social and economic development of the relevant region. If, due to material changes in circumstances, a licence holder cannot meet certain deadlines or achieve certain volumes of exploration work or production output as set forth in the licence, it may apply to amend the relevant licence conditions. The Subsoil Law provides that a licence holder may, on application to Rosnedra, extend its licence where the licence holder complies with the terms of the licence and where the exploration, assessment or development of the subsoil plot requires completion or wind-up operations. The Group intends to extend its licences for each of the subsoil plots that it expects will continue to be productive following the end of their current periods. Termination of Licences Governmental authorities may undertake periodic reviews for ensuring compliance by subsoil users with the terms of their licences and applicable legislation. The Federal Service for Supervision in the Sphere of Natural Resource Use (the “Rosprirodnadzor”) and the Federal Service for Ecological, Technological and Nuclear Supervision (the “Rostekhnadzor”) can fine a licensee for failing to comply with a subsoil licence and requirements of subsoil protection and efficient subsoil use, and the Rosnedra can prematurely revoke, suspend or limit a subsoil production licence in certain circumstances, including:  a breach or violation by the licensee of material terms and conditions of the licence;  repeated violation by the licensee of subsoil regulations;  the failure by the licensee to commence operations within a period of time specified in the licence with production of required volumes;  the occurrence of an emergency;  the emergence of a direct threat to the life or health of people working or residing in the area affected by the subsoil use operations;  the liquidation of the licensee; and

164  a failure to submit reporting data or geological information in accordance with Russian subsoil legislation. If the licensee does not agree with a decision of the licensing authorities, including a decision relating to a licence limitation, suspension or termination or the refusal to reissue an existing licence, the licensee may appeal the decision through administrative or judicial proceedings. In certain cases of termination, the licensee has the right to attempt to cure the violation within three months of its receipt of notice of the violation. If the issue has been resolved within such a three-month period, the licensing authorities may decide not to terminate the licence but may still take other action against the licensee. The subsoil user can also be held administratively or criminally liable for violations of the terms of a licence. “Actualisation” of Licences In February 2015, the Rosnedra commenced working on a one-time “actualisation” of subsoil licences, which includes elimination of some conditions of subsoil use, bringing them in compliance with amended regulatory framework, as well as exclusion of those licence conditions that cannot be complied with and result in a formal requirement of premature termination of the right for subsoil use. The list of licences which are subject to “actualisation” is determined and from time to time updated by the Rosnedra. All of the Group’s licences which were subject to a one-off “actualisation” have already been “actualised”, while documentation formalising such “actualisation” in respect of some licences is under technical registration by the Rosnedra, which is expected to be completed by the end of 2017. Mining Allotments Under the Subsoil Law, the Rosnedra provides a subsoil plot to a subsoil user as a “mining allotment”, in other words, a geometric block of subsoil. The Rosnedra determines the boundaries of the preliminary mining allotment at the time it issues the licence, subject to approval of the regional bodies of Rostekhnadzor. Following the preparation of a subsoil use development plan by the licensee, which the state mining supervision authorities (or, in relation to subsoil plots of local importance, the regional authorities) and an environmental examination committee must approve, Rostekhnadzor (or, in relation to subsoil plots of local importance, the regional authorities) prepares a mining allotment act and graphic annexes, which certify the exact mining allotment boundaries. The licence will then incorporate the exact mining allotment boundaries. Land Use Permits In addition to a subsoil production licence, a licensee needs to obtain rights to use surface land within the specified licensed mining area. The land resources management authorities provide a subsoil user with rights to the relevant land plot pursuant to Russian civil, forestry and land legislation. Under Federal Law “On Enactment of the Land Code of the Russian Federation” No. 137-FZ dated 25 October 2001 (as amended), commercial legal entities were required to purchase or enter into lease agreements with respect to land plots occupied by their operations by 1 July 2012. However, from 1 March 2015, state-owned or municipality-owned land plots may be used for the purposes of geological exploration of a subsoil plot upon a formal decision of the regional land resources management authorities without entering into a purchase or lease agreement. System of Payments for the Use of Subsoil Under the Russian Subsoil Law, the payment system for the use of subsoil currently consists of the following payment obligations:  one-off payments in cases specified in the licence;  regular payments for subsoil use;  fees for the right to participate in tenders and auctions; and

165  other payments and fees set forth by the legislation of the Russian Federation on taxes and duties. The Russian Subsoil Law contains a range of minimum and maximum rates of regular payments for the use of subsoil and the federal authorities (and, in relation to subsoil plots of local importance, the regional authorities) have authority to set the rate in any particular licence. The Russian Tax Code contains the relevant rates of mineral extraction tax. Regulation of Precious Metals Pre-emptive Right of the State to Purchase Precious Metals The extraction, production and refining of precious metals are subject to specific regulations set forth in the Precious Metals Law. As a general rule, a company which extracts ores that contain precious metals has title to those precious metals. Russian companies may buy or sell ores and concentrate which contain precious metals provided that they are registered with the Russian State Assaying Chamber under the Ministry of Finance of the Russian Federation (the “State Assaying Chamber”). Only authorised entities approved by the Russian Government may refine precious metals. Companies which extract precious metals are required to offer refined precious metals, as well as nuggets and precious metals both qualified as “unique” ones, on a priority basis to the relevant governmental authorities (i.e., the competent federal authority and competent regional authority on which territory such precious metals have been obtained), which may use their pre-emptive rights if they have notified such companies of their intention to purchase precious metals within a month since the date of the relevant offer to purchase refined precious metals on a priority basis, have entered into agreements for the purchase and sale of precious metals and made an advance payment under those agreements. If the competent governmental authorities do not exercise their right to purchase refined precious metals on a priority basis, such metals may be sold in the domestic market, used in internal production or exported. The relevant state authorities in the past have rarely exercised its pre-emptive right in relation to the Group’s refined PGMs and only in respect of insignificant volumes of refined PGMs. The replenishment of the state fund of precious metals is determined by the Russian Government and is implemented in compliance with the limits specified in the annual federal budget. Pricing Requirements The Precious Metals Law requires that prices for precious metals are to be determined by reference to current world prices in the precious metals market. The price for which the refined precious metals are sold to a competent authority is determined on the basis of the LME prices on the day preceding the day when the price is established, less certain of the competent authority’s expenses in connection with the acceptance, storage and sale of precious metals and must not under any circumstances exceed the LME precious metals market prices. Extraction and Refinery The Precious Metals Law requires that extracted and processed precious metals (except for precious metal nuggets) are forwarded, after the necessary treatment, to refineries approved by the Russian Government. Currently there are only eleven refineries, including the Company, that have been authorised by the Russian Government to refine precious metals. The title to the precious metals after refining remains with their initial owners, unless otherwise stipulated by the terms of a refinery agreement. Export and Import The procedure for the export of precious metals from the Russian Federation depends on the type of precious metal or ore and may be subject to licensing (other than exports to the countries which are the participants of the Customs Union within the Eurasian Economic Community). For instance, a licence is required for the export of raw silver, gold, platinum and other PGMs. Relevant licences for the export of precious metals are issued by the Ministry of Industry and Trade of the Russian Federation, in accordance with the procedure established by the Russian Government. For non- banking institutions, the Ministry of Industry and Trade only issues such licences with respect to each particular export contract for a term of not longer than one year. This kind of one-off licence is

166 granted for a fixed volume of product, as specified in the sale contract. The import of precious metals into the Russian Federation is not subject to quantitative restrictions or licensing requirements. Accession of Russia to the WTO On 16 December 2011, Russia signed the Accession Protocol to the WTO. The relevant ratification procedures were completed on 21 July 2012, and on 22 August 2012 the formal accession of the Russian Federation to the WTO became effective. The Accession Protocol does not impose any additional restrictions on Russian producers and exporters of non-ferrous metals or PGMs. As part of its accession to the WTO, Russia abolished quantitative restrictions on the import/export of precious metals. It is further expected that Russia’s accession to the WTO will remove restrictions on the purchase of machinery and equipment for non-ferrous metal industries, which is widely regarded in the industry to be a positive development for Russian producers and exporters of non-ferrous metals and PGMs. In addition, under the accession terms, Russia has reduced import duties on certain types of metal products, including unrefined nickel and platinum, and has abolished (and undertook not to introduce and increase) export duties on such goods within four years from the date of Russia’s accession to the WTO. Accounting and Reporting Precious metals must be recorded according to their mass and quality when extracted, and also during the production process, use and trading. The procedure for such recording and reporting is established by the Russian Government. Security Any entities engaged in the geological survey, exploration, mining, production, use and turnover of precious metals, and any goods produced from such precious metals, as well as individual entrepreneurs performing transactions with precious metals, are obliged to organise the safekeeping of such precious metals and goods produced from such precious metals. Such entities and individual entrepreneurs are obliged to implement certain security measures at facilities where transactions with precious metals are performed and to equip such facilities with special safety authorised and communication equipment. In addition, such entities and individual entrepreneurs are obliged to set up their own security services or to contract for such services with organisations that specialise in providing such services. Transportation vehicles for precious metals and goods produced from precious metals must be equipped with corresponding safety and security measures and must be accompanied by armed guards. The requirements for the equipment of the specialised road transport vehicles (with the exception of special vehicles of a bank’s security services and money transport services) are established by a special authorised federal executive body in coordination with Russian internal affairs authorities. Special Control in Precious Metals Industry For the purposes of compliance with applicable legislation in the area of precious metals, effective use of precious metals, use of environmentally friendly extraction and production technologies, safety of precious metals and goods produced from precious metals, the federal and regional authorities carry out state control over the precious metals industry. Respective authorities may perform audits and inspections of all organisations engaged in the precious metals industry, establish accounting and reporting requirements, and issue orders for the cessation of violations of regulatory requirements. The principal authority entitled to carry out the above control is the State Assaying Chamber, which, together with its structural subdivisions, among other things, controls the compliance of legal entities and individuals with regulatory requirements in connection with the production, extraction, processing, use, trade accounting and storage of precious metals. Licensing of Operations In addition to licenses for subsoil use, the Group is required to obtain other licenses, authorisations and permits from Russian governmental authorities for its operations. In particular, the Group

167 requires licences for the operation of its hazardous industrial facilities using explosive and flammable materials and chemically hazardous materials and for the use of its underground water resources. Licensing of the Operation of Hazardous Facilities The Rostekhnadzor issues licences for the operation of industrial facilities using explosive and flammable materials and chemically hazardous materials having a specified hazard level and maintains a register of such facilities. In accordance with the Licensing Law, many provisions of which came into effect on 3 November 2011, the Group must continue to conduct those types of its activities on the basis of previously issued licences issued under the Old Licensing Law and the regulations introduced under that law. Under the Old Licensing Law, licences were issued for a minimum period of five years. Licences issued under the Licensing Law are not limited to a specified term. The issuance of the licence is subject to completion of a state industrial safety review and an industrial safety declaration and other requirements set forth in the licensing regulations. Licences issued prior to and valid as at the date of the Licensing Law coming into force will also have unlimited duration. Under the Licensing Law, a licence will be suspended by a licensing authority in the following situations:  imposition of administrative sanctions on a licensee for failure to implement, within the established period, orders issued by the licensing authority curing a material violation of the licensing requirements; and  imposition upon a licensee of an administrative penalty in the form of administrative suspension of activity by reason of a material violation of licensing requirements. If during a period of administrative suspension of the activity and suspension of a licence, as established by a court or an official of the Rostekhnadzor, a licensee has failed to cure a material violation of the licensing requirements, the licensing authority is obliged to bring before a court an application for revocation of the licence. The licence can be revoked by a court on the basis of consideration of the licensing authority’s application for revocation of the licence. Licensing of Surface Water Use The Water Code of the Russian Federation No. 74-FZ dated 3 June 2006 (the “Water Code”) does not require licensing of surface water use, although, prior to the Water Code, the law did require such licensing. Under the Water Code, water users may use surface water under a water use agreement concluded with state or local authorities; a decision of state or local authorities granting rights to the use of surface water; or without any such agreements or decisions, depending on the purpose of the surface water use. Water users and state or local authorities may conclude agreements on water use for a period of up to 20 years. Licensing of Underground Water Use Users of underground water resources in Russia require a subsoil licence issued under the Subsoil Law and the regulations adopted under that law. The Rosnedra currently issues licences for the use of underground water (except for the subsoil plots of local importance). The Rosnedra may grant licences for a term of up to 25 years. Licensees may only amend the conditions of a subsoil licence, including its term, by application to the licensing authorities. However, if underground water is produced for the process of water supply by the holders of combined licences for the geological survey, exploration and production of natural resources or licences for the geological survey and exploration of a subsoil plot, the requirements described above do not apply and the subsoil user is entitled to produce underground water upon approval of the technical design.

168 In the event of repeated breaches by the licensee of applicable regulations or material terms of the licence, as well as upon the occurrence of certain emergencies, the licensing authorities may amend, suspend or terminate the licence. Breaches may also result in the imposition of fines.

Technical Regulation

The Group is subject to various technical regulations and standards which apply to industrial manufacturing businesses. On 1 July 2003, the Technical Regulation Law introduced a new regime for the development, enactment, application and enforcement of mandatory rules applicable to products, manufacturing, storage, transportation, sales and specified other operations and processes, as well as new regulations relating to the quality of products and processes, including technical regulations, standards and certifications. Technical regulations are expected to replace the previously adopted state standards (the so-called “GOSTs”), and, in the absence of certain technical regulations, the existing federal laws and regulations, including GOSTs, that prescribe rules for different products and processes remain in force to the extent that they protect health, property, the environment or consumers. In any event, the State Committee on Standardisation and Metrology (a predecessor of the Federal Service for Technical Regulation and Metrology) has declared GOSTs and interstate standards adopted before 1 July 2003 to be the applicable national standards. In those cases where the Technical Regulation Law provides for mandatory confirmation that a product conforms to established technical regulations or standards, companies are required to obtain certifications or declarations of compliance with the applicable technical regulations, standards and terms of contracts. Currently, companies must certify a number of products containing precious metals and Russian law requires mandatory certification under a classification system. Where certification is not mandatory, a company may elect for voluntary certification by applying for a compliance certificate from the relevant authorities. Following the issuance of that certificate, the applicant has the right to use the relevant compliance mark on its products.

Environmental Regulation

General The Group is subject to laws, regulations and other legal requirements relating to protection of the environment, including those governing the discharge of polluting substances into the air and water, the management and disposal of hazardous substances and wastes (including their neutralisation, where applicable), the rehabilitation of the contaminated areas on the production sites, as well as the protection of the environment. Issues of environmental protection in Russia are regulated primarily by the Environmental Protection Law, as well as by a number of other federal and regional legal acts. Pay-to-pollute The Environmental Protection Law establishes a “pay-to-pollute” regime administered by federal and local authorities. Additional payment obligations may arise under other laws such as Federal Law “On Production and Consumption Waste” No. 89-FZ dated 24 June 1998, as amended, and Federal Law “On the Protection of Atmospheric Air” No. 96-FZ dated 4 May 1999, as amended. Legal regulation with respect to control and surveillance over environmental use and protection is a function of the Ministry of Natural Resources and Ecology. Ecology surveillance functions, including administering the “pay-to-pollute” regime, are administered by the Russian Federal Service for Supervision of Natural Resource Usage (“Rosprirodnadzor”). Certain ecology surveillance functions are exercised by the Rostekhnadzor, the authority responsible for the register of the hydro-technical facilities, such as tailing dams. The Russian Government has established standards that regulate the permissible impact of industrial and other business activities on the environment. Various Russian state authorities, including the Rosprirodnadzor and Rostekhnadzor, determine limits for emissions and disposal of hazardous substances, waste disposal and soil and subsoil contamination. Companies must develop their own pollution standards based on these statutory standards, as modified to take into account the type and

169 scale of the environmental impact of their operations. Companies must then submit these standards and limits for waste disposal for approval by the Rosprirodnadzor, which, if those standards do not comply with the relevant regulations, may determine the applicable limit for pollution and require the relevant company to prepare and submit a program for the reduction of emissions or disposals to the prescribed limit. The law generally requires a company to implement an emission reduction program within a specified period. The Russian Government has established fees for the statutory approved limits on emissions and effluents and for pollution in excess of these limits. The fees may be increased by statutory approved multiples. Under the Environmental Protection Law, multiples that may reach up to 25 for emissions and effluents in excess of statutory limits will be effective until 31 December 2019. Starting 1 January 2020, the highest multiple will be increased to 100 and will apply to companies exceeding such pollution limits and having a significant negative environmental impact. Payments of such fees do not relieve a company from its responsibility to take environmental protection measures and undertake restoration and clean-up activities. Industrial Environmental Monitoring Under the Environmental Protection Law, objects having negative environmental impact are divided into four categories based on the level of impact: objects having significant negative environmental impact, objects having moderate negative environmental impact, objects having low negative environmental impact and objects having minimal negative environmental impact. The criteria for determining the appropriate category of impact are determined by the Russian Government and take into account such factors as level of negative environmental impact of business and/or production activity, toxic level and carcinogenic property of polluting substances, classification of industrial facilities, etc. All objects having negative environmental impact will be registered with state authorities. The Environmental Protection Law requires companies operating businesses and activities at a specified impact criteria to carry on an industrial environmental monitoring, which includes implementation of a program of industrial environmental monitoring and reporting on the results of the industrial environmental monitoring to the Rosprirodnadzor. Ecological Approval Federal Law “On Ecological Expert Examination” No. 174-FZ dated 23 November 1995, as amended (the “Ecological Examination Law”), provides for mandatory ecological approval of documentation before the implementation of certain types of activities made to prevent negative impact of these activities on the environment, and the receipt of a positive examination by state ecological expert before the project may commence or be financed. State ecological approval must be obtained from federal or regional authorities based on the list of certain types of documentation being objects of such ecological approval (Environmental Impact Assessment) set forth by the Ecological Examination Law. Violation of the Ecological Examination Law may result in administrative fines, civil liability (to compensate for damages and losses) and criminal liability as described below in “— Environmental Liability”. Environmental Protection Authorities The Rosprirodnadzor, the Rostekhnadzor, the Russian Federal Service for Hydrometeorology and Environmental Monitoring, the Rosnedra, the Russian Federal Agency on Forestry and the Russian Federal Agency on Water Resources, along with their regional branches, are primarily responsible for environmental control, and the monitoring, implementation and enforcement of the relevant laws and regulations. The Russian Government and the Russian Ministry of Natural Resources and Ecology are responsible for the development of regulations in the sphere of environmental protection and for the coordination of activities of the regulatory authorities in this area. These regulatory authorities, along with other state authorities, individuals and public and non-governmental authorities, have the right to initiate lawsuits for the compensation of damage caused to the environment. The statute of limitations for such lawsuits is 20 years.

170 Reclamation The Group strives to conduct its reclamation activities, such as re-cultivation, restoration, regeneration and other methods of rehabilitation, in accordance with the Basic Regulations on Land Reclamation, Removal, Preservation, and Rational Use of the Fertile Soil Layer, approved by Order No. 525/67 of 22 December 1995 of the Ministry of Natural Resources and Environment and the Russian Committee for Land Resources and Land Use. In general, reclamation activities applicable to the Group involve both a technical stage and a biological stage. In the first, technical stage, the Group performs landscaping operations (backfilling of the pits, grades and terraces mound slopes, levelling of the surface of the mounds, and adding clay rock on top for greater adaptability of young plants). In the second, biological stage, conifers, such as pine, larch or cedar, on horizontal and gently sloping surfaces, as well as shrubs and bushes start to grow to reinforce inclines. Russian environmental regulations do not require mines to achieve the approximate original contour of the property as is required, for example, in the United States. Environmental Protection Programmes The Group has been developing and implementing environmental protection programmes. The Group’s programmes include measures to achieve compliance with limits imposed on air and water pollution and storage of industrial waste, in particular the introduction of environmentally friendly industrial technologies, the construction of purification and filtering facilities, the repair and reconstruction of industrial water supply systems, the installation of metering systems, reforestation and the treatment of water and industrial waste recycling. In addition, the Group is required under regulation issued by the authorities of Krasnoyarsk region to reduce the annual volume of sulphur dioxide emissions from its operations at the Polar Division from their level of 1,915 thousand tonnes to 337 thousand tonnes by 2020. As a result of recent amendments to the Environmental Protection Law, the scope of state support for business activities carried out by companies and individual entrepreneurs in order to protect the environment has been significantly extended. State support is provided by way of tax benefits, benefits with respect to payments for negative impact on the environment and funding from federal and regional budgets. It is also provided that other measures of state support can be established in federal and regional legislation. Environmental Liability If the operations of a company violate environmental requirements or cause harm to the environment or any individual or legal entity, the environmental authorities may suspend these operations (for up to 90 days) or a court action may be brought to limit or ban these operations and require the company to remedy the effects of the violation. Any company that fails to comply with environmental regulations may be subject to administrative and/or civil liability, and its employees may be held disciplinary, civilly, administratively or criminally liable. A court may impose an obligation to conduct reclamation measures at the expense of a breaching entity pursuant to a plan of restorative works. Since 1 January 2012, owners of certain types of hazardous facilities are required to obtain insurance for liability for harm caused to third parties as a result of accidents at the facilities, except for harm caused to the environment. In addition, the Ministry of Natural Resources and Environment has recommended that a voluntary environmental insurance policy be obtained to cover events of accidental environmental pollution of air or land or accidental discharge of waste waters or other clean-up liabilities.

Regulation of Real Estate

General At present, the Russian Federation or the Russian regions or municipalities own most land in Russia, and only a small proportion of land is in private ownership. A relatively higher proportion of

171 buildings and similar real estate assets is privately owned, due to a less restrictive regulatory regime which applies to these properties. Under the Land Code, companies generally have ownership or lease rights in relation to the use of land in the Russian Federation. The Group owns or leases the majority of land plots that it uses in its activities. The Federal Service for State Registration, Cadastre and Cartography (“Rosreestr”) records details of land plots and other types of immovable property in a Unified State Register of Immovable Property, which includes, among other parameters of land plots, their measurements and boundaries, category and permitted use. As a general rule, a landowner must register a land plot in the Unified State Register of Immovable Property and obtain a state cadastre number for a land plot as conditions to selling, leasing or otherwise transferring interests in that plot. As described below, Rosreestr maintains a combined register for the state cadastre numbers and maps, registration of rights, transactions and encumbrances and other information relating to the real estate. Russian law categorizes all land as having a particular designated purpose, for example agricultural land, industry land, settlement lands, lands by specially protected territories and objects. Land should be used in accordance with the purpose designated by the relevant category and determined permitted use. However, in May 2014, a draft federal law prepared by the Ministry of Economic Development of the Russian Federation and aimed primarily at simplifying the existing land use rules was submitted to the Russian State Duma, which was adopted in the first reading in December 2014 and is currently being considered by the Russian State Duma in the second reading. If the draft is adopted, the land categories will be abolished, and all land plots (save for the most valuable agricultural land) will be divided into certain functional zones. Those companies that had obtained a right of perpetual use over land prior to the enactment of the Land Code were required, by 1 July 2012, either to purchase the land from, or to enter into a land lease agreement with, the relevant federal, regional or municipal authority owning the land. Those companies that had a right of perpetual use over land containing linear facilities (such as power transmission lines, communication lines, pipelines and railway lines) were entitled to purchase such land, enter into a land lease agreement or establish a right of limited use of such land (servitude) by 1 January 2016. The right of perpetual use was abolished for companies starting from 1 March 2015. Under Russian law, it is possible that the person or entity holding the ownership rights to a building or other real estate asset may not be the same person or entity holding the ownership rights to the land plot on which the building or other real estate asset is constructed. In these circumstances, the owner of that building, as a general rule, has a right of use over the relevant portion of that plot of land occupied by the building and needed for its use or, in some cases, the owner of the building or other real estate asset can use the relevant portion of the land plot under the lease agreement with the owner of such land plot. Moreover, in certain cases, an owner of a building or plot of land may require that the owner of an adjoining plot of land grant a right of limited use of the adjoining plot of land (servitude) in its favour. State Registration of Real Estate and Transactions and Encumbrances Involving Registered Real Estate With effect from 1 January 2017, the Rosreestr maintains a Unified State Register of Immovable Property (the “Register of Immovable Property”), which contains, among other things, the information on rights and encumbrances in respect of real estate, cadastre of real estate assets and borders of zones with special terms of land use. Registration in the Register or Immovable Property is required for specified transactions involving leases of the registered real estate (including, among other things, buildings, facilities, land plots and other real estate for a term of not less than one year (with certain exceptions and assumptions), as well as certain encumbrances, such as servitude. A person acquires rights to the relevant real estate only upon such state registration. A failure to register a transaction which requires state registration generally results in the transaction being rendered invalid for the third parties or, to the extent stipulated by law, null and void.

172 Regulation of the Sale and Lease of Real Estate The Civil Code requires that agreements for the sale or lease of buildings expressly set out the price of such sale or lease. In relation to leases, both the rights granted by the lease and the lease agreement (other than lease agreements for a term of less than one year) require registration. In relation to sales, only the transfer of ownership effected by the relevant sale (but not the sale agreement itself) requires registration.

Health and Safety

Due to the nature of the business of the Group, the Group’s workplace safety issues are of significant importance to the operation of these sites. The principal law regulating industrial safety is the Safety Law. The Safety Law applies, in particular, to industrial facilities and sites where companies undertake specific activities, including sites where companies use lifting machines, produce alloys of ferrous and non-ferrous metals and conduct certain types of mining. Hazardous industrial facilities under the Safety Law are divided into four categories based on the level of hazard. These categories vary from level one (extremely hazardous industrial sites) to level four (least hazardous industrial sites). The Safety Law also contains a comprehensive list of dangerous substances and their permitted concentration, and extends to facilities and sites where companies use these substances. As a general rule, a company that utilizes industrial facilities of I and II levels of hazard is obliged to adopt an industrial safety declaration. Other Russian regulations address safety rules for coal mines and the production and processing of ore, gold smelting and alloy production. Additional safety rules apply to metallurgical and coke chemical enterprises, the foundry industry and other industries. Any construction, reconstruction, liquidation or other activity in relation to regulated industrial sites is subject to a state industrial safety review. Any deviation from project documentation in the process of construction, reconstruction and liquidation of industrial sites is prohibited, unless the revised documentation undergoes expert examination and the Rostekhnadzor approves the same. Maintenance of Industrial Safety Companies that operate regulated industrial facilities and sites have a wide range of obligations under the Safety Law and other laws, including the Russian Labour Code effective from 1 February 2002, as amended (the “Labour Code”). In particular, companies must limit access to such sites to qualified and trained specialists, maintain industrial safety controls, have third-party insurance liability for injuries caused in the course of operating industrial sites and comply with other specific obligations. The Safety Law also requires these companies to enter into contracts with professional wrecking companies or, in some cases, create their own wrecking services; conduct personnel training programs; create emergency response systems; inform the Rostekhnadzor of accidents; and maintain these systems in good working order. Declarations of Industrial Safety In some cases, companies operating industrial sites must also prepare industrial safety declarations, which summarize the risks associated with operating a particular industrial site and the measures the company has taken, and will take, to mitigate such risks and to use the site in accordance with applicable industrial safety requirements. The chief executive officer of the company must adopt those declarations, and is personally responsible for the completeness and accuracy of the data contained in the declarations. The Rostekhnadzor requires the industrial safety declaration and certain other documents, including a state industrial safety review, for the issuance of a licence permitting the operation of a hazardous industrial facility when such a licence is required by law. Companies operating hazardous industrial facilities at the highest two levels are required to approve and ensure maintenance of an industrial safety management system, including industrial safety policy,

173 an internal regulation on industrial safety management system and an internal regulation on industrial control. State Control over Industrial Safety The Rostekhnadzor has broad authority in the field of industrial safety. In the event of an accident, a special commission led by a representative of the Rostekhnadzor conducts a technical investigation of the cause of the incident. The company operating the hazardous industrial facility where the accident took place must bear all the costs of the investigation. Rostekhnadzor officials have the right to access industrial sites and may inspect documents to ensure a company’s compliance with safety rules. The Rostekhnadzor has power to suspend or terminate operations or impose administrative liability on the company or its officials. Liability Any company or individual violating industrial safety rules may incur administrative and/or civil liability, and individuals may also incur criminal liability. A company that violates safety rules in a way that negatively impacts the health of an individual may also be obliged to compensate the individual for lost earnings, as well as for health-related damages, and, in certain cases, its activity may be suspended.

Regulation of Competition

Federal Law “On the Protection of Competition” No. 135-FZ dated 26 July 2006, as amended (the “Competition Law”), regulates competition in Russia, through the FAS. Dominant position in the market The Competition Law determines a dominant position pursuant to certain criteria, including, among other things, where a company or a group of persons has a market share in a particular commodity market in excess of 50 per cent, unless the FAS specifically establishes that the relevant company does not have a dominant position. However, even if a company has a market share of less than 50 per cent in a particular commodity market, the FAS may still specifically determine that the company has a dominant position in certain cases. The Competition Law assumes that a company has a dominant position if it has a substantial influence on the circulation of goods in a particular commodity market; may force other participants from such market; or may restrict the access of other companies to such market. The Competition Law also provides for the principle based on “collective” dominance, which applies to a number of markets characterised by an absence of substitute goods and fixed demand for goods. In such markets, any one of three or fewer entities with a total market share of more than 50 per cent, or any one of five or fewer entities with a total market share of more than 70 per cent (if the shares of these entities are bigger than the shares of other participants in this market and in no event is the share of each such entity less than 8 per cent), will be deemed to be in a dominant position to the extent that, for a period of at least one year or for the period of existence of the relevant market, the market shares of the respective entities do not change in any significant respect; the access of new competitors to this market is impeded; and the relevant commodity cannot be substituted by other commodities, a price increase for such commodity does not condition the relevant decrease in demand for such commodity and information about prices, sale and purchase of such commodity in the relevant market is publicly available. As a general rule, a company may not be deemed to be in a dominant position if its market share is less than 35 per cent, but this rule does not apply if the company is holding a collective dominant position (as described above) or if any specific federal law establishes that dominance may still be recognised where the market share of a certain company is less than 35 per cent. Russian law prohibits companies having a dominant position from, among other things, entering into agreements which have the effect of price fixing or which otherwise have the effect of limiting competition, artificially limiting the supply of goods, maintaining high or low monopolistic prices and refusing without justification to sell goods to third parties, setting different prices for the same goods.

174 Merger and joint venture control The FAS also exercises state control over competition by reviewing merger and acquisition transactions. Relevant persons must obtain prior antimonopoly clearance from the FAS for an acquisition of: more than 25 per cent of the voting shares in a Russian joint stock company (or a one- third interest in a Russian limited liability company) and any subsequent increase of that stake to more than 50 per cent or more than 75 per cent of the voting shares (or a one-half and two-thirds interest in a Russian limited liability company); subject to certain exceptions, an acquisition of fixed production assets or goodwill of a company located in Russia in an amount exceeding 20 per cent of the aggregate balance sheet value of all fixed production assets and goodwill of the company; the right to control the business activities of another Russian company or perform the functions of its executive body; or an acquisition of more than 50 per cent of voting shares (or a 50 per cent interest) in a company registered outside Russia, which delivered goods to the Russian territory in the amount exceeding RUB 1 billion within the previous year, or any other right to control its business activities or perform the functions of its executive body. Certain other transactions are also subject to a prior antimonopoly clearance from the FAS. Any of the above acquisition transactions would require prior approval by the FAS if, based on the latest balance sheet: the aggregate asset value of a purchaser (and its group) together with the target (and its group) exceeds RUB 7 billion; or the total revenues of such persons for the preceding calendar year exceed RUB 10 billion and in each case the total asset value of the target (and its group) exceeds RUB 400 million. Mergers and acquisitions within the same group are exempt from pre- transactional clearance by the FAS, subject to compliance with specified reporting requirements. Under the amendments to the Competition Law introduced in 2015, joint venture agreements are subject to prior antimonopoly clearance if the aggregate asset value of the parties to the agreement (or their group), based on the latest balance sheet, exceeds RUB 7 billion, or if the total revenues of the parties to the transaction (or their group) for the preceding calendar year exceed RUB 10 billion.

Regulation of Natural Monopolies

Federal Law “On Natural Monopolies” No. 147-FZ dated 17 August 1995, as amended (the “Natural Monopolies Law”) defines a “natural monopoly” as a condition of the commodities market where demand for particular products or services is satisfied more effectively in the absence of competition and where the monopoly product or service cannot be easily replaced. The Company is included in the register of natural monopolies in the transportation market because it provides port services at the Dudinka sea port and is therefore subject to the Natural Monopolies Law. The Natural Monopolies Law provides for the following key restrictions that apply to investment activities and share dealings by and in natural monopolies:  a natural monopoly whose revenue from the natural monopolistic activities exceeds 1 per cent of its total revenue must obtain prior regulatory approval for any acquisition of fixed assets or rights to use such assets, if (a) such assets are not used for the natural monopolistic activities and (b) the book value of such asset exceeds 10% of the natural monopoly’s own capital based on its latest balance sheet;  a natural monopoly whose revenue from the natural monopolistic activities exceeds 1 per cent of its total revenue must obtain prior regulatory approval for any investments in production or distribution of goods, unrelated to the industry in which such natural monopoly operates, whose value exceeds 10 per cent of the natural monopoly’s own capital (as calculated in accordance with its latest balance sheet);  a party that intends to acquire, lease or obtain the right to otherwise own or use the fixed assets of a natural monopoly must obtain prior regulatory approval, if (a) such assets are used for the natural monopolistic activity and (b) such assets exceed by value 10 per cent of the natural monopoly’s own capital (as calculated in accordance with its latest balance sheet) and

175 (c) as a result of such transaction, the natural monopoly’s revenue from the natural monopolistic activities exceeds 1% of its total revenue; and  any person or group of persons that acquires at least 10 per cent of the natural monopoly’s voting shares or equity capital is obliged to notify the regulatory authorities of such acquisition, as well as of any subsequent changes in his or their stake. The competent supervising authority can adopt binding decisions in the case of a breach of the Natural Monopolies Law and issue binding instructions to a natural monopoly to remedy the breach or cease or refrain from conduct in breach of the Natural Monopolies Law, including instructions on eliminating the consequences of a breach. Price regulation, such as the imposition of tariffs, or price limits on a natural monopoly’s goods or services are the principal methods that competent supervising authorities use to regulate the activities of natural monopolies. Natural monopolies must submit on- going reports on their activities and drafts of capital investment plans to the competent supervisory authority. In order to promote transparency of natural monopolies and their regulation, natural monopolies are required to grant free access to information regarding their activity in accordance with the standards of disclosure approved by the Russian Government. Procurement of Goods and Services The Federal Law “On Procurement of Goods, Works and Services by Certain Types of Legal Entities” No. 223-FZ dated 18 July 2011, as amended (the “Procurement Law”), provides for bidding principles and procedures that apply to the procurement of goods, works and services by certain categories of legal entities (including natural monopolies) and their direct and indirect subsidiaries which are more than 50 per cent owned by these entities. In accordance with the Procurement Law, these entities are required to develop procurement regulations specifying rules and procedures for tender-based purchase of goods, services and works and publish them on a specified public web-site. There is also a requirement for these entities to provide certain information and document relating to agreements they conclude, into a special register of agreements maintained by the Federal Treasury. The Company is included in the register of natural monopolies in the transportation market because it provides port services at the Dudinka sea port, but the Company is exempt from requirements of the Procurement Law described above since its revenue from natural monopoly activities do not exceed ten per cent of the total revenue of the Company as of the date of this Prospectus. Investments in Russian Companies of Strategic Importance In May 2008, new laws came into effect that changed the legal environment for foreign investment in sectors that are of strategic importance for the national security and defence of the Russian Federation, including the gold mining industry. The relevant laws are the Foreign Investments Law and Federal Law “On Certain Legislative Acts of the Russian Federation and Deeming Inoperative Certain Legislative Acts of the Russian Federation in Connection with the Adoption of the Federal Law on Procedure of Foreign Investment in Commercial Entities Having Strategic Importance for the Defence of the Country and the Security of the State” No. 58-FZ dated 29 April 2008 (the “Amending Law”) (together with the Foreign Investments Law, the “Strategic Investment Laws”), which introduced, among other things, various amendments to the Russian Subsoil Law. The Foreign Investments Law provides for stringent requirements in respect of foreign investment in companies engaged in activities that have strategic importance for the national defence and security, the list of which is provided in the Foreign Investments Law. These activities include geological exploration of, and production on, subsoil plots of federal importance. Companies engaged in such activities are considered Strategic Subsoil Companies. Foreign investors, or a group of persons including a foreign investor, intending to enter into a transaction or perform acts which result in the acquisition of “control” (as defined in the Foreign Investments Law) over Strategic Subsoil Companies, as well as the acquisition of right of ownership, possession or use of the fixed production assets of a Strategic Subsoil Company, the value of which represents 25 per cent or more of the balance sheet value of the assets of such company as of the last reporting date, are required to obtain the prior approval of the Government Commission on Monitoring Foreign Investment in the Russian

176 Federation (the “Foreign Investment Commission”). The list of subsoil plots of federal importance was officially published in March 2009, and has been subsequently amended several times. As at the date of this Prospectus, certain material Group companies, namely the Company (the holder of licences with respect to Oktyabrskoye, Talnakh, Norilsk-1 (excluding the southern part) and Maslovskoye deposits), JSC Kola “GMK” (the holder of licences with respect to Zhdanovskoye, Kotselvaara-Kammikivy, Semiletka, Zapolyarnoye, Tundrovoe, Bystrinskoye, Verkhnee, and Sputnik deposits), LLC Bystrinskoe GRK (the holder of license with respect to Bystrinskoye area) and OJSC Taimyrgas (the holder of licence with respect to Pelyatkinskoye deposit) are using subsoil plots of federal importance, as defined in the Russian subsoil law, that are included in the list of such deposits maintained by the Federal Agency for Subsoil Use and therefore are considered Strategic Subsoil Companies. Under the Foreign Investments Law, the acquisition, which includes agreements in written or oral form, by a foreign investor (or a “group” of persons (as defined in the Competition Law) including one or more foreign investors directly or indirectly) of 25 per cent or more, or in case of the acquisition by foreign states, international organisations or entities under their control, of more than 5 per cent, of the voting shares of a Strategic Subsoil Company is subject to prior approval, where foreign states, international organizations or entities under their control are generally prohibited from acquiring control over strategic companies. The Foreign Investments Law further provides that if a foreign investor (or a group of persons including one or more foreign investors) already exercises direct or indirect control over 25 per cent (but less than 75 per cent) of the voting shares of a Strategic Subsoil Company, each subsequent acquisition of shares of the Strategic Subsoil Company by the foreign investor (or group of persons including the foreign investor) would require the prior approval of the Foreign Investment Commission (with the exception of transactions which do not result in the increase of an ownership percentage of a foreign investor or a group including a foreign investor in the charter capital of a Strategic Subsoil Company, where such transactions are performed as part of the charter capital increase of such Strategic Subsoil Company or by persons that are under control of the person which controls such Strategic Subsoil Company), whereas transactions in respect of Strategic Subsoil Companies, if prior to the transaction the foreign investor (or group of persons including a foreign investor) had the right to directly or indirectly control more than 75 per cent of the total number of the voting shares of the relevant Strategic Subsoil Company, are exempted from the scope of the Foreign Investments Law. Failure to obtain such prior approval will either render the relevant transaction void or may prevent the relevant foreign investor, or the group of persons including the foreign investor, from voting at shareholders meetings of the relevant Strategic Subsoil Company. Furthermore, should a foreign investor or a group of persons including a foreign investor establish control over a Strategic Subsoil Company as a result of events other than the direct acquisition of shares, for example, as a result of a buy-out or redemption by the Strategic Subsoil Company of its own shares, a conversion of its preferred shares into ordinary shares or otherwise, the relevant foreign investor or a group of persons including a foreign investor would be obliged to apply for approval of control by the Foreign Investment Commission within three months from the date of establishment of control. Failure to apply for such approval may result in a prohibition on voting, as set out above. Should the Foreign Investment Commission refuse to approve the establishment of foreign control over a Strategic Subsoil Company, the relevant foreign investor or a group of persons including a foreign investor would be obliged to dispose of part of its shares so that the remaining shares do not represent a controlling stake. If the foreign investor (or a group of persons including a foreign investor) fails to dispose of the shares within three months from the date when the prior governmental approval is declined, the FAS may file a lawsuit with a Russian court requiring that a foreign investor (or a group of persons including a foreign investor) be prohibited from voting at the shareholders meeting of the Strategic Subsoil Company. The Russian Subsoil Law also provides that exploration and production at a subsoil plot of federal importance, even under a previously issued combined subsoil licence, may only be commenced if permitted by the Russian Government following the completion of a geological survey. If, in the course of geological research at a subsoil plot, a foreign investor or a Russian legal entity with foreign

177 participation discovers a deposit which meets the criteria for a subsoil plot of federal importance, and there is a possibility of an apparent threat to the national security of the Russian Federation, the licensing authorities have the right to revoke the related combined subsoil licence or refuse to grant an exploration and production subsoil licence following a decision of the Russian Government. In the case of such a revocation, the Russian Subsoil Law contemplates that the licence holder will be reimbursed for costs incurred in connection with prospecting and evaluating the relevant deposit and the amount of the one-off fee for subsoil use paid under the terms of the related combined subsoil licence or geological research licence, and may be paid a premium in accordance with applicable procedures. These amounts, however, may not cover the licence holder’s actual costs, or be paid at all. In addition, the Russian Subsoil Law provides that only Russian legal entities are entitled to use subsoil plots of federal importance. In the interests of national security, Russian legal entities with foreign participation may also be subject to limitations imposed by the Russian Government on participation in subsoil auctions or tenders for the use of subsoil plots of federal importance. The rights to use a subsoil plot of federal importance may not be transferred to legal entities controlled by a foreign investor or a group of persons including a foreign investor, save for the transfer of rights in exceptional cases at the discretion of the Russian Government. Currency Restrictions The Group’s operations are subject to certain currency control restrictions, which are set forth in the Russian Currency Law and respective regulations of the CBR. Pursuant to the Russian Currency Law, Russian residents and non-residents may settle transactions between them either in roubles or in a foreign currency, and there are no restrictions on currency operations between Russian residents and non-residents. However, the settlement of transactions between Russian residents in a foreign currency is generally prohibited. Under the Russian Currency Law, Russian residents conducting foreign trade operations must, subject to certain exemptions stipulated by the Russian Currency Law, repatriate to accounts in authorised Russian banks all roubles and foreign currency payable to them under foreign trade contracts. In addition, such Russian residents must procure the repatriation of funds paid to non-residents for goods, works, services, intellectual property and information that were not delivered into the Russian Federation. In addition, the Russian Currency Law and CBR Regulation No. 138-I of 4 June 2012 set forth the requirement for Russian residents to open a “transaction passport” with an authorised Russian bank to comply with the CBR regulations on currency control. This procedure applies, as a general rule, to export and import operations between Russian residents and non-residents, and to loans granted to Russian residents by non-residents (and vice versa). The relevant parties must open “transaction passports” prior to any transactions subject to currency control. Employment and Labour General The Labour Code is the key law in Russia which governs labour matters. In addition to this core legislation, various federal laws, such as the Russian Law “On Employment of Population in the Russian Federation” No. 1032-1 dated 19 April 1991, as amended, regulate relationships between employers and employees. For certain territories with harsh climatic conditions, Russian legislation establishes additional regulations to protect the interests of employees. Under the Law of the Russian Federation No. 4520-1 “On the State Guarantees and Compensation for Persons Working and Residing in the Far North Regions and Areas of Equal Status”, dated 19 February 1993, such employees are entitled to certain additional benefits including higher salaries and bonuses and additional vacation days. Employment Contracts As a general rule, employers must conclude employment contracts for an indefinite term with all employees. Russian labour legislation expressly limits the possibility of entering into fixed term employment contracts. However, employers and employees may enter into an employment contract

178 for a fixed term in certain cases where it is not possible to establish labour relations for an indefinite term due to the nature of the duties or the conditions of the performance of such duties, as well as in other cases expressly identified by the Labour Code or other federal laws. An employer may terminate an employment contract only on the basis of the specific grounds stated in the Labour Code, including, among others:  the liquidation of the company or downsizing of staff;  the failure of the employee to comply with the position’s requirements due to incompetence confirmed by results of the employee’s appraisal;  the systematic failure of the employee to fulfil his or her labour duties if he or she was the subject of disciplinary measures;  a gross violation by the employee of labour duties; and  the provision by the employee of false documents upon entering into the employment contract. Employees’ Rights The Labour Code provides an employee with certain minimum rights, including the right to a working environment which complies with health and safety requirements and the right to receive a salary on a timely basis and to participate in the management of the authorised entity. These rights may be extended by other federal laws, the company’s constituent documents and local regulations, and collective and other agreements. An employee dismissed from the company due to downsizing or liquidation is entitled to receive compensation from his or her employer, including a severance payment and, depending on the circumstances, salary payments for a specified period of time. The Labour Code also provides protections for specified categories of employees. For example, except in limited circumstances, an employer cannot dismiss minors, expectant mothers, mothers with a child under the age of three, single mothers with a child under the age of 14 (or with a disabled child under the age of 18) or other persons caring for a child under the age of 14 without a mother. Any termination by an employer that is inconsistent with the Labour Code requirements may be invalidated by a court, which may require the employer to reinstate the employee. Lawsuits resulting in the reinstatement of illegally dismissed employees and the payment of damages for wrongful dismissal are increasingly frequent and Russian courts tend to support employees’ rights in most cases. Where a court reinstates an employee, the employer must compensate the employee for unpaid salary for the period between the wrongful termination and reinstatement, as well as for any mental distress. Work Time The Labour Code sets the regular working week at 40 hours. In general, an employer must compensate an employee for any time worked beyond 40 hours per week, as well as for work on public holidays and weekends, at a higher rate. Annual paid vacation leave is generally 28 calendar days. Employees who perform underground and open pit mining works or other work in harmful or hazardous conditions are entitled to additional paid vacation of at least 7 calendar days. Employees working in the areas of the Russian Far North are entitled to additional vacation of 24 calendar days. Employees required to work non-standardised working hours are entitled to additional paid vacation of at least three calendar days. The retirement age in the Russian Federation is generally 60 years for males and 55 years for females. However, the retirement ages of males who have worked in arduous working conditions for at least 12 years and six months and females who have worked in arduous working conditions for at least 10 years are 55 years and 50 years, respectively, provided that their total qualifying period is not less than 25 years and 20 years, respectively. In the case of work involving underground operations,

179 hazardous conditions or hot workshops, the retirement age is 50 years for males who have worked in such conditions for at least 10 years and whose qualifying period is not less than 20 years and 45 years for females who have worked in such conditions for at least 7 years and six months and whose qualifying period is not less than 15 years. Persons who have worked as miners in open pit mines or underground mines for at least 25 years, and in specified circumstances for at least 20 years, may retire regardless of age. Salary The minimum monthly salary in Russia is established by federal law from time to time. Starting from 1 July 2016, the minimum monthly salary is set at an amount of RUB 7,500 and, from 1 July 2017, will be set at an amount of RUB 7,800. Although the law requires that the minimum wage be at or above a minimum subsistence level, the current statutory minimum monthly salary is generally considered to be less than the minimum subsistence level. Salaries of the Group’s employees are generally higher than the statutory minimum and none are below such minimum. Strikes The Labour Code defines a strike as the temporary and voluntary refusal of workers to fulfil their work duties with the intention of settling a collective labour dispute. Russian legislation contains several requirements which must be met for strikes to be legal. An employer may not use an employee’s participation in a legal strike as grounds for terminating an employment contract, although Russian law generally does not require employers to pay wages to striking employees for the duration of the strike. Conversely, an employee’s participation in an illegal strike may provide adequate grounds for termination of his or her employment contract. Trade Unions Trade unions are defined by Federal Law “On Trade Unions, Their Rights and Guaranties of Their Activity” No. 10-FZ dated 12 January 1996, as amended (the “Trade Union Law”), as voluntary unions of individuals with common professional interests which are created for the purposes of representing and protecting social and labour rights and interests of their members. Russian law also permits national trade union associations, which coordinate activities of trade unions throughout Russia. Although Russian labour regulations have curtailed the authority of trade unions, they still retain significant influence over employees and, as such, may affect the operations of large industrial companies in Russia. The Group’s management routinely interacts with trade unions in order to ensure the appropriate treatment of its employees and the stability of the Group’s business. The activities of trade unions are generally governed by the Trade Union Law and applicable legal acts including the Labour Code. As part of their activities, trade unions may:  negotiate collective contracts and agreements such as those between the trade unions and employers, federal, regional and local governmental authorities and other entities;  monitor compliance with labour laws, collective contracts and other agreements;  access work sites and offices, and request information relating to labour issues from the management of companies and state and municipal authorities;  represent their members and other employees in individual and collective labour disputes with management;  participate in strikes and meetings to protect social and labour rights of employees; and  monitor the redundancy of employees and seek action by municipal authorities to delay or suspend mass redundancies. Russian laws require that companies cooperate with trade unions and not interfere with their activities. Trade unions and their members enjoy certain guarantees as well, such as:

180  the retention of job positions for those employees who stop working due to their election to the management of trade unions;  protection from dismissal for employees who previously served in the management of a trade union for two years after the termination of the office term, save for certain exceptions enumerated in applicable Russian laws; and  the provision of the necessary equipment, premises and transportation vehicles by the employer for use by the trade union free of charge, if provided for by a collective bargaining contract or other agreement. If a trade union discovers any violation of work conditions requirements, notification is sent to the employer with a request to cure the violation and to suspend work if there is an immediate threat to the lives or health of employees. The trade union may receive information on social and labour issues from an employer (or employers’ unions) and state and local authorities, as well as cooperate with state authorities for the purposes of supervision of compliance with Russian labour laws. Trade unions may also initiate collective labour disputes, which may lead to strikes. To initiate a collective labour dispute, trade unions must present their demands to the employer. The employer is then obliged to consider the demands and notify the trade union of its decision. If the dispute remains unresolved, a reconciliation commission attempts to end the dispute. If this proves unsuccessful, collective labour disputes are generally referred to mediation or labour arbitration. The Trade Union Law provides that those who violate the rights and guarantees of trade unions and their officers may be subject to disciplinary, administrative and criminal liability. The Russian Code on Administrative Offences of 30 December 2001, as amended, specifies that such violations may lead to imposition of an administrative fine. Although the Russian Criminal Code of 13 June 1996, as amended, currently has no provisions specifically relating to these violations, general provisions and sanctions may be applicable.

181 DESCRIPTION OF THE ISSUER

The Issuer was incorporated in Ireland as a private limited company on 25 October 2012, registered number 519265, under the Companies Acts 1963-2012 (as amended) of Ireland, and was subsequently re-registered as a designated activity company under the Companies Act 2014 (the “Companies Act 2014”) on 2 July 2016 where its name changed to MMC Finance Designated Activity Company. The registered office of the Issuer is 2nd Floor, Palmerston House, Fenian Street, Dublin 2, Ireland and phone number +353 1 905 8020. The authorised share capital of the Issuer is EUR 100 divided into 100 ordinary shares of par value EUR 1 each (the “Shares”). The Issuer has issued one Share, which is fully paid and is held on trust by Cafico Trust Company Limited (the “Share Trustee”) under the terms of a declaration of trust (the “Declaration of Trust”) dated 31 October 2012, under which the Share Trustee holds the Shares on trust for charity. The Share Trustee has no beneficial interest in and derives no benefit (other than any fees for acting as Share Trustee) from its holding of the Shares. The Share Trustee will apply any income derived from the Issuer solely for the above purposes. Cafico Corporate Services Limited (the “Corporate Services Provider”), an Irish company, acts as the corporate services provider for the Issuer. The office of the Corporate Services Provider serves as the general business office of the Issuer. Through the office and pursuant to the terms of the corporate services agreement entered into on 29 April 2013 between the Issuer and the Corporate Services Provider (the “Corporate Services Agreement”), the Corporate Services Provider performs various management functions on behalf of the Issuer, including the provision of certain clerical, reporting, accounting, administrative and other services until termination of the Corporate Services Agreement. In consideration of the foregoing, the Corporate Services Provider receives various fees and other charges payable by the Issuer at rates agreed upon from time to time plus expenses. The terms of the Corporate Services Agreement provide that either party may terminate the Corporate Services Agreement upon the occurrence of certain stated events, including any material breach by the other party of its obligations under the Corporate Services Agreement which is either incapable of remedy or which is not cured within 30 days from the date on which it was notified of such breach. In addition, either party may terminate the Corporate Services Agreement at any time by giving at least 90 days written notice to the other party. The Corporate Services Provider’s principal office is Palmerston House, Fenian Street, Dublin 2, Ireland.

Business

The principal objects of the Issuer are set forth in clause 3 of its Constitution (as currently in effect) and permit the Issuer, inter alia, to lend money and give credit, secured or unsecured, to issue debentures, loan participation notes, enter into derivatives and otherwise to borrow or raise money and to grant security over its property for the performance of its obligations or the payment of money. The Issuer is organised as a special purpose company. The Issuer was established to raise capital by the issue of debt securities and to use an amount equal to the proceeds of each such issuance to advance a loan to the Borrower. Since its incorporation the Issuer has not engaged in material activities other than those incidental to its registration as a private company, re-registration as a designated activity company under the Companies Acts 2014 and those related to the issue of U.S.$750,000,000 4.375 per cent. loan participation notes due 2018 issued in April 2013, the issue of U.S.$1,000,000,000 5.55 per cent. loan participation notes due 2020 issued in October 2013, the issue of U.S.$1,000,000,000 6.625 per cent. loan participation notes due 2022 issued in October 2015, the issue of U.S.$1,000,000,000 4.10 per cent. loan participation notes due 2023 issued in April 2017 and the issue of the Notes. The Issuer has no employees.

182 Directors and Company Secretary

The Issuer’s Constitution provide that the Board of Directors of the Issuer will consist of at least two Directors. The Directors of the Issuer and their business addresses are as follows: Thomas O’Beirne Palmerston House, Fenian Street, Dublin 2, Ireland.

Yolanda Kelly Palmerston House, Fenian Street, Dublin 2, Ireland.

The Company Secretary is Cafico Secretaries Limited.

Financial Statements

The financial year of the Issuer ends on 31 December in each year. The audited financial statements of the Issuer as at and for the years ended 31 December 2016 and 2015 together with the audit reports thereon, have been filed with the Central Bank of Ireland. The Issuer does not prepare interim financial statements. The profit and loss account and balance sheet can be obtained free of charge from the registered office of the Issuer. The independent auditors of the Issuer are KPMG of 1 Harbourmaster Place, IFSC, Dublin 1, Ireland who are chartered accountants and are members of the Institute of Chartered Accountants and registered auditors qualified to practise in Ireland.

183 OVERVIEW OF THE TRANSACTION STRUCTURE AND THE SECURITY

The following summary description should be read in conjunction with, and is qualified in its entirety by “Terms and Conditions of the Notes” and “The Loan Agreement”.

Principal and Interest on the Loan

Issuer The Company

Loan

Payment of amounts Proceeds of received the Notes under the Loan

Noteholders

The transaction will be structured around the Loan to the Company by the Issuer. The Issuer will issue the Notes, which will be limited recourse secured loan participation notes issued for the sole purpose of funding the Loan to the Company. The Notes will be constituted by, be subject to, and have the benefit of, the Trust Deed. The obligations of the Issuer to make payments under the Notes shall constitute an obligation only to account to the Noteholders for an amount equal to the sums of principal, interest and/or additional amounts (if any) due under the Loan and actually received and retained (net of tax) by or for the account of the Issuer from the Company pursuant to the Loan Agreement less any amount in respect of the Reserved Rights (as defined in the Trust Deed). In the event that any amount expressed as due and payable by the Issuer under the Notes exceeds the sums so received or recovered and retained (net of tax), the right of any person to claim payment of any amount exceeding such sums shall be extinguished, and Noteholders may take no further action to recover such amounts. As provided in the Trust Deed, the Issuer, with full title guarantee and as continuing security for the payment of all sums under the Trust Deed and the Notes, will charge by way of first fixed charge in favour of the Trustee (the “Charge”):  all its rights to principal, interest and other amounts now or hereafter payable to the Issuer by the Company under the Loan Agreement;

 the right to receive all sums which may be or become payable by the Company under any claim, award or judgment relating to the Loan Agreement, as the case may be; and

 all the rights, title and interest in and to all sums of money now or in the future deposited in an account with the Paying Agent in the name of the Issuer (the “Account”) and the debts represented thereby (including interest from time to time earned on the Account, if any),

184  provided that for the avoidance of doubt, the Issuer shall remain the legal and beneficial owner of the property subject to the Charge following the granting of the Charge and that Reserved Rights and any amounts relating to Reserved Rights are excluded from the Charge.

In addition, the Issuer with full title guarantee will assign to the Trustee for the benefit of the Trustee and the Noteholders all the rights, interest and benefits, both present and future, which have accrued or may accrue to the Issuer as lender under or pursuant to the Loan Agreement (as amended from time to time) (including, without limitation, all monies payable to the Issuer and any claims, awards and judgments in favour of the Issuer in connection with the Loan Agreement (as amended from time to time) and the right to declare the Loan immediately due and payable in certain circumstances and to take proceedings to enforce the obligations of the Company thereunder) other than any rights, title, interests and benefits which are subject to the Charge and other than the Reserved Rights and any amounts relating to the Reserved Rights. As a consequence of such assignment, the Trustee will assume the rights of the Issuer under the Loan Agreement as set out in the relevant provisions of the Trust Deed. Formal notice of the Charge and assignment will be given to the Company, who will each be required to acknowledge the same. The Issuer will covenant not to agree to any amendments to, or any modification, rescission, cancellation, termination or waiver of, or authorise any breach by any counterparty or proposed breach by any counterparty of, the terms of the Loan Agreement unless the Trustee has given its prior written consent or unless authorised to do so by an Extraordinary Resolution (as defined in the Trust Deed) or Written Resolution (as defined in the Trust Deed) of the Noteholders (except in relation to Reserved Rights). The Issuer will further agree to act at all times in accordance with any instructions of the Trustee from time to time with respect to the Loan Agreement (subject to being indemnified and/or secured to its satisfaction by the Company), save as otherwise provided in the Trust Deed or the Loan Agreement. Any amendments, modifications, waivers, rescission, cancellation, termination or authorisations made with the Trustee’s consent shall be notified to the Noteholders in accordance with Condition 13 of the Terms and Conditions relating to the Notes.

185 THE LOAN AGREEMENT

The following is the text of the Loan Agreement to be entered into between the Company and the Issuer.

This Agreement is made on 6 June 2017 between: (1) PJSC MMC NORILSK NICKEL (“NN”); and (2) MMC FINANCE D.A.C., a company incorporated under the laws of Ireland (the “Lender”). Whereas: The Lender has at the request of NN agreed to make available to NN a loan facility in the amount of U.S.$500,000,000 on the terms and subject to the conditions of this Agreement. Now it is hereby agreed as follows: 1 Definitions and Interpretation 1.1 Definitions In this Agreement (including the recitals), the following terms shall have the meanings indicated: “Account” means the account in the name of the Lender with the Principal Paying Agent, account number 18368678 (or such other account as may from time to time be agreed by the Lender with the Trustee and NN pursuant to the Trust Deed and notified to NN in writing at least five Business Days in advance of such change); “Accounting Standards” means, with respect to a person, as applicable, IFRS, U.S. GAAP or any other internationally recognised set of accounting standards deemed equivalent to IFRS by the relevant regulators for the time being. “Advance” means the advance to be made under Clause 3 of the sum equal to the amount of the Facility; “Agency” means any agency, authority, central bank, department, committee, government, legislature, minister, ministry, official or public or statutory person (whether autonomous or not) of, or of the government of, any state or supra-national body; “Agreement” means this Agreement as originally executed or as it may be amended from time to time; “Business Day” means a day on which (a) the London interbank market is open for dealings between banks generally and (b) if on that day a payment is to be made hereunder, commercial banks generally are open for business in New York City, Moscow and in the city where the specified office of the Principal Paying Agent is located; “Closing Date” means 8 June 2017; “Comparable Treasury Issue” means the United States Treasury security selected by the Determination Agent as having a maturity comparable to the remaining term of the Loan from the Make Whole Optional Prepayment Date to the Repayment Date, that would be utilised, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a maturity most nearly equal to the Repayment Date;

“Comparable Treasury Price” means, with respect to any Make Whole Optional Prepayment Date, the average of three, or such lesser number as is obtained by the Determination Agent, Reference Treasury Dealer Quotations for the Make Whole Optional Prepayment Date;

186 “Consolidated Assets” means the total amount of assets appearing on the consolidated balance sheet of NN, prepared in accordance with the Accounting Standards, as of the date of the most recently prepared consolidated financial statements;

“Definitive Certificate” means the definitive certificates in registered form representing the Notes, to be issued in limited circumstances pursuant to the Trust Deed;

“Determination Agent” means a financial adviser or bank being a reputable financial institution operating in the United States Treasury Securities market in New York which is independent of NN appointed by NN and at NN’s expense for the purpose of determining the Make Whole Prepayment Amount;

“Dollars”, “U.S.$” and “U.S. Dollars” means the lawful currency of the United States of America; “Domestic Relevant Indebtedness” means any Relevant Indebtedness which is not quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market, in each case outside the Russian Federation; “Event of Default” has the meaning assigned to such term in sub-clause 11.1 hereof; “Facility” means the facility specified in Clause 2; “Global Certificate” means the single, permanent global certificate in fully registered form without interest coupons representing the Notes to be issued pursuant to Clause 3.1 of the Trust Deed outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act; “Group” means NN and its Subsidiaries for the time being; “IFRS” means International Financial Reporting Standards (formerly International Accounting Standards) issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (as amended, supplemented or re-issued from time to time); “Indebtedness” means, in respect of any person, any indebtedness for, or in respect of (without duplication): (a) moneys borrowed; (b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) any amount of money raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; (e) the amount of any liability in respect of a capital lease that would be required to be capitalised on a balance sheet in accordance with the Accounting Standards and (without double counting) the amount of any liability in respect of any guarantee or indemnity (whether on or off balance sheet) for any of the items referred to above; provided that, for the avoidance of doubt, Indebtedness shall not include moneys raised by way of the issue of share capital (whether or not for cash consideration) and any premium on such share capital; and provided further that Indebtedness shall not include Indebtedness among NN and Subsidiaries or among Subsidiaries; and provided further that Indebtedness shall not include any trade credit extended to such person in connection with the acquisition of goods and/or services on arm’s length terms and in the ordinary course of trading of that person;

187 “Interest Payment Date” means 8 April and 8 October of each year, commencing on 8 October 2017; “Loan” means, at any time, an amount equal to the aggregate principal amount of the Facility granted by the Lender pursuant to this Agreement or the principal amount outstanding for the time being under the Facility; “Make Whole Optional Prepayment Date” has the meaning assigned to such term in sub- Clause 5.4 hereof;

“Make Whole Prepayment Amount” means the higher of (a) the portion of the Loan that is to be prepaid pursuant to Clause 5.4 and (b) the amount equal to the sum of the present values of the portion of the Loan that is to be prepaid pursuant to Clause 5.4, together with the present values of the scheduled interest payments on such portion of the Loan from the Make Whole Optional Prepayment Date to the Repayment Date in each case, discounted to the Make Whole Optional Prepayment Date on a semi-annual compounded basis at the adjusted U.S. Treasury Rate plus 50 basis points, all as determined by the Determination Agent;

“Material Adverse Effect” means a material adverse effect on (a) the financial condition or operations of NN, or the Group taken as a whole, or (b) NN’s ability to perform its payment or other material obligations under this Agreement or (c) the validity, legality or enforceability of this Agreement or the rights or remedies of the Lender under this Agreement, provided that a “Material Adverse Effect” may under no circumstances arise, or be invoked in connection with, or as a result of, any Treasury Shares Cancellation; “Material Subsidiary” means any Subsidiary of NN: (a) whose gross assets constitute ten per cent (10%) of the total consolidated gross assets of the Group; or (b) whose gross revenue constitutes ten per cent (10%) or more of the total consolidated gross revenue of the Group, determined by reference to the most recent annual consolidated financial statements of the Group and the most recent annual stand-alone reporting forms of the relevant Subsidiary, which were used for the purposes of preparing the Group’s consolidated financial statements and, for the avoidance of doubt, excluding intra-Group items and any Treasury Shares, in each case taking into account, on a pro-forma basis, any subsequent consolidation, amalgamation or merger referred to in Clause 9.2; “Noteholder” means, in relation to a Note, the person in whose name such Note is for the time being registered in the register of Noteholders (or, in the case of a joint holding, the first named holder thereof); “Notes” means the loan participation notes proposed to be issued by the Lender; “Officers’ Certificate” means a certificate signed by two authorised signatories of NN, one of whom shall be the principal executive officer, a member of the management board, principal accounting officer or principal financial officer of NN; “Opinion of Counsel” means a written opinion from international legal counsel who is acceptable to the Lender and the Trustee, each acting reasonably; “Par Optional Prepayment Date” has the meaning assigned to such term in sub-Clause 5.5 hereof;

“Paying Agency Agreement” means the paying agency agreement to be dated on or about 6 June 2017, as amended, varied, novated, supplemented, extended or restated relating to the Notes; “Paying Agent” shall have the meaning attributed to it in the Paying Agency Agreement;

188 “Permitted Security Interest” means: (a) any Security Interests: (i) existing on the Closing Date; or (ii) securing Refinancing Indebtedness in respect of Indebtedness existing on the Closing Date, provided that such Security Interests are limited to all or part of the assets, undertaking, property or revenues that secured the original Indebtedness and that the aggregate principal amount of such Refinancing Indebtedness secured over such assets does not exceed the sum of (x) the aggregate principal amount of the Indebtedness being refinanced; (y) accrued and unpaid interest on such Refinancing Indebtedness and (z) fees, premiums and other costs and expenses incurred in connection with such Refinancing Indebtedness; (b) any Security Interest created or existing in respect of Domestic Relevant Indebtedness; (c) any Security Interest created in respect of Relevant Indebtedness in the form of, or represented by, notes, debentures, bonds or other debt securities exchangeable for or convertible into Treasury Shares or shares in any other company listed on a stock exchange, including American Depositary Receipts or Global Depositary Receipts (as the case may be) representing rights in respect of such shares; (d) any Security Interests: (i) existing on any undertaking, property, assets or revenues of any person at the time such person becomes a Subsidiary of NN or such undertaking property, assets or revenues are acquired by NN or any Subsidiary provided that such Security Interest was not created in contemplation of such event and that no such Security Interest shall extend to other undertaking property, assets or revenues of such person or the Group; or (ii) securing Refinancing Indebtedness in respect of the Indebtedness specified in paragraph (d)(i) above provided that such Security Interests are limited to all or part of the undertaking, assets, property or revenues that secured the original Indebtedness and that the aggregate principal amount of such Refinancing Indebtedness secured over such assets does not exceed the sum of (x) the aggregate principal amount of the Indebtedness being refinanced; (y) accrued and unpaid interest on such Refinancing Indebtedness and (z) fees, premiums and other costs and expenses incurred in connection with such Refinancing Indebtedness; (e) any Security Interest on the undertaking, property, assets or revenues of NN or any Subsidiary created or existing in respect of Relevant Indebtedness the principal amount of which (when aggregated with the principal amount of any other Relevant Indebtedness which then has the benefit of a Security Interest on the undertaking, property, assets or revenues of NN or any Subsidiary) does not exceed 20 per cent. of Consolidated Assets, as determined by reference to the most recently available consolidated financial statements prepared in accordance with the Accounting Standards; or (f) any Security Interest created or existing in respect of any Indebtedness or other obligation or liability that is, in each case, not Relevant Indebtedness; “person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organisation, limited liability company or government or other entity;

189 “Potential Event of Default” means an event or circumstance which would, with the giving of notice, and/or the expiry of any remedy period, or the making of any determination under this Agreement, become an Event of Default; “Principal Paying Agent” means Citibank N.A., London Branch; “Prospectus” means the prospectus of even date herewith prepared in connection with the issue of the Notes; “Rate of Interest” has the meaning assigned to such term in Clause 4.1; “Reference Treasury Dealer” means each of the three nationally recognised firms selected by the Determination Agent that are primary U.S. Government securities dealers;

“Reference Treasury Dealer Quotations” means with respect to each Reference Treasury Dealer and any Make Whole Optional Prepayment Date, the average, as determined by the Determination Agent, of the bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, quoted in writing to the Determination Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time on the third business day (in New York City) immediately preceding such Make Whole Optional Prepayment Date;

“Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings; “Refinancing Indebtedness” means Indebtedness that is incurred to Refinance any existing Indebtedness, including Indebtedness that Refinances Refinancing Indebtedness; “Relevant Indebtedness” means any present or future Indebtedness in the form of, or represented by, notes, debentures, bonds or other debt securities (but for the avoidance of doubt, excluding term or revolving loans (whether syndicated or unsyndicated), credit facilities, credit agreements and other similar facilities and evidence of indebtedness under such loans, facilities or credit agreements) which either are by their terms payable, or confer a right to receive payment, in any currency and are for the time being quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market; “Repayment Date” means 8 April 2022; “Reserved Rights” has the meaning specified in the Trust Deed; “Same-Day Funds” means Dollar funds settled through the New York Clearing House Interbank Payments System or such other funds for payment in Dollars as the Lender may at any time determine to be customary for the settlement of international transactions in New York City of the type contemplated hereby; “Securities Act” means the U.S. Securities Act of 1933, as amended; “Security Interest” means any mortgage, charge, pledge, lien or other form of security interest securing any obligation of any person; “Subscription Agreement” means the agreement between NN, the Lender and the Joint Lead Managers (as defined therein) dated on or about 6 June 2017 providing for the issuance of the Notes; “Subsidiary” means any corporation or other business entity of which NN owns or controls (either directly or through one or more Subsidiaries) more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect a majority of the directors, managers or trustees of such corporation or other business entity;

190 “Taxes” means any present or future taxes, levies, imposts or duties (including interest or penalties thereon) imposed, assessed, charged, collected, demanded, withheld or claimed by the Russian Federation, Ireland or any tax authority thereof or therein provided, however, that for the purposes of this definition the references to Ireland shall, upon the occurrence of a Relevant Event (as this term is defined in the Trust Deed), be deemed to be references to the jurisdiction in which the Trustee is domiciled for tax purposes; and the term “Taxation” shall be construed accordingly; “Treasury Shares” means any ordinary shares in the charter capital of NN and any American Depositary Receipts or Global Depositary Receipts (as the case may be) representing rights in respect of such shares, as may be owned by NN or any of its Subsidiaries; “Treasury Shares Cancellation” means any cancellation, redemption, acquisition, or disposal of Treasury Shares by NN or any of its Subsidiaries and any actions, operations, transactions, agreements, arrangements necessary or advisable for such cancellation, redemption, acquisition or disposal; “Trust Deed” means the trust deed between the Lender and the Trustee to be dated on or about the Closing Date as amended, varied, novated, supplemented, extended or restated from time to time; “Trustee” means Citicorp Trustee Company Limited as trustee under the Trust Deed and any successor thereto as provided thereunder; “U.S. Dollar Equivalent” means with respect to any amount denominated in a currency other than U.S. Dollars, at any time for the determination thereof, the amount of U.S. Dollars obtained by converting such other currency involved into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with such other currency as most recently published under “Currency Rates” in the section of the Financial Times entitled “Currencies, Bonds & Interest Rates” (or, if the Financial Times is no longer published, or if such information is no longer available in the Financial Times, such other source as may be selected in good faith by NN); “US GAAP” means generally accepted accounting principles set forth as of the relevant date in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are in effect and applicable to the circumstances as of the date of determination; and “U.S. Treasury Rate” means either (i) the rate per annum equal to the yield, under the heading that represents the average for the week immediately preceding the third business day (in New York City) prior to the Make Whole Optional Prepayment Date, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the Repayment Date, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the U.S. Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the third business day (in New York City) prior to the relevant date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the Make Whole Optional Prepayment Date, in each case calculated on the third business day (in New York City) immediately preceding the Make Whole Optional Prepayment Date.

191 1.2 Other Definitions Unless the context otherwise requires, terms used in this Agreement which are not defined in this Agreement but which are defined in the Trust Deed, the Notes, the Paying Agency Agreement or the Subscription Agreement shall have the meanings assigned to such terms therein, provided that in the case of terms defined or references herein to documents to which NN is not a party, NN has been sent an up-to-date copy of such documents by the Lender as soon as reasonably practicable (including any amendments thereto that may affect the meaning or interpretation of any such term or reference). 1.3 Interpretation Unless the context or the express provisions of this Agreement otherwise require, the following shall govern the interpretation of this Agreement: 1.3.1 all references to “Clause” or “sub-clause” are references to a Clause or sub-clause of this Agreement. 1.3.2 the terms “hereof”, “herein” and “hereunder” and other words of similar import shall mean this Agreement as a whole and not any particular part hereof. 1.3.3 words importing the singular number include the plural and vice versa. 1.3.4 the table of contents and the headings are for convenience only and shall not affect the construction hereof. 1.3.5 a reference to “this agreement” or to any other agreement or document referred to in this agreement is a reference to this agreement or such other document or agreement as varied, amended, novated, supplemented, extended or restated (in each case, other than in breach of the provisions of this agreement) from time to time. 1.3.6 a reference to a statute or statutory provision shall include all subordinate legislation under that statute or statutory provision, or replacement or substitution of such legislation, made from time to time. 1.3.7 a Potential Event of Default or an Event of Default is “continuing” if has not been remedied or waived. 2 Facility 2.1 Facility On the terms and subject to the conditions set forth herein, the Lender hereby agrees to lend NN, and NN hereby agrees to borrow from the Lender, U.S.$500,000,000. 2.2 Purpose The proceeds of the Advance will be used for the purposes set out in the Prospectus, but the Lender shall not be concerned with the application thereof. 2.3 Facility Fee NN shall pay a fee to the Lender in consideration of the arrangement of the Facility of U.S.$114,307.55 (the “Facility Fee”). 3 Drawdown 3.1 Drawdown On the terms and subject to the conditions set forth herein, on the Closing Date the Lender shall make the Advance to NN and NN shall make a single drawing in the full amount of the Facility.

192 3.2 Payment of the Facility Fee NN agrees to pay the Facility Fee to the Lender in Same-Day Funds not later than by 2:30pm (London time) (or such earlier time as the Lender and NN may otherwise agree) on the Closing Date to such account as the Lender and NN may agree in writing. 3.3 Disbursement Subject to the conditions set forth herein, on the Closing Date the Lender shall transfer in Same Day Funds (unless the Lender and NN agree otherwise) the amount of the Advance to such account as the Lender and NN may agree in writing. 3.4 Ongoing Fees and Expenses In consideration of the Lender (i) making the Loan available to NN; and (ii) supporting such a continuing facility, NN shall pay in one or more instalments within 10 Business Days of demand to the Lender each year an additional amount equating to all documented ongoing costs and expenses of the Lender properly incurred in connection with this Agreement or the Notes (including, without limitation, any taxes and any properly incurred and documented corporate service provider fees, legal fees, listing fees, audit fees and any expenses incurred in order to maintain the Lender as a validly incorporated company and any expenses required to cover the Lender’s anticipated winding-up expenses) as set forth in an invoice from the Lender to NN. Before such payment is made by NN, the Lender shall submit an invoice providing, in reasonable detail, the nature and calculation of the invoiced amount, and shall provide NN with an executed act of acceptance (an “Act of Acceptance”), the form of which NN shall provide to the Lender in advance. 4 Interest 4.1 Rate of Interest NN will pay interest in U.S. Dollars to the Lender on the outstanding principal amount of the Loan from time to time hereunder at the rate of 3.849 per cent. per annum (the “Rate of Interest”). 4.2 Payment Interest at the Rate of Interest shall accrue from day to day, starting from (and including) the Closing Date and shall be paid in respect of each Interest Period in arrear in equal instalments of U.S.$19.25 per each U.S.$1,000 of the Loan (each such U.S.$1,000, the “Calculation Amount”), other than in respect of the First Interest Period in respect of which the amount of Interest payable will be U.S.$12.83 per the Calculation Amount, not later than 2:30pm (London time) one Business Day prior to each Interest Payment Date to the Account. Interest on the Loan will cease to accrue from (and excluding) the due date for repayment thereof unless payment of principal is improperly withheld or refused, in which event interest will continue to accrue (before or after any judgment) at the Rate of Interest to but excluding the date on which payment in full of the principal thereof is made. The amount of interest payable in respect of the Loan for any Interest Period other than the First Interest Period shall be calculated by applying the Rate of Interest to the Calculation Amount, dividing the product by two and rounding the resulting figure to the nearest cent (half a cent being rounded upwards). If interest is required to be calculated for the First Interest Period or any other period, it will be calculated on the basis of a 360 day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of actual days elapsed. “Interest Period” means each period beginning on (and including) any Interest Payment Date and ending on (but excluding) the next Interest Payment Date and “First Interest Period” means the period beginning on (and including) the Closing Date and ending on (but excluding) the Interest Payment Date on 8 October 2017.

193 5 Repayment and Prepayment 5.1 Repayment Except as otherwise provided herein, NN shall repay the Loan not later than 2:30pm (London time) one Business Day prior to the Repayment Date. 5.2 Special Prepayment If, (i) either (a) as a result of the application of any amendments or clarifications to, or change in, the double tax treaty between the Russian Federation and Ireland or the laws or regulations of the Russian Federation or Ireland or of any political sub-division thereof or any authority having power to tax therein (including as a result of a judgment of a court of competent jurisdiction) or a change in, or clarification of, the application or official interpretation of such double tax treaty, such laws or regulations which in each case becomes effective (or enacted, adopted or made) on or after the date of this Agreement or as a result of the application of Russian withholding tax, or (b) as a result of the enforcement of the security provided for in the Trust Deed, NN would thereby be required to make or increase any payment due hereunder as provided in sub-clauses 6.2 or 6.3, or (ii) (for whatever reason) NN would have to or has been required to pay additional amounts pursuant to Clause 8, then NN may (without premium or penalty), upon not less than 30 days’ notice to the Lender (which notice shall be irrevocable), prepay the Loan in whole (but not in part). 5.3 Illegality If, at any time, by reason of the introduction of any change after the date of this Agreement in any applicable law, regulation, regulatory requirement or directive of any Agency the Lender reasonably determines (setting out in reasonable detail the nature and extent of the relevant circumstances) (following receipt of such determination NN may request from the Lender an Opinion of Counsel with the cost of such Opinion of Counsel being borne solely by NN) that it is or would be unlawful or contrary to such applicable law, regulation, regulatory requirement or directive for the Lender to allow all or part of the Loan or the Notes to remain outstanding or for the Lender to maintain or give effect to any of its obligations in connection with this Agreement or the Notes and/or to charge or receive or to be paid interest at the rate then applicable to the Loan or the Notes, then upon notice by the Lender to NN in writing, NN and the Lender shall consult in good faith as to a basis which eliminates the application of such circumstances; provided, however, that the Lender shall be under no obligation to continue such consultation if a basis has not been determined within 30 days of the date on which it so notified NN. If such a basis has not been determined within the 30 days, then upon notice by the Lender to NN in writing, NN shall prepay the Loan in whole (but not in part) without premium on the next Interest Payment Date or on such earlier date as the Lender shall certify on not less than 15 days’ notice to be necessary to comply with the requirements of such law, regulation, regulatory requirement or directive (in any event being not earlier than the last Business Day of any grace period allowed by applicable laws or regulations).

5.4 Optional Prepayment at Make Whole NN may, at any time, on giving not less than 30 nor more than 60 days’ notice to the Lender (which notice shall be irrevocable and shall specify the date fixed for prepayment (the “Make Whole Optional Prepayment Date”)), prepay in whole or in part the Loan at the Make Whole Prepayment Amount plus accrued and unpaid interest on the Loan so prepaid to but excluding the Make Whole Optional Prepayment Date.

5.5 Optional Prepayment at Par NN may, at any time on or after the date three months prior to the Repayment Date, on giving not less than 30 nor more than 60 days’ notice to the Lender (which notice shall be irrevocable and shall specify the date fixed for prepayment (the “Par Optional Prepayment

194 Date”)), prepay in whole or in part the Loan at its principal amount plus accrued and unpaid interest on the Loan so prepaid to but excluding the Par Optional Prepayment Date. 5.6 Reduction of Loan Upon Cancellation of Notes The Lender, NN or any member of the Group may from time to time, in accordance with the terms and conditions of the Notes, purchase Notes in the open market or by tender or by a private agreement at any price. The Lender, NN or any such member of the Group may, at its option, hold, reissue, resell or, in the case of NN or such member of the Group, from time to time deliver to the Lender Notes together with a request (a “Request”) for the Lender to present such Notes to the Registrar for cancellation or from time to time procure the delivery to the Registrar of instructions (“Instructions”) to redeem and thereafter cancel a specified aggregate principal amount of Notes represented by the Global Certificate in each case upon not less than 30 days’ notice. Any Instructions shall be accompanied by evidence reasonably satisfactory to the Lender and Registrar that the Lender, NN or any such member of the Group is entitled to give such Instructions or Request (or, in the case of Notes represented by the Global Certificate, request that the account entries in the records of the relevant clearing system reflecting the Lender’s, NN’s or any such member of the Group’s beneficial interest in such part of the Global Certificate be updated to reflect such cancellation) on the date specified in the Instructions or Request (as the case may be) whereupon the Register shall be updated accordingly to reflect such cancellation. On and with effect from the date specified in any Request or, as the case may be, Instructions, the Loan shall be deemed to be prepaid for all purposes in an amount as corresponds to the aggregate principal amount of Notes so cancelled and no further interest shall be payable with respect thereto. 5.7 Payment If the Loan is to be prepaid by NN pursuant to any of the provisions of Clauses 5.2, 5.3, 5.4 or 5.5: 5.7.1 no later than one Business Day prior to the due date for such prepayment, NN shall deposit in the Account an amount in cash equal to the amount required to be paid on such due date; and 5.7.2 NN shall, simultaneously with such prepayment, pay to the Lender (by deposit in the Account) accrued but unpaid interest thereon to (but excluding) the date of such prepayment and all other sums then payable by NN pursuant to this Agreement in relation to the amount to be prepaid. 5.8 Provisions Exclusive NN may not voluntarily prepay the Loan except in accordance with the express terms of this Agreement. Any amount prepaid may not be re-borrowed. 6 Payments 6.1 Making of Payments All payments of principal and interest and other amounts payable under Clause 6.2 hereof (other than those in respect of Reserved Rights) to be made by NN under this Agreement shall be made unconditionally by credit transfer to the Lender not later than 2:30pm (London time) one Business Day prior to each Interest Payment Date, the Repayment Date or any other due date for redemption (as the case may be) in Same-Day Funds to the Account, or as the Trustee may otherwise direct following the occurrence of a Relevant Event (as defined in the Trust Deed). The Lender agrees with NN that the Lender will not deposit any other monies into the Account and that no withdrawals shall be made from the Account other than for payments to be made in accordance with the Trust Deed and Paying Agency Agreement.

195 6.2 No Set-Off, Counterclaim or Withholding; Gross-Up All payments to be made by NN under this Agreement (including any amounts payable under Clause 6.3) shall be (i) made in full without set-off or counterclaim and (except to the extent required by law) without deduction or withholding for or on account of any Taxes and (ii) made only from the Russian Federation, Ireland or such other jurisdiction which would not require any deductions or withholding from any such payment. If NN shall be required by applicable law to make any deduction or withholding from any payment under this Agreement for or on account of any such Taxes, it shall, on the due date of such payment, increase any payment due hereunder to such amount as may be necessary to ensure that the Lender receives a net amount in Dollars equal to the full amount which it would have received had payment not been made subject to such Taxes, it shall account to the relevant authorities for the relevant amount of such Taxes so withheld or deducted within the time allowed for such payment under the applicable law and shall deliver to the Lender without undue delay evidence reasonably satisfactory to the Lender of such deduction or withholding and of the accounting therefor to the relevant taxing authority. If the Lender pays any amount in respect of any Taxes, including penalties or interest, NN shall reimburse the Lender in Dollars, for such payment within five Business Days of demand. Any notification by the Lender to NN in connection with this Clause 6.2 shall be given as soon as reasonably practicable after the Lender becomes aware of any obligation on it to make any such withholding or deduction or pay any Taxes. The Lender shall, as soon as reasonably practicable following request by NN, provide NN (at NN’s expense) with reasonable detail in writing as to the reasons for such withholding or deduction or payment of Taxes. Nothing in this paragraph shall prejudice in any way the obligation to gross up contained in this Clause 6.2. 6.3 Withholding on the Notes If the Lender notifies NN (setting out in reasonable detail the nature and extent of the obligation and providing, upon the request of NN, an Opinion of Counsel in respect of the existence of such obligation, with the cost of such Opinion of Counsel to be borne solely by NN) that it has become obliged to make any withholding or deduction for or on account of any Taxes imposed or levied, collected, withheld or assessed by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax from any payment which it is obliged to make, or would otherwise be obliged to make but for the imposition of any such withholding or deduction for or on account of any such Taxes, under or in respect of the Notes, NN agrees to pay into the Account for the benefit of the Lender, not later than 2.30pm (London time) one Business Day prior to the date on which payment is due to the Noteholders in Same-Day Funds, such additional amounts as are equal to the said additional amounts which the Lender would be required to pay in order for the net amounts received by the Noteholders after such withholding or deduction to equal the respective amounts which would have been received by the Noteholders in the absence of such withholding or deduction; provided, however, that the Lender shall immediately upon receipt from any Paying Agent of the reimbursement of any sums paid pursuant to this provision, to the extent that the Noteholders, as the case may be, are not entitled to such additional amounts pursuant to the terms and conditions of the Notes, pay such additional amounts to NN (it being understood that neither the Lender, nor the Principal Paying Agent nor any Paying Agent shall have any obligation to determine whether any Noteholder is entitled to such additional amounts). 6.4 Reimbursement To the extent that the Lender subsequently obtains and uses any tax credit or allowance or obtains any other reimbursements or refunds relating to a deduction or withholding or payment of Taxes with respect to which NN has made a payment pursuant to this Clause 6, the Lender shall promptly pay to NN so much of the benefit or refund it received as will leave the Lender, to the maximum extent possible, in the same position as it would have been had

196 no additional amount been required to be paid by NN pursuant to this Clause 6; provided, however, that the question of whether any such benefit or refund has been received, and accordingly, whether any payment should be made to NN, the amount of any such payment and the timing of any such payment, shall be determined reasonably by the Lender, in consultation with NN, and the Lender shall notify NN promptly upon determination that it has received any such benefit or refund. 6.5 Mitigation and Substitution 6.5.1 If at any time either party hereto becomes aware of circumstances which would or might, then or thereafter, give rise to an obligation on the part of NN to make any deduction, withholding or payment as described in sub-clauses 6.2 or 6.3, then, without in any way limiting, reducing or otherwise qualifying the Lender’s rights, or NN’s obligations, under such sub-clauses, such party shall as soon as reasonably practicable upon becoming aware of such circumstances notify the other party, and, thereupon the parties shall consider and consult with each other in good faith with a view to finding, agreeing upon and implementing a method or methods by which any such obligation may be avoided or mitigated and, to the extent that both parties can do so without taking any action which in the reasonable opinion of such party would have any adverse effect upon its business, operations or financial condition or would be in breach of any provision of the NN Agreements, take such reasonable steps as may be available to it to avoid such obligation or mitigate the effect of such circumstances. NN agrees to reimburse the Lender upon receipt of an original demand for payment for all reasonable, properly incurred and documented costs and expenses (including but not limited to legal fees) incurred by the Lender in connection with this sub-clause. 6.5.2 If the Lender ceases, as a result of the Lender’s actions, to be tax resident in Ireland for the purposes of a double taxation treaty between the Russian Federation and Ireland, and such cessation results in NN being required to make payments pursuant to sub-clauses 6.2 or 6.3 or Clause 8 then, except in circumstances where the Lender has ceased to be tax resident in Ireland by reason of any change of law (as described in sub-clause 5.2) (including without limitation, a change in a double taxation treaty or in such law or treaty’s application or interpretation), NN may require the Lender to seek the substitution of the Lender as obligor under the Notes and as lender under any Loan. NN shall bear all costs and expenses relating to or arising out of such substitution. 6.6 Tax Treaty Relief 6.6.1 The Lender shall once in each calendar year, no later than 10 Business Days prior to the first date on which any payment by NN is due hereunder in that calendar year, deliver to NN, at the expense of NN (provided that the incurred expenses are reasonable and documented), a notarised tax residency certificate issued or certified by (as applicable) the competent authorities of Ireland confirming that the Lender is resident in Ireland for the purposes of the agreement between Ireland and the Russian Federation for the avoidance of double taxation with respect to income in that calendar year. At the cost of NN (provided that the incurred expenses are reasonable and documented), the residency certificate shall be apostilled at the Irish Department of Foreign Affairs, or otherwise approved by the competent authority in Ireland as contemplated by applicable law or regulations. The Lender shall not be responsible for any failure to provide, or any delays in providing, such tax residency certificate as a result of any action or inaction of any authority of Ireland, but shall notify NN promptly about any such failure or delay with a detailed description of the actions taken by the Lender to obtain such tax residency certificate. 6.6.2 If Russian legislation regulating the procedures for obtaining an exemption from Russian withholding tax on income changes, the Lender shall use its reasonable and timely efforts to assist NN to obtain relief from such tax pursuant to the double

197 taxation treaty between the Russian Federation and Ireland. In all other cases, the Lender shall, subject to being fully indemnified by NN for all documented costs it incurs in so doing, co-operate with NN in completing any procedural formalities necessary for NN to obtain authorisation to make any payment without any deduction or withholding on account of any Taxes. 6.6.3 Notwithstanding Clause 6.4, if NN makes a withholding or deduction for or on account of Taxes from a payment under or in respect of this Agreement, NN may apply on behalf of the Lender to the relevant taxing authority of the Russian Federation (the “Russian Taxing Authority”) for a payment to be made by such authority to the Lender with respect to such Tax. If, whether following a claim made on its behalf by NN or otherwise, the Lender receives such a payment (“Russian Tax Payment”) from the Russian Taxing Authority with respect to such Taxes, it will as soon as reasonably possible notify NN that it has received that payment (and the amount of such payment); whereupon, provided that NN has notified the Lender in writing of the details of an account (the “Borrower Account”) to which a payment or transfer should be made, and that the Lender is able to make a payment or transfer under applicable laws and regulations, the Lender will, as soon as reasonably practicable, pay or transfer an amount equal to the Russian Tax Payment to the Borrower Account. 6.6.4 The Lender agrees promptly, upon becoming aware thereof, to notify NN if it ceases to be resident in Ireland for tax purposes. 6.6.5 Subject to Clauses 6.5 and 8.2, the Lender agrees that it shall maintain its residency for tax purposes only in Ireland. 6.6.6 The Lender represents and warrants to NN as of the Closing Date as follows: (i) the Lender is a resident of Ireland for taxation purposes and is subject to taxation in Ireland not merely on the basis of the source of its income or location of its property but on the basis of its registration as a legal entity, location of its management body or other similar criteria. The Lender will be able to receive certification to the effect that it is resident in Ireland for taxation purposes from the relevant Irish authority; (ii) save for any which may be created as a result of entering into this transaction or any previous loan transaction with NN, the Lender does not have a permanent establishment or presence outside Ireland, including in particular in the Russian Federation; (iii) the Lender does not have a branch, representation, division, bureau, office, agency or any other economically autonomous subdivision or other place of business in any other country than Ireland through which the business of the Lender is wholly or partially carried out; (iv) the Lender did not explicitly grant authority to and is not aware of an implied authority for NN or any other person located outside Ireland to negotiate key parameters of any contracts or sign any contracts on behalf of the Lender, bind the Lender to any contracts by other means or otherwise represent the Lender in dealings with third parties; (v) the Lender has its central management and control in Ireland. The Lender’s place of effective management is only in Ireland; (vi) the directors of the Lender are Irish nationals and reside in Ireland and shall at all times act independently and exercise their authority from and within Ireland by taking all key decisions relating to the Lender in the Ireland;

198 (vii) the Notes and the Loan will be fully accounted for by the Lender on its balance sheet, meaning that the Loan will be treated as an asset of the Lender under generally accepted accounting practice applicable to the Lender, while the Notes will be treated as a liability of the Lender under generally accepted accounting practices applicable to the Lender; (viii) the Lender does not own, either directly or indirectly, any shares of NN; (ix) the Lender has the actual right to income constituted by payments due to it under this Agreement; (x) there is no reference to the territory of Russia as the actual place of the Lender’s activity in the constitution of the Lender; and (xi) the board of directors of the Lender is located in Ireland. 7 Conditions Precedent The obligation of the Lender to make the Advance shall be subject to the further conditions precedent that as of the Closing Date (a) the Lender shall have received the proceeds of the issue of the Notes pursuant to the Subscription Agreement and (b) the Lender shall have received the Facility Fee. 8 Change in Law; Increase in Cost 8.1 Compensation In the event that after the date of this Agreement there is any change in or introduction of any tax, law, regulation, regulatory requirement or official directive (whether or not having the force of law but, if not having the force of law, the observance of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) or in the official interpretation or application thereof by any Agency and/or any compliance by the Lender in respect of the Loan or the Facility with any request, policy or guideline (whether or not having the force of law but, if not having the force of law, the observances of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) made or issued after the date of this Agreement from or of any Agency, which: 8.1.1 subjects or will subject the Lender to any Taxes with respect to payments of principal of or interest on the Loan or any other amount payable under this Agreement (other than any Taxes payable by the Lender on its overall net income or any Taxes referred to in sub-clauses 6.2 or 6.3); or 8.1.2 increases or will increase the taxation of or changes or will change the basis of taxation of payments to the Lender of principal of or interest on the Loan or any other amount payable under this Agreement (other than any such increase or change which arises by reason of any increase in the rate of tax payable by the Lender on its overall net income or as a result of any Taxes referred to in sub-clauses 6.2 or 6.3); or 8.1.3 imposes or will impose on the Lender any other condition affecting this Agreement, the Facility or the Loan, and if as a result of any of the foregoing: (i) the cost to the Lender of making, funding or maintaining the Loan or the Facility is increased; or (ii) the amount of principal, interest or other amount payable to or received by the Lender hereunder is reduced; or (iii) the Lender makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of any sum receivable by it from

199 NN hereunder or makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of the Loan, then subject to the following, and in each such case: (a) the Lender shall, as soon as practicable after becoming aware of such increased cost, reduced amount or payment made or foregone, give written notice to NN, together with a certificate signed by one authorised officer of the Lender describing in reasonable detail the introduction or change or request which has occurred and the country or jurisdiction concerned and the nature and date thereof and demonstrating the connection between such introduction, change or request and such increased cost, reduced amount or payment made or foregone, and setting out in reasonable detail the basis on which such amount has been calculated, and enclosing all relevant supporting documents evidencing the matters set out in such certificate; and (b) NN, in the case of Clauses (i) and (iii) above, shall promptly on demand by the Lender, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such increased cost, and, in the case of Clause (ii) above, at the time the amount so reduced would otherwise have been payable, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such reduction, payment or foregone interest or other return; provided, however, the amount of such increased cost, reduced amount or payment made or foregone shall be deemed not to exceed an amount equal to the proportion thereof which is directly attributable to this Agreement and provided that the Lender shall not be entitled to such additional amount where such increased cost arises as a result of the negligence or wilful default of the Lender, provided that this sub-clause 8.1 will not apply to or in respect of any matter for which the Lender has already been compensated under sub-clauses 6.2 or 6.3. 8.2 Mitigation In the event that the Lender becomes entitled to make a claim pursuant to sub-clause 8.1, the Lender shall consult in good faith with NN and shall use reasonable efforts (based on the Lender’s reasonable interpretation of any relevant tax, law, regulation, requirement, official directive, request, policy or guideline) to reduce, in whole or in part, NN’s obligations to pay any additional amount pursuant to such sub-clause, except that nothing in this sub-clause 8.2 shall obligate the Lender to incur any costs or expenses in taking any action (other than minor costs of an administrative or similar nature) which, in the reasonable opinion of the Lender, is prejudicial to its interests, unless NN agrees to reimburse the Lender for such costs and expenses. 9 Covenants The covenants in this Clause 9 shall remain in force from the date of this Agreement for so long as the Loan or any other sum owing to the Lender hereunder remains outstanding. 9.1 Negative Pledge NN will: (a) not, and will procure that no Material Subsidiary will, create or permit to subsist any Security Interest other than a Permitted Security Interest upon the whole or any part of its respective undertaking, property, assets or revenues, present or future, to secure for the benefit of the holders of any Relevant Indebtedness: (i) payment of any sum due in respect of any such Relevant Indebtedness;

200 (ii) any payment under any guarantee of any such Relevant Indebtedness; or (iii) any payment under any indemnity or other like obligation relating to any such Relevant Indebtedness; (b) procure that no Material Subsidiary gives any guarantee of, or indemnity in respect of, any of NN’s Relevant Indebtedness (other than Domestic Relevant Indebtedness) to the holders thereof, without in any such case at the same time or prior thereto procuring that the Loan (x) is secured at least equally and rateably with such Relevant Indebtedness for so long as such Relevant Indebtedness is so secured or (y) has the benefit of such other guarantee, indemnity or other like obligations or such other security (in each case) as the Lender in its absolute discretion shall deem to be not materially less beneficial to it or as otherwise shall be approved by the Lender (for as long as such Relevant Indebtedness has the benefit of such other guarantee, indemnity, other like obligation or other security). 9.2 Mergers NN shall not enter into or become subject to, and shall not permit any Material Subsidiary to enter into or become subject to, any reorganisation (as such term is construed by applicable legislation, including, without limitation and where applicable, any amalgamation, demerger, merger or corporate reconstruction) or other analogous event (as determined by the legislation of the relevant jurisdiction) if such reorganisation or other analogous event would have a Material Adverse Effect. 9.3 Payment of Taxes NN shall, and shall ensure that its Subsidiaries shall, pay or discharge or cause to be paid or discharged, before the same shall become overdue, all taxes, levies, imposts or duties levied or imposed upon, or upon the income, profits or assets of NN or any Subsidiary (a “Relevant Tax”), provided, however, that none of NN nor any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any Relevant Tax (x) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with the Accounting Standards or other appropriate provision (in the opinion of NN or the relevant Material Subsidiary) has been made or (y) where such non-payment or failure to discharge, together with non-payment or failure to discharge any other unpaid or undischarged Relevant Taxes, does not have in the aggregate a Material Adverse Effect, and provided further that in the case of either (x) or (y) above if any Relevant Tax (including any applicable penalties) is paid or discharged after becoming overdue, such payment or discharge shall be deemed to remedy any breach of this Clause 9.3 with respect to such Relevant Tax. 9.4 Delivery of Information 9.4.1 NN will (i) make available on its website and (ii) deliver to the Lender and the Trustee as soon as they become available, but in any event within 180 days after the end of each of its financial years, copies of NN’s consolidated financial statements for such financial year audited and prepared in accordance with the Accounting Standards. 9.4.2 NN will (i) make available on its website and (ii) deliver to the Lender and the Trustee as soon as the same become available, but in any event within 150 days after the end of the first half of each of its financial years, copies of NN’s consolidated financial statements for such period reviewed and prepared in accordance with the Accounting Standards. 9.4.3 NN will ensure that each set of consolidated financial statements delivered by it pursuant to this Clause 9.4 is accompanied by a report or review thereon by or of its auditors (including any accompanying notes).

201 9.4.4 NN will deliver to the Lender and the Trustee on each Interest Payment Date (or if such Interest Payment Date is not a Business Day, on the first succeeding Business Day) or within 14 days of any request of the Lender or the Trustee an Officers’ Certificate stating that, to the best of the knowledge, information and belief of the signatories to such Officers’ Certificate, having made all reasonable enquiries, no Potential Event of Default or Event of Default is continuing as at a date (the “Certification Date”) not more than five Business Days before the date of such certificate, or, if any Potential Event of Default or Event of Default are, to the knowledge, information and belief of such signatories, continuing as at the Certification Date, specifying such Potential Event of Default or Event of Default. 9.4.5 Subject to any restrictions under applicable law or regulations (including without limitation regarding insider dealing or market abuse), NN hereby undertakes that it will deliver to the Lender and the Trustee, without undue delay, such additional information as it or the Trustee reasonably requires for the purposes of the discharge of the duties and discretions vested in it under this Loan Agreement or the Trust Deed, including providing, without limitation (a) an Officers’ Certificate certifying (i) those Subsidiaries which are Material Subsidiaries and (ii) as to the Notes held by or on behalf of NN or any member of the Group as at the date of such certificate, such Officers’ Certificate to be provided within 14 days of NN’s audited and consolidated annual accounts being made available pursuant to Clause 9.4.1 above, and (b) a notification whenever it or any member of the Group purchases and retains Notes for its own account. 9.4.6 NN undertakes to furnish to the Lender such information as the Irish Stock Exchange plc (or any other or further stock exchange or stock exchanges on which the Notes may, from time to time, be listed or admitted to trading) may require in respect of NN or the Group as necessary in connection with the listing or admission to trading on such stock exchange of such instruments. 9.4.7 NN agrees that any information provided to the Lender pursuant to this Clause 9.4 may also be provided to the Trustee, if so requested by the Trustee, without violating any duty of confidentiality or secrecy that the Lender may owe to NN under the laws of Ireland. 10 FATCA and Tax Reporting Each party to this Agreement shall, reasonably promptly following a reasonable request by another party, provide such other party with such information or assistance reasonably requested by the other party so as to enable such other party to comply with its obligation (i) under Section 1471(b) of the US Internal Revenue Code of 1986, as amended (the “Code”) or otherwise imposed pursuant to Section 1471 through 1474 of the Code and any regulations or agreements thereunder, any intergovernmental agreement between the US and any other jurisdiction which facilitates the implementation of any such law, regulation or interpretation, official interpretations thereof or law implementing an intergovernmental approach thereto and (ii) any other tax reporting or information exchange regime to which any party is subject. NN hereby covenants with the Lender that it will pay or reimburse the Lender for any reasonable costs incurred by the Lender in order for it to comply with (i) its obligations under Section 1471(b) of the Code or otherwise imposed pursuant to Section 1471 through 1474 of the Code and any regulations or agreements thereunder, any intergovernmental agreement between the US and any other jurisdiction which facilitates the implementation of any such law, regulation or interpretation, official interpretation thereof, or law implementing an intergovernmental approach thereto and (ii) any other tax reporting or information exchange regime to which any party is subject.

202 11 Events of Default 11.1 Events of Default If one or more of the following events shall occur and be continuing (each, an “Event of Default”), the Lender shall be entitled to exercise the remedies set forth in sub-clause 11.3: 11.1.1 NN fails to pay any amount of principal, interest or other amounts payable hereunder within seven Business Days (in the case of principal) or fourteen Business Days (in the case of interest or other amounts) of when the same were due hereunder; 11.1.2 NN fails to perform or observe any of its other obligations under this Agreement and except where such default is not capable of remedy, such default remains unremedied for the period of 45 calendar days after written notice thereof, addressed to NN by the Lender, has been delivered to NN; or 11.1.3 any present or future Indebtedness of NN or any Material Subsidiary (i) is not paid upon the later of (a) when due upon final maturity or (b) if there is an originally applicable grace period in respect of such Indebtedness at final maturity, upon the expiration of such originally applicable grace period or (ii) becomes due and payable prior to its specified maturity as a result of an event of default (however described); provided that, either, (x) the individual amount of such Indebtedness that is not so paid (after the expiration of any such originally applicable grace period) or so due and payable equals or exceeds U.S.$50,000,000 or (y) the aggregate amount of such Indebtedness that is not so paid (after the expiration of any such originally applicable grace period) or so due and payable equals or exceeds U.S.$150,000,000 or, in the case of an amount specified in (i) or (ii) above, its U.S. Dollar Equivalent; or 11.1.4 an effective resolution is passed by NN or an order of a court of competent jurisdiction is made (and has come into force) that NN be wound-up or dissolved, in each case otherwise than for the purposes of or pursuant to a reorganisation, consolidation, amalgamation, merger or reconstruction permitted by this Agreement or the terms of which shall have previously been approved in writing by the Lender; or 11.1.5 an effective resolution is passed by a Material Subsidiary or an order of a court of competent jurisdiction is made (and has come into force) for the winding-up or dissolution of any Material Subsidiary except (i) for the purposes of or pursuant to a consolidation or amalgamation with or merger into NN or any other Subsidiary (provided such Subsidiary will be a Material Subsidiary following such consolidation, amalgamation or merger), (ii) for the purposes of or pursuant to a reorganisation, consolidation, amalgamation, merger or reconstruction which is not prohibited by this Agreement or the terms of which shall have previously been approved in writing by the Lender or (iii) by way of a voluntary winding-up or dissolution and there are surplus assets in any Material Subsidiary and any such surplus assets attributable to NN and/or any Material Subsidiary are distributed to NN and/or any other Subsidiary (provided such Subsidiary will be a Material Subsidiary following such winding-up or dissolution); or 11.1.6 an encumbrancer takes possession or a receiver is appointed of the whole or a material part of the assets or undertaking of NN or any Material Subsidiary and the same has a Material Adverse Effect, if such possession or appointment is not discharged or rescinded within 120 days thereof (or such longer period as the Lender, acting reasonably, may consider appropriate in relation to the jurisdiction concerned); or 11.1.7 a distress, execution or seizure before judgment is levied or enforced upon the whole or a material part of the property of NN or any Material Subsidiary and the same has a Material Adverse Effect, unless such distress, execution or seizure is stayed or discharged within 120 days of its commencement (or such longer period as the Lender,

203 acting reasonably, may consider appropriate in relation to the jurisdiction concerned); or 11.1.8 NN or any Material Subsidiary through an official action of the board of directors of NN or such Material Subsidiary (as the case may be) announces its inability to pay, or is unable to pay its debts generally as and when they fall due; or 11.1.9 proceedings shall have been initiated against NN or any Material Subsidiary for its liquidation, insolvency, bankruptcy or dissolution under any applicable bankruptcy or insolvency law and, in respect of a Material Subsidiary only, such liquidation, insolvency, bankruptcy or dissolution would have a Material Adverse Effect, and such proceedings shall not have been discharged or stayed within a period of 120 days (or such longer period as the Lender, acting reasonably, may consider appropriate in relation to the jurisdiction concerned) unless, and for so long as, the Lender, acting reasonably, is satisfied that it is being contested in good faith; or 11.1.10 NN or any Material Subsidiary shall initiate or consent to proceedings for its liquidation, insolvency, bankruptcy or dissolution relating to itself under any applicable bankruptcy, or insolvency law or make a general assignment for the benefit of, or enters into any general composition with, its creditors generally, unless, in respect of a Material Subsidiary only, such liquidation, insolvency, bankruptcy or dissolution would not have a Material Adverse Effect; or 11.1.11 a moratorium is agreed or declared in respect of any Indebtedness of NN or any Material Subsidiary and the same has a Material Adverse Effect, or any governmental authority or agency condemns, seizes, compulsorily purchases, transfers or expropriates all or (in the reasonable opinion of the Lender) a material part of the assets, licences or a majority of shares of NN or any Material Subsidiary and, in respect of a Material Subsidiary or in respect of a majority of shares in NN, the same has a Material Adverse Effect; or 11.1.12 any event occurs which under the laws of Ireland, the Russian Federation or, in the case of a Material Subsidiary, the jurisdiction of its incorporation (if different), has an analogous effect to any of the events referred to in Clauses 11.1.4 to 11.1.11 above. 11.2 Notice of Default NN shall deliver to the Lender and the Trustee, promptly after becoming aware thereof, written notice in the form of an Officers’ Certificate of any event which is an Event of Default, or a Potential Event of Default, its status and what action, if any, NN is taking or proposes to take with respect thereto. 11.3 Default Remedies If any Event of Default shall occur and be continuing, the Lender may, by notice in writing to NN, (a) declare the obligations of the Lender hereunder to be immediately terminated, whereupon such obligations shall terminate, and (b) declare the principal outstanding amount of the Loan, together with accrued interest to such date, to be immediately due and payable, whereupon all such amounts shall become immediately due and payable, all without diligence, presentment, demand of payment or protest of any kind, which are expressly waived by NN. 11.4 Rights Not Exclusive The rights provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law. 11.5 Right of Set-off If any Event of Default shall occur and be continuing, NN authorises the Lender to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker’s lien, counterclaim or otherwise, against any assets of NN in any currency that may at

204 any time be in the possession of the Lender, at any branch or office, to the full extent of all amounts due and payable to the Lender hereunder. 12 Indemnity 12.1 Indemnification NN undertakes to the Lender, that if the Lender, or any director, officer, employee or agent of the Lender (each an “indemnified party”) incurs any loss, liability, claim, demand or damage, charge or expense (including without limitation reasonable legal fees, costs and expenses) (a “Loss”) as a result of or in connection with the Loan, this Agreement (or enforcement thereof), and/or the issue, constitution, sale, listing and/or enforcement of the Notes and/or the Notes being outstanding (excluding any Loss that is the subject of the undertakings contained in Clauses 8 and 13.8 of this Agreement (it being understood that the Lender may not recover twice in respect of the same Loss) and excluding any taxes(which exclusion shall, for the avoidance of doubt, be without prejudice to the provisions of Clause 13.4 below)), NN shall pay to the Lender within five Business Days of demand an amount equal to such Loss and (without duplication) all documented costs, charges and expenses which it or any indemnified party has reasonably incurred or may reasonably incur in connection with investigating, disputing, defending or preparing to defend any such action or claim as such costs, charges and expenses are incurred unless such Loss, cost, charge or expense was either caused by any indemnified party’s gross negligence, bad faith, fraud or wilful misconduct or arises out of a breach of the representations, warranties or undertakings of the Lender contained in this Agreement, the Trust Deed, the Paying Agency Agreement or the Subscription Agreement. The Lender shall not have any duty or obligation whether as fiduciary or trustee for any indemnified party or otherwise, to recover any such payment or to account to any other person for any amounts paid to it under this Clause. The indemnity set out in this Clause 12.1 shall not apply to: (a) any indirect Loss, or special or punitive damages, or (b) any loss of profits, suffered or incurred by any indemnified party, whether any claim for such loss or damage is based on tort (including negligence), strict liability, contract (including breach of or failure to perform the agreement or the breach of any representation or warranty hereunder, whether express or implied) or otherwise, other than any such indirect Loss, special or punitive damages or loss of profits of a person that is not an indemnified party and which have been awarded against an indemnified party where the indemnified party has complied in full with any requirements imposed upon it by Clause 12.2. 12.2 Conduct of Claims 12.2.1 NN agrees that: (i) if it becomes aware of any claims, actions, suits, proceedings (including any government or regulatory investigation), demands, judgments and awards, joint or several (each a “Claim”) relevant for the purpose of Clause 12.1 or any matter which may give rise to a Claim, NN shall notify the Lender, on behalf of the indemnified parties thereof and shall provide them with such information and copies of such documents relating to the Claim as the Lender, on behalf of the indemnified parties may reasonably request; and (ii) it will not, without the prior written consent of the Lender, on behalf of the indemnified parties, settle or compromise or consent to the entry into of any judgment with respect to any pending or threatened Claim in respect of which indemnification may be sought under Clause 12.1 (whether or not any indemnified party is an actual or potential party to such Claim) unless such settlement, compromise or consent includes an unconditional release of the

205 indemnified party from all liability arising out of such Claim and does not include a statement as to, or an admission of, fault, culpability or failure to act by or on behalf of any indemnified party. 12.2.2 Promptly after it becomes aware of any Claim made or threatened within the scope of the indemnity set out above, the Lender shall, in strict confidence, notify NN of the relevant Claim (indicating the nature of the allegations being made), provided that any failure to so notify shall not relieve NN of its obligation to indemnify under Clause 12.1 unless and to the extent that NN did not otherwise learn of such action and such failure results in NN being materially prejudiced. 12.2.3 Subject to this Clause 12.2.3 NN may elect to participate in the defence of any Claim. If it so elects after receipt of the notice referred to in Clause 12.2.2, NN may assume the defence of the action at its own expense with legal advisers chosen by it and reasonably satisfactory to the indemnified party. Notwithstanding such election, the indemnified parties may employ separate legal advisers and NN shall bear the reasonable fees and expenses of such separate legal advisers if (i) NN has failed within a reasonable time to retain legal advisers reasonably satisfactory to the Lender; (ii) the Lender shall have reasonably concluded that there may be legal defences available to them that are different from or in addition to those available to NN; or (iii) the parties in any such Claim include both NN and an indemnified party and representation of all parties by the same legal advisers would be inappropriate due to actual or potential differing interests between them, provided that (unless it would be inappropriate due to actual or potential differing interests among indemnified parties) NN shall not be responsible for the fees and expenses of more than one counsel (including local counsel) with respect to all indemnified parties in an action for which indemnification is sought without the consent of NN. If NN assumes the defence of the action, NN shall not be liable for any fees or expenses of legal advisers of any indemnified party incurred thereafter in connection with the action, except as stated above. 12.2.4 NN shall not be liable in respect of any settlement or any action effected without its prior written consent, such consent not to be unreasonably withheld or delayed. 12.2.5 Save as provided in Clause 12.1 and 12.2, indemnified parties other than the Lender will not be entitled directly to enforce their rights against NN under this Agreement, under the Contracts (Rights of Third Parties) Act 1999 or otherwise. The Lender (without obligation) has the right to enforce any rights of the indemnified parties on their behalf. NN and the Lender may agree to terminate this Agreement or vary any of its terms without the consent of any indemnified party and the Lender will have no responsibility to any indemnified party under or as a result of this Agreement. 12.3 Independent Obligation Sub-clause 12.1 constitutes a separate and independent obligation of NN from its other obligations under or in connection with this Agreement and shall not affect, or be construed to affect, any other provision of this Agreement. 12.4 Evidence of Loss A certificate of the Lender setting forth the amount of Loss described in Clause 12.1 and specifying in full detail the basis therefor shall, in the absence of manifest error be prima facie evidence of the amount of such losses, expenses and liabilities. 12.5 Survival The obligations of NN pursuant to Clause 12.1 shall survive the execution and delivery of this Agreement, the drawdown of the Facility and the repayment of the Loan and all payments due thereunder, in each case by NN.

206 13 General 13.1 Evidence of Debt The entries made by the Lender in the accounts maintained by the Lender in accordance with its usual practice and evidencing the amounts from time to time lent by and owing to it hereunder shall, in the absence of manifest error, be prima facie evidence of the existence and amounts of NN’s obligations recorded herein. 13.2 Stamp Duties NN shall pay all stamp, registration and documentary taxes or duties (if any) imposed on or payable by NN or the Lender in the United Kingdom, the Russian Federation or Ireland which may be payable or determined to be payable in connection with the execution, delivery, performance, enforcement or admissibility in evidence of this Agreement. NN shall indemnify the Lender against any and all costs and expenses which may be incurred or suffered by the Lender with respect to, or resulting from, delay or failure by NN to comply with its obligation under this Clause 13.2 to pay such taxes or similar charges. 13.3 VAT Where a sum is payable under this Agreement to the Lender, NN will, in addition, pay in respect of VAT: 13.3.1 where the payment (or any part of it) constitutes the consideration (or any part thereof) for any supply of services made to NN, such amounts as equal any VAT properly chargeable thereon on receipt of a valid VAT invoice; 13.3.2 where the payment is to reimburse or indemnify the Lender for any cost, charge or expense incurred by it (except where the payment falls within sub-clause 13.3.3 below), such amount as equals any VAT, which the Lender represents in good faith is not recoverable by it or by the representative member of any VAT group of which it is a member, charged to or incurred by the Lender in respect of any cost, charge or expense which gives rise to or is reflected in the payment on production of relevant invoices or equivalent evidence of such payment having been made; and 13.3.3 where the payment is in respect of costs or expenses incurred by the Lender as agent for NN and except where section 47(3) of the United Kingdom Value Added Tax Act 1994 (or any equivalent legislation in a jurisdiction outside the United Kingdom) applies, such amount as equals the amount included in the costs or expenses in respect of VAT and in such case the Lender shall use reasonable efforts to procure that the actual supplier of goods or services which the Lender received as agent issues a valid VAT invoice directly to NN in respect of the relevant supply. 13.4 Payment Gross-Up Where any payment is made under this Agreement to the Lender pursuant to an indemnity, compensation or reimbursement provision, the sum payable shall take into account (i) any charge to Taxation in the hands of the Lender in respect of such payment and (ii) any tax relief available to the Lender in respect of the matter giving rise to the payment and which may be offset against the charge to Taxation, such that the Lender shall be left with a sum equal to the sum that it would have retained in the absence of such a charge to Taxation and such tax relief. 13.5 Waivers No failure to exercise and no delay in exercising, on the part of the Lender or NN, any right, power or privilege hereunder and no course of dealing between NN and the Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights, or remedies provided by applicable law.

207 13.6 Notices 13.6.1 Method Each communication under this Agreement shall be made by fax or otherwise in writing (by hand, courier or pre-paid express delivery service). Each communication or document to be delivered to any party under this Agreement shall be sent to that party at the fax number or postal address, and marked for the attention of the person (if any), from time to time designated by that party to each other party for the purpose of this Agreement. The initial fax number, postal address and person so designated by the parties under this Agreement are set out below: if to NN:

Address PJSC MMC Norilsk Nickel 1st Krasnogvardeyskiy proezd, 15 “Mercury” Moscow City Tower Moscow, 123100 Russian Federation

Fax: +7 495 787 04 62

Attention: Head of Corporate Finance

if to the Lender:

Address 2nd Floor Palmerston House Fenian Street Dublin 2 Ireland

Fax: +353 1 905 8029

Attention: The Directors

E-mail: [email protected]

or to such other address or fax number as any party may hereafter specify in writing to the other. 13.6.2 Deemed Receipt Any communication from any party to any other under this Agreement shall be effective, (if by fax) when the relevant delivery receipt is received by the sender and, (if in writing) when delivered; provided that any communication which is received (or deemed to take effect in accordance with the foregoing) outside business hours or on a non-business day in the place of receipt shall be deemed to take effect at the opening of business on the next following business day in such place. Any communication delivered to any party under this Agreement which is to be sent by fax will be written legal evidence.

208 13.7 Assignment 13.7.1 Subject to Clauses 13.7.2 and 13.7.3, this Agreement shall inure to the benefit of and be binding upon the parties, their respective successors and any permitted assignee or transferee of some or all of a party’s rights under this Agreement. Any reference in this Agreement to any party shall be construed accordingly and, in particular, references to the exercise of any rights, benefits and discretions or the making of any determination (including forming an opinion) by, and the delivery of notices, certificates and information to, the Lender, shall include references to the exercise of any such rights, benefits or discretions by or the making of such determination (including forming an opinion) by the Trustee (as Trustee). Notwithstanding the foregoing, the Trustee shall not be entitled to participate in any determinations by, and the delivery of notices, certificates and information to, the Lender or any discussions between the Lender and NN or any agreements of the Lender or NN, pursuant to Clauses 6.4, 6.5 or 8. 13.7.2 NN shall not assign or transfer all or any part of its rights or obligations hereunder to any other party or person. 13.7.3 Subject to the provisions of Clause 17 of the Trust Deed, the Lender may not assign or transfer, in whole or in part, any of its rights, obligations and benefits under this Agreement other than the Reserved Rights except that the Lender may charge by way of first fixed charge in favour of the Trustee (as Trustee) certain of the Lender’s rights and benefits under this Agreement and assign to the Trustee certain rights, interests and benefits under this Agreement, in each case, as set out in Clause 4 of the Trust Deed. 13.8 Currency Indemnity To the fullest extent permitted by law, the obligation of NN in respect of any amount due in Dollars under this Agreement shall, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in Dollars that the Lender may, in accordance with normal banking procedures, purchase with the sum paid in such other currency (after any reasonable premium and costs of exchange) on the Business Day immediately following the day on which the Lender receives such payment. If the amount in Dollars that may be so purchased for any reason falls short of the amount originally due (the “Due Amount”), NN hereby agrees to indemnify and hold harmless the Lender against any deficiency in Dollars. Any obligation of NN not discharged by payment in Dollars shall, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect. If the amount in Dollars that may be purchased exceeds that Due Amount the Lender shall promptly pay the amount of the excess to NN. 13.9 Contracts (Rights of Third Parties) Act 1999 Except as otherwise specifically provided herein and other than in the case of the Trustee who shall have rights under the Contracts (Rights of Third Parties) Act 1999 under this Agreement, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement. This Agreement may be terminated and any term may be amended or waived without the consent of any such person so expressly provided for under this Agreement. 13.10 Governing Law This Agreement and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law.

209 13.11 Jurisdiction The parties irrevocably agree that any dispute arising out of or in connection with this Agreement, including a dispute as to the formation, validity, existence breach, enforceability, applicability or termination of this Agreement and/or this Clause 13.11 or the consequences of its or their nullity (a “Dispute”), shall be referred to and finally resolved by arbitration seated in London, England. The arbitration shall be conducted in the English language by three arbitrators, in accordance with the rules set down by the LCIA (“LCIA Rules”) in effect at the time of the arbitration, except as they may be modified herein of by mutual agreement of the parties. The LCIA Rules are deemed to be incorporated by reference into this Clause. The claimant shall nominate an arbitrator in its request for arbitration, and the respondent shall nominate an arbitrator within 30 days of receipt of the request for arbitration. The two arbitrators so nominated shall jointly nominate a third arbitrator within 30 days of the nomination of the second arbitrator. The third arbitrator shall be the Chairman of the tribunal. If any of the three arbitrators is not nominated within the time periods prescribed above, any party may request that the LCIA chooses and appoints that arbitrator. The arbitration award shall be final and binding on the parties. The parties agree to exclude the jurisdiction of the English court under Sections 45 and 69 of the Arbitration Act 1996. 13.12 Waiver of Immunity To the extent that NN or the Lender may now or hereafter be entitled, in any jurisdiction in which any legal action or proceeding may at any time be commenced with respect to this Agreement, to claim for itself or any of its undertaking, properties, assets or revenues present or future any immunity (sovereign or otherwise) from suit, jurisdiction of any court, attachment prior to judgment, attachment in aid of execution of a judgment, execution of a judgment or award or from set-off, banker’s lien, counterclaim or any other legal process or remedy with respect to its obligations under this Agreement and/or to the extent that in any such jurisdiction there may be attributed to NN or the Lender any such immunity (whether or not claimed), NN and the Lender hereby irrevocably agree not to claim, and hereby waive, any such immunity. 13.13 Severability In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 13.14 Counterparts This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same agreement. 13.15 Language The language which governs the interpretation of this Agreement is the English language. 13.16 Amendments Except as otherwise provided by its terms, this Agreement may not be varied except by an agreement in writing signed by the parties. 13.17 Partial Invalidity The illegality, invalidity or unenforceability to any extent of any provision of this Agreement under the law of any jurisdiction shall affect its legality, validity or enforceability in such jurisdiction to such extent only and shall not affect its legality, validity or enforceability under the law of any other jurisdiction, nor the legality, validity or enforceability of any other provision.

210 13.18 Prescription In the event that any Notes become void pursuant to Condition 10 of the Notes, the Lender shall forthwith repay to NN the principal amount of such Notes subject to the Lender having previously received from NN, and being in possession of, a corresponding amount in respect of principal pursuant to this Agreement. 13.19 Limited Recourse and Non Petition NN hereby agrees that, notwithstanding any other provisions hereof, it shall have recourse in respect of any claim against the Lender only to sums in respect of principal, interest or other amounts (if any), as the case may be, received by or for the account of the Lender pursuant to this Agreement (after deduction or withholding of such taxes as may be required to be made by the Lender by law in respect of each such sum or in respect of the Notes and for which the Lender has not received a corresponding payment (also after deduction or withholding of such taxes or duties as may be required to be made by the Lender) in respect thereof pursuant to this Agreement) (the “Lender Assets”), subject always to (i) the Security Interests and (ii) to the fact that any claims of the Joint Lead Managers (as defined in the Subscription Agreement) shall rank in priority to any claims of NN hereunder and that any such claim by any and all such Joint Lead Managers or NN shall be reduced pro rata so that the total of all such claims does not exceed the aggregate value of the Lender Assets after meeting claims secured on them. Neither NN nor any person acting on behalf of it shall be entitled to take any further steps against the Lender to recover any further sums and no debt shall be owed by the Lender to NN in respect of any such further sum. In particular, neither NN nor any other person acting on behalf of it shall be entitled at any time to institute against the Lender, or join in any institution against the Lender of any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, examinership, winding-up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Lender relating to the Notes or otherwise owed to the Lender’s creditors, save for lodging a claim in the liquidation of the Lender which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Lender. No party to this Agreement shall have any recourse against any director, shareholder, or officer of the Lender in respect of any obligations, covenants or agreement entered into or made by the Lender in respect of this Agreement, except to the extent that any such person acts in bad faith or is negligent or is wilfully in default in the context of its obligations. The provisions of this Clause 13.19 shall survive the termination of this Agreement.

211 TERMS AND CONDITIONS OF THE NOTES

The following is the text of the Terms and Conditions of the Notes, which contains summaries of certain provisions of the Trust Deed and which (subject to completion and amendment) will be attached to the Notes in definitive form (if any) and (subject to the provisions thereof) will apply to the Global Certificate. The U.S.$ 500,000,000 3.849 per cent. Loan Participation Notes due 2022(the “Notes” which expression includes any further Notes issued pursuant to Condition 14 and forming a single series herewith), without coupons, of MMC Finance D.A.C. (the “Issuer” which expression shall include any entity substituted for the Issuer in accordance with the Trust Deed) are constituted by, are subject to, and have the benefit of a trust deed (the “Trust Deed”, which expression includes such trust deed as from time to time modified in accordance with the provisions therein contained and any deed or other document expressed to be supplemental thereto, as from time to time so modified) dated 8 June 2017 and made between the Issuer and Citicorp Trustee Company Limited (the “Trustee”, which expression shall include any successor as trustee) as trustee for the Noteholders (as defined below). The Issuer has authorised the creation, issue and sale of the Notes for the sole purpose of financing a U.S.$500,000,000 loan (the “Loan”) to PJSC MMC Norilsk Nickel (“NN”). The terms of the Loan are set forth in a loan agreement (the “Loan Agreement”) dated 6 June 2017 between the Issuer and NN. In each case where amounts of principal, interest and additional amounts (if any) are stated herein or in the Trust Deed to be payable in respect of the Notes, the obligations of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders on each date upon which such amounts of principal, interest and additional amounts (if any) are due in respect of the Notes, for an amount equivalent to sums of principal, interest and additional amounts (if any) actually received by or for the account of the Issuer pursuant to the Loan Agreement, less any amounts in respect of the Reserved Rights (as defined in the Trust Deed). Noteholders must therefore rely on the covenant to pay under the Loan Agreement, the benefit of the Security Interests (as defined below) and the credit and financial standing of NN. Noteholders shall have no recourse (direct or indirect) to any other asset of the Issuer. The Issuer has charged, by way of first fixed charge in favour of the Trustee for the benefit of itself and the Noteholders, certain of its rights and interests as lender under the Loan Agreement and under the Account (as defined in the Trust Deed) as security for its payment obligations in respect of the Notes and under the Trust Deed (the “Charge”) and has assigned certain other rights under the Loan Agreement to the Trustee (the “Assigned Rights” and, together with the Charge, the “Security Interests”), in each case excluding the Reserved Rights. In certain circumstances, the Trustee can (subject to it being indemnified and/or secured and/or prefunded to its satisfaction) be required by Noteholders holding in aggregate at least 25 per cent. of the principal amount of the Notes outstanding (as defined in the Trust Deed) or by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders to exercise certain of its powers under the Trust Deed (including those arising under the Security Interests). Payments in respect of the Notes will be made (subject to the receipt of the relevant funds from NN under the Loan Agreement) pursuant to a paying agency agreement (the “Paying Agency Agreement”) dated 6 June 2017 and made between the Issuer, NN, Citibank, N.A., London Branch as the principal paying agent, and a transfer agent (the “Principal Paying Agent”, the “Transfer Agent”, which expressions shall include any successors), Citigroup Global Markets Deutschland AG as the registrar (the “Registrar”, which expression shall include any successors) and the Trustee. References herein to the “Agents” are to the Registrar, the Principal Paying Agent, the Paying Agents (as defined in the Paying Agency Agreement) and the Transfer Agent and any reference to an “Agent” is to any one of them. Copies of the Trust Deed, the Loan Agreement and the Paying Agency Agreement are available for inspection during normal business hours at (i) the registered office of the Trustee being, at the date

212 hereof, at Citigroup Centre, 6th Floor, Canada Square, Canary Wharf, London E14 5LB; (ii) the registered office of the Issuer being, at the date hereof, MMC Finance D.A.C., 2nd Floor Palmerston House, Fenian Street, Dublin 2, Ireland; and (iii) at the specified office of the Principal Paying Agent, the initial specified office of which is set out below. Certain provisions of these terms and conditions (the “Conditions”) are summaries or restatements of, and are subject to, the detailed provisions of the Trust Deed, the Loan Agreement (the form of which is scheduled to and incorporated in the Trust Deed) and the Paying Agency Agreement. Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of all the provisions of the Loan Agreement and the Paying Agency Agreement that are applicable to them. Unless otherwise stated, terms not defined herein shall have the meanings given to them in the Trust Deed. 1 Status The Notes are limited recourse secured obligations of the Issuer. The sole purpose of the issue of the Notes is to provide the funds for the Issuer to finance the Loan. The Notes constitute the obligation of the Issuer to apply the proceeds from the issue of the Notes solely for financing the Loan and to account to the Noteholders for an amount equivalent to sums of principal, interest and additional amounts (if any) actually received (after deduction or withholding of such taxes or duties as may be required to be made by the Issuer by law in respect of each such sum to the extent that the Issuer has not received a corresponding payment (also after deduction or withholding of such taxes or duties as may be required to be made by the Issuer) in respect thereof) by or for the account of the Issuer pursuant to the Loan Agreement less any amount in respect of the Reserved Rights. The Trust Deed provides that payments in respect of the Notes equal to the sums actually received by or for the account of the Issuer by way of principal, interest or additional amounts (if any) pursuant to the Loan Agreement, less any amount in respect of the Reserved Rights will be made pro rata among all Noteholders (subject to Condition 7), on the Business Day following the date of, and in the currency of, and subject to the conditions attaching to, the equivalent payment pursuant to the Loan Agreement. The Issuer shall not be liable to make any payment in respect of the Notes other than as expressly provided herein and in the Trust Deed. As provided therein, neither the Issuer nor the Trustee shall be under any obligation to exercise in favour of the Noteholders any rights of set-off or to combine accounts or counterclaim that may arise out of other transactions between the Issuer and NN. Noteholders have notice of, and have accepted, these Conditions and the contents of the Trust Deed, the Paying Agency Agreement and the Loan Agreement. It is hereby expressly provided that, and Noteholders are deemed to have accepted that: (a) neither the Issuer nor the Trustee makes any representation or warranty in respect of, or shall at any time have any responsibility for, or, (in the case of the Issuer) save as otherwise expressly provided in the Trust Deed, in Condition 1(f) below or in the Loan Agreement (in the case of the Issuer), any liability or obligation in respect of the performance and observance by NN of its obligations under the Loan Agreement or the recoverability of any sum of principal or interest (or any additional amounts) due or to become due from NN under the Loan Agreement save that nothing in this Condition shall absolve the Trustee from responsibility and liability for performance of its trusts, duties and obligations pursuant to, and subject to the terms of, the Trust Deed; (b) neither the Issuer nor the Trustee shall at any time have any responsibility for, or obligation or liability in respect of, the condition (financial or otherwise), creditworthiness, affairs, status, nature or prospects of NN;

213 (c) neither the Issuer nor the Trustee shall at any time be liable for any representation or warranty or any act, default or omission of NN under or in respect of the Loan Agreement; (d) neither the Issuer nor the Trustee shall at any time have any responsibility for, or liability or obligation in respect of, the performance and observance by the Agents of their respective obligations under the Paying Agency Agreement; (e) the payment of principal, interest and other amounts, if any, under, and performance of the terms of, the Notes depend upon performance by NN of its obligations under the Loan Agreement, and NN’s credit and financial standing; (f) the Issuer and the Trustee shall be entitled to rely on delivery to them of Officers’ Certificates (as defined in the Trust Deed) and/or any other certificates (whether or not addressed to the Issuer or the Trustee) from NN as a means of monitoring whether NN is complying with its obligations under the Loan Agreement or as to the identity of NN’s Material Subsidiaries (as defined in the Loan Agreement) and shall not otherwise be responsible for investigating any aspect of NN’s performance in relation thereto and, (in the case of the Issuer) subject as further provided in the Trust Deed, neither the Issuer as lender under the Loan Agreement nor the Trustee will be liable for any failure to make the usual or any investigations which might be made by a lender or a security holder (as applicable) in relation to the property which is subject to the Security Interests and held by way of security for the Notes, and shall not be bound to enquire into or be liable for any defect or failure in the right or title of the Issuer to the property which is subject to the Security Interests whether such defect or failure was known to the Trustee or might have been discovered upon examination or enquiry or whether capable of remedy or not, nor will the Trustee have any liability for the enforceability of the security created by the Security Interests whether as a result of any failure, omission or defect in registering or filing or otherwise protecting or perfecting such security; the Trustee has no responsibility for the value of such security; (g) neither the Trustee nor the Issuer shall at any time be required to expend or risk its own funds or otherwise incur any financial liability in the performance of its obligations or duties or the exercise of any right, power, authority or discretion pursuant to these Conditions until the Issuer, or the Trustee, as the case may be, has received an indemnity and/or security to its satisfaction and/or the funds that are necessary to cover the costs, liabilities and expenses in connection with such performance or exercise, or has been (in its sole discretion) sufficiently assured that it will receive such funds; and (h) the Issuer will not be liable to make any payments to compensate for any withholding or deduction required to be made by or on behalf of the Issuer in respect of any payment relating to the Notes, or for any payment for or on account of tax required to be made by the Issuer on or in relation to any sum received by it under the Loan Agreement, save to the extent that it has received additional amounts under the Loan Agreement in respect of such withholding or deduction or payment. The Issuer shall not be obliged to take any actions or measures as regards such deduction or withholding or payment, other than those set out in this context in the Loan Agreement. The Trustee shall have no liability in respect of any such deduction, withholding or payment. Under the Trust Deed, the obligations of the Issuer in respect of the Notes rank pari passu and rateably without any preference among themselves. In the event that the payments under the Loan Agreement are made by NN to, or to the order of, the Trustee or (subject to the provisions of the Trust Deed) the Principal Paying Agent, they will pro tanto, to the extent of such payment, satisfy the obligations of the Issuer in

214 respect of the Notes, unless, upon the due presentation of a Note, payment is improperly withheld or refused. Save as otherwise expressly provided herein and in the Trust Deed, no proprietary or other direct interest in the Issuer’s right under or in respect of the Loan Agreement or the Loan exists for the benefit of the Noteholders. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce the Loan Agreement or direct recourse to NN except through action by the Trustee pursuant to the relevant Security Interests granted to the Trustee in the Trust Deed. Neither the Issuer nor, following the enforcement of the Security Interests created in the Trust Deed, the Trustee shall be required to take any steps, actions or proceedings to enforce payment under the Loan Agreement unless it has been indemnified and/or secured and/or prefunded by the Noteholders to its satisfaction. As provided in the Trust Deed, and notwithstanding any other provision hereof, the obligations of the Issuer are solely to make payments of amounts in aggregate equal to each sum actually received by or for the account of the Issuer pursuant to the Loan Agreement from NN in respect of principal, interest, additional amounts (if any), as the case may be, (less any amount in respect of the Reserved Rights) (after deduction or withholding of such taxes or duties as may be required to be made by the Issuer by law in respect of each such sum or in respect of the Notes), the right to which will be subject to the Security Interests as provided in the Trust Deed. Accordingly, all payments to be made by the Issuer under the Notes will be made only from and to the extent of such sums received or recovered by or on behalf of the Issuer or the Trustee (following a Relevant Event (as defined in the Trust Deed) or (if applicable) an Event of Default (as defined in the Loan Agreement)). Noteholders shall look solely to such sums for payments to be made by the Issuer under the Notes, the obligation of the Issuer to make payments in respect of the Notes will be limited to such sums and Noteholders will have no further recourse to the Issuer or any of the Issuer’s other assets (other than those subject to the Security Interests) in respect thereof. Noteholders must therefore rely upon the covenant to pay under the Loan Agreement and the credit and financial standing of NN and no other assets of the Issuer (other than those subject to the Security Interests) will be available to the Noteholders. Notwithstanding any other provisions of these Conditions and the provisions in the Trust Deed, the Trustee and the Noteholders shall have recourse only to the Security Interests in accordance with Clause 4 of the Trust Deed. After realisation of the security which has become enforceable and distribution of the proceeds in accordance with Clause 8 of the Trust Deed, the obligations of the Issuer with respect to the Trustee and the Noteholders in respect of the Notes shall be satisfied and none of the foregoing parties may take any further steps against the Issuer to recover any further sums in respect thereof and the right to receive any such sums shall be extinguished. In particular, none of the Noteholders, the Trustee, nor any other person acting on behalf of any of them shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, examinership, winding-up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Issuer relating to the Notes or otherwise owed to the creditors or the Trustee, save for lodging a claim in the liquidation of the Issuer which is initiated by another party (other than in breach of these Conditions or the Trust Deed) or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer. Neither the Noteholder nor the Trustee shall have any recourse against any director, shareholder, or officer of the Issuer in respect of any representations, warranties, obligations, covenants or agreements entered into or made by the Issuer in respect of the Notes except to the extent that any such person acts in bad faith or is negligent or is wilfully in default in the context of its obligations.

215 2 Form, Denomination, Register and Transfers 2.1 Form and denomination: Notes are in registered form, in the denominations of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof (each an “Authorised Holding”), without coupons attached. The Notes will be initially issued in global, fully registered form, and represented by the Global Certificate, interests in which are to be offered outside the United States to non-U.S. persons within the meaning of, and pursuant to, Regulation S under the Securities Act (“Regulation S”) and which will be exchangeable for Notes in definitive, fully registered form in the limited circumstances specified in the Global Certificate and the Paying Agency Agreement. 2.2 Register, Title and Transfers: (a) Register The Registrar will maintain a register (the “Register”) in respect of the Notes in accordance with the provisions of the Paying Agency Agreement. In these Conditions the “holder” of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and “Noteholder” shall be construed accordingly. A definitive certificate (a “Definitive Certificate”) will be issued to each Noteholder in respect of its registered holding of Notes. (b) Title Title to the Notes will pass by and upon registration in the Register. The holder of each Note shall (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Definitive Certificate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Definitive Certificate) and no person shall be liable for so treating such holder. (c) Transfers Subject to the terms of the Paying Agency Agreement and paragraphs (d), (e), (f) and (g) of this Condition 2.2, a Note may be transferred upon surrender of the relevant Definitive Certificate, with the endorsed form of transfer duly completed, at the specified office of the Registrar or at the specified office of the Transfer Agent, together with such evidence as the Registrar or the Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided however, that a Note may not be transferred unless the principal amount of the Notes transferred and (where not all of the Notes held by a holder are being transferred) the principal amount of the balance of the Notes not transferred are Authorised Holdings. Where not all the Notes represented by the surrendered Definitive Certificates are the subject of the transfer, a new Definitive Certificate in respect of the balance of the Notes not transferred will be issued to the transferor. (d) Registration and delivery of Definitive Certificates Subject to paragraph (e) of this Condition 2.2, within five business days of the surrender of a Definitive Certificate in accordance with paragraph (c) above, the Registrar will register the transfer in question and deliver a new Definitive Certificate to each relevant holder at its specified office or (at the request and risk of such relevant holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant holder. In this paragraph, “business day” means a day on which commercial banks are open for business (including dealings in foreign currencies) in the city where the Registrar has its specified office. In the case of the transfer of only a part of the Notes, a new Definitive Certificate in respect of the balance of the Notes not transferred will be so delivered or (at the

216 risk and, if mailed at the request of the transferor otherwise than by ordinary uninsured mail, at the expense of the transferor) sent by mail to the transferor. (e) No charge The transfer of Notes will be effected without charge to the holder or transferee thereof but against such indemnity as the Registrar or the Transfer Agent, as applicable, may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer. (f) Closed periods Noteholders may not require transfers to be registered (i) during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Notes, and (ii) after any Note has been called for redemption. (g) Regulations concerning Transfers and Registration All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Paying Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations and who can confirm they are a Noteholder to the satisfaction of the Registrar and a copy of such regulations will also be available at the specified office of the Registrar. 3 Restrictive Covenant As provided in the Trust Deed, so long as any of the Notes remain outstanding (as defined in the Trust Deed), the Issuer will not, without the prior written consent of the Trustee or an Extraordinary Resolution or a Written Resolution (each as defined in the Trust Deed), agree to any amendment to or any modification or waiver of, or authorise any breach or proposed breach of, or agree any novation, assignment, rescission, cancellation or termination of the terms of the Loan Agreement (other than in respect of Reserved Rights) and will act at all times in accordance with any instructions of the Trustee from time to time with respect to the Loan Agreement, except as otherwise expressly provided in the Trust Deed or the Loan Agreement, as the case may be. Any such amendment, modification, waiver, authorisation, novation, assignment, recission, cancellation or termination made with the consent of the Trustee shall be binding on the Noteholders and, unless the Trustee agrees otherwise, any such amendment or modification shall be notified by the Issuer to the Noteholders in accordance with Condition 13. Save as provided above, so long as any Note remains outstanding, the Issuer, without the prior written consent of the Trustee or an Extraordinary Resolution or a Written Resolution, shall not, inter alia, incur any other indebtedness for borrowed money other than the issue of Notes and any further notes in accordance with Condition 14 or the issue of notes on a limited recourse basis, provided that such notes are not secured on assets of the Issuer over which the Security Interests have been created or the Issuer’s share capital, engage in any business (other than entering into any agreements related to the Notes or any other issue of notes as aforesaid (including any repurchase or exchange thereof), activities reasonably required to maintain its existence or comply with any applicable law, regulation, judgment or its constitutional documents and performing any acts incidental to or necessary in connection with the Notes or any other issue of notes as aforesaid or such related agreements (including the holding of any security in connection with any of the foregoing), making the Loan to NN pursuant to the Loan Agreement or any future loans to NN in connection with the issue of notes as aforesaid and performing any act or executing any document incidental to or necessary in connection therewith), declare any dividends, have any subsidiaries or employees, purchase, own, lease or otherwise acquire any real property, consolidate or merge with any other person or convey or transfer its properties or assets substantially as an entirety (to the extent the same is within the

217 control of the Issuer) to any person (otherwise than as contemplated in these Conditions and the Trust Deed), issue any further shares (other than those required to convert the Issuer’s status to that of a public limited company or as are in issue as at the date of the Trust Deed) (to the extent the same is within the control of the Issuer) or make any distribution to its shareholders, give any guarantee or assume any other liability (other than in connection with any act or agreement permitted pursuant to this Condition 3), or, unless required under the laws of Ireland, petition for any winding-up or bankruptcy. 4 Interest On each Interest Payment Date (or such later date as amounts equivalent to amounts of interest due on such date are received) the Issuer shall account to the Noteholders for an amount equal to the amount of interest actually received by or for the account of the Issuer pursuant to the Loan Agreement which interest under the Loan is payable at a rate of 3.849 per cent. per annum calculated on the outstanding principal amount of the Loan from time to time as set out in Clause 4 of the Loan Agreement. Interest shall cease to accrue on each Note on the due date for redemption unless, upon due presentation, payment is improperly withheld or refused, in which event interest shall accrue (after as well as before judgment) at the rate of interest and until the time set out in Clause 4 of the Loan Agreement. In these Conditions, “Interest Payment Date” means 8 April and 8 October of each year commencing on 8 October 2017. 5 Redemption and Purchase (a) Final Redemption Unless previously prepaid or repaid pursuant to the terms of the Loan Agreement, NN will be required to repay the Loan on 8 April 2022 (the “Repayment Date”) and, subject to such repayment, as set forth in the Loan Agreement, all the Notes then outstanding will on the Repayment Date be redeemed or repaid by the Issuer at 100 per cent. of the principal amount thereof together with accrued interest. (b) Early Redemption Under the Loan Agreement: (i) NN may, in the circumstances set out in Clause 5.2 of the Loan Agreement prepay the Loan in whole but not in part; or (ii) NN may be required to prepay the Loan in whole but not in part in the circumstances set out in Clause 5.3 of the Loan Agreement. If the Loan should become repayable pursuant to the terms of the Loan Agreement prior to the Repayment Date, as set forth in the Loan Agreement, all Notes then remaining outstanding will thereupon become due and redeemable or repayable at 100 per cent. of the principal amount together with accrued interest and (subject to the Loan being repaid together with accrued interest and such amounts actually being received by the Issuer) shall be redeemed or repaid by the Issuer on the date specified pursuant to the Loan Agreement and the Issuer will endeavour to give not less than 14 days’ notice thereof to the Trustee and the Noteholders in accordance with Condition 13. (c) Optional Redemption at the option of the Issuer under Make Whole Call Option At any time prior to the Repayment Date NN may, at its option, on giving not less than 30 nor more than 60 days’ notice to the Issuer (which notice shall be irrevocable and shall specify the date fixed for prepayment (the “Make Whole Optional Prepayment Date”)), prepay in whole or in part the Loan at the Make Whole Prepayment Amount (as defined in the Loan Agreement) plus accrued and unpaid interest on the Loan so prepaid to but excluding the Make Whole Optional Prepayment Date (the “Make Whole Call Option”).

218 Immediately on receipt of such notice, the Issuer shall forward it to the Noteholders (in accordance with Condition 14), the Trustee and the Principal Paying Agent. If, as a result of the Make Whole Call Option, the Loan is repaid by NN as set forth in the Loan Agreement prior to the Repayment Date, the Notes will thereupon become due and repayable and the Issuer shall, subject to receipt of the relevant amounts from NN under the Loan, redeem the Notes on the Make Whole Optional Prepayment Date. In the case of a partial redemption, the Notes shall be selected for redemption either: (a) in accordance with the procedures of the relevant Clearing Systems; or (b) if the Notes are not held in a Clearing System or if the relevant Clearing Systems prescribe no method of selection, the Notes will be redeemed on a pro rata basis according to the holding of each Noteholder; subject, in each case, to compliance with any applicable laws and stock exchange or other relevant regulatory requirements. Neither the Trustee nor any Agent shall have any liability for any selection made pursuant to this Condition 5(c). The Issuer’s obligations in respect of this Condition 6(c) to redeem and make payment for the Notes shall constitute an obligation only to account to Noteholders on the Make Whole Optional Prepayment Date for an amount equivalent to the sums received by or for the account of the Issuer pursuant to the Loan Agreement. (d) Optional Redemption at the option of the Issuer under Par Call Option At any time on or after the date three months prior to the Repayment Date, NN may, on giving not less than 30 nor more than 60 days’ notice to the Issuer (which notice shall be irrevocable and shall specify the date fixed for prepayment (the “Par Optional Prepayment Date”)), prepay in whole or in part the Loan at its principal amount plus accrued and unpaid interest on the Loan so prepaid to but excluding the Par Optional Prepayment Date (the “Par Call Option”). Immediately on receipt of such notice, the Issuer shall forward it to the Noteholders (in accordance with Condition 14), the Trustee and the Principal Paying Agent. If, as a result of the Par Call Option, the Loan is repaid by NN as set forth in the Loan Agreement prior to the Repayment Date, the Notes will thereupon become due and repayable and the Issuer shall, subject to receipt of the relevant amounts from NN under the Loan, redeem the Notes on the Par Optional Prepayment Date. In the case of a partial redemption, the Notes shall be selected for redemption either: (a) in accordance with the procedures of the relevant Clearing Systems; or (b) if the Notes are not held in a Clearing System or if the relevant Clearing Systems prescribe no method of selection, the Notes will be redeemed on a pro rata basis according to the holding of each Noteholder; subject, in each case, to compliance with any applicable laws and stock exchange or other relevant regulatory requirements. Neither the Trustee nor any Agent shall have any liability for any selection made pursuant to this Condition 5(d). The Issuer’s obligations in respect of this Condition 6(d) to redeem and make payment for the Notes shall constitute an obligation only to account to Noteholders on the Par Optional Prepayment Date for an amount equivalent to the sums received by or for the account of the Issuer pursuant to the Loan Agreement. (e) Purchases The Loan Agreement provides that the Issuer, NN or any member of the Group (as defined in the Loan Agreement) may, among other things, purchase Notes from time to time, in the open market or by tender or by private agreement at any price. Such Notes may, at the option of the Issuer, NN or such member of the Group, be held, reissued, resold or, in the case of NN or such member of the Group, delivered to the Issuer together with a request for the Issuer to present such Notes to the Registrar for cancellation on not less than 30 days’ notice, whereupon the Issuer shall, pursuant to the Paying Agency Agreement, instruct the Registrar, subject to the satisfaction of certain conditions set out in the Loan Agreement, to cancel such

219 Notes. Upon the cancellation of such Notes, the Loan shall be treated as prepaid by NN in an amount corresponding to the aggregate principal amount of the Notes surrendered for cancellation, together with accrued interest (if any) thereon, and no further payment shall be made or required to be made by the Issuer in respect of such Notes. 6 Payments (a) Principal and interest Payment of principal and interest in respect of the Notes will be made to the person(s) shown as the holder in the Register at the opening of business on the Record Date (as defined below). Payments of all amounts other than as provided in this Condition 6(a) will be made as provided in these Conditions. (b) Payments Each payment in respect of the Notes pursuant to Condition 6(a) shall be made by U.S. Dollar cheque drawn on, or, upon request by a Noteholder to the specified office of the Principal Paying Agent not later than the relevant Record Date, by transfer to a U.S. dollar account maintained by or on behalf of the payee with a bank in New York City and (in the case of interest payable on redemption) upon surrender of the relevant Definitive Certificates at the specified office of the Principal Paying Agent or at the specified office of a Transfer Agent. Payment instructions or U.S. Dollar cheque, as the case may be, (for value on the due date or, if that is not a business day (as defined in (d) below), for value the first following day which is a business day) will be initiated or drawn, as the case may be, on the business day preceding the due date for payment (for value the next business day). Where payment in respect of a Note is to be made by cheque, the cheque will be, at the expense of the Issuer, mailed to the address shown as the address of the Noteholder in the Register at the opening of business on the relevant Record Date. (c) Payments subject to fiscal law All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment or other laws and regulations to which the Issuer agrees to be subject, but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Noteholders in respect of such payments. (d) Payments on business day A Note may only be presented for payment on a day which is a business day in the place of presentation. If the due date for payment of interest or principal is not a business day, the holder of a Note shall not be entitled to payment of the amount due until the next following business day and shall not be entitled to any further interest or other payment in respect of any such delay. In this paragraph, “business day” means a day on which (i) the London interbank market is open for dealings between banks generally and (ii) if on that day a payment is to be made hereunder, commercial banks generally are open for business in Dublin, New York and in the city where the specified office of the Principal Paying Agent is located. (e) Record Date Each payment in respect of a Note will be made to the person shown as the holder in the Register at the close of business (in the place of the Registrar’s specified office) on the fifteenth day before the due date for each payment (the “Record Date”). (f) Agents The Paying Agency Agreement provides that the Issuer may at any time, with the prior written approval of the Trustee appoint a successor Registrar or Principal Paying Agent and/or additional or successor paying agents or transfer agents. Any such appointment of successor or other Agents shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not more than 45 days’ and not less than 30 days’ notice thereof shall

220 have been given to the continuing Agents, NN, the Trustee and to the Noteholders in accordance with Condition 13. In acting under the Paying Agency Agreement and in connection with the Notes, the Agents act solely as agents of the Issuer and (to the extent provided therein) the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders. (g) Payments by NN Save as directed by the Trustee at any time after the Security Interests created under the Trust Deed become enforceable, the Issuer will require NN to make all payments of principal, interest and additional amounts (if any) to be made pursuant to the Loan Agreement to an account in the name of the Issuer with the Principal Paying Agent. Pursuant to the Charge, the Issuer will charge by way of first fixed charge, all its rights, title and interest in and to all sums of money (with the exception of sums relating to the Reserved Rights) then or in the future so deposited in such account and the debts represented thereby to the Trustee for the benefit of the Trustee and the Noteholders. (h) Currency other than U.S. Dollars In respect of the Issuer’s obligations under Conditions 4, 5, 6 and 7, and subject to the following sentence, if the Issuer receives any amount under the Loan Agreement in a currency other than U.S. Dollars, the Issuer’s obligation under the relevant Condition shall be fully satisfied by paying such sum (after deducting any costs of exchange) as the Issuer receives upon conversion of such sum into U.S. Dollars in accordance with customary banking practice in the spot market on the business day immediately following the day on which such sum is received by the Issuer, provided that the Issuer shall use its best efforts to procure payment of any amounts due from NN pursuant to Clause 13.8 of the Loan Agreement. If the Issuer receives any payment from NN pursuant to Clause 13.8 of the Loan Agreement with respect to amounts due under the Notes, the Issuer shall pay such sum to the Noteholders in accordance with this Condition 6. 7 Taxation All payments in respect of the Notes by or on behalf of the Issuer shall be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied, collected, withheld or assessed by or on behalf of any authority having the power to tax, unless the deduction or withholding of such taxes or duties is required by law or regulations. In the event any such taxes, duties, assessments or governmental charges of whatever nature are imposed or levied, collected, withheld or assessed by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax, the Issuer shall, except as provided below, make such additional payments as shall result in the receipt by the Noteholders of such amount as would have been received by them if no such withholding or deduction had been required. However, the Issuer shall only be required to make such additional payments to the extent and at such time as it shall receive and retain equivalent sums from NN under the Loan Agreement. To the extent that the Issuer does not receive and retain any such equivalent sum, the Issuer shall account to the relevant Noteholder for an additional amount equivalent to a pro rata proportion of such additional amount (if any) as is actually received and retained by, or for the account of, the Issuer pursuant to the provisions of the Loan Agreement on the date of, in the currency of, and subject to any conditions attaching to the payment of such additional amount to the Issuer provided that no such additional amount will be payable: (i) to a Noteholder who (i) is liable for such taxes or duties by reason of his having some connection with Ireland other than the mere holding of such Notes or the receipt of payments in respect thereof; or (ii) is able to avoid such withholding or deduction by

221 satisfying any statutory requirements or by making a declaration of non-residence or other claim for exemption to the tax authority; (ii) in respect of a Note presented for payment of principal more than 30 days after the Relevant Date except to the extent that such additional payment would have been payable if such Note had been presented for payment on such thirtieth day; (iii) in respect of a Note held by or on behalf of a Noteholder who would have been able to avoid such withholding or deduction by arranging to receive the relevant payment through another Paying Agent in a Member State of the European Union; (iv) where such withholding or deduction is required pursuant to Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any amended or successor version), any current or future regulations or agreements (including any intergovernmental agreements) thereunder, official interpretations thereof, or any law, regulation or official interpretation implementing any of the foregoing; or (v) any combination of the above. As used herein, “Relevant Date” means the later of (i) the date on which the equivalent payment under the Loan Agreement first becomes due and (ii) if the full amount payable by NN corresponding to such payment has not been received by, or for the account of, the Issuer pursuant to the Loan Agreement on or prior to such date, it means the date on which such full amount shall have been so received and notice to that effect shall have been duly given to the Noteholders by or on behalf of the Issuer in accordance with Condition 13. Any reference herein or in the Trust Deed to payments in respect of the Notes shall be deemed also to refer to any additional amounts which may be payable in accordance with the Trust Deed and this Condition 7 or any undertaking given in addition thereto or in substitution therefor pursuant to the Trust Deed. If the Issuer becomes subject to any taxing jurisdiction other than or in addition to Ireland, references in these Conditions to Ireland shall be construed as references to Ireland and/or such other jurisdiction. 8 Enforcement The Trust Deed provides that only the Trustee may pursue the remedies under the general law, the Trust Deed or the Notes to enforce the rights of the Noteholders and no Noteholder will be entitled to pursue such remedies unless the Trustee (having become bound to do so in accordance with the terms of the Trust Deed) fails to do so within a reasonable period and such failure is continuing. The Trust Deed also provides that, in the case of an Event of Default that is continuing, or of a Relevant Event, the Trustee may, and shall, if requested in writing to do so by Noteholders holding at least 25 per cent. in principal amount of the Notes outstanding, or if directed to do so by an Extraordinary Resolution, and, in any such case, subject to it being secured and/or indemnified and/or prefunded to its satisfaction, institute such steps (subject to the non- petition covenant in Condition 1), actions or proceedings as it may think fit to enforce the rights of the Noteholders and the provisions of the Trust Deed, including to declare all amounts payable under the Loan Agreement by NN to be immediately due and payable in certain circumstances (in the case of an Event of Default that is continuing), or exercise any rights under the Security Interests created in the Trust Deed in favour of the Trustee (in the case of a Relevant Event). Upon repayment of the Loan following an Event of Default and a declaration as provided herein, the Notes will be redeemed or repaid at their principal amount together with accrued interest thereon and thereupon shall cease to be outstanding.

222 9 Meetings of Noteholders; Modification of Notes, Trust Deed and Loan Agreement; Waiver; Substitution of the Issuer (a) Meeting of Noteholders The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including any modification of, or any arrangement in respect of, the Notes, the Loan Agreement or the Trust Deed. Noteholders will be entitled to one vote per U.S.$1,000 in principal amount of Notes held by them. Such a meeting may be convened by the Issuer, NN or the Trustee and shall be convened by the Issuer or by the Trustee, subject to its being indemnified and/or secured and/or prefunded to its satisfaction, upon the request in writing of holders of the Notes holding not less than one tenth of the principal amount of the outstanding Notes. The Trust Deed provides that special quorum provisions apply for meetings of Noteholders convened for the purpose of amending certain terms concerning, inter alia, the amount payable on, and the currency of payment in respect of, the Notes and the amounts payable and currency of payment under the Loan Agreement. Under the terms of the Trust Deed, an Extraordinary Resolution means a resolution passed at a meeting of the Noteholders duly convened and held in accordance with the provisions contained therein by (i) the affirmative vote of holders of outstanding Notes present in person or represented by proxy or representative owning in the aggregate more than half in principal amount of the outstanding Notes owned by the Noteholders who are so present or represented at the meeting or (ii) in respect of an Extraordinary Resolution the business of which includes the modification of certain terms, conditions and provisions as listed in the proviso to paragraph 5 (Powers of Meetings) of Schedule 4 (Provisions for Meetings of the Noteholders) of the Trust Deed the affirmative vote of holders of outstanding Notes present in person or represented by proxy or representative owning in aggregate not less than two-thirds in principal amount of the outstanding Notes owned by the Noteholders who are present or represented at the meeting. Any resolution duly passed at a meeting of Noteholders will be binding on all the Noteholders, whether present or not. The Trust Deed provides that a Written Resolution signed by or on behalf of the holders of not less than 75 per cent. in principal amount of the Notes outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders. (b) Modification and Waiver The Trustee may agree, without the consent of the Noteholders, to any modification of the Notes and the Trust Deed, the Paying Agency Agreement or the Loan Agreement which, in each case, in the sole opinion of the Trustee is of a formal, minor or technical nature, is made to correct a manifest error or (other than as mentioned in the Trust Deed) in the opinion of the Trustee is not materially prejudicial to the interests of the Noteholders. The Trustee may also waive or authorise or agree to the waiving or authorising of any breach or proposed breach by the Issuer of the Conditions or the Trust Deed or, following the creation of the Security Interests, by NN of the terms of the Loan Agreement or determine that any event which would or might otherwise give rise to a right of acceleration under the Loan Agreement or any Relevant Event shall not be treated as such, if in the sole opinion of the Trustee, to do so would not be materially prejudicial to the interests of the Noteholders, provided always that the Trustee may not exercise such power of waiver in contravention of a written request given by holders of 25 per cent. in aggregate principal amount of the Notes then outstanding or any express direction by Extraordinary Resolution. Any such modification, waiver, authorisation or determination shall be binding on the Noteholders and, unless the Trustee agrees otherwise, shall be promptly notified to the Noteholders in accordance with Condition 13.

223 (c) Substitution The Trust Deed contains provisions to the effect that the Issuer may, with the consent of NN, and further provided certain conditions have been met (as further set out in the Trust Deed), and subject to having complied with the requirements set out in the Trust Deed and such requirements as the Trustee may direct (without obtaining the consent of the Noteholders) in the interest of Noteholders, substitute any entity in place of the Issuer as creditor under the Loan Agreement, as issuer and principal obligor in respect of the Notes and as obligor under the Trust Deed, subject to the substitute’s entity’s rights under the Loan Agreement being charged and assigned to the Trustee as security for the payment obligations of the substitute obligor under the Trust Deed and the Notes. Not later than 14 days after compliance with the aforementioned requirements, notice thereof shall be given by the Issuer to the Noteholders in accordance with Condition 13, failing which the Issuer shall use its best endeavours to ensure that the substitute obligor does so. (d) Exercise of powers In connection with the exercise of any of its powers, trusts, authorities or discretions, the Trustee shall have regard to the interests of the Noteholders as a class and, in particular, shall not have regard to the consequences of such exercise for individual Noteholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. No Noteholder is entitled to claim from the Issuer, NN or the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders. 10 Prescription Notes will become void unless presented for payment within 10 years (in the case of principal) or five years (in the case of interest) from the due date for payment in respect thereof. 11 Indemnification and Removal of the Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility in certain circumstances, including provisions relieving it from taking steps, actions or proceedings to enforce payment unless indemnified and/or secured and/or prefunded to its satisfaction, and to be paid its costs, liabilities and expenses in priority to any claims of Noteholders. In addition, the Trustee is entitled to enter into business transactions with the Issuer and/or NN and any entity relating to the Issuer and/or NN without accounting for any profit. The Trustee’s responsibilities are solely those of trustee for the Noteholders on the terms of the Trust Deed. Accordingly, the Trustee makes no representations and assumes no responsibility for the validity or enforceability of the Loan Agreement or the security created in respect thereof or for the performance by the Issuer of its obligations under or in respect of the Notes and the Trust Deed or by NN in respect of the Loan Agreement. The Trustee is entitled to assume that NN is performing all of its obligations pursuant to the Loan Agreement and that the Issuer is performing its obligations under the Notes, the Loan Agreement and the Trust Deed (and shall have no liability for doing so) until it has actual knowledge to the contrary. The Trustee shall have no liability to any Noteholder or any other person for any shortfall such Noteholder or other person may suffer if such Noteholder or other person is liable for tax in respect of any payments received by such Noteholder or other person or as a result of the Security Interests being enforced by the Trustee. The Trust Deed provides that the Noteholders shall together have the power, exercisable by Extraordinary Resolution, to remove the Trustee (or any successor trustee or additional trustees) provided that the removal of the Trustee or any other trustee shall not become effective unless there remains a Trustee in office after such removal.

224 12 Replacement of Notes If a Definitive Certificate shall become mutilated, defaced, lost, stolen or destroyed it may, subject to all applicable laws and regulations and requirements of the Irish Stock Exchange (the “Stock Exchange”) (or any other stock exchange on which the Notes are listed or quoted from time to time), be replaced at the specified offices of the Transfer Agent in London on payment of such costs, expenses, taxes and duties as may be incurred in connection therewith and on such terms as to evidence, security and indemnity and otherwise as may reasonably be required by or on behalf of the Issuer and/or the Transfer Agent. Mutilated or defaced Definitive Certificates must be surrendered before replacements will be issued. 13 Notices All notices to Noteholders shall be deemed to have been validly given if published in a leading newspaper having general circulation in Ireland (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication shall not be practicable, in an English language newspaper of general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which such publication is made. The Issuer shall also ensure that all notices are duly published (if such publication is required) in a manner which complies with the rules and regulations of the Stock Exchange or any other stock exchange on which the Notes are for the time being listed and/or admitted to trading. Any such notice shall be deemed to have been given on the date of such notice. In case by reason of any other cause it shall be impracticable to publish any notice to Noteholders as provided above, then such notification to such Noteholders as shall be given with the approval of the Trustee in accordance with the rules of the Stock Exchange (or any other stock exchange on which the Notes are listed or quoted from time to time) shall constitute sufficient notice to such Noteholders for every purpose hereunder. 14 Further Issues The Issuer may from time to time, with the consent of NN but without the consent of the Noteholders, create and issue further securities having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them, the date of issue and the amount of principal) so as to be consolidated and form a single series with the Notes. Such further notes shall be issued under a deed supplemental to the Trust Deed containing such provisions as the Trustee may reasonably require. In relation to any further issue which is to be consolidated and form a single series with the Notes, the Issuer will enter into a loan agreement with NN on the same terms as the Loan Agreement (or the same terms except for the date, first payment of interest, the provisions relating to the fees payable by NN to the Issuer (whether payable as a lump sum payment, additional interest or otherwise) and the amount of principal) and supplemental to the Loan Agreement, or may amend and restate the same with NN on substantially the same terms as the Loan Agreement (except for the date, the first payment of interest, the provisions relating to the fees payable by NN to the Issuer (whether payable as a lump sum payment, additional interest or otherwise) and the amount of principal). The Issuer will provide a first fixed charge in favour of the Trustee in respect of certain of its rights and interests under such loan agreement and will assign absolutely to the Trustee certain of its rights under such loan agreement, which will secure both the Notes and such further securities and which will supplement the Security Interests in relation to the existing Notes or may amend and supplement the Security Interests for such purpose. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of securities of other series where the Trustee so decides. Application will be made for such further securities to be listed and admitted to trading on the stock exchange on which the Notes are from time to time listed or quoted.

225 15 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Notes or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999. 16 Governing Law The Notes, these Conditions, the Trust Deed and any non-contractual obligations arising out of or in connection therewith, are governed by, and shall be construed in accordance with, English law. The Issuer has submitted in the Trust Deed to the jurisdiction of the courts of England and has appointed an agent for the service of process in England.

226 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM

The Global Note Certificate

The Notes will be evidenced on issue by the Global Note Certificate registered in the name of a nominee for, and deposited with a common depository on behalf of, Euroclear and Clearstream, Luxembourg. Beneficial interests in the Global Note Certificate may be held only through Euroclear or Clearstream, Luxembourg at any time. See “Clearing and Settlement”. By acquisition of a beneficial interest in the Global Note Certificate, the purchaser thereof will be deemed to represent, among other things, that it is not a U.S. person, that it is located outside the United States and that, if it determines to transfer such beneficial interest prior to the expiration of the “distribution compliance period” (as such term is defined in Rule 902 of Regulation S), it will transfer such interest only to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S. See “Transfer Restrictions”.

Beneficial interests in the Global Note Certificate will be subject to certain restrictions on transfer set forth therein and in the Trust Deed and the Global Note Certificate will bear the applicable legends regarding the restrictions set forth under “Transfer Restrictions”.

Except in the limited circumstances described below, owners of beneficial interests in the Global Note Certificate will not be entitled to receive physical delivery of Definitive Certificates. The Notes are not issuable in bearer form.

Exchange For Definitive Certificates

Exchange

Subject to receipt by the Issuer of the funds necessary to cover the cost therefor from the Company, each Global Note Certificate will be exchangeable, free of charge to the holder, on or after its Exchange Date (as defined below), in whole but not in part, for Notes in definitive form if: (i) the Global Note Certificate is held by or on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, and Euroclear or Clearstream, Luxembourg, as the case may be, is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so, by the holder giving notice to the Registrar or any Transfer Agent and the Issuer or (ii) the Issuer would suffer a material disadvantage in respect of the Notes as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 7 which would not be suffered were the Notes in definitive form and a note to such effect signed by the requisite number of signatories of the Issuer is delivered to the Trustee, by the Issuer giving notice to the Registrar or any Transfer Agent and the Noteholders of its intention to exchange the Global Note Certificate for Definitive Certificates on or after the Exchange Date (as defined below) specified in the notice or (iii) the Trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the Noteholders under the Notes and the Trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the Trustee to obtain possession of the Notes, by the Trustee giving notice to the Registrar or any Transfer Agent and the Noteholders.

The Registrar will not register the transfer of, or exchange of interests in, the Global Note Certificate for Definitive Certificates for a period of 15 calendar days ending on the date for any payment of principal or interest in respect of the Notes.

If the Global Note Certificate (the “Exchanged Global Note Certificate”) becomes exchangeable for Definitive Certificates in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Definitive Certificates issued in exchange for beneficial interests in the Exchanged Global Note Certificate and, on the other hand, persons wishing to purchase beneficial interests in the other Global Note Certificate.

227 “Exchange Date” means a day falling not later than 90 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Registrar and any Transfer Agent is located.

Delivery

In such circumstances, the Global Note Certificate shall be exchanged in full for Definitive Certificates and the Issuer will, at the cost of the Issuer (and against such indemnity as the Registrar or any relevant Transfer Agent may require in respect of any tax or other duty of whatever nature which may be levied or imposed in connection with such exchange), cause sufficient Definitive Certificates to be executed and delivered to the Registrar for completion, authentication and dispatch to the relevant Noteholders. A person having an interest in the Global Note Certificate must provide the Registrar with a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Notes.

Legends

The holder of a Definitive Certificate may transfer the Notes evidenced thereby in whole or in part in the applicable minimum denomination by surrendering it at the specified office of the Registrar or any Transfer Agent, together with the completed form of transfer thereon.

Other Provisions

In addition, each Global Note Certificate will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Note Certificate. The following is a summary of these provisions:

Payments

Payments of principal and interest in respect of Notes evidenced by the Global Certificate shall be made to the person who appears at the relevant time on the register of Noteholders as holder of the Global Certificate against presentation and (if no further payment falls to be made on it) surrender thereof to or to the order of the Paying Agent (or to or to the order of such other Paying Agent as shall have been notified to the Noteholders for this purpose) which shall endorse such payment or cause such payment to be endorsed in Schedule A to the Global Certificate (such endorsement being prima facie evidence that the payment in question has been made). No person shall however be entitled to receive any payment on the Global Certificate falling due after the Exchange Date, unless the exchange of the Global Certificate for the relevant Definitive Certificates is improperly withheld or refused by or on behalf of the Issuer.

Notices

Notwithstanding Condition 13, so long as the Global Note Certificate is held by or on behalf of Euroclear, Clearstream, Luxembourg or any other clearing system (an “Alternative Clearing System”), notices to Noteholders represented by the Global Note Certificate may be given by delivery of the relevant notice to Euroclear, Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System provided that, for so long as the Notes are listed, all notices will also be given in accordance with the rules of the relevant stock exchange.

Issuer’s Option

Any option of the Issuer provided for in the Conditions of any Notes while such Notes are represented by a permanent Global Certificate shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Notes drawn in the case of a partial

228 exercise of an option and accordingly no drawing of Notes shall be required. In the event that any option of the Issuer is exercised in respect of some but not all of the Notes, the rights of accountholders with a clearing system in respect of the Notes will be governed by the standard procedures of Euroclear, Clearstream, Luxembourg or any other clearing system (as the case may be).

Record Date

All payments in respect of Notes represented by the Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the Clearing System Business Day immediately prior to the date for payment, where “Clearing System Business Day” means a day when Euroclear or Clearstream, Luxembourg is open for business.

Meetings

The holder of the Global Certificate will be treated as being two persons for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Noteholders and in any such meeting as having one vote in respect of each U.S.$1,000 in principal amount of Notes represented by the Global Certificate.

Trustee’s Powers

In considering the interests of Noteholders whilst the Global Certificate is held on behalf of a clearing system, the Trustee, to the extent it considers it appropriate to do so in the circumstances, may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Certificate and may consider such interests as if such accountholders were the holders of the Global Certificate.

Cancellation

Cancellation of any Note required by the Terms and Conditions of the Notes to be cancelled will be effected by reduction in the principal amount of the Global Certificate by a record made in the Register.

Prescription

Claims in respect of principal, interest and other amounts payable in respect of the Global Certificate will become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest or any other amounts) from the due date for payment in respect thereof.

Enforcement

For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holder of the Notes in respect of which the Global Certificate is issued shall be authorised as the beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interest in the Notes set out in the certificate of the holder as if they were themselves the holders of Notes in such principal amounts. Benefit of the Conditions

Unless the Global Certificate has been exchanged or cancelled the holder hereof shall, except as provided in the Global Certificate, be entitled to the same rights and benefits and subject to the Conditions as if such holder were the holder of the relevant Definitive Certificates for which the Global Certificate may be exchanged.

229 The Global Certificate shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Registrar.

The Global Certificate and any non-contractual obligations arising out of or in connection with them shall be governed by and construed in accordance with English law.

230 TRANSFER RESTRICTIONS

Because of the following restrictions, you are advised to consult legal counsel prior to making any offer, resale or other transfer of the Notes offered hereby.

Each purchaser of Notes, by accepting delivery of this Prospectus and the Notes, will be deemed to have represented, agreed and acknowledged that:

1. It is, or at the time Notes are purchased will be, the beneficial owner of such Notes and (a) it is not a U.S. person and it is located outside the United States (within the meaning of Regulation S) and (b) it is not an affiliate of the Issuer, the Company or a person acting on behalf of such an affiliate.

2. It understands that the Notes have not been and will not be registered under the Securities Act and that, prior to the expiration of the “distribution compliance period” (as such term is defined in Rule 902 of Regulation S) deemed to include the 40-day period after commencement of the offering or the closing date, whichever is later, it will not offer, sell, pledge or otherwise transfer such Notes except in an offshore transaction to a person that is not a U.S. person in accordance with Rule 903 or Rule 904 of Regulation S and in accordance with any applicable securities laws of any state or other jurisdiction of the United States.

3. It understands and acknowledges that its purchase, holding and disposition of such Notes constitutes a representation and agreement by it that (1) either (i) it is not, and is not acting on behalf of (and for so long as it holds such Notes or any interest therein will not be, or be acting on behalf of), a Benefit Plan Investor or a governmental, church or non U.S. plan which is subject to any Similar Laws and/or laws or regulations that provide that the assets of the Issuer could be deemed to include “plan assets” of such plan under Section 3(42) of ERISA, the Plan Assets Regulation or otherwise, and no part of the assets used by it to purchase or hold such Note or any interest therein constitutes the assets of such Benefit Plan Investor or such plan, or (ii) it is, or is acting on behalf of, a governmental, church or non U.S. plan, and such purchase or holding of such Note does not and will not result in a non-exempt violation of any Similar Laws, and will not subject the Issuer to any laws, rules or regulations applicable to such plan solely as a result of the investment in the Issuer by such plan; and (2) it will not sell or otherwise transfer any Note or interest therein otherwise than to any person without first obtaining these same foregoing representations, warranties and covenants from that person with respect to its acquisition, holding and disposition of such Note.

231 CLEARING AND SETTLEMENT

Book-Entry Procedures for the Global Note Certificate

Custodial and depository links are to be established among Euroclear and Clearstream, Luxembourg to facilitate the initial issue of the Notes and cross-market transfers of the Notes associated with secondary market trading. See “—Book-Entry Ownership” and “—Settlement and Transfer of Notes.”

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions through electronic book-entry transfer between their respective accountholders. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions which clear through or maintain a custodial relationship with an accountholder of either system. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective customers may settle trades with each other. Their customers are worldwide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Investors may hold their interests in the Global Note Certificate directly through Euroclear or Clearstream, Luxembourg if they are accountholders (“Direct Participants”) or indirectly (“Indirect Participants” and together with Direct Participants, “Participants”) through organisations which are accountholders therein.

Book-Entry Ownership

Euroclear and Clearstream, Luxembourg

The Global Note Certificate will have an ISIN and a Common Code and will be registered in the name of a nominee for, and deposited with a common depositary on behalf of, Euroclear and Clearstream, Luxembourg.

The address of Euroclear is 1 Boulevard du Roi Albert 11, B-1210 Brussels, Belgium, and the address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L-1855, Luxembourg.

Relationship of Participants with Clearing Systems

Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a Note evidenced by the Global Note Certificate must look solely to Euroclear or Clearstream, Luxembourg for his share of each payment made by the Issuer to the holder of the Global Note Certificate and in relation to all other rights arising under the Global Note Certificate, subject to and in accordance with the respective rules and procedures of Euroclear or Clearstream, Luxembourg. The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by the Global Note Certificate, the common depositary by whom such Note is held, or nominee in whose name it is registered, will immediately credit the relevant participants’ or accountholders’ accounts in the relevant clearing system with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Note Certificate as shown on the records of the relevant clearing system or its nominee. The Issuer also expects that payments by Direct Participants in any clearing system to owners of beneficial interests in the Global Note Certificate held through such Direct Participants in any clearing system will be governed by standing instructions and customary practices. Save as aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are evidenced by the Global Note Certificate and

232 the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of the Global Note Certificate in respect of each amount so paid. None of the Issuer, the Trustee or any Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of ownership interests in the Global Note Certificate or for maintaining, supervising or reviewing any records relating to such ownership interests.

Settlement and Transfer of Notes

Subject to the rules and procedures of each applicable clearing system, purchases of Notes held within a clearing system must be made by or through Direct Participants, which will receive a credit for such Notes on the clearing system’s records. The ownership interest of each actual purchaser of each such Note (the “Beneficial Owner”) will in turn be recorded on the Direct Participants’ or Indirect Participants’(as the case may be).

Beneficial Owners will not receive written confirmation from any clearing system of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant or Indirect Participant (as the case may be) through which such Beneficial Owner entered into the transaction.

Transfers of ownership interests in Notes held within the clearing system will be affected by entries made on the books of Direct Participants or Indirect Participants (as the case may be) acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in such Notes, unless and until interests in the Global Note Certificate held within a clearing system are exchanged for individual note certificates.

No clearing system has knowledge of the actual Beneficial Owners of the Notes held within such clearing system and their records will reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the clearing systems to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants or Indirect Participants (as the case may be) to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

The laws of some jurisdictions may require that certain persons take physical delivery in definitive form of securities. Consequently, the ability to transfer interests in the Global Note Certificate to such persons may be limited.

Trading between Euroclear and/or Clearstream, Luxembourg Participants

Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional Eurobonds.

Pre-issue Trades Settlement

It is expected that delivery of Notes will be made against payment therefor on the Closing Date, which could be more than three business days following the date of pricing. Settlement procedures in different countries will vary. Purchasers of Notes may be affected by such local settlement practices, and purchasers of Notes between the relevant date of pricing and the Closing Date should consult their own advisors.

233 CERTAIN ERISA CONSIDERATIONS

ERISA imposes fiduciary standards and certain other requirements on employee benefit plans subject thereto (collectively “ERISA Plans”), including collective investment funds, separate accounts, and other entities or accounts whose underlying assets are treated as assets of such plans pursuant to the U.S. Department of Labour “plan assets” regulation, 29 CFR Section 2510.3-101 (as modified by Section 3(42) of ERISA, the “Plan Asset Regulation”) and on those persons who are fiduciaries with respect to ERISA Plans. Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986 (the “Code”) prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code (together with ERISA Plans, “Plans”)) and certain persons (referred to as “parties in interest” or “disqualified persons”) having certain relationships to such Plans, unless a statutory or administrative exemption applies to the transaction. In particular, an extension of credit between a Plan and a “party in interest” or “disqualified person” may constitute a prohibited transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes or other liabilities under ERISA and the Code. The Issuer or the Trustee, directly or through affiliates, may be considered a party in interest or disqualified person with respect to many Plans. Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if the Notes are acquired by a Plan with respect to which the Issuer or the Trustee or any of their respective affiliates is a party in interest or a disqualified person, unless the Notes are acquired pursuant to and in accordance with an applicable exemption. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may apply depending in part on the type of Plan fiduciary making the decision to acquire a Note and the circumstances under which that decision is made. Under a “look-through rule” set forth in the Plan Assets Regulation, if a Plan invests in an “equity interest” of an entity and no other exception applies, the Plan’s assets include both the equity interest and an undivided interest in each of the entity’s underlying assets. This rule will only apply where equity participation in an entity by benefit plan investors is “significant.” Equity participation by benefit plan investors is significant if 25 per cent. or more of the value of any class of equity interest in the entity is held by benefit plan investors. The term “benefit plan investor” includes (a) an employee benefit plan (as defined in Section 3(3) of ERISA), that is subject to Title I of ERISA; (b) a plan defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code; or (c) any entity whose underlying assets include “plan assets” by reason of any such plan’s investment in the entity. The Plan Asset Regulation defines the term “equity interest” as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features, and specifically includes a beneficial interest in a trust. Where the value of an equity interest in an entity relates solely to identified property of the entity, that property is treated as the sole property of a separate entity. Because the Notes do not represent an interest in any property of the Issuer other than the Loan, they may be regarded for ERISA purposes as equity interests in a separate entity whose sole asset is the Loan. Furthermore, neither the Trustee nor the Issuer will be able to monitor the Noteholders’ possible status as benefit plan investors. Accordingly, the Notes may not be purchased or held by any benefit plan investor. While not subject to ERISA, the Code or the Plan Assets Regulation, a governmental, church or non U.S. plan may be subject to federal, state, local, non U.S. or other laws or regulations that are substantially similar to the fiduciary responsibility and/or the prohibited transaction provisions of ERISA (“Similar Laws”) and/or laws or regulations that provide that the assets of the Issuer could be deemed to include “plan assets” of such plan under Section 3(42) of ERISA, 29 C.F.R. Section 2510.3-101 or otherwise. Accordingly, the Notes either (a) may not be purchased or held by any such a governmental, church or non U.S. plan or (b) may be purchased or held by any such

234 governmental, church or non U.S. plan where such acquisition, holding and subsequent disposition does not and will not result in a non-exempt violation of any Similar Laws and will not subject the Issuer to any laws, rules or regulations applicable to such plan solely as a result of the investment in the Issuer by such plan. BY ITS ACQUISITION, HOLDING OR DISPOSITION OF THE NOTES (OR ANY INTEREST THEREIN) PURCHASER OR TRANSFEREE, AND EACH FIDUCIARY ACTING ON BEHALF OF SUCH PURCHASER OR TRANSFEREE (BOTH IN ITS INDIVIDUAL AND CORPORATE CAPACITY), WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT, DURING THE PERIOD SUCH PURCHASER OR TRANSFEREE HOLDS ANY INTEREST IN THE NOTES (1) EITHER (A) IT IS NOT, AND IT IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THE NOTES (OR ANY INTEREST THEREIN) WILL NOT BE, OR BE ACTING ON BEHALF OF) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF PART 4 OF SUBTITLE B OF TITLE I OF ERISA, A PLAN TO WHICH SECTION 4975 OF THE CODE APPLIES, OR ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” UNDER SECTION 3(42) OF ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE BY REASON OF A BENEFIT PLAN INVESTOR OR A GOVERNMENTAL, CHURCH OR NON U.S. PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL, NON U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY AND/OR THE PROHIBITED TRANSACTION PROVISIONS OF ERISA (“SIMILAR LAWS”) AND/OR LAWS OR REGULATIONS THAT PROVIDE THAT THE ASSETS OF THE ISSUER COULD BE DEEMED TO INCLUDE “PLAN ASSETS” OF SUCH PLAN UNDER SECTION 3(42) OF ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE, AND NO PART OF THE ASSETS TO BE USED BY IT TO PURCHASE OR HOLD SUCH NOTES OR ANY INTEREST HEREIN CONSTITUTES THE ASSETS OF ANY BENEFIT PLAN INVESTOR OR SUCH A GOVERNMENTAL, CHURCH OR NON U.S. PLAN OR (B) SUCH PURCHASER OR TRANSFEREE IS, OR IS ACTING ON BEHALF OF, A GOVERNMENTAL, CHURCH OR NON U.S. PLAN, AND SUCH ACQUISITION DOES NOT AND WILL NOT RESULT IN A NON EXEMPT VIOLATION OF ANY SIMILAR LAWS AND WILL NOT SUBJECT THE ISSUER TO ANY LAWS, RULES OR REGULATIONS APPLICABLE TO SUCH PLAN SOLELY AS A RESULT OF THE INVESTMENT IN THE ISSUER BY SUCH PLAN; AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THE NOTES OR ANY INTEREST HEREIN OTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO MAKE THESE SAME REPRESENTATIONS, WARRANTIES AND AGREEMENTS WITH RESPECT TO ITS ACQUISITION, HOLDING AND DISPOSITION OF THIS NOTE. NO PURCHASE BY OR TRANSFER TO A BENEFIT PLAN INVESTOR OF THE NOTES, OR ANY INTEREST HEREIN, WILL BE EFFECTIVE, AND NEITHER THE ISSUER NOR THE TRUSTEE WILL RECOGNISE ANY SUCH ACQUISITION OR TRANSFER. IN THE EVENT THAT THE ISSUER DETERMINES THAT THIS NOTE IS HELD BY A BENEFIT PLAN INVESTOR, THE ISSUER MAY CAUSE A SALE OR TRANSFER IN THE MANNER DESCRIBED HEREIN.

235 TAXATION

The following is a general description of certain tax considerations relating to the Notes and does not purport to be a comprehensive discussion of all tax considerations relating to the Notes, whether in those countries referred to or elsewhere. Prospective investors in the Notes are advised to consult their own tax advisors as to the tax consequences of the purchase, ownership and disposal of the Notes in light of their particular circumstances, including, but not limited to, the consequences of the receipt of interest and the sale or redemption of the Notes. This overview is based on the law as in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date (possibly with retroactive effect). The information and analysis contained within this section are limited to taxation issues, and prospective investors should not apply any information or analysis set out below to other areas, including (but not limited to) the legality of transactions involving the Notes.

CERTAIN RUSSIAN TAX CONSIDERATIONS

Taxation of the Notes General The following is an overview of certain Russian tax considerations relevant to the purchase, ownership and disposal of the Notes as well as the taxation of interest income on the Loan. The overview does not seek to address the applicability of, or procedures in relation to, taxes levied by regions, municipalities or other non-federal level authorities of the Russian Federation, nor does it seek to address the availability of double tax treaty relief in respect of income payable on the Notes, or practical difficulties connected with claiming such double tax treaty relief. Prospective investors should consult their own tax advisers regarding the tax consequences of investing in the Notes that may arise in their own particular circumstances. No representation with respect to the Russian tax consequences pertinent to any particular Noteholder is made hereby. Many aspects of the Russian tax laws are subject to significant uncertainty and lack of interpretive guidance, resulting in inconsistent interpretations and application thereof. Further, provisions of the Russian Tax Code applicable to financial instruments and the interpretation and application of those provisions by the Russian tax authorities may be subject to more rapid and unpredictable changes (possibly with retroactive effect) and inconsistent interpretation than in jurisdictions with more developed capital markets or more developed taxation systems. In particular, the interpretation and application of such provisions will in practice rest substantially with local tax inspectorates and relevant interpretations may constantly change. In practice, interpretation by different tax inspectorates may be inconsistent or contradictory, and may result in the imposition of conditions, requirements or restrictions that are not explicitly stated in the Russian Tax Code. Similarly, in the absence of binding precedents, court rulings on tax or other related matters taken by different Russian courts relating to the same or similar facts and circumstances may also be inconsistent or contradictory. For the purposes of this overview, the term “Resident Noteholder” means:  a Noteholder which is a legal entity or an organisation and is:  a Russian legal entity;  a foreign legal entity or organisation recognized as a Russian tax resident based on the provisions of an applicable double tax treaty (for the purposes of application of such double tax treaty);  a foreign legal entity or organisation recognized as a Russian tax resident based on Russian domestic law (in case the Russian Federation is recognized as the place of effective management of such legal entity or organisation as determined in the Russian Tax Code unless otherwise envisaged by an applicable double tax treaty);

236  a foreign legal entity or organisation which holds and/ or disposes of the Notes through its permanent establishment in the Russian Federation (as defined by Russian tax law), (the “Resident Noteholder – Legal Entity”), and  a Noteholder who is an individual and is actually present in Russia for an aggregate period of 183 calendar days or more in any period comprised of 12 consecutive months (the “Resident Noteholder – Individual”). Presence in the Russian Federation is not considered interrupted if an individual departs for short periods (less than six months) from Russia for medical treatment or education purposes as well as for the employment or other duties related to the performance of works (services) on offshore hydrocarbons fields. The interpretation of this definition by the Ministry of Finance of the Russian Federation states that, for tax withholding purposes, an individual's tax residence status should be determined on the date of the income payment (based on the number of days in Russia in the 12-month period preceding the date of the payment). An individual's final tax liability in the Russian Federation for any reporting calendar year should be determined based on the number of days spent in Russia in such calendar year. Although the Russian Tax Code states that tax residency for individuals depends exclusively on the number of days spent in Russia, the Federal Tax Service (the “FTS”) has issued several private clarifications promulgating a view that besides the number of days of physical presence such factors as permanent home and centre of vital interest (country where family, business are located) must be taken into account for the purposes of determination of tax residency. Although the Ministry of Finance of the Russian Federation has subsequently cancelled these letters of the FTS, the risk remains of a challenge to non-resident status for individuals who do not meet the physical presence test for residents but have ties (property, family, business, etc.) to Russia. For the purposes of this overview, the term “Non-Resident Noteholder” means any Noteholder (including any individual (the “Non-Resident Noteholder – Individual”) and any legal entity or an organisation (the “Non-Resident Noteholder – Legal Entity”)) that does not qualify as a Resident Noteholder. Noteholders should seek professional advice on their tax status in Russia. Non-Resident Noteholders Legal entities and organisations Acquisition of the Notes The acquisition of the Notes by a Non-Resident Noteholder – Legal Entity (whether upon issuance or in the secondary market) should not trigger any Russian tax implications for the Non-Resident Noteholder– Legal Entity. Interest on the Notes and repayment of principal on the Notes Non-Resident Noteholders – Legal Entities generally should not be subject to any Russian taxes in respect of interest payments and repayments of principal on the Notes received from the Issuer subject to the conditions and requirements described in “Taxation of Interest Income on the Loan”. Sale and/or other Disposal of the Notes Interest on debt obligations of foreign companies (including any portion of the sales or disposal proceeds derived in connection with the disposal of the debt obligations of such non-Russian entities (such as the Notes)), even if payable from Russian sources, should not be subject to Russian withholding tax. There is some uncertainty regarding the tax treatment of the portion of the sales or disposal proceeds, if any, attributable to accrued interest (coupon) on the bonds (i.e. debt obligations) where proceeds from sale or other disposition of the Notes are received from a source within Russia by a Non- Resident Noteholder–Legal Entity, which is caused by isolated precedents in which the Russian tax authorities challenged the non-application of the Russian tax to the amount of accrued interest

237 (coupon) embedded into the sale price of the Notes. Although the Ministry of Finance of the Russian Federation in its most recent clarification letters opined that the amount of sale or other disposal proceeds attributable to the accrued interest paid to a non-Russian organisation should not be regarded as Russian source income and on this basis should not be subject to taxation in Russia, there remains a possibility that a Russian entity or a foreign entity having a registered tax presence in Russia which purchases the Notes or acts as an intermediary may seek to assess Russian withholding tax at the rate of 20% (or such other rate as could be effective at the time of such sale or other disposal) on the accrued interest portion of the disposal proceeds. Non-Resident Noteholders – Legal Entities should consult their own tax advisers with respect to the tax consequences of the sale or other disposal of the Notes. Individuals Acquisition of the Notes Under Russian tax legislation, the taxation of the income of Non-Resident Noteholders – Individuals will depend on whether the income qualifies as received from a Russian or non-Russian source. In case the income is not qualified as received from Russian sources no tax consequences should arise. However, according to provisions of the Russian Tax Code relating to the material benefit (deemed income) received by individuals as a result of the acquisition of securities, the acquisition of the Notes by Non-Resident Noteholders - Individuals (either at original issuance if the Notes are not issued at par or in the secondary market) may constitute a taxable event for Russian personal income tax purposes. In particular, if Non-Resident Noteholders - Individuals acquire the Notes in Russia and the acquisition price of the Notes is below fair market value (calculated under a specific procedure for the determination of market prices of securities for Russian personal income tax purposes), the difference may become subject to Russian personal income tax at the rate of 30 per cent (or such other tax rate as may be effective at the time of the acquisition) provided such material benefit is viewed as income from Russian sources. Although the Russian Tax Code does not contain any provisions as to how the source of the related material benefit should be determined, in practice the Russian tax authorities may infer that such income should be considered Russian source income if the Notes are purchased “in Russia”. In the absence of any additional guidance as to what should be considered as a purchase of securities in Russia, the Russian tax authorities may apply various criteria to determine the source of the related material benefit, including looking at the place of conclusion of the acquisition transaction, the location of the Issuer, or other similar criteria. There is no assurance therefore that as a result any material benefit received by the Non-Resident Noteholders Individuals in connection with the acquisition of the Notes will not become taxable in Russia. However, when the Notes are initially issued at par, the above provisions are likely to be relevant for the acquisition of the Notes in the secondary market only. The tax may be withheld at source of payment or, if the tax is not withheld, the Non-Resident Noteholder - Individual may be required to declare its income in Russia by filing a tax return and paying the tax. Interest on the Notes and repayment of principal on the Notes Non-Resident Noteholders - Individuals generally should not be subject to any Russian taxes in respect of interest payments and repayments of principal on the Notes received from the Issuer. Taxation of interest payable on the Notes may be affected however by the tax treatment of interest payable on the Loans (please see “Sale or other Disposal of the Notes” and “Taxation of Interest Payments on the Loans” below). Sale or other Disposal of the Notes Non-resident Noteholder–Individuals should not be subject to any Russian taxes in respect of gains or other income realised on a redemption, sale or other disposal of the Notes outside of Russia, provided that the proceeds of such sale, redemption, or disposal are not received from a source within Russia.

238 If proceeds from the sale, redemption or other disposal of the Notes, including any portion of such proceeds attributable to accrued interest income under the Notes, are received from a Russian source, a Non-Resident Noteholder - Individual will generally be subject to Russian personal income tax at a rate of 30% (or such other tax rate as may be effective at the time of disposal) subject to any available double tax treaty relief as discussed below in “Double Tax Treaty Relief”, in respect of the gross proceeds from such sale, redemption or other disposal less any available cost deduction (which includes the purchase price of the Notes). Under Russian tax legislation, income received from a sale, redemption or disposal of securities should be treated as having been received from a Russian source if such sale, redemption or disposal occurs in Russia. In absence of any guidance as to what should be considered as a sale or other disposal of securities “in Russia”, the Russian tax authorities may apply various criteria in order to determine the source of the sale or other disposal, including looking at the place of conclusion of the transaction, the location of the Issuer, or other similar criteria. There is no assurance, therefore, that proceeds received by Non-Resident Noteholders – Individuals from a sale, redemption or disposal of the Notes will not become subject to tax in Russia. In case the sales or other disposal proceeds are considered as derived from Russian sources, Russian personal income tax will apply to the gross amount of proceeds decreased by the amount of any available cost deductions (including the original acquisition costs of the Notes and expenses relating to the acquisition, holding and sale or other disposal) provided that duly executed supporting documentation is provided to the person obliged to calculate and withhold Russian personal income tax in relation to this income in a timely manner. There is a risk that, if the documentation supporting the cost deductions is deemed insufficient by the Russian tax authorities or by the person remitting the proceeds to a Non-Resident Noteholder - Individual (where such person is considered the tax agent, obliged to calculate and withhold Russian personal income tax and remit it to the Russian budget), the cost deductions may be disallowed and the tax will apply to the gross amount of the sales, redemption or disposal proceeds. Furthermore, there is also some uncertainty regarding tax treatment of the portion of the sales or disposal proceeds derived by a Non-Resident Noteholder Individual from Russian sources in connection with the sale or disposal of the Notes, that is attributable to accrued interest on the Notes, if any. The Russian tax authorities could argue that such portion should be subject to Russian personal income tax at the rate of 30 percent (or such other tax rate as may be effective at the time of payment), even if the sale or other disposal of the Notes results in a loss. In certain circumstances, if the sales and/or disposal proceeds (including accrued interest on the Notes) are paid to a Non-Resident Noteholder - Individual by a licensed broker, an asset manager, a securities registrar or a depositary organisation who carries out operations in Russia under an asset management agreement, a brokerage service agreement, an agency agreement, a commission agreement, a commercial mandate agreement or a depository agreement for the benefit of a Non- Resident Noteholder - Individual, the applicable Russian personal income tax at the rate of 30 percent (or such other tax rate as may be effective at the time of payment) should be withheld at source by such person who will be considered the tax agent. In this case the amount of the withholding tax should be applied to the difference between the proceeds paid to the Non-Resident Noteholder - Individual and the amount of duly documented deductions relating to the original purchase cost and related expenses on the purchase, holding and sale of the Notes to the extent that such deductions and expenses can be determined by the entity making the payment. The entity making the payment would be required to report to the Russian tax authorities the income received by the Non-Resident Noteholder - Individual and tax withheld upon the sale of the Notes not later than April 1 of the year following the reporting year. In the context of deducting duly documented acquisition costs, if the costs were borne in connection with the acquisition of the Notes within the relationship with the party other than tax agent which is obliged to calculate and withhold Russian personal income tax under the respective agreement, upon the sale or other disposal of the Notes it may be taken into account by the tax agent upon written application of the Noteholders and presentation of the documents confirming the costs.

239 If Russian personal income tax obligation arises as a result of the sale, redemption or other disposal of the Notes but the tax has not been withheld, a Non-Resident Noteholder - Individual is required to file a personal income tax return in Russia to report the amount of income received to the Russian tax authorities and apply for a deduction in the amount of the acquisition cost and other expenses related to the acquisition, holding, sale or other disposal of the Notes, based on the provision of supporting documentation. The applicable personal income tax will then have to be paid by the individual on the basis of the filed personal income tax return. Under certain circumstances, gains received and losses incurred by a Non-Resident Noteholder - Individual as a result of the sale, redemption or other disposal of the Notes and other securities of the same category (i.e., securities qualified as traded or non-traded for Russian personal income tax purposes) occurring within the same tax year may be aggregated for Russian personal income tax purposes, which would affect the total amount of personal income of a Non-Resident Noteholder - Individual subject to taxation in Russia. Since the sales, redemption or other disposal proceeds and deductible expenses for Russian tax purposes are calculated in roubles, there is a risk that the taxable base may be affected by fluctuations in the exchange rates between the currency in which the Notes were acquired, the currency in which the Notes were sold and roubles, i.e. there could be a loss or no gain in the currency of the Notes but a gain in roubles which could be potentially subject to taxation. Non-resident Noteholders - Individuals should consult their own tax advisers with respect to the tax consequences of the acquisition and disposal of the Notes and the tax consequences of the receipt of proceeds from a source within Russia in respect of a sale, redemption or other disposal of the Notes. Resident Noteholders A Resident Noteholder will generally be subject to all applicable Russian taxes and responsible for complying with any documentation requirements that may be established by law or practice in respect of gain from the sale, redemption or other disposal of the Notes and interest income received on the Notes. Resident Noteholders should consult their own tax advisors with respect to the effect that the acquisition, holding and disposal of the Notes may have on their tax position. Legal entities and organisations A Resident Noteholder - Legal entity should, prima facie, be subject to Russian profits tax at the rate of up to 20% on interest (coupon) income on the Notes as well as on the capital gain from the sale, redemption or other disposal of the Notes. Generally, Resident Noteholders - Legal Entities are required to submit Russian profits tax returns, and assess and pay tax on capital gains and interest (coupon) income. Individuals A Resident Noteholder - Individual should generally be subject to personal income tax at a rate of 13% on (i) deemed income resulting from the acquisition of the Notes at a price below fair market value, (ii) on interest (coupon) income on the Notes and (iii) income received from the sale, redemption or other disposal of the Notes. If such income is paid to a Resident Noteholder - Individual by a tax agent, the applicable Russian personal income tax of 13% (or such other tax rate as may be effective at the time of payment) should be withheld at source by such person. For the purposes of interest (coupon) income and income received from sale, redemption and/or other disposal of the Notes, a tax agent is a licensed broker, an asset manager, a securities registrar or a depositary organisation who carries out operations under an asset management agreement, a brokerage service agreement, an agency agreement, a commission agreement, a commercial mandate agreement or a depository agreement for the benefit of a Resident Noteholder - Individual in respect of relevant income. In case the Russian personal income tax has not been withheld Resident Noteholders - Individuals are required to submit annual personal income tax returns, assess and pay the tax. Resident Noteholders should consult their own tax advisers with respect to their tax position regarding the Notes.

240 Double Tax Treaty Relief The Russian Federation has concluded double tax treaties with a number of countries and honours some double tax treaties concluded by the former Union of Soviet Socialist Republics. These double tax treaties may contain provisions that allow for the reduction or elimination of Russian withholding taxes with respect to income received by Non-Resident Noteholders from Russian sources, including income from the sale, redemption or other disposal of the Notes. To the extent double tax treaty relief is available, a Non-Resident Noteholder must comply with the certification, information, documentation and reporting requirements which are in force in the Russian Federation in order to obtain such relief. In order to benefit from the double tax treaty, a Non-Resident Noteholder - Legal Entity which has the beneficial ownership right to receive income (i.e. who qualifies as a “beneficial owner of income” - the concept of beneficial ownership for Russian tax purposes is discussed in “Risks relating to taxation” section) should provide the tax agent with a certificate of tax residence issued by the competent authority of his/ her country of residence for tax purposes before the date of each income payment. This certificate should confirm that the respective Non-Resident Noteholder - Legal Entity is a tax resident of the relevant double tax treaty country for the purposes of the relevant treaty in the particular calendar year during which the income is paid. This certificate should be apostilled or legalised and needs to be renewed on an annual basis. A notarised Russian translation of the certificate may be required. Also a Non-Resident Noteholder - Legal Entity should confirm that it has the beneficial ownership right to the income in question. However, the tax agent in practice may request additional documents confirming the eligibility of the Non-Resident Noteholder— Legal Entity for the benefits of the double tax treaty. The tax agent that pays Russian source income from 1 January has an obligation to request confirmation that a Non-Resident Noteholder–Legal Entity has an actual right to receive the income in question. There can be no assurance, however, that the advance double tax treaty relief will be available in practice. In order to obtain the double tax treaty relief at source, a Non-Resident Noteholder - Individual should confirm to a tax agent that he or she is tax resident in a relevant foreign jurisdiction having a double tax treaty with Russia by providing the tax agent with (i) a passport of a foreign resident, or (ii) another document envisaged by an applicable federal law or recognized as a personal identity document of a foreign resident in accordance with the double tax treaty, and (iii) upon request of the tax agent, a tax residency certificate issued by the competent authorities of his or her country of residence for tax purposes. A notarised Russian translation of the certificate is required. The above provisions are intended to provide a tax agent with the opportunity of applying reduced (or zero) withholding tax rates under an applicable double tax treaty at source. It is not explicit whether under the new law Russian citizens may enjoy exemption from taxation at source under the respective double tax treaty. The law does not clearly establish how the tax agent shall determine whether a passport is sufficient to confirm the individual’s eligibility to double tax treaty benefits. There are no requirements under Russian law for the individuals to provide evidence that they can be deemed as actual recipients (beneficial owners) of income from the Russian sources. The procedure of elimination of double taxation of Non-Resident Noteholders–Individuals in case of absence of a tax agent is not explicitly indicated in the Russian Tax Code. Non-Resident Noteholders should consult their own tax advisers with respect to the applicability of any double tax treaty relief and the relevant procedures required in Russia. Refund of Tax Withheld If (i) Russian withholding tax on income derived from Russian sources by a Non-Resident Noteholder has been withheld at source or (ii) tax on such income has been paid by a Non-Resident Noteholder on the basis of a tax return, and such Non-Resident Noteholder is entitled to relief from tax on such income under an applicable double tax treaty allowing it not to pay the tax or to pay the tax at a reduced rate, a claim for a refund of such tax that was excessively withheld at source or paid by the Non-Resident Noteholder can be filed with the Russian tax authorities within three years from the end of the tax period in which the tax was withheld or paid (subject to limitations described below).

241 In order to obtain a refund, the Non-Resident Noteholder would need to file with the Russian tax authorities a duly notarised, apostilled and translated certificate of tax residence issued by the competent tax authority of the relevant double tax treaty country. In addition, a Non-Resident Noteholder - Individual would need to provide appropriate documentary proof of tax payments made outside of Russia on income with respect to which such tax refund is claimed. The supporting documents must be provided within one year following the year in which the tax was withheld. The Russian tax authorities may, in practice, require a wide variety of documentation confirming a Noteholder’s right to benefits under a double tax treaty. Such documentation, in practice, may not be explicitly required by the Russian Tax Code or the relevant double tax treaty and may to a large extent depend on the position of the local tax inspectors. If a Non-Resident Noteholder—Individual wishes to obtain a refund, he/she should provide a claim for a refund of the tax withheld and documents confirming the right for a refund under the Russian Tax Code to the tax agent. Since then a claim for a refund and documents confirming the right for a refund under the Russian Tax Code can be filed within three years following the tax period in which the tax was withheld. In case there is no tax agent on the date of receipt by the individual of confirmation of its tax residence status in a relevant foreign jurisdiction having an applicable double tax treaty with Russia, the individual can file a claim for a refund and documents confirming the right for a refund directly with the Russian tax authorities. Obtaining a refund of Russian taxes withheld may be a time-consuming process and can involve considerable practical difficulties, including the possibility that a tax refund may be denied for various reasons. Non-Resident Noteholders should consult their own tax advisors regarding the procedures required to be fulfilled in order to obtain a refund of Russian income tax which was excessively withheld at source. Taxation of Interest Income on the Loan In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity or organisation having no permanent establishment in Russia are subject to Russian withholding income tax at a rate of 20 percent, subject to reduction or elimination pursuant to the terms of an applicable double tax treaty. No withholding tax should be withheld from interest on the loans payable under the Eurobond structure by virtue of the exemption, which stipulates that Russian borrowers should be fully released from the obligation to withhold Russian withholding tax from interest payable to foreign legal entities provided that the following conditions are all simultaneously met: (a) interest is paid on debt obligations of Russian entities that arose in connection with the placement by foreign entities of “issued bonds”, defined as bonds or other debt obligations (i) listed and/or admitted to trading on one of the specified foreign exchanges, and/or (ii) that have been registered in the specified foreign depository/clearing organisations. The lists of qualifying foreign exchanges and foreign depositary/clearing organisations were approved by Order No. 12-91/pz-n of the Federal Financial Markets Service dated 25 October 2012 (the “List”). The Irish Stock Exchange, Euroclear and Clearstream are included in the above-mentioned lists. While Clearstream and some legal entities – members of Clearstream group are mentioned in the List, the List does not explicitly mention Clearstream, Luxembourg. According to the shareholding structure of Clearstream group, Clearstream, Luxembourg is a member entity of Clearstream group, and, therefore, is part of Clearstream. However, there is a residual risk that the Russian tax authorities may apply a formalistic approach and take a position that Clearstream, Luxembourg is not included in the List based on the fact that it is not explicitly mentioned in the List. (b) there is a double tax treaty between Russia and the jurisdiction of tax residence of the recipient of interest of the loan (i.e., the Issuer) which can be confirmed by a tax residency

242 certificate issued by the competent authority of his/ her country of residence for tax purposes and effective as of the moment of income payment. The Company, based on professional advice received, believes that it should be released from the obligation to withhold the Russian withholding tax from interest payments made to the Issuer under the Loan Agreement provided that the Issuer duly confirms its tax residence, since the Notes should be considered as “traded bonds” as described above and the Loan is financed from the funds received from the issue of the Notes. If the Notes are simultaneously (i) delisted from the Irish Stock Exchange and (ii) exchanged for duly executed and authenticated registered Notes in definitive form in the limited circumstances specified in the Global Note Certificate, the above exemption will not apply and the Company will be required to withhold Russian withholding income tax from interest payments made by the Borrower to the Issuer. In addition, if the Notes are delisted from the Irish Stock Exchange and deposited with a common depository for, and registered in the name of a nominee of, Clearstream, Luxembourg only, then the Notes may potentially not fall within the definition of traded bonds under the Russian Tax Code (as Clearstream, Luxembourg is not explicitly mentioned in the List), and therefore, there is a residual risk that the Company may potentially be required to withhold Russian withholding tax from interest payments made by the Company to the Issuer. Release from the tax agent duty effectively means that, in practice, income tax on interest payments should not arise in Russia, because currently there is no mechanism or requirement for foreign income recipients that are legal entities to self-assess and pay the tax. However, there can be no assurance that such mechanism will not be introduced in the future or that the Russian tax authorities would not seek to collect the tax from foreign income recipients. If the payments under the Loan are subject to Russian withholding tax for any reason (as a result of which the Issuer would reduce payments made under the Notes by the amount of such withholding taxes), the Company is required (subject to certain conditions) to increase payments under the Loan Agreement as may be necessary so that the Issuer and the Noteholders receive a net amount equal to the full amount they would have received in the absence of such withholding. It should be noted, however, that it is currently unclear whether the provisions obliging the Company to gross up interest payments under the Loan will be enforceable in the Russian Federation. There is a risk that a gross up for withholding tax will not take place and that the interest payments made by the Company under the Loan Agreement will be reduced by the amount of the Russian income tax withheld by the Company at the rate of 20 percent (or such other rate as may be in force at the time of payment) or, potentially, with respect to Non-Resident Noteholders – Individuals Russian personal income tax at a rate of 30 percent (or such other rate as may be in force at the time of payment). If the Company is obliged to increase payments under the Loan Agreement, it may (without premium or penalty), subject to certain conditions, prepay the Loan in full. In such case, all outstanding Notes would be redeemable at par together with accrued and unpaid interest and additional amounts, if any, to the date of the redemption. No VAT will be payable in the Russian Federation in respect of interest and principal payments under the Loan.

CERTAIN IRISH TAX CONSIDERATIONS

The following is a summary of the principal Irish tax consequences for individuals and companies of ownership of the Notes based on the laws and practice of the Irish Revenue Commissioners currently in force in Ireland and may be subject to change. It deals with Noteholders who beneficially own their Notes as an investment. Particular rules not discussed below may apply to certain classes of taxpayers holding Notes, such as dealers in securities, trusts, etc. The summary does not constitute tax or legal advice and the comments below are of a general nature only. Prospective investors in the Notes should consult their professional advisers on the tax implications of the purchase, holding, redemption or sale of the Notes and the receipt of interest thereon under the laws of their country of residence, citizenship or domicile.

243 Taxation of Noteholders

Withholding Tax

In general, tax at the standard rate of income tax (currently 20 per cent.) is required to be withheld from payments of Irish source interest which should include interest payable on the Notes. The Issuer will not be obliged to make a withholding or deduction for or on account of Irish income tax from a payment of interest on a Note where: (a) the Notes are Quoted Eurobonds, i.e. securities which are issued by a company (such as the Issuer), which are listed on a recognised stock exchange (such as the Irish Stock Exchange) and which carry a right to interest; and (b) the person by or through whom the payment is made is not in Ireland, or if such person is in Ireland, either: (i) the Notes are held in a clearing system recognised by the Irish Revenue Commissioners; (Euroclear and Clearstream, Luxembourg are, amongst others, so recognised); or (ii) the person who is the beneficial owner of the Notes is not resident in Ireland and has made a declaration to a relevant person (such as a paying agent located in Ireland) in the prescribed form; and (c) one of the following conditions is satisfied: (i) the Noteholder is resident for tax purposes in Ireland or, if not so resident, is otherwise within the charge to corporation tax in Ireland in respect of the interest; or (ii) the interest is subject, under the laws of a relevant territory, without any reduction computed by reference to the amount of such interest or other distribution, to a tax in a Relevant Territory which corresponds to income tax or corporation tax in Ireland and which generally applies to profits, income or gains received in that territory, by persons, from sources outside that territory; or (iii) the Noteholder is not a company which, directly or indirectly, controls the Issuer, is controlled by the Issuer, or is controlled by a third company which also directly or indirectly controls the Issuer, and neither the Noteholder, nor any person connected with the Noteholder, is a person or persons: i. from whom the Issuer has acquired assets; ii. to whom the Issuer has made loans or advances; or iii. with whom the Issuer has entered into a Swap Agreement, where the aggregate value of such assets, loans, advances or Swap Agreements represents not less than 75 per cent. of the aggregate value of the assets of the Issuer, or (iv) the Issuer is not aware at the time of the issue of any Notes that any Noteholder of those Notes is (i) a person of the type described in (c)(iii) above AND (ii) is not subject, without any reduction computed by reference to the amount of such interest or other distribution, to a tax in a Relevant Territory which generally applies to profits, income or gains received in that territory, by persons, from sources outside that territory, where for these purposes, the term “Relevant Territory” means a member state of the European Union (other than Ireland) or a country with which Ireland has signed a double tax treaty; and “Swap Agreement” means any agreement, arrangement or understanding that –

244 (i) provides for the exchange, on a fixed or contingent basis, of one or more payments based on the value, rate or amount of one or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and (ii) transfers to a person who is a party to the agreement, arrangement or undertaking, or to a person connected with that person, in whole or in part, the financial risk associated with a future change in any such value, rate or amount without also conveying a current or future direct or indirect ownership interest in the asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred. Thus, so long as the Notes continue to be quoted on the Irish Stock Exchange are held in a clearing system recognised by the Irish Revenue Commissioners; (Euroclear and Clearstream, Luxembourg are, amongst others, so recognised), and one of the conditions set out in paragraph (c) above is satisfied, interest on the Notes can be paid by any Paying Agent acting on behalf of the Issuer free of any withholding or deduction for or on account of Irish income tax. If the Notes continue to be quoted but cease to be held in a recognised clearing system, interest on the Notes may be paid without any withholding or deduction for or on account of Irish income tax provided such payment is made through a Paying Agent outside Ireland, and one of the conditions set out in paragraph (c) above is satisfied.

Encashment Tax

Irish tax will be required to be withheld at the standard rate of income tax (currently 20 per cent.) from interest on any Note, where such interest is collected or realised by a bank or encashment agent in Ireland on behalf of any Noteholder. There is an exemption from encashment tax where the beneficial owner of the interest is not resident in Ireland and has made a declaration to this effect in the prescribed form to the encashment agent or bank.

Income Tax, PRSI and Universal Social Charge

Notwithstanding that a Noteholder may receive interest on the Notes free of withholding tax, the Noteholder may still be liable to pay Irish tax with respect to such interest. Noteholders resident or ordinarily resident in Ireland who are individuals may be liable to pay Irish income tax, pay related social insurance (PRSI) contributions and the universal social charge in respect of interest they receive on the Notes. Interest paid on the Notes may have an Irish source and therefore may be within the charge to Irish income tax, notwithstanding that the Noteholder is not resident in Ireland. In the case of Noteholders who are non-resident individuals such Noteholders may also be liable to pay the universal social charge in respect of interest they receive on the Notes. Ireland operates a self-assessment system in respect of tax and any person, including a person who is neither resident nor ordinarily resident in Ireland, with Irish source income comes within its scope. There are a number of exemptions from Irish income tax available to certain non-residents. Firstly, interest payments made by the Issuer are exempt from income tax so long as the Issuer is a qualifying company for the purposes of Section 110 of the TCA, the recipient is not resident in Ireland and is resident in a Relevant Territory and, the interest is paid out of the assets of the Issuer. Secondly, interest payments made by the Issuer in the ordinary course of its trade or business to a company are exempt from income tax provided the recipient company is not resident in Ireland and is a company which is either resident for tax purposes in a Relevant Territory which imposes a tax that generally applies to interest receivable in that Relevant Territory by companies from sources outside that Relevant Territory and which tax corresponds to income tax or corporation tax in Ireland or, in respect of the interest is exempted from the charge to Irish income tax under the terms of a double tax agreement which is either in force or which is not yet in force but which will come into force once all

245 ratification procedures have been completed. Thirdly, interest paid by the Issuer free of withholding tax under the quoted Eurobond exemption is exempt from income tax, where the recipient is a person not resident in Ireland and resident in a Relevant Territory or is a company not resident in Ireland which is under the control, whether directly or indirectly, of person(s) who by virtue of the law of a Relevant Territory are resident for the purpose of tax in a Relevant Territory and are not under the control of person(s) who are not so resident or is a company not resident in Ireland where the principal class of shares of the company or its 75% parent is substantially and regularly traded on a recognised stock exchange. For the purposes of these exemptions and where not specified otherwise, residence is determined under the terms of the relevant double taxation agreement or in any other case, the law of the country in which the recipient claims to be resident. Interest falling within the above exemptions is also exempt from the universal social charge. Notwithstanding these exemptions from income tax, a corporate recipient that carries on a trade in Ireland through a branch or agency in respect of which the Notes are held or attributed, may have a liability to Irish corporation tax on the interest. Relief from Irish income tax may also be available under the specific provisions of a double tax treaty between Ireland and the country of residence of the recipient. Interest on the Notes which does not fall within the above exemptions is within the charge to income tax, and, in the case of Noteholders who are individuals, is subject to the universal social charge. In the past the Irish Revenue Commissioners have not pursued liability to income tax in respect of persons who are not regarded as being resident in Ireland except where such persons have a taxable presence of some sort in Ireland or seek to claim any relief or repayment in respect of Irish tax. However, there can be no assurance that the Irish Revenue Commissioners will apply this treatment in the case of any Noteholder.

Capital Gains Tax

A Noteholder will not be subject to Irish tax on capital gains on a disposal of Notes unless (i) such holder is either resident or ordinarily resident in Ireland or (ii) such holder carries on a trade or business in Ireland through a branch or agency in respect of which the Notes were used or held or (iii) the Notes cease to be listed on a stock exchange in circumstances where the Notes derive their value or more than 50% of their value from Irish real estate, mineral rights or exploration rights.

Capital Acquisitions Tax

A gift or inheritance comprising of Notes will be within the charge to capital acquisitions tax (which subject to available exemptions and reliefs, will be levied at 33 per cent.) if either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland (or, in certain circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of the donee/successor) on the relevant date or (ii) if the Notes are regarded as property situate in Ireland (i.e. if the Notes are physically located in Ireland or if the register of the Notes is maintained in Ireland).

Stamp Duty

No stamp duty or similar tax is imposed in Ireland (on the basis of an exemption provided for in Section 85(2)(c) of the Stamp Duties Consolidation Act, 1999 so long as the Issuer is a qualifying company for the purposes of Section 110 of the TCA and the proceeds of the Notes are used in the course of the Issuer’s business), on the issue, transfer or redemption of the Notes.

CERTAIN CONSIDERATIONS UNDER THE U.S. FOREIGN ACCOUNT TAX COMPLIANCE ACT.

Under the Foreign Account Tax Compliance Act provisions of the Code and related U.S. Treasury guidance (“FATCA”), a withholding tax of 30% will be imposed in certain circumstances on (i)

246 payments of certain U.S. source income (including interest and dividends) and gross proceeds from the sale or other disposition of property that can produce U.S. source interest or dividends (“withholdable payments”) and (ii) payments by certain foreign financial institutions (such as banks, brokers, investment funds or certain holding companies) (“FFIs”) that agree to comply with FATCA (“participating FFIs”) that are attributable to withholdable payments (“foreign passthru payments”). As the U.S. Treasury has not yet issued regulations defining foreign passthru payments (“passthru payments regulations”), it is uncertain at present when payments will be treated as “attributable” to withholdable payments. FATCA withholding on foreign passthru payments generally will not apply to obligations that are issued on or before the date that is six months after the date on which the final passthru payment regulations are filed with the U.S. Federal Register unless such obligations are materially modified after that date or are treated as equity for U.S. federal income tax purposes. It is possible that, in order to comply with FATCA, the Issuer (or if the Notes are held through an FFI, such FFI) may be required, pursuant to the intergovernmental agreement between the United States and Ireland or any law enacted in connection with such agreement, an agreement with the United States (an “FFI Agreement”) or under applicable non-U.S. law enacted in connection with an intergovernmental agreement between the United States and another jurisdiction (an “IGA”) to request certain information and documentation from the holders or beneficial owners of the Notes, which may be provided to the home tax authorities of the Issuer or other FFI or to the IRS. In addition, (i) if the Notes are treated as debt for U.S. federal income tax purposes and the terms of the Notes are materially modified, including by substitution of another obligor for the Issuer, on a date more than six months after the date on which the passthru payment regulations are filed or (ii) if the Notes are treated as equity for U.S. federal income tax purposes, then it is possible that the FATCA withholding tax could apply to any payment with respect to the Notes treated as a foreign passthru payment made after the later of (a) 31 December 2018 and (b) the date on which the passthru payment regulations are published if any required information or documentation is not provided or if payments are made to certain FFIs that have not agreed to comply with an FFI Agreement (and are not subject to similar requirements under applicable non-U.S. law enacted in connection with an IGA). The Issuer will not have any obligation to gross up or otherwise pay additional amounts for any withholding or deduction required with respect to payments on the Notes under or in connection with FATCA. FATCA is particularly complex and its application is uncertain at this time. The above description is based in part on regulations, official guidance and IGAs, all of which are subject to change or may be implemented in a materially different form. Each non-U.S. person considering an investment in the Notes should consult its own tax advisers regarding the application of FATCA to the Notes.

247 SUBSCRIPTION AND SALE

Each of Bank GPB International S.A., Citigroup Global Markets Limited, ICBC Standard Bank Plc, Mizuho International plc, SIB (Cyprus) Limited, Société Générale, and VTB Capital plc (together the “Joint Lead Managers” and each, a “Joint Lead Manager”) have, in a subscription agreement dated 6 June 2017 (the “Subscription Agreement”) among the Issuer, the Company and the Joint Lead Managers, upon the terms and subject to the conditions contained therein, severally and not jointly, agreed to subscribe and pay for the Notes at their issue price of 100% of their principal amount. The Notes may be resold at prevailing market prices, or at prices related thereto, at the time of such resale. The Joint Lead Managers are entitled to commissions and reimbursement of certain expenses pursuant to the Subscription Agreement. The Joint Lead Managers are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreement prior to the closing of the issue of the Notes. The Company has agreed to indemnify Joint Lead Managers against certain liabilities as set out in the Subscription Agreement, including certain liabilities under the Securities Act, or to contribute to payments that the Joint Lead Managers may be required to make because of those liabilities.

Selling Restrictions

United States

The Notes and the Loan have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except in accordance with Regulation S or except pursuant to an exemption from the registration requirements of the Securities Act.

Each Joint Lead Manager has agreed, severally and not jointly, that, except as permitted by the Subscription Agreement, it will not offer or sell the Notes (1) as part of its distribution at any time or (2) otherwise until after completion of the distribution compliance period within the United States to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S.

The Notes are being offered and sold outside of the United States in reliance on Regulation S. The Issuer and the Joint Lead Managers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Prospectus does not constitute an offer to any person in the United States. Distribution of this Prospectus by any non-U.S. person outside the United States or to any U.S. person or any person within the United States, and those persons, if any, retained to advise such person outside the United States, is unauthorized and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person or any person within the United States and those persons, if any, retained to advise such non-U.S. person, is prohibited.

United Kingdom

Each Joint Lead Manager severally and not jointly nor jointly and severally has represented and agreed that:  Financial promotion: it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and

248  General compliance: it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Russian Federation

Each Joint Lead Manager has severally and not jointly nor jointly and severally agreed that the Notes will not be offered, transferred or sold as part of their initial distribution or at any time thereafter to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation unless and to the extent otherwise permitted under Russian Law.

Ireland

Each Joint Lead Manager has severally and not jointly nor jointly and severally agreed that:  it will not underwrite the issue of, or place, the Notes otherwise than in conformity with the provisions of the European Communities (Markets in Financial Instruments) Regulations 2007 (Nos. 1 to 3) (as amended, the “MiFID Regulations”), including, without limitation, Regulations 7 (Authorisation) and 152 (Restrictions on advertising) thereof, any codes of conduct made under the MiFID Regulations, and the provisions of the Investor Compensation Act 1998 (as amended);

 it will not underwrite the issue of, or place, the Notes otherwise than in conformity with the provisions of the Companies Act 2014 (as amended, the “Companies Act”), the Central Bank Acts 1942-2015 (as amended) and any codes of practice made under Section 117(1) of the Central Bank Act 1989 (as amended);

 it will not underwrite the issue of, or place, or do anything in Ireland in respect of, the Notes otherwise than in conformity with the provisions of the Prospectus (Directive 2003/71/EC) Regulations 2005 (as amended) and any rules issued by the Central Bank of Ireland (the “Central Bank”) under Section 1363 of the Companies Act; and

 it will not underwrite the issue of, place or otherwise act in Ireland in respect of, the Notes otherwise than in conformity with the provisions of the Market Abuse Regulation (EU 596/2014) (as amended) and any rules and guidance issued by the Central Bank under Section 1370 of the Companies Act.

Hong Kong

Each Joint Lead Manager severally represented and agreed that it had not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.

Singapore

Each Joint Lead Manager severally acknowledged that the Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint Lead Manager severally represented and agreed that it has not offered or sold any Notes or caused such Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell such Notes or

249 cause such Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

General

Each Joint Lead Manager has agreed that it has, to the best of its knowledge and belief, complied and will comply with applicable laws and regulations in each jurisdiction in which it offers, sells or delivers Notes or distributes this Prospectus or any other offering or publicity material relating to the Notes, the Issuer or the Company. No action has or will be taken in any jurisdiction by the Issuer, the Company or any of the Joint Lead Managers that would, or is intended to, permit a public offer of the Notes or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Accordingly, each Joint Lead Manager has undertaken to the Issuer and the Company that it will not, directly or indirectly, offer or sell any Notes or distribute or publish the Prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms. These selling restrictions may be modified by the agreement of the Issuer, the Company and the Joint Lead Managers following a change in a relevant law, regulation or directive. The Joint Lead Managers and their respective affiliates have engaged in transactions with the Company and other members of the Group (including, in some cases, credit agreements and credit lines) in the ordinary course of their banking business and the Joint Lead Managers performed various investment banking, financial advisory, and other services for the Company, for which they received customary fees, and the Joint Lead Managers and their respective affiliates may provide such services in the future. Certain of the Joint Lead Managers or their affiliates that have a lending relationship with the Company and other members of the Group routinely hedge their credit exposure to them consistent with their customary risk management policies. Typically, such Joint Lead Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the securities of the Company or other members of the Group, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes offered hereby.

250 GENERAL INFORMATION

1. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The Common Code and the ISIN numbers for the Notes are 162214675 and XS1622146758, respectively. The address of Euroclear is 1 Boulevard du Roi Albert II, B- 1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855 Luxembourg. 2. The Company is a public joint stock company organised in accordance with the Russian Joint Stock Companies Law on 4 July 1997 for an unlimited duration. The Company has its registered offices at Russia, Krasnoyarsk Territory, Dudinka, Ulitsa Morozova 1, (telephone: +7 (495) 787 76 67) with state registration number 1028400000298. 3. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to trading on the Main Securities Market, through the Listing Agent, Arthur Cox Listing Services Limited (“ACLSL”). ACLSL is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission to the Official List or trading on the Main Securities Market for the purposes of the Prospectus Directive. 4. For the life of the Prospectus, copies (and certified English translations where documents at issue are not in English) of the following documents may be inspected at and are available in physical form from the registered office of the Issuer and the offices of the Paying Agent in London at 6th Floor, Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom during usual business hours on any business day (Saturdays, Sundays and public holidays excepted): (a) a copy of this Prospectus, together with any supplement to this Prospectus; (b) the constitution of the Issuer; (c) the memorandum and articles of association of the Company; (d) the Annual Consolidated Financial Statements, including the independent auditor’s reports thereon; (e) the Loan Agreement; (f) the Agency Agreement; (g) the Trust Deed, which includes the forms of the Global Certificate and the Certificates; and (h) the audited financial statements of the Issuer in respect of the financial years ended 31 December 2016 and 2015. 5. The Loan Agreement has been authorised by a decision of the Board of Directors of the Company on 25 May 2017. The issue of the Notes and the granting of the Loan was authorised by a decision of the Board of Directors of the Issuer on 2 June 2017. 6. No consents, approvals, authorisations or orders of any regulatory authorities other than as disclosed in the Prospectus are required by the Issuer under the laws of the Ireland for maintaining the Loan or for issuing the Notes. 7. Since 31 December 2016, there has been no material adverse change in the financial position or prospects of the Issuer. The Issuer has no subsidiaries. 8. Save for the fees payable to the Joint Lead Managers, the Trustee and the Agents, so far as the Issuer is aware, no person involved in the issue of the Notes has an interest that is material to the issue of the Notes.

251 9. There has been no significant change in the financial or trading position of the Company or of the Group since 31 December 2016 and no material adverse change in the financial position or prospects of the Company or of the Group since 31 December 2016. 10. There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware), during the previous 12 months in relation to the Issuer, which may have, or have had in the recent past, significant effects on the Issuer’s financial position or profitability.

11. The Annual Consolidated Financial Statements and related notes of the Group as at and for the years ended 31 December 2016 and 2015 included in this Prospectus have been reported on by JSC KPMG, independent auditors, of Naberezhnaya Tower, Block C, Floor 31, 10 Presnenskaya Naberezhnaya, Moscow 123112, Russian Federation. JSC KPMG is a member of the Self-regulation organization of auditors “Russian Union of auditors” (Association) (Rossiyskiy Soyuz auditorov).

12. The Trust Deed provides, inter alia, that the Trustee may rely on any certificate or report prepared by accountants pursuant to the Trust Deed (whether or not addressed to the Trustee), notwithstanding whether or not the accountants’ liability in respect thereof is limited by a monetary cap or otherwise. 13. The Company has obtained all necessary consents, approvals and authorisations in the Russian Federation in connection with its entry into, and performance of its obligations under, the Loan Agreement. 14. The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. 15. The Issuer estimates the total expenses related to the admission of the Notes to trading on the Market to be EUR 5,000. 16. The Issuer does not intend to provide any post-issuance transaction information regarding the Notes or the Loan. 17. Citigroup Global Markets Deutschland AG will act as Registrar in relation to the Notes. 18. The loan to value ratio of the Notes is 100%. 19. Citicorp Trustee Company Limited is a professional trustee company, which is providing its services in relation to the Notes on an arm’s length basis in consideration of a fee. Under the terms of the Trust Deed, the power of appointing new trustees is vested in the Issuer (with the prior written consent of the Company) but a trustee so appointed must in the first place be approved by an Extraordinary Resolution of Noteholders. The Noteholders have the power, exercisable by Extraordinary Resolution, to remove any trustee or trustees. The removal of any trustee is only effective if following the removal there remains a trustee (being a trust corporation) in office after such removal. In addition, Citicorp Trustee Company Limited, or any other trustee duly appointed, may retire at any time upon giving not less than three months’ notice in writing to the Issuer (copied to the Company). The retirement of any trustee is only effective if, following the retirement, there remains a trustee (being a trust corporation) in office after such retirement. If the trustee has given notice of its desire to retire and the Issuer is unable to procure a new trustee to be appointed and the Issuer has not by the expiry of such notice (with the prior written consent of the Company) appointed a new trustee, the trustee shall have the power of appointing new trustee(s).

252 GLOSSARY OF TERMS

Term or expression Meaning Acid leaching Leaching conducted by dissolving ore in acid (typically, sulphuric acid).

Anode Crude metal (nickel or copper) obtained from anode smelting and fed for electrolytic refining (electrolysis) whereby it is dissolved.

Cake Solid residue from pulp filtering received as a result of leaching of ores, concentrates or intermediate metallurgical products as well as the purification of technological solutions.

Cathode Pure metal (nickel or copper) obtained as a result of electrolytic refining of anodes.

Concentrate A product resulting from ore enrichment, with a high grade of extracted mineral. The concentrate is named after the prevailing metal (copper, nickel, etc.).

Concentration Artificial improvement in the mineral grades in the rock for metallurgic purposes by removing a major portion of waste rock not containing any beneficial minerals.

Conversion Autogenous pyrometallurgical process, where ferrous and other detrimental impurities are oxidised and removed as slag. The result of the conversion is blister copper (copper concentrate smelting) or high grade matte (copper and nickel concentrate smelting).

Cuprous ores Ores containing 20% to 70% sulphides. The mineralisation is as follows: nickel 0.2-2.5%, copper 1-15%, PGMs 5-50 grammes per tonne.

Dilution Contamination of a mineral resource with non-commercial grades and surrounding formations which leads to decreased content of a useful component in the mined material as compared with its original content. Dilution results in increased mining and transportation costs of the mineral resource, and deterioration of the technical and economic performance of enrichment plants. The level of dilution depends on the mode of occurrence, equipment used, development methods and mining work organisation. For ore deposits with favourable geological conditions the dilution factor may be up to 10%, and goes up to 35-40% for difficult occurrence positions.

Disseminated ores Ores containing 5 to 30% sulphides. The mineralisation is as follows: nickel 0.2 to 1.5%, copper 0.3 to 2%, PGMs 2 to 10 grammes per tonne.

Drying Removal of moisture from concentrates, performed in designated drying furnaces (to a moisture level below 9%).

253 Term or expression Meaning Electrolysis Physical-chemical process consisting of extraction at electrodes the components of dissolved substances through secondary reactions caused by the passage of an electric current through solution or electrolyte melt.

Extracted ore Natural minerals containing metals or their compounds in economically valuable amounts and forms.

Flotation A process of concentration by selectively attaching air bubbles to mineral particles within pulp. Dry mineral particles do not attach well to the air bubbles and rise through the suspension to the top of the pulp, producing foam. The minerals that moisten well do not attach to the bubbles and remain in the pulp. In this way, the metals are separated.

Gas condensate Product produced from natural gas fields and representing a mixture of hydrocarbon liquids.

High-grade matte A metallurgical semi-product produced as a result of matte conversion. Depending on the chemical composition, the following types of high-grade matte are distinguished: copper, nickel and copper-nickel.

Horizon All workings located along a specific layer and designated for mining.

Hydrometallurgical processes Metallurgical processes performed using aqueous chemistry including leaching and concentration.

Indicated mineral resources Resources representing that part of mineral resources from which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.

Inferred mineral resources Resources representing that part of mineral resources from which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.

JORC Code The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

Leaching Selective dissolution of any or a number of components of the processed solid material in organic solvents or water solutions of

254 Term or expression Meaning inorganic substances.

Matte Intermediate product in the form of alloy of ore sulphides and non-ferrous metals with varying chemical composition. Matte is the main product in which precious and auxiliary metals are accumulated.

Measured mineral resources Resources representing that part of mineral resources from which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and/or grade continuity.

Metal extraction Ratio of the quantities of a component extracted from the original material to its quantity in the original material (as a percentage or fraction of an integer).

Metal grade Ratio of the amount of metal in the material and the total gross weight of the material, expressed as percentage or grammes per tonne (g/t).

Mineral deposit A mass of naturally occurring mineral material near to the surface or deeper underground, which is suitable for economic use in terms of quantity, quality and conditions.

Mineral resources A concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economically viable extraction.

Open mining The process of extracting minerals by surface excavations.

Ore body Natural occurrence of ores linked to a certain structural and geologic element or a combination of such elements.

Ore mixture A mixture of materials in a certain proportion needed to achieve the required chemical composition in an end product. The metallurgical ore mixture may include ores, ore concentrates and agglomerates, return slag, dust from dust collecting units, metals (mostly in scrap).

Ore reserve The economically mineable part of a measured or indicated mineral resource. It includes diluting materials and allowances for losses, which may occur when the material is mined.

Oxide A compound of a chemical element with oxygen.

Pelletising A pyrometallurgical process, involving the mixing of metal containing ores or concentrate and thermal treatment to bake the concentrate into hard spheres (pellets).

255 Term or expression Meaning PGM Platinum group metals in a complex or in any combination of platinum, palladium, rhodium, ruthenium, osmium and iridium.

Probable ore reserves The economically mineable part of an indicated, and in some circumstances, a measured mineral resource. It includes diluting materials and allowances for losses which may occur when the material is mined.

Proven ore reserves Ore reserves that represent the economically mineable part of a measured mineral resource. It includes diluting materials and allowances for losses which may occur when the material is mined.

Pyrometallurgical processes Metallurgical processes performed at high temperatures. In accordance with the technological characteristics, the following types of pyrometallurgical processes are distinguished: roasting, smelting and conversion.

Refinement The process of extracting high purity precious metals through their separation and removing impurities.

Rich ores High-sulphide grade (over 70%) ores. Mineralisation is as follows: nickel – 2-5%, copper – 2-25%, PGMs – 5-100 grammes per tonne.

Roasting A process performed upon heating and keeping various materials (ores, concentrates and etc.) to eliminate light components and change the chemical composition of such material at temperatures enabling various chemical reactions between solid components of the processed material and gases and insufficient for the melting of solid components.

Slag Melted or solid substance with a varying composition covering the liquid product in the course of metallurgical processes (obtained from melting of ore mixture, processing of melted intermediate products and metal refining) and including waste rock, fluxing substances, fuel ash, sulphides and metal oxides, products of interaction between processed materials and lining of melting facilities.

Sludge Powder product containing precious metals precipitated during electrolysis of copper and other metals.

Smelting A pyrometallurgical process performed at temperatures enabling the complete melting of the processed metal.

Sulphides A compound of metals and sulphur.

Tailing storage A complex of hydraulic structures used to receive and store mineral waste/tailings.

Tailings Waste materials left over after concentration operations containing primarily waste rock with a minor amount of

256 Term or expression Meaning precious metals.

Thickening The separation of liquid (water) from solid particles within the dispersion systems (pulp, suspension or colloid) based on natural precipitation of solid particles under gravity in waste basins, thickeners and centrifugally in cyclones.

Underground (sub-surface) A set of stripping, preparatory and sloped excavation works on a mining natural resource. vanukov furnace An autogenous smelter for the processing of concentrates. Smelting is performed in a bath of liquid slag and matte which is intensively rabbled by a mixture of air and oxygen. The heat generated by the oxidising reaction is actively used in the process.

6 PGM Platinum, palladium, rhodium, ruthenium, osmium and iridium.

4 PGM Platinum, palladium, rhodium and gold.

257 APPENDIX - CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 Report of Independent Auditors...... F-4 Consolidated income statement for the for the year ended 31 December 2016 ...... F-8 Consolidated statement of comprehensive income for the year ended 31 December 2016 ...... F-9 Consolidated statement of financial position as of 31 December 2016 ...... F-10 Consolidated statement of cash flows for year ended 31 December 2016...... F-11 Consolidated statement of changes in equity for year ended 31 December 2016...... F-13 Notes to the consolidated financial statements...... F-14 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2015 Report of Independent Auditors...... F-56 Consolidated income statement for the year ended 31 December 2015...... F-58 Consolidated statement of comprehensive income for the year ended 31 December 2015 ...... F-59 Consolidated statement of financial position as of 31 December 2015 ...... F-60 Consolidated statement of cash flows for the year ended 31 December 2015 ...... F-61 Consolidated statement of changes in equity for the year ended 31 December 2015 ...... F-63 Notes to the consolidated financial statements...... F-65

258 Mining and Metallurgical Company Norilsk Nickel

Consolidated financial statements for the year ended 31 December 2016

F-1 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

INDEX Page

Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended 31 December 2016 1

Independent auditors’ report 2-5

Consolidated financial statements for the year ended 31 December 2016:

Consolidated income statement 6

Consolidated statement of comprehensive income 7

Consolidated statement of financial position 8

Consolidated statement of cash flows 9-10

Consolidated statement of changes in equity 11

Notes to the consolidated financial statements 12-50

F-2 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

The following statement, which should be read in conjunction with the auditors’ responsibilities stated in the auditors’ report set out on page 2, is made with a view to distinguishing the respective responsibilities of management and those of the auditors in relation to the consolidated financial statements of Public Joint Stock Company “Mining and Metallurgical Company Norilsk Nickel” and its subsidiaries (the “Group”).

Management is responsible for the preparation of the consolidated financial statements that present fairly in all material aspects the consolidated financial position of the Group at 31 December 2016 and consolidated statements of income, comprehensive income, cash flows and changes in equity for the year then ended, in accordance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for:  selecting suitable accounting principles and applying them consistently;  making judgements and estimates that are reasonable and prudent;  stating whether IFRS have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and  preparing the consolidated financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business for the foreseeable future.

Management, within its competencies, is also responsible for:  designing, implementing and maintaining an effective system of internal controls throughout the Group;  maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions in which the Group operates;  taking steps to safeguard the assets of the Group; and  detecting and preventing fraud and other irregularities.

The consolidated financial statements for the year ended 31 December 2016 were approved by:

F-3 JSC“KPMG” 10 Presnenskaya Naberezhnaya Moscow, Russia 123112 Telephone +7 (495) 937 4477 Fax +7 (495) 937 4400/99 Internet www.kpmg.ru

Independent Auditors' Report To the Shareholders and Board of Directors PJSC "Mining and Metallurgical Company Norilsk Nickel" Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of PJSC "Mining and Metallurgical Company Norilsk Nickel" and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

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 Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the independence requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation and with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the requirements in the Russian Federation and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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.

Audited entity: PJSC "Mining and Metallurgical Company Norilsk Independent auditor: JSC "KPMG", a company incorporated under the Laws of Nickel" the Russian Federation, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Registration No. in the Unified State Register of Legal Entities 1028400000298

Dudinka, Krasnoyarsk Region, Russian Federation Registration No. in the Unified State Register of Legal Entities 1027700125628.

Member of the Self-regulated organization of auditors "Russian Union of auditors" (Association). The Principal Registration Number of the Entry in the Register of Auditors and Audit Organisations: No. 11603053203

F-4 PJSC "Mining and Metallurgical Company Norilsk Nickel" Independent Auditors' Report Page 2

Assets classified as held for sale — Measurement of Nkomati Nickel Mine

Please refer to the Note 21 in the financial statements

The key audit matter How the matter was addressed in our audit As of 31 December 2016 the Group Our audit procedures included testing had a 50% interest in Nkomati Nickel the significant assumptions (metal price Mine (hereinafter "Nkomati"). This forecasts and discount rate) and investment has been classified as evaluating the methodology used by the held for sale since 31 December Group. We involved our own valuation 2013. As of 31 December 2016, the specialists to assist us in evaluating the carrying value of this investment was methodology used by the Group and to USD 177 million. compare: The Group measures its investment in - projected metal prices to publicly Nkomati at the lower of its carrying available market information, amount and fair value less cost to sell. - discount rate calculation to our As of 31 December 2016, the fair value own assessment of key less cost to sell was components of discount rate determined using discounted cash calculation flows. - results ofthemodeltoour own Given the significant judgment involved sensitivity analysis and the inherent uncertainty in In addition, we tested the Group's cash flow measuring fair value less cost to sell, forecasts by comparing production volumes we considered this area to be a key to reserve estimates and historical audit matter. operating performance of Nkomati.

We also assessed appropriateness and completeness of the disclosures in the financial statements in relation to uncertainties and judgment involved in determining the fair value less cost to sell.

Other Information Management is responsible for the other information. The other information comprises the Financial Overview (MD&A) (but does not include the consolidated financial statements and our auditors' report thereon), which we obtained prior to the date of this auditors' report, and the information included in other sections of Annual report for 2016, which is expected to be made available to us after that date. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above 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. If, based on the work we have performed on the other information that we have obtained prior to the date of this auditors' report, we conclude that there is a material

F-5 PJSC "Mining and Metallurgical Company Norilsk Nickel" Independent Auditors' Report Page 3 misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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 for such internal control as management determines is necessary to enable the preparation of 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.

Auditors' 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 auditors' 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 auditors' 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 auditors' 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

F-6 PJSC "Mining and Metallurgical Company Norilsk Nickel" Independent Auditors' Report Page 4

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 communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 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 auditors' 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.

F-7 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

For the year ended For the year ended Notes 31 December 2016 31 December 2015 Revenue Metal sales 6 7,646 7,883 Other sales 613 659 Total revenue 8,259 8,542

Cost of metal sales 7 (3,651) (3,165) Cost of other sales (508) (616) Gross profit 4,100 4,761

General and administrative expenses 9 (581) (554) Selling and distribution expenses 8 (93) (129) Impairment of non-financial assets 14 (61) (284) Other net operating expenses 10 (84) (288) Operating profit 3,281 3,506

Foreign exchange gain/(loss), net 485 (865) Finance costs 11 (453) (326) Impairment of available-for-sale investments 16 (153) – Loss from disposal of subsidiaries and assets classified as held for sale 21 (4) (302) Income from investments, net 12 114 215 Share of profits of associates 6 16 Profit before tax 3,276 2,244

Income tax expense 13 (745) (528) Profit for the year 2,531 1,716

Attributable to: Shareholders of the parent company 2,536 1,734 Non-controlling interests (5) (18) 2,531 1,716

EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 22 16.1 11.0

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-8 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

For the year ended For the year ended 31 December 2016 31 December 2015 Profit for the year 2,531 1,716 Other comprehensive income/(loss) Items to be reclassified to profit or loss in subsequent periods: Increase in fair value of available-for-sale investments – 74 Realised gain on disposal of available-for-sale investments – (73) Reclassification of foreign currency translation reserve on disposed assets classified as held for sale to profit or loss – 326 Effect of translation of foreign operations 13 (26) Other comprehensive income to be reclassified to profit or loss in subsequent periods, net 13 301 Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency 561 (868) Other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods, net 561 (868) Other comprehensive income/(loss) for the year, net of tax 574 (567) Total comprehensive income for the year, net of tax 3,105 1,149

Attributable to: Shareholders of the parent company 3,106 1,173 Non-controlling interests (1) (24) 3,105 1,149

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-9 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2016 US Dollars million

At 31 December At 31 December Notes 2016 2015 ASSETS Non-current assets Property, plant and equipment 14 9,006 6,392 Intangible assets 94 50 Investment property 15 93 83 Other financial assets 16 187 62 Other taxes receivable 17 2 – Deferred tax assets 13 56 42 Other non-current assets 18 1,013 117 10,451 6,746 Current assets Inventories 18 1,895 1,698 Trade and other receivables 19 170 167 Advances paid and prepaid expenses 68 55 Other financial assets 16 8 1 Income tax receivable 82 234 Other taxes receivable 17 276 199 Cash and cash equivalents 20 3,301 4,054 5,800 6,408 Assets classified as held for sale 21 206 217 6,006 6,625 TOTAL ASSETS 16,457 13,371

EQUITY AND LIABILITIES Capital and reserves Share capital 22 6 6 Share premium 1,254 1,254 Treasury shares 22 – (196) Translation reserve (4,778) (5,348) Retained earnings 28 7,340 6,523 Equity attributable to shareholders of the parent company 3,822 2,239 Non-controlling interests 23 74 22 3,896 2,261 Non-current liabilities Loans and borrowings 24 7,274 7,142 Provisions 26 435 357 Trade and other long-term payables 18 514 – Deferred tax liabilities 13 303 205 Other long-term liabilities 59 30 8,585 7,734 Current liabilities Loans and borrowings 24 578 1,124 Trade and other payables 27 1,610 1,010 Dividends payable 28 1,164 698 Employee benefit obligations 25 299 215 Provisions 26 183 205 Income tax payable 2 5 Other taxes payable 17 138 95 3,974 3,352 Liabilities associated with assets classified as held for sale 21 2 24 3,976 3,376 TOTAL LIABILITIES 12,561 11,110 TOTAL EQUITY AND LIABILITIES 16,457 13,371

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-10 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

For the year ended For the year ended 31 December 2016 31 December 2015 OPERATING ACTIVITIES Profit before tax 3,276 2,244 Adjustments for: Depreciation and amortisation 557 506 Impairment of non-financial assets 61 284 Impairment of available-for-sale investments 153 – Loss on disposal of property, plant and equipment 16 20 Share of profits of associates (6) (16) Loss from disposal of subsidiaries and assets classified as held for sale 4 302 Change in provisions and allowances 13 120 Finance costs and income from investments, net 360 137 Foreign exchange (gain)/loss, net (485) 865 Other 9 27 3,958 4,489 Movements in working capital: Inventories (751) (340) Trade and other receivables (3) 74 Advances paid and prepaid expenses 13 (2) Other taxes receivable (36) (62) Employee benefit obligations 44 42 Trade and other payables 816 152 Provisions (45) (4) Other taxes payable 26 28 Cash generated from operations 4,022 4,377 Income tax paid (530) (672) Net cash generated from operating activities 3,492 3,705

INVESTING ACTIVITIES Proceeds from sale of associate – 10 Purchase of property, plant and equipment (1,648) (1,626) Purchase of other financial assets (150) – Purchase of intangible assets (47) (28) Purchase of other non-current assets (31) (31) Loans issued (103) (27) Net change in deposits placed (10) 91 Proceeds from sale of other financial assets 10 204 Proceeds from disposal of property, plant and equipment 1 1 Proceeds from disposal of subsidiaries and assets classified as held for sale 3 – Interest received 74 101 Dividends received – 5 Net cash used in investing activities (1,901) (1,300)

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-11 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 (CONTINUED) US Dollars million

For the year ended For the year ended 31 December 2016 31 December 2015 FINANCING ACTIVITIES Proceeds from loans and borrowings 936 3,192 Repayments of loans and borrowings (1,741) (727) Financial lease payments (5) (1) Dividends paid (1,232) (2,859) Interest paid (591) (376) Proceeds from sale of a non-controlling interest in a subsidiary 80 – Buy-out of a non-controlling interest in a subsidiary – (31) Sale of own shares from treasury stock 154 – Acquisition of own shares from shareholders – (196) Net cash used in financing activities (2,399) (998)

Net (decrease)/increase in cash and cash equivalents (808) 1,407 Cash and cash equivalents at the beginning of the year 4,054 2,793 Cash and cash equivalents related to assets classified as held for sale at the beginning of the year 38 5 Less: cash and cash equivalents related to assets classified as held for sale at the end of the year (20) (38) Effects of foreign exchange differences on balances of cash and cash equivalents 37 (113) Cash and cash equivalents at the end of the year 3,301 4,054

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-12 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

Equity attributable to shareholders of the parent company Non- Share Treasury Translation Retained controlling Notes Share capital premium shares reserve earnings Total interests Total Balance at 1 January 2015 6 1,254 – (4,787) 8,295 4,768 25 4,793 Profit/(loss) for the year – – – – 1,734 1,734 (18) 1,716 Other comprehensive loss – – – (561) – (561) (6) (567) Total comprehensive income/(loss) for the year – – – (561) 1,734 1,173 (24) 1,149 Dividends 28 – – – – (3,497) (3,497) – (3,497) Non-controlling interest on disposal of assets classified as held for sale – – – – – – 12 12 Acquisition of own shares from shareholders 22 – – (196) – – (196) – (196) Decrease in non-controlling interest due to increase in ownership of a subsidiary – – – – (9) (9) 9 – Balance at 31 December 2015 6 1,254 (196) (5,348) 6,523 2,239 22 2,261

Profit/(loss) for the year – – – – 2,536 2,536 (5) 2,531 Other comprehensive income – – – 570 – 570 4 574 Total comprehensive income/(loss) for the year – – – 570 2,536 3,106 (1) 3,105 Dividends 28 – – – – (1,708) (1,708) – (1,708) Increase in non-controlling interest due to decrease in ownership of a subsidiary 23 – – – – 25 25 55 80 Sale of own shares from treasury stock 22 – – 196 – (38) 158 – 158 Decrease in non-controlling interest due to increase in ownership of a subsidiary – – – – 2 2 (2) – Balance at 31 December 2016 6 1,254 – (4,778) 7,340 3,822 74 3,896

The accompanying notes on pages 12-50 form an integral part of the consolidated financial statements

F-13 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 1. GENERAL INFORMATION Organisation and principal business activities Public Joint-Stock Company “Mining and Metallurgical Company Norilsk Nickel” (the “Company” or “MMC Norilsk Nickel”) was incorporated in the Russian Federation on 4 July 1997. The principal activities of the Company and its subsidiaries (the “Group”) are exploration, extraction, refining of ore and nonmetallic minerals and sale of base and precious metals produced from ore. Further details regarding the nature of the business and structure of the Group are presented in note 34.

Major production facilities of the Group are located in Taimyr and Kola Peninsulas of the Russian Federation, and in Finland.

BASIS OF PREPARATION Statement of compliance The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The entities of the Group maintain their accounting records in accordance with the laws, accounting and reporting regulations of the jurisdictions in which they are incorporated and registered. Accounting principles in certain jurisdictions may differ substantially from those generally accepted under IFRS. Financial statements of such entities have been adjusted to ensure that the consolidated financial statements are presented in accordance with IFRS.

The Group issues a separate set of IFRS consolidated financial statements to comply with the requirements of Russian Federal Law No 208-FZ On consolidated financial statements (“Law 208-FZ”) dated 27 July 2010.

Basis of measurement The consolidated financial statements of the Group are prepared on the historical cost basis, except for:  mark-to-market valuation of by-products, in accordance with IAS 2 Inventories;  mark-to-market valuation of certain classes of financial instruments, in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

F-14 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 2. CHANGES IN ACCOUNTING POLICIES Reclassification At 31 December 2016 management reassessed reclassification between cost of metal sales, cost of other sales and selling and distribution expenses in order to better align cost of sales structure with management accounts and reporting (refer to notes 7 and 8). Information for the year ended 31 December 2015 has been reclassified to conform with the current period presentation. Other certain items presented in the consolidated financial statements were also reclassified to conform with current year presentation. Standards and interpretations effective in the current year In the preparation of these consolidated financial statements the Group has adopted all new and revised International Financial Reporting Standards and Interpretations issued by International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for adoption in annual periods beginning on 1 January 2016. Adoption of an Interpretation and amendments to the existing Standards detailed below did not have significant impact on the accounting policies, financial position or performance of the Group:  IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (amended);  IFRS 7 Financial Instruments: Disclosures (amended);  IFRS 10 Consolidated Financial Statements (amended);  IFRS 11 Joint Arrangements (amended);  IFRS 12 Disclosure of Interests in Other Entities (amended);  IFRS 14 Regulatory Deferral Accounts;  IAS 1 Presentation of Financial Statements (amended);  IAS 16 Property, Plant and Equipment (amended);  IAS 19 Employee Benefits (amended);  IAS 27 Separate Financial Statements (amended);  IAS 28 Investments in Associates and Joint Ventures (amended);  IAS 34 Interim Financial Reporting (amended);  IAS 38 Intangible Assets (amended);  IAS 41 Agriculture (amended). Standards and interpretations in issue but not yet effective At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations or amendments to them were in issue but not yet effective: Effective for annual periods Standards and Interpretations beginning on or after IFRS 1 First-time Adoption of International Financial Reporting Standards (amended) 1 January 2018 IFRS 2 Share-based Payment (amended) 1 January 2018 IFRS 4 Insurance Contracts (amended) 1 January 2018 IFRS 9 Financial Instruments (amended) 1 January 2018 IFRS 12 Disclosure of Interests in Other Entities (amended) 1 January 2017 IFRS 15 Revenue from Contracts with Customers 1 January 2018 IFRS 16 Leases 1 January 2019 IAS 7 Statement of Cash Flows (amended) 1 January 2017 IAS 12 Income Taxes (amended) 1 January 2017 IAS 28 Investments in Associates and Joint Ventures (amended) 1 January 2018 IAS 40 Investment Property (amended) 1 January 2018 Management of the Group plans to adopt all of the above standards and interpretations in the Group’s consolidated financial statements for the respective periods. The impact of adoption of these standards and interpretations on the consolidated financial statements of future periods is currently being assessed by management.

F-15 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 3. SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation Subsidiaries

The consolidated financial statements incorporate financial statements of the Company and its subsidiaries, from the date that control effectively commenced until the date that control effectively ceased. Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests include interests at the date of the original business combination and non-controlling share of changes in net assets since the date of the combination. Total comprehensive income must be attributed to the interest of the Group and to the non- controlling interests even if this results in the non-controlling interests having a deficit balance.

Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.

All intra-group balances, transactions and any unrealised profits or losses arising from intra-group transactions are eliminated in full on consolidation.

Changes in the Group’s ownership interest in a subsidiary that do not result in the Group losing control are accounted for within the equity.

When the Group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the former subsidiary. Any gain or loss is recognised in the consolidated income statement. Any investment retained in the former subsidiary is measured at its fair value at the date when control is lost.

Associates

An associate is an entity over which the Group exercises significant influence, but not control or joint control, through participation in financing and operating policy decisions, in which it normally owns between 20% and 50% of the voting equity. Associates are equity accounted for from the date significant influence commenced until the date that significant influence effectively ceased.

Investments in associates are carried at cost, including goodwill, as adjusted for the Group’s share of post-acquisition changes in associate’s retained earnings and other movements in reserves. The carrying value of investments in associates is reviewed on a regular basis and if any impairment in value has occurred, it is written down in the period in which these circumstances are identified. The results of associates are equity accounted for based on their most recent financial statements after any adjustments necessary to give effect to uniform accounting policies.

Losses of associates are recorded in the consolidated financial statements until the investment in such associates is written down to nil value. Thereafter losses are only accounted for to the extent that the Group is committed to provide financial support to such associates.

Profits and losses resulting from transactions with associates are eliminated to the extent of the Group’s interest in the relevant associates. When significant influence over an associate is lost, any investment retained in the former associate is stated at fair value, with any consequential gain or loss recognised in the consolidated income statement.

F-16 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group at the date of acquisition in exchange for control of the acquiree. Where an investment in a subsidiary or an associate is made, any excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the fair value of the identifiable assets acquired and the liabilities assumed at the acquisition date is recognised as goodwill. Goodwill in respect of subsidiaries is disclosed separately and goodwill relating to associates is included in the carrying value of the investment in associates. Goodwill is reviewed for impairment at least annually. If impairment has occurred, it is recognised in the consolidated income statement during the period in which the circumstances are identified and is not subsequently reversed. If, after reassessment, the net amounts of the identifiable assets acquired and liabilities assumed at the acquisition date exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised in the consolidated income statement immediately as a bargain purchase gain. Acquisition-related costs are recognised in the consolidated income statement as incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are retrospectively adjusted during the measurement period (a maximum of twelve months from the date of acquisition), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. Assets classified as held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered primarily through a sale transaction rather than through continuing use. This condition is ordinarily regarded as met when sale is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition and management has committed to the sale. Non-current assets and disposal groups classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Assets held for sale and related liabilities are presented in the consolidated statement of financial position separately from other assets and liabilities. Comparative information related to assets held for sale is not amended in the consolidated statement of financial position for the prior period. Functional and presentation currency The individual financial statements of each Group entity are presented in its functional currency. The Russian Rouble (“RUB”) is the functional currency of the Company, all of its subsidiaries located in the Russian Federation and all foreign subsidiaries of the Group, except for the following subsidiaries operating with a significant degree of autonomy. The functional currency of Norilsk Nickel Harjavalta Oy is US Dollar, and the functional currency of Norilsk Nickel Africa Proprietary Limited is South African Rand.

F-17 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million The presentation currency of the consolidated financial statements of the Group is US Dollar (“USD”). Using USD as a presentation currency is common practice for global mining companies. In addition, USD is a more relevant presentation currency for international users of the consolidated financial statements of the Group. The Group also issues consolidated financial statements to comply with Law 208-FZ, which use the Russian Rouble as the presentation currency (refer to note 1).

The translation of components of the consolidated statement of financial position, consolidated income statement, consolidated statement of cash flows into presentation currency is made as follows:  all assets and liabilities, both monetary and non-monetary, in the consolidated statement of financial position are translated at the closing exchange rates at the end of the respective reporting period;  income and expense are translated at the average exchange rates for each quarter (unless this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in these cases income and expenses are translated at the dates of the transaction);  all equity items are translated at the historical exchange rates at the dates of the transaction;  all resulting exchange differences are recognised as a separate component in other comprehensive income; and  in the consolidated statement of cash flows, cash balances at beginning and end of each period presented are translated at exchange rates at the respective dates;  all cash flows are translated at the average exchange rates for the periods presented with the exception of borrowings, dividends and advances received, gains and losses from disposal of subsidiaries, which are translated using the prevailing exchange rates at the dates of the transactions;  resulting exchange differences are presented in the consolidated statement of cash flows as effects of foreign exchange differences on balances of cash and cash equivalents. Foreign currency transactions Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the exchange rates prevailing at the date of transactions. All monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at each reporting date. Non-monetary items carried at historical cost are translated at the exchange rates prevailing at the date of transactions. Non-monetary items carried at fair value are translated at the exchange rate prevailing at the date on which the most recent fair value was determined. Exchange differences arising from changes in exchange rates are recognised in the consolidated income statement. Exchange rates used in the preparation of the consolidated financial statements were as follows:

At 31 December At 31 December 2016 2015

Russian Rouble/US Dollar 31 December 60.66 72.88 Average for the year ended 31 December 67.03 60.96

South African Rand/US Dollar 31 December 13.78 15.55 Average for the year ended 31 December 14.68 12.69

Australia Dollar/US Dollar 31 December 1.39 1.37 Average for the year ended 31 December 1.34 1.33

Hong Kong dollar/US Dollar 31 December 7.75 7.75 Average for the year ended 31 December 7.76 7.75

F-18 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million Revenue recognition Metal sales revenue Revenue from metal sales is recognised when the significant risks and rewards of ownership are transferred to the buyer and represents invoiced value of all metal products shipped to customers, net of value added tax. Revenue from contracts that are entered into and continue to meet the Group’s expected sale requirements designated for that purpose at their inception, and are expected to be settled by physical delivery, are recognised in the consolidated financial statements as and when they are delivered. Certain contracts are provisionally priced so that price is not settled until a predetermined future date based on the market price at that time. Revenue from these transactions is initially recognised at the current market price. Provisionally priced metal sales are marked-to-market at each reporting date using the forward price for the period equivalent to that outlined in the contract. This mark-to-market adjustment is recorded in revenue. Other revenue Revenue from sale of goods, other than metals, is recognised when significant risks and rewards of ownership are transferred to the buyer in accordance with the shipping terms specified in the sales agreements. Revenue from service contracts is recognised when the services are rendered and the outcome can be reliably measured. Dividends and interest income Dividends from investments are recognised when the Group’s right to receive payment has been established. Interest income is accrued based on effective interest method. Leases Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance leases are capitalised as property, plant and equipment at the lower of fair value or present value of future minimum lease payments at the date of acquisition. Simultaneously, related lease obligation is recognised at the same value. Assets held under finance leases are depreciated over their estimated economic useful lives or over the term of the lease, if shorter. If there is reasonable certainty that the lessee will obtain ownership at the end of the lease term, the period of expected use is the useful life of the asset. Finance lease payments are allocated using the effective interest rate method, between the lease finance cost, which is included in finance costs, and the capital repayment, which reduces the related lease obligation to the lessor. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating and finance leases are expensed in the period in which they are incurred. Finance costs Finance costs mostly comprise interest expense on borrowings and unwinding of discount on decommissioning obligations. Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

F-19 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

Government grants Government grants are recognised when there is reasonable assurance that the grant will be received and all conditions and requirements attaching to the grant will be met. Government grants related to assets are deducted from the cost of these assets in arriving at their carrying value.

Employee benefits Remuneration to employees in respect of services rendered during a reporting period is recognised as an expense in that period. Long term employee benefits obligations are discounted to net present value.

Defined contribution plans

The Group contributes to the following major defined contribution plans:  Pension Fund of the Russian Federation;  Mutual accumulated pension plan.

The only obligation of the Group with respect to these and other defined contribution plans is to make specified contributions in the period in which they arise. These contributions are recognised in the consolidated income statement when employees have rendered services entitling them to the contribution.

Income tax expense Income tax expense represents the sum of the tax currently payable and deferred tax.

Income tax is recognised as an expense or income in the consolidated income statement, except when it relates to other items recognised directly in other comprehensive income, in which case the tax is also recognised directly in other comprehensive income. Where current or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Current tax

Deferred tax

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

F-20 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and adjusted to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

The measurement of deferred tax liabilities and assets reflects the tax consequences of the manner in which the Group expects at the reporting date to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority. The Group offsets deferred tax assets and liabilities for the subsidiaries which entered into the tax consolidation group.

Property, plant and equipment and mine development costs Mining assets Mine development costs are capitalised and comprise expenditures directly related to:  acquiring mining and exploration licences;  developing new mining operations;  estimating revised content of minerals in the existing ore bodies; and  expanding capacity of a mine.

Mine development costs include interest capitalised during the construction period, when financed by borrowings.

Mine development costs are transferred to mining assets and start to be depreciated when a new mine reaches commercial production quantities.

Mining assets are recorded at cost less accumulated amortisation and impairment losses. Mining assets include cost of acquiring and developing mining properties, pre-production expenditure, mine infrastructure, plant and equipment that process extracted ore, mining and exploration licenses and present value of future decommissioning costs.

Depreciation of mining assets is charged from the date on which a new mine reaches commercial production quantities and is included in the cost of production. Carrying value of mining assets is depreciated on a straight-line basis over the lesser of their remaining economic useful lives or remaining life of mine that they relate to, calculated on the basis of the amount of proven and probable ore reserves. When determining the life of mine, assumptions valid at the time of estimation may change in case new information becomes available. Useful lives are in average varying from 2 to 45 years.

Non-mining assets

Non-mining assets are depreciated on a straight-line basis over their economic useful lives.

Depreciation is calculated over the following economic useful lives:  buildings, structures and utilities 5 – 50 years  machinery, equipment and transport 3 – 30 years  other non-mining assets 2 – 20 years

Capital construction-in-progress

Capital construction-in-progress comprises costs directly related to construction of buildings, processing plant, infrastructure, machinery and equipment, including:  advances given for purchases of property, plant and equipment and materials acquired for construction of buildings, processing plant, infrastructure, machinery and equipment;  irrevocable letters of credit opened for future fixed assets deliveries and secured with deposits placed in banks;  finance charges capitalised during construction period where such costs are financed by borrowings.

Depreciation of these assets commences when the assets are put into production.

F-21 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

Research and exploration expenditure Research and exploration expenditure, including geophysical, topographical, geological and similar types of expenditure, is capitalised, if it is deemed that such expenditure will lead to an economically viable capital project, and begins to be amortised over the life of mine, when commercial viability of the project is proved. Otherwise it is expensed in the period in which it is incurred.

Research and exploration expenditure written-off before development and construction starts is not subsequently capitalised, even if a commercial discovery subsequently occurs.

Investment property Investment property recognised at historical cost less accumulated depreciation. Investment property is depreciated on a straignt-line basis.

Intangible assets, excluding goodwill Intangible assets are recorded at cost less accumulated amortisation and impairment losses. Intangible assets mainly include patents, licences, software and rights to use software and other intangible assets.

Amortisation of patents, licenses and software is charged on a straight-line basis over 1 – 10 years.

Impairment of tangible and intangible assets, excluding goodwill At each reporting date, the Group analyses the triggers of impairment of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not practical to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less cost to sell and value-in-use. 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 or cash- generating unit. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the consolidated income statement immediately.

Inventories Refined metals Main produced metals include nickel, copper, palladium, platinum; by-products include gold, rhodium, silver and other minor metals. Main products are measured at the lower of net cost of production or net realisable value. The net cost of production of main products is determined as total production cost, allocated to each joint product by reference to their relative sales value. By-products are measured at net realisable value, through a mark-to-market valuation.

Work-in-process Work-in-process includes all costs incurred in the normal course of business including direct material and direct labour costs and allocation of production overheads, depreciation and amortisation and other costs, incurred for producing each product, given its stage of completion.

F-22 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million Materials and supplies

Materials and supplies are valued at the weighted average cost less provision for obsolete and slow-moving items.

Financial assets Financial assets are recognised when the Group has become a party to the contractual arrangement of the instrument and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories:  financial assets at fair value through profit or loss  held-to-maturity investments;  available-for-sale financial assets; and  loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest basis for debt securities other than those financial assets designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss where the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:  it has been acquired principally for the purpose of selling in the near future; or  it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or  it is a derivative.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in the consolidated income statement. The net gain or loss recognised in the consolidated income statement incorporates any dividend or interest earned on the financial asset.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments which are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Available-for-sale financial assets Available-for-sale financial assets mainly include investments in listed and unlisted equity securities, that are not classified in other categories.

F-23 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million . Listed equity securities held by the Group that are traded in an active market are measured at their market value. Gains and losses arising from changes in fair value are recognised in other comprehensive income in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the consolidated income statement. Where an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investment revaluation reserve is included in the consolidated income statement for the period.

Investments in unlisted equity securities that do not have a quoted market price in an active market are recorded at management’s estimate of fair value.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively impacted.

The Group has fully provided for all trade and other receivables which were due in excess of 365 days. Trade and other receivables that are past due for less than 365 days are provided according to expected probability of repayment and the length of the overdue period.

Objective evidence of impairment for a accounts receivable could include the Group’s past experience of collecting payments, an increase in the number of delayed payments as well as observable changes in economic conditions that correlate with defaults on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an provision for doubtful debts. When trade and other receivables are considered uncollectible, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited against the provision. Changes in the provision are recognised in the consolidated income statement.

With the exception of available-for-sale debt and equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the consolidated income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

When a decline in fair value of an available-for-sale investment has been recognised in other comprehensive income and there is objective evidence that investment is impaired, the cumulative loss that had been recognised in other comprehensive income is reclassified from other comprehensive income and recognised in the consolidated income statement even though the investment has not been derecognised. Impairment losses previously recognised through consolidated income statement are not reversed. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

F-24 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities The Group classifies financial liabilities into loans and borrowings, trade and other payables. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate, a shorter period.

Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Cash and cash equivalents Cash and cash equivalents comprise cash balances, cash deposits in banks, brokers and other financial institutions and highly liquid investments with original maturities of three months or less and on demand deposits, which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of past events for which it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Decommissioning obligations Decommissioning obligations include direct asset decommissioning costs as well as related land restoration costs.

Future decommissioning and other related obligations, discounted to net present value, are recognised at the moment when the legal or constructive obligation in relation to such costs arises (generally when the related asset is put into operation) and the future cost can be reliably estimated. This cost is capitalised as part of the initial cost of the related asset (i.e. a mine) and is depreciated over the useful life of the asset. The unwinding of the discount on decommissioning obligations is included in the consolidated income statement as finance costs. Decommissioning obligations are periodically reviewed in light of current laws and regulations, and adjustments are made as necessary.

F-25 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCE OF ESTIMATION UNCERTAINTY Preparation of the consolidated financial statements in accordance with IFRS requires the Group’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires judgements which are based on historical experience, current and expected economic conditions, and all other available information. Actual results could differ from these estimates.

The most significant areas requiring the use of management estimates and assumptions relate to:  useful economic lives of property, plant and equipment;  impairment of assets, including fair value of assets held for sale;  provisions;  decommissioning obligations;  income taxes; and  contingencies.

Useful economic lives of property, plant and equipment Carrying value of the Group’s mining assets, classified within property, plant and equipment, is amortised on a straight-line basis over the lesser of their remaining economic useful lives or remaining life of mine. When determining the life of a mine, valid assumptions at the time of estimation may change in case of new information becomes available.

The factors that could affect the estimation of the life of mine include the following:  changes in proved and probable ore reserves;  the grade of mineral reserves varying significantly from time to time;  differences between actual commodity prices and commodity price assumptions used in the estimation and classification of ore reserves;  unforeseen operational issues at mine sites; and  changes in capital, operating, mining, processing and decommissioning costs, discount rates and foreign exchange rates could possibly adversely affect the economic viability of ore reserves.

Any of these changes could affect prospective amortisation of mining assets and their carrying value. Useful economic lives of non-mining property, plant and equipment are reviewed by management periodically. The review is based on the current condition of the assets and the estimated period during which they will continue to bring economic benefit to the Group.

Impairment of assets The Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets are impaired or indication of reversal of impairment. In making the assessment for impairment, assets that do not generate independent cash flows are allocated to an appropriate cash-generating unit. Management necessarily applies its judgement in allocating assets that do not generate independent cash flows to appropriate cash-generating units, and also in estimating the timing and value of the underlying cash flows within the value-in-use calculation. Subsequent changes to the cash- generating unit allocation or to the timing of cash flows could impact the carrying value of the respective assets.

F-26 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

Provisions The Group creates provision for doubtful debts to account for estimated losses resulting from the inability of customers to make the required payments. When evaluating the adequacy of a provision for doubtful debts, management bases its estimate on current overall economic conditions, ageing of the accounts receivable balances, historical write-off experience, customer creditworthiness and changes in payment terms. Changes in the economy, industry or specific customer conditions may require adjustments to the provision for doubtful debts recorded in the consolidated financial statements.

The Group also creates a provision for obsolete and slow-moving raw materials and supplies. In addition, certain finished goods of the Group are carried at net realisable value. Estimates of net realisable value of inventories are based on the most reliable evidence available at the time the estimates are made. These estimates take into consideration fluctuations of price or cost directly relating to events occurring subsequent to the statement of financial position date to the extent that such events confirm conditions existing at the end of the period.

The Group creates a provision for social commitments. The provision represents present value of the best estimate of the future outflow of economic benefits to settle these obligations.

Decommissioning obligations The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates decommissioning obligations based on management’s understanding of the current legal requirements in the various jurisdictions in which it operates, terms of the license agreements and internally generated engineering estimates. Provision is made, based on net present values, for decommissioning and land restoration costs as soon as the obligation arises. Actual costs incurred in future periods could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision.

Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining provision for income taxes due to the complexity of legislation in some jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Deferred tax assets are reviewed at each statement of financial position date and adjusted to the extent that it is probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be utilised. The estimation of that probability includes judgements based on the expected performance.

Various factors are considered to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plans, expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position, results of operations and cash flows may be affected.

Contingencies By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events.

F-27 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 5. SEGMENTAL INFORMATION Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the Management Board.

Management has determined the following operating segments:  “GMK Group” segment, which includes mining and metallurgy operations, transport services, energy, repair and maintenance services located at Taimyr Peninsula;  “Group KGMK” segment, which includes mining and metallurgy operations, energy, exploration activities located at Kola Peninsula;  “NN Harjavalta” segment, which includes refinery operations located in Finland;  “Other metallurgical” segment, which includes operations of Bystrinskoye project, other metallurgy operations and exploration activities located in Russia and abroad;  “Other non-metallurgical” segment, which includes metal and other trading, supply chain management, transport services, energy and utility, research and other activities located in Russia and abroad.

Corporate activities of the Group do not represent an operating segment, include primarily headquarters’ general and administrative expenses and treasury operations of the Group and are presented as “Unallocated”, together with assets classified as held for sale and liabilities associated with assets classified as held for sale.

The amounts in respect of reportable segments in the disclosure below are stated before intersegment eliminations, excluding:  balances of intercompany loans and borrowings and interest accruals;  intercompany investments;  accrual of intercompany dividends;  intercompany metal sales.

Amounts are measured on the same basis as those in the consolidated financial statements. Information for the year ended 31 December 2015 has been presented to conform with the current year presentation.

The following tables present revenue, measure of segment profit or loss (EBITDA) and other segmental information from continuing operations regarding the Group’s reportable segments for the years ended 31 December 2016 and 31 December 2015, respectively.

Other Other For the year ended GMK Group NN metallur- non-metal- Elimi- 31 December 2016 Group KGMK Harjavalta gical lurgical nations Total Revenue from external customers 5,981 465 727 7 1,079 – 8,259 Inter-segment revenue 213 199 – – 620 (1,032) – Total revenue 6,194 664 727 7 1,699 (1,032) 8,259 Segment EBITDA 3,883 117 45 (11) 119 112 4,265 Unallocated (366) Consolidated EBITDA 3,899 Depreciation and amortisation (557) Impairment of non-financial assets (61) Finance costs (453) Foreign exchange gain, net 485 Other income and expenses, net (37) Profit before tax 3,276

Other segmental information Purchase of property, plant and equipment and intangible assets 1,284 93 16 269 33 – 1,695 Depreciation and amortisation 435 41 28 – 23 30 557 Impairment of non- financial assets 50 2 – – 9 – 61

F-28 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 5. SEGMENTAL INFORMATION (CONTINUED)

Other Other For the year ended GMK Group NN metallur- non-metal- Elimi- 31 December 2015 Group KGMK Harjavalta gical lurgical nations Total Revenue from external customers 6,532 615 757 17 621 – 8,542 Inter-segment revenue 58 158 – 13 561 (790) – Total revenue 6,590 773 757 30 1,182 (790) 8,542 Segment EBITDA 4,429 257 63 (12) (81) 26 4,682 Unallocated (386) Consolidated EBITDA 4,296 Depreciation and amortisation (506) Impairment of property, plant and equipment (284) Finance costs (326) Foreign exchange loss, net (865) Other income and expenses, net (71) Profit before tax 2,244

Other segmental information Purchase of property, plant and equipment and intangible assets 1,353 146 24 100 31 – 1,654 Depreciation and amortisation 418 37 42 1 34 (26) 506 Impairment of non- financial assets 272 – – 11 1 – 284

The following tables present assets and liabilities of the Group’s operating segments at 31 December 2016 and 31 December 2015, respectively.

Other Other GMK Group NN metallur- non-metal- Elimi- At 31 December 2016 Group KGMK Harjavalta gical lurgical nations Total Inter-segment assets 296 79 160 15 49 (599) – Segment assets 9,922 768 383 802 793 (111) 12,557 Total segment assets 10,218 847 543 817 842 (710) 12,557 Unallocated 3,900 Total assets 16,457 Inter-segment liabilities 113 87 77 27 295 (599) – Segment liabilities 2,241 113 102 200 862 – 3,518 Total segment liabilities 2,354 200 179 227 1,157 (599) 3,518 Unallocated 9,043 Total liabilities 12,561

Other Other GMK Group NN metallur- non-metal- Elimi- At 31 December 2015 Group KGMK Harjavalta gical lurgical nations Total Inter-segment assets 344 90 128 23 137 (722) – Segment assets 6,949 510 346 317 985 (171) 8,936 Total segment assets 7,293 600 474 340 1,122 (893) 8,936 Unallocated 4,435 Total assets 13,371 Inter-segment liabilities 178 17 1 4 522 (722) – Segment liabilities 1,020 78 69 157 740 – 2,064 Total segment liabilities 1,198 95 70 161 1,262 (722) 2,064 Unallocated 9,046 Total liabilities 11,110 The Group’s non-current assets are primarily located in the Russian Federation and Finland.

F-29 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 6. METAL SALES The Group’s metal sales to external customers are detailed below (based on external customers’ locations):

For the year ended Semi- Other 31 December 2016 Total Nickel Copper Palladium Platinum products metals Europe 4,394 1,143 1,544 821 420 123 343 Asia 1,723 1,104 1 478 26 92 22 North and South America 737 222 – 488 – 1 26 Russian Federation and CIS 792 156 294 101 208 – 33 7,646 2,625 1,839 1,888 654 216 424

For the year ended 31 December 2015 Europe 4,698 1,453 1,448 1,182 327 72 216 Asia 2,110 1,153 249 384 180 109 35 North America 613 232 22 209 76 12 62 Russian Federation and CIS 462 172 197 32 48 – 13 7,883 3,010 1,916 1,807 631 193 326

7. COST OF METAL SALES

For the year ended For the year ended 31 December 2016 31 December 2015 Cash operating costs Labour 1,145 1,131 Purchases of metals for resale, raw materials and semi-products 555 718 Materials and supplies 520 459 Third party services 170 186 Mineral extraction tax and other levies 122 128 Electricity and heat energy 101 108 Transportation expenses 89 75 Fuel 60 66 Sundry costs 143 126 Total cash operating costs 2,905 2,997 Depreciation and amortisation 456 476 Decrease/(increase) in metal inventories 290 (308) Total 3,651 3,165

8. SELLING AND DISTRIBUTION EXPENSES

For the year ended For the year ended 31 December 2016 31 December 2015 Export duties 61 78 Staff costs 13 19 Marketing expenses 7 15 Transportation expenses 5 8 Other 7 9 Total 93 129

F-30 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 9. GENERAL AND ADMINISTRATIVE EXPENSES

For the year ended For the year ended 31 December 2016 31 December 2015 Staff costs 376 352 Taxes other than mineral extraction tax and income tax 58 54 Third party services 55 55 Depreciation and amortisation 20 19 Rent expenses 19 19 Transportation expenses 6 4 Other 47 51 Total 581 554

10. OTHER NET OPERATING EXPENSES

For the year ended For the year ended 31 December 2016 31 December 2015 Social expenses 111 114 Change in provision for reconfiguration of production facilities (33) 116 Change in allowance for doubtful debts 14 (3) Change in allowance for obsolete and slow-moving inventory (2) 5 Change in allowance for value added tax recoverable 2 4 Other (8) 52 Total 84 288

11. FINANCE COSTS

For the year ended For the year ended 31 December 2016 31 December 2015 Interest expense on borrowings net of amounts capitalised 403 281 Unwinding of discount on provisions 46 44 Other 4 1 Total 453 326

12. INCOME FROM INVESTMENTS, NET

For the year ended For the year ended 31 December 2016 31 December 2015 Interest income on bank deposits 78 107 Realised gain on disposal of investments 4 75 Other 32 33 Total 114 215

F-31 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 13. INCOME TAX EXPENSE

For the year ended For the year ended 31 December 2016 31 December 2015 Current income tax expense 686 506 Deferred tax expense 59 22 Total 745 528

A reconciliation of theoretic income tax, calculated at the statutory rate in the Russian Federation, the location of major production assets of the Group, to the amount of actual income tax expense recorded in the consolidated income statement is as follows:

For the year ended For the year ended 31 December 2016 31 December 2015 Profit before tax 3,276 2,244 Income tax at statutory rate of 20% 655 449 Allowance for deferred tax assets 18 18 Non-deductible impairment of financial and non-financial assets 41 53 Utilisation of previously unrecognised deferred tax asset – (96) Non-taxable gain from disposal of financial assets – (14) Non-deductible loss from disposal of assets held for sale – 59 Non-deductible social expenses 31 32 Effect of different tax rates of subsidiaries operating in other jurisdictions (27) 37 Tax effect of other permanent differences 27 (10) Total 745 528

The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 40%.

Deferred tax balances

Effect of Recognised translation to At 31 December in income Classified as presentation At 31 December 2015 statement held for sale currency 2016 Property, plant and 201 58 – 41 300 Inventoriesequipment 92 (6) – 17 103 Trade and other receivables (8) (2) – (4) (14) Decommissioning (61) (4) – (13) (78) Loansobligations and borrowings, trade and other payables (16) (9) – (8) (33) Other assets (9) (2) – 2 (9) Other liabilities 5 – – 2 7 Tax loss carried forward (41) 24 – (12) (29) Net deferred tax liabilities 163 59 – 25 247

F-32 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

13. INCOME TAX EXPENSE (CONTINUED)

Effect of Recognised translation to At 31 December in income Classified as presentation At 31 December 2014 statement held for sale currency 2015 Property, plant and 228 24 – (51) 201 Inventoriesequipment 39 73 – (20) 92 Trade and other receivables (9) (1) – 2 (8) Decommissioning (56) (20) – 15 (61) Loansobligations and borrowings, trade and other payables (5) (16) – 5 (16) Other assets (15) (1) – 7 (9) Other liabilities – 10 – (5) 5 Tax loss carried forward (19) (47) 10 15 (41) Net deferred tax liabilities 163 22 10 (32) 163

Certain deferred tax assets and liabilities have been offset to the extent they relate to taxes levied on the Group’s entities which entered into the tax consolidation group. Deferred tax balances (after offset) presented in the consolidated statement of financial position were as follows:

At 31 December At 31 December 2016 2015 Deferred tax liability 303 205 Deferred tax asset (56) (42) Net deferred tax liabilities 247 163

Unrecognised deferred tax assets Deferred tax assets have not been recognised as follows:

At 31 December At 31 December 2016 2015 Deductible temporary differences 90 78 Tax loss carry-forwards 214 187 Total 304 265

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom. At 31 December 2016 deferred tax asset in amount of USD 166 million related to tax loss arising on disposal of OJSC “Third Generation Company of the Wholesale Electricity Market” (“OGK-3”) (31 December 2015: USD 138 million) was not recognised as it was incurred by the Company prior to setting up of the tax consolidation group. This deferred tax asset can be utilized only if the Company exits the tax consolidation group without expiry (2015: within nine years after the exit). Unrecognised deferred tax assets in the amount of USD 48 million related to other tax losses will not expire and can be utilized according to specific rules stated by art. 283 of the Tax code of the Russian Federation (31 December 2015: USD 49 million – expire in ten years). During the year ended 31 December 2015 previously unrecognised deferred tax assets arising on an impairment of available-for-sale investments in securities in amount of USD 96 million was utilised, following the changes in tax legislation. At 31 December 2016, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 1,104 million (31 December 2015: USD 1,191 million) associated with investments in subsidiaries, because management believes that it is in a position to control the timing of reversal of such differences and does not expect its reversal in foreseeable future.

F-33 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 14. PROPERTY, PLANT AND EQUIPMENT

Non-mining assets

Mining assets and mine Buildings, Machinery, Capital development structures equipment construction-in- cost and utilities and transport Other progress Total Cost Balance at 1 January 2015 5,042 2,222 2,850 5 1,276 11,395 Additions 1,032 – – – 832 1,864 Reclassified between groups 39 (2) (101) 89 (25) – Transfers – 165 234 10 (409) – Change in decommissioning provision 63 25 – – – 88 Reclassified from assets held for sale 104 (3) (2) 30 9 138 Reclassified to investment property – (8) (2) (2) – (12) Disposals (106) (10) (73) (2) (17) (208) Effect of translation to presentation currency (1,299) (506) (587) (28) (358) (2,778) Balance at 31 December 2015 4,875 1,883 2,319 102 1,308 10,487 Additions 1,214 – – – 673 1,887 Reclassified between groups (49) 7 (37) 26 53 – Transfers – 450 363 58 (871) – Change in decommissioning provision (18) 5 – – – (13) Disposals (58) (11) (100) (7) (31) (207) Effect of translation to presentation currency 1,077 379 431 30 256 2,173 Balance at 31 December 2016 7,041 2,713 2,976 209 1,388 14,327 Accumulated depreciation and impairment Balance at 1 January 2015 (1,742) (977) (1,527) (1) (137) (4,384) Charge for the year (180) (150) (222) (8) – (560) Reclassified between groups (32) (5) 86 (49) – – Reclassified from assets held for sale (83) 2 5 – (12) (88) Disposals 98 7 67 2 14 188 Impairment loss (7) (124) (8) – (145) (284) Effect of translation to presentation currency 428 235 322 12 36 1,033 Balance at 31 December 2015 (1,518) (1,012) (1,277) (44) (244) (4,095) Charge for the year (213) (91) (201) (14) – (519) Reclassified between groups (11) 2 14 (5) – – Disposals 46 7 90 3 19 165 Impairment loss (7) (70) (2) – 18 (61) Effect of translation to presentation currency (309) (209) (242) (10) (41) (811) Balance at 31 December 2016 (2,012) (1,373) (1,618) (70) (248) (5,321) Carrying value At 31 December 2015 3,357 871 1,042 58 1,064 6,392 At 31 December 2016 5,029 1,340 1,358 139 1,140 9,006

F-34 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) At 31 December 2016 capital construction-in-progress included USD 87 million of irrevocable letters of credit opened for fixed assets purchases (31 December 2015: USD 107 million), representing security deposits placed in banks. For the year ended 31 December 2016 purchases of property, plant and equipment in the consolidated statement of cash flows include USD 78 million related to these irrevocable letters of credit (for the year ended 31 December 2015: USD 103 million).

Capitalised borrowing costs for the year ended 31 December 2016 amounted to USD 202 million (for the year ended 31 December 2015: USD 153 million). Capitalisation rate used to determine the amount of borrowing costs equals to 6.59% per annum (2015: 5.14%).

At 31 December 2016 mining assets and mine development cost included USD 2,994 million of mining assets under development (31 December 2015: USD 2,026 million).

Impairment During the year ended 31 December 2015 the Group revised its intention on the further use of the gas extraction assets. As a result, these assets were assessed as a separate cash generating unit. At 31 December 2015 the Group identified indicators of the impairment of gas production assets and determined their recoverable amount based on the value-in-use estimate. As a result, impairment loss in the amount of USD 266 million was recognised in Impairment of non-financial assets in the consolidated income statement.

At 31 December 2016 indicators of additional impairment of gas production assets have been identified. The most significant estimates and assumptions used in determination of value in use are as follows:

 Future cash flows were projected based on budgeted amounts, taking into account actual results for the previous years. Forecasts were assessed up to 2100. Measurements were performed based on discounted cash flows expected to be generated by gas production assets.  Management estimates prices for natural gas and gas concentrate based on commodities price forecasts. Commodities price forecast was based on consensus forecast.  Production forecasts were primarily based on internal production reports available at the date of impairment test and management’s assumptions regarding future production levels.  The amounts and timing of capital investments were based on management’s forecast.  Inflation indices and foreign currency rate forecasts were sourced from Economist Intelligence Unit report. Inflation used was projected within 4-6%. Forecast for exchange rates was made based on expected RUR and USD inflation indices.  A pre-tax nominal RUR discount rate of 17.4% was estimated by the reference to the weighted average cost of capital for the Group and reflects management’s estimates of the risks specific to production units.

As a result, impairment loss in the amount of USD 50 million was recognised in Impairment of non- financial assets in the consolidated income statement.

During the year ended 31 December 2016 additional impairment losses in the amount of USD 11 million (for the year ended 31 December 2015: USD 18 million) were recognised in respect of specific individual assets, primarily non-mining assets.

15. INVESTMENT PROPERTY At 31 December 2016 investment property is recognised in the consolidated statement of financial position at historical cost less accumulated depreciation in the amount of USD 93 million (31 December 2015: USD 83 million). Carrying value of investment property approximates to its fair value.

F-35 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 16. OTHER FINANCIAL ASSETS

At 31 December At 31 December 2016 2015 Non-current Loans issued and other receivables 173 57 Bank deposits 10 5 Available-for-sale investments 4 – Total non-current 187 62

Current Loans issued and other receivables 6 1 Derivative financial instruments 2 – Total current 8 1 Available-for-sale investments in securities During the year ended 31 December 2016, the Group fully impaired an interest in a related party which owns various real estate properties. Impairment loss was recognised in the consolidated income statement.

During the year ended 31 December 2015 the Group sold its 12.35% stake in PJSC Inter RAO for the total consideration in the amount of USD 204 million. Gain on disposal in the amount of USD 75 million was recognised in the consolidated income statement.

Bank deposits Interest rate on long-term RUB-denominated deposits held in banks was 5.10% (31 December 2015: 5.10%) per annum.

17. OTHER TAXES

At 31 December At 31 December 2016 2015 Taxes receivable Value added tax recoverable 242 186 Other taxes 36 14 278 200 Less: Allowance for value added tax recoverable – (1) Total 278 199 Less: Non-current portion of other taxes receivable (2) – Other taxes receivable 276 199

Taxes payable Value added tax 70 45 Social security contributions 27 23 Property tax 18 10 Mineral extraction tax 11 7 Other 12 10 Other taxes payable 138 95

F-36 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 18. INVENTORIES

At 31 December At 31 December 2016 2015 Refined metals 310 541 Work-in-process 894 663 Total metal inventories 1,204 1,204

Materials and supplies 718 520 Less: Allowance for obsolete and slow-moving items (27) (26) Net materials and supplies 691 494 Inventories 1,895 1,698 In December 2016 the Group acquired metal semi-products stock of USD 891 million. Part of metal semi- products stock in the amount of USD 810 million was presented in other non-current assets according to production plans. Accounts payable were recognised at fair value using market discount rate in accordance with four-year maturity. Part of accounts payable was presented in trade and other long-term payables according to maturity profiles of liabilities.

19. TRADE AND OTHER RECEIVABLES

At 31 December At 31 December 2016 2015 Trade receivables from metal sales 95 86 Other receivables 156 135 251 221 Less: Allowance for doubtful debts (81) (54) Trade and other receivables, net 170 167 In 2016 and 2015, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest bearing. At 31 December 2016 and 2015, there were no material trade accounts receivable which were overdue or individually determined to be impaired. The average credit period on sales of other products and services for the year ended 31 December 2016 was 32 days (2015: 27 days). No interest was charged on these receivables. Included in the Group’s other receivables at 31 December 2016, were debtors with a carrying value of USD 45 million (31 December 2015: USD 45 million) that were past due but not impaired. Management of the Group believes that these amounts are recoverable in full. The Group did not hold any collateral for accounts receivable balances. Ageing of other receivables past due but not impaired was as follows: At 31 December At 31 December 2016 2015 Less than 180 days 41 34 180-365 days 4 11 45 45 Movement in the allowance for doubtful debts was as follows:

At 31 December At 31 December 2016 2015 Balance at beginning of the year 54 92 Change in allowance 14 (3) Accounts receivable written-off (2) (16) Effect of translation to presentation currency 15 (19) Balance at end of the year 81 54

F-37 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 20. CASH AND CASH EQUIVALENTS

At 31 December At 31 December 2016 2015 Current accounts - foreign currencies 372 525 - RUB 58 43 Bank deposits - foreign currencies 1,739 2,598 - RUB 1,119 879 Other cash and cash equivalents 13 9 Total 3,301 4,054

21. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES In December 2013, the Group made a decision to dispose of the following assets:  Nkomati Nickel Mine, a South Africa mining company, an associate of the Group;  assets located in Western Australia;  certain other non-core assets located in the Russian Federation. During the year ended 31 December 2014, management of the Group made a decision to dispose of Tati Nickel Mining Company (“TNMC”), a subsidiary of the Group, located in Botswana. During the year ended 31 December 2015, management of the Group made a decision to dispose of OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian Federation. During the year ended 31 December 2015, management of the Group made a decision to reclassify certain other non-core assets located in the Russian Federation from assets classified as held for sale to investment property (refer to note 15) or to the assets classified as held for use. Reclassification does not have significant effect on operations of the Group. All of the above assets have been measured at the lower of their fair values less costs to sell and their carrying values. The Group has assessed fair value of assets classified as held for sale at 31 December 2015 based on price offers available. Management of the Group concluded that the sale of assets in South Africa and disposal of other assets classified as held for sale referred to above does not constitute discontinued operations. At 31 December 2016 and 31 December 2015 aggregate net assets included:

At 31 December At 31 December 2016 2015

Property, plant and equipment – 7 Investments in associates 177 154 Deferred tax assets 9 10 Trade and other receivables – 3 Other financial assets – 1 Cash and cash equivalents 20 42 Total assets 206 217

Deferred tax liabilities – (1) Employee benefit obligations (1) (1) Loans and borrowings – (21) Trade and other payables (1) (1) Total liabilities (2) (24) Net assets 204 193

F-38 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

21. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES (CONTINUED)

On 17 October 2014, the Group entered into binding agreements to sell its assets in South Africa, comprising its 50% participation interest in Nkomati Nickel Mine (“Nkomati”) and its 85% stake in Tati Nickel Mining Company (together “African assets”) to BCL Investments (“BCL”). The total consideration for the assets amounts to USD 337 million subject to certain adjustments under agreement. Under the terms of the agreements, the buyers will assume all attributable decommissioning rehabilitation obligations related to the assets. On 2 April 2015, the Group sold its 85% stake in TNMC. The carrying value of the Group’s share in net assets including decommissioning obligations at the date of disposal was negative in the amount of USD 20 million. Financial result from the disposal includes the negative impact due to write down of the historical amount of the foreign currency translation reserve representing cumulative exchange differences between the presentation currency – the US dollar and the Botswana Pula. Finalisation of sale of Nkomati was subject to completion of conditions precedent, which was achieved in September 2016. However, BCL failed to meet its obligations according to the agreement and was put into a voluntary liquidation. The Group has filed legal claims against BCL in Botswana and LCIA to enforce sale of Nkomati. Notwithstanding these circumstances management actively pursues its interests under the agreement and believes Nkomati should be classified as held for sale as of 31 December 2016. As at 31 December 2016, the Group accounts for Nkomati at the lower of its carrying value or fair value less cost to sell. The fair value less cost to sell was determined by the Group using a discounted cash flow model approach. Based on the results of discounted cash flows analysis the Group didn’t recognize any impairment of Nkomati as of 31 December 2016. The discounted cash flow model is particularly sensitive to the following inputs:  Increase in discount rate by 2 p.p. up to 10.8% real rate for ZAR will lead to impairment recognition amounting to USD 19 million;  Decrease in sale price on metals by 2% will lead to impairment recognition amounting to USD 14 million. On 29 November 2016, the Group sold its 74.8% share in OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian Federation, for a consideration of USD 7 million. The carrying value of net assets at the date of disposal amounted to USD 8 million. Loss on disposal in the amount of USD 1 million was recognised in the consolidated income statement. In 2014 the Group sold goldfields assets North Eastern Goldfields Operations (“NEGO”), nickel assets Black Swan, Silver Swan, Lake Johnston Nickel Project, Avalon and Cawse, located in Western Australia. During the year ended 31 December 2016, the Group received deferred consideration in the amount of USD 2 million related to NEGO. During the year ended 31 December 2016, the Group sold certain royalty rights related to previously disposed assets in Western Australia, for USD 7 million. On 15 April 2016, the Group sold its aircompany assets comprising 96.8% share in CJSC "Nordavia – Regional Airlines" (“Nordavia”), a subsidiary of the Group located in the Russian Federation and related to Nordavia aircrafts and infrastructure, for a consideration of USD 10 million. The carrying value of net assets at the date of disposal amounted to USD 14 million. Loss on disposal in the amount of USD 4 million was recognised in the consolidated income statement. 22. SHARE CAPITAL Authorised and issued ordinary shares 2016 2015 At 1 January 156,995,401 158,245,476 Acquisition of own shares from shareholders – (1,250,075) Sale of own shares from treasury stock 1,250,075 – At 31 December 158,245,476 156,995,401

F-39 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

22. SHARE CAPITAL (CONTINUED) During the year ended 31 December 2015, the Group acquired 1,250,075 ordinary shares for a cash consideration in the amount of USD 196 million.

During the year ended 31 December 2016, the Group sold 1,250,075 treasury shares to the non- controlling shareholder Crispian Investments Limited for a cash consideration in the amount of USD 158 million.

Earnings per share

For the year ended For the year ended 31 December 2016 31 December 2015 Basic earnings per share (US Dollars per share): 16.1 11.0

The earnings and weighted average number of shares used in the calculation of earnings per share are as follows:

For the year ended For the year ended 31 December 2016 31 December 2015 Profit for the year attributable to shareholders of the parent company 2,536 1,734

For the year ended For the year ended 31 December 2016 31 December 2015 Weighted average number of shares on issue 156,995,401 158,245,476

Less: weighted average number of treasury shares – (489,575) Effect of sale of own shares from treasury stock 54,648 – Weighted average number of issued common shares outstanding 157,050,049 157,755,901

As at 31 December 2016 and 31 December 2015, the Group had no securities, which would have a dilutive effect on earnings per share of ordinary stock.

23. NON-CONTROLLING INTEREST During the year ended 31 December 2016 the Group sold 10.67% share in Bystrinskoye project for USD 80 million.

F-40 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 24. LOANS AND BORROWINGS Average nominal Fixed or rate during the floating year ended At At interest 31 December 31 December 31 December Currency rate 2016, % Maturity 2016 2015 Unsecured loans USD floating 3.04% 2018-2025 2,704 3,404 RUB fixed 12.52% 2019-2021 1,990 1,655 Secured loans USD floating 7.37% 2024 165 – Total loans 4,859 5,059 Corporate bonds USD fixed 5.62% 2018-2022 2,715 2,717 RUB fixed 11.60% 2026 247 480 2,962 3,197 Finance leasing EUR fixed 7.10% 2026 24 – USD fixed 4.20% 2019 7 10 31 10 Total 7,852 8,266 Less: current portion due within twelve months and presented as short-term loans and borrowings (578) (1,124) Long-term loans and borrowings 7,274 7,142

The Group is obliged to comply with a number of restrictive financial and other covenants, including maintaining certain financial ratios and restrictions on pledging and disposal of certain assets.

25. EMPLOYEE BENEFIT OBLIGATIONS

At 31 December At 31 December 2016 2015 Accrual for annual leave 179 136 Wages and salaries 147 96 Other 21 5 Total obligations 347 237 Less: non-current obligations (48) (22) Current obligations 299 215

Defined contribution plans Amounts recognised within continuing operations in the consolidated income statement in respect of defined contribution plans were as follows:

For the year ended For the year ended 31 December 2016 31 December 2015

Pension Fund of the Russian Federation 273 287 Mutual accumulated pension plan 7 8 Other 5 6 Total 285 301

F-41 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 26. PROVISIONS

At 31 December At 31 December 2016 2015 Current provisions Tax provision 124 127 Provision for social commitments 19 12 Other provisions 40 66 Total current provisions 183 205 Non-current provisions Decommissioning obligations 391 308 Provision for social commitments 43 38 Other long-term provisions 1 11 Total non-current provisions 435 357 Total 618 562

Social Decommissioning commitments Tax Other Total Balance at 1 January 2015 228 61 140 1 430 Provision accrued – 3 4 95 102 Settlements during the year – (13) (3) – (16) Change in estimates 122 11 – (1) 132 Unwinding of discount 35 6 – 3 44 Effect of translation to presentation currency (77) (18) (14) (21) (130) Balance at 31 December 2015 308 50 127 77 562 Provision accrued – 12 3 4 19 Settlements during the year – (16) (5) (30) (51) Change in estimate (13) (1) – (27) (41) Unwinding of discount 32 6 – 5 43 Effect of translation to presentation currency 64 11 (1) 12 86 Balance at 31 December 2016 391 62 124 41 618

Decommissioning obligations Key assumptions used in estimation of decommissioning obligations were as follows:

At 31 December At 31 December 2016 2015 Discount rates of Russian entities 8.5% - 8.6% 9.3% - 10.4% Discount rates of non-Russian entities 3% - 5% 3% - 8% Expected closure date of mines up to 2059 up to 2056 Expected inflation over the period from 2017 to 2029 3.7% - 5.4% 4.1% - 8.7% Expected inflation over the period from 2030 onwards 3.6% 4.0%

Present value of expected cost to be incurred for settlement of decommissioning obligations was as follows:

At 31 December At 31 December 2016 2015 Due from second to fifth year 265 170 Due from sixth to tenth year 44 49 Due from eleventh to fifteenth year 4 16 Due from sixteenth to twentieth year 26 5 Due thereafter 52 68 Total 391 308

F-42 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

26. PROVISIONS (CONTINUED) In 2015 the Group approved a programme for reconfiguration of production facilities located in the Taimyr Peninsula. The programme started in 2016 and also included activites related to closure of the Nickel plant. In 2016 changes in the provision estimates for the reconfiguration of production facilities were recognised in Other net operating expenses in the consolidated income statement.

Social commitments In 2010 the Group entered into several multilateral agreements with the Government of the Russian Federation, the Krasnoyarsk Regional Government and the Norilsk Municipal Authorities for construction of pre-schools and other items of social infrastructure in Norilsk and Dudinka, and resettlement of families currently residing in these cities to other Russian regions with more favorable living conditions during 2015-2020. The provision represents present value of the best estimate of the future outflow of economic benefits to settle these obligations.

27. TRADE AND OTHER PAYABLES

At 31 December At 31 December 2016 2015 Financial liabilities Trade payables 605 173 Payables for acquisition of property, plant and equipment 146 93 Other creditors 141 140 Total financial liabilities 892 406 Non-financial liabilities Advances received 718 604 Total non-financial liabilities 718 604 Total 1,610 1,010

The maturity profile of the Group’s financial liabilities was as follows:

At 31 December At 31 December 2016 2015

Due within one month 189 175 Due from one to three months 209 198 Due from three to twelve months 494 33 Total 892 406

28. DIVIDENDS On 16 December 2016, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 9 months ended 30 September 2016 in the amount of RUB 444.25 (USD 7.21) per share with the total amount of USD 1,141 million. The dividends were paid to the shareholders in January 2017 in the amount of USD 1,169 million at the prevailing RUB/USD rates on the payments dates.

On 10 June 2016 the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2015 in the amount of RUB 230.14 (USD 3.61) per share with the total amount of USD 571 million (including USD 4 million in respect of Treasury shares). The dividends were paid to the shareholders in July 2016 in the amount of USD 567 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payments dates.

F-43 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 28. DIVIDENDS (CONTINUED) On 19 December 2015, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 9 months ended 30 September 2015 in the amount of RUB 321.95 (USD 4.51) per share with the total amount of USD 714 million (including USD 6 million in respect of Treasury shares). The dividends were paid to the shareholders in January 2016 in the amount of USD 665 million using prevailing RUB/USD rates on the payment dates. On 14 September 2015, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 6 months ended 30 June 2015 in the amount of RUB 305.07 (USD 4.49) per share with the total amount of USD 710 million (including USD 4 million in respect of Treasury shares). The dividends were paid to the shareholders from September to December 2015 in the amount of USD 731 million, recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates. On 13 May 2015, the Annual General shareholder’s meeting declared final dividends for the year ended 31 December 2014 in the amount of RUB 670.04 (USD 13.2) per share with the total amount of USD 2,083 million. The dividends were paid to the shareholders in May and June 2015 in the amount of USD 2,126 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates.

29. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES Related parties include shareholders, associates and entities under common ownership and control of the Group’s major shareholders and key management personnel. The Group defines major shareholders as shareholders, which have significant influence over the Group activities. The Company and its subsidiaries, in the ordinary course of their business, enter into various sale, purchase and service transactions with related parties. Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Purchase of goods and services and Sale of goods and services financial assets For the year ended For the year ended For the year ended For the year ended 31 December 31 December 31 December 31 December Transactions with related parties 2016 2015 2016 2015 Entities under ownership and control of the Group's major shareholders 13 – 177 19 Associates of the Group 2 6 169 242 Total 15 6 346 261

Accounts payable, loans and Accounts receivable and cash borrowings received Outstanding balances with At 31 December At 31 December At 31 December At 31 December related parties 2016 2015 2016 2015 Entities under ownership and control of the Group's major shareholders – – 2 – Associates of the Group 1 2 20 25 Total 1 2 22 25 Terms and conditions of transactions with related parties Sales to and purchases from related parties of electricity, heat energy and natural gas supply were made at prices established by the Federal Tariff Service, government regulator responsible for establishing and monitoring prices on the utility and telecommunication markets in the Russian Federation. Compensation of key management personnel Key management personnel of the Group consists of members of the Management Board and the Board of Directors. For the year ended 31 December 2016 remuneration of key management personnel of the Group included salary and performance bonuses amounted to USD 62 million (for the year ended 31 December 2015: USD 61 million).

F-44 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 30. COMMITMENTS Capital commitments At 31 December 2016, contractual capital commitments amounted to USD 1,138 million (31 December 2015: USD 798 million).

Operating leases The land plots in the Russian Federation where the Group’s production facilities are located are owned by the state. The Group leases land through operating lease agreements, which expire in various years through 2065. According to the terms of lease agreements the rent rate is revised annually subject to the decision of the relevant local authorities. The Group entities have a renewal option at the end of the lease period and an option to buy land at any time, at a price established by the local authorities. Future minimum lease payments due under non-cancellable operating lease agreements for land and buildings were as follows:

At 31 December At 31 December 2016 2015 Due within one year 29 31 From one to five years 95 128 Thereafter 92 79 Total 216 238

At 31 December 2016, ten aircraft lease agreements (31 December 2015: nine) were in effect. The lease agreements have an average life of five (31 December 2015: eight) years with a renewal option at the end of the term and place no restrictions upon lessees by entering into these agreements.

Future minimum lease payments due under non-cancellable operating lease agreements for aircrafts were as follows:

At 31 December At 31 December 2016 2015 Due within one year 43 37 From one to five years 70 89 Total 113 126

Social commitments The Group contributes to mandatory and voluntary social programs and maintains social assets in the locations where it has its main operating facilities. The Group’s social assets as well as local social programs benefit the community at large and are not normally restricted to the Group’s employees.

The Group’s commitments are funded from its own cash resources.

31. CONTINGENCIES Litigation At 31 December 2016 the Group has unresolved legal disputes with the state authorities due to non- approval of the reduction of the negative environmental impact charge in relation to the environmental protection expenditure incurred by the Group. Management believes that the Group complied with all relevant regulations to be eligible for the reduction and that no provision for these disputes is required. Additionally, the Group is involved in other legal disputes in the ordinary course of its operations, with the probability of their unfavorable resolution being assessed as possible. At 31 December 2016, total claims under unresolved litigation amounted to approximately USD 25 million (31 December 2015: USD 53 million).

F-45 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 31. CONTINGENCIES (CONTINUED) Taxation contingencies in the Russian Federation The Russian Federation currently has a number of laws related to various taxes imposed by both federal and regional governmental authorities. Applicable taxes include value-added (VAT), corporate income tax, mandatory social security contributions, together with others. Tax returns, together with other legal compliance areas (for example, customs and currency control matters), are subject to review and investigation by government authorities, which are authorised by law to impose severe fines, penalties and interest charges. Generally, tax returns remain open and subject to inspection for a period of three years following the fiscal year. While management of the Group believes that in the financial statements of the Group it has provided adequate reserves for tax liabilities based on its interpretation of current and previous legislation, the risk remains that tax authorities in the Russian Federation could take differing positions with regard to interpretive issues. This uncertainty may expose the Group to additional taxation, fines and penalties.

Transfer pricing legislation enacted in the Russian Federation starting from 1 January 2012 provides for major modifications making local transfer pricing rules closer to OECD guidelines, but creating additional uncertainty in practical application of tax legislation in certain circumstances.

These transfer pricing rules provide for an obligation for the taxpayers to prepare transfer pricing documentation with respect to controlled transactions and prescribe the basis and mechanisms for accruing additional taxes and interest in case prices in the controlled transactions differ from the market level.

Currently there is lack of practice of applying the transfer pricing rules by the tax authorities and courts, however, it is anticipated that transfer pricing arrangements will be subject to very close scrutiny potentially having effect on the financial results and the financial position of the Group.

Environmental matters The Group is subject to extensive federal, state and local environmental controls and regulations in the countries in which it operates. The Group’s operations involve pollutant emissions to air and water objects as well as formation and disposal of production wastes. Management of the Group believes that the Group is in compliance with all current existing environmental legislation in the countries in which it operates. However, environmental laws and regulations continue to evolve. The Group is unable to predict the timing or extent to which those laws and regulations may change. Such change, if it occurs, may require that the Group modernise technology to meet more stringent standards.

Russian Federation risk As an emerging market, the Russian Federation does not possess a fully developed business and regulatory infrastructure including stable banking and judicial systems which would generally exist in a more mature market economy. The economy of the Russian Federation is characterised by a currency that is not freely convertible outside of the country, currency controls, low liquidity levels for debt and equity markets, and continuing inflation. As a result, operations in the Russian Federation involve risks that are not typically associated with those in more developed markets. Stability and success of Russian economy and the Group’s business mainly depends on the effectiveness of economic measures undertaken by the government as well as the development of legal system. The situation in Ukraine has increased the perceived risks of doing business in the Russian Federation. The imposition of economic sanctions on Russian individuals and legal entities has resulted in increased economic uncertainty including more volatile equity and currency markets, a reduction in both local and foreign investment inflows and a significant tightening in the availability of credit. Management assesses the changes in the Russian business environment did not significantly affect the operations, financial results and the financial position of the Group.

F-46 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 32. FINANCIAL RISK MANAGEMENT Capital risk management The Group manages its capital structure in order to safeguard the Group’s ability to continue as a going concern and to maximise the return to shareholders through the optimisation of debt and equity balance.

The capital structure of the Group consists of debt, which includes long and short-term borrowings, equity attributable to shareholders of the parent company, comprising share capital, other reserves and retained earnings.

Management of the Group regularly reviews its level of leverage, calculated as the proportion of Net Debt to EBITDA, to ensure that it is in line with the Group’s financial policy aimed at preserving investment grade credit ratings.

As at 19 and 25 October 2016 the Company maintains BBB- investment grade ratings, assigned by rating agencies Fitch and S&P's, despite S&P’s maintenance of Russian sovereign rating BB+ on 19 September 2016. The Company’s rating assigned by Moody’s is restrained by Russia’s country ceiling at Ba1 level.

Financial risk factors and risk management structure In the normal course of its operations, the Group is exposed to a variety of financial risks: market risk (including interest rate and currency risk), credit risk and liquidity risk. The Group has an explicit risk management structure aligned with internal control procedures that enable it to assess, evaluate and monitor the Group’s exposure to such risks.

Risk management is carried out by financial risk management. The Group has adopted and documented policies covering specific areas, such as market risk management system, credit risk management system, liquidity risk management system and use of derivative financial instruments.

Interest rate risk

Interest rate risk is the risk that changes in interest rates will adversely impact the financial results of the Group. The Group’s interest rate risk arises from long- and short-term borrowings at floating rates.

The Group performs thorough analysis of its interest rate risk exposure regularly. Various scenarios are simulated. The table below details the Group’s sensitivity to a 2 percentage points increase in those borrowings subject to a floating rate. The sensitivity analysis is prepared assuming that the amount of liabilities at floating rates outstanding at the reporting date was outstanding for the whole year.

2% LIBOR increase impact For the year ended For the year ended 31 December 2016 31 December 2015 Loss 57 68

Management believes that the Group’s exposure to interest rate risk fluctuations does not require additional hedging activities.

F-47 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 32. FINANCIAL RISK MANAGEMENT (CONTINUED) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument denominated in foreign currency will fluctuate because of changes in exchange rates.

The major part of the Group’s revenue and related trade accounts receivable are denominated in US dollars and therefore the Group is exposed primarily to USD currency risk. Foreign exchange risk arising from other currencies is assessed by management of the Group as immaterial.

The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than functional currencies of the individual Group entities at 31 December 2016 and 31 December 2015 were as follows:

At 31 December 2016 At 31 December 2015 Other Other USD HKD currencies USD HKD currencies Cash and cash equivalents 1,053 1,014 32 2,068 1,009 32 Trade and other receivables 162 – 2 88 – 8 Other assets 140 – 101 95 – 115 Total assets 1,355 1,014 135 2,251 1,009 155 Trade and other payables 261 – 66 200 – 82 Loans and borrowings 5,584 – – 6,121 – – Other liabilities 12 – 24 11 – 5 Total liabilities 5,857 – 90 6,332 – 87

Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if a risk for a potential loss is at an acceptable level. The Group calculates the financial impact of exchange rate fluctuations on USD-denominated monetary assets and liabilities in respect of the Group entities where functional currency is the Russian Rouble. The following table presents the decrease of the Group’s profit and equity before tax due to a 20% weakening of the Russian Rouble against USD.

US Dollar 20% strengthening For the year ended For the year ended 31 December 2016 31 December 2015 Loss 900 816

Given that the Group’s exposure to currency risk for the monetary assets and liabilities is offset by the revenue denominated in USD, management believes that the Group’s exposure to currency risk is acceptable. The Group does not apply hedge instruments.

Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, bank deposits as well as credit exposures to customers, including outstanding uncollateralised trade and other receivables. The Group’s exposure to credit risk is continuously monitored and controlled.

Having dealing with new counterparty, management assesses the creditworthiness of a potential customer or financial institution. If the counterparty is rated by major independent credit-rating agencies, this rating is used to evaluate creditworthiness; otherwise it is evaluated using an analysis of the latest available financial statements of the counterparty and other publically available information.

F-48 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 32. FINANCIAL RISK MANAGEMENT (CONTINUED) The balances of ten major counterparties are presented below. The banks have a minimum of ВВ+ credit rating.

Outstanding balance At 31 December At 31 December Cash and cash equivalents 2016 2015 Bank A 1,014 1,009 Bank B 653 948 Bank C 521 632 Bank D 381 369 Bank E 226 312 Total 2,795 3,270 Trade receivables Company A 11 17 Company B 9 10 Company C 7 8 Company D 7 6 Company E 6 5 Total 40 46

The Group is not economically dependent on a limited number of customers because the majority of its products are highly liquid and traded on the world commodity markets. Metal and other sales to the Group’s customers are presented below:

For the year ended 31 December 2016 For the year ended 31 December 2015 Number of Turnover Number of Turnover customers USD million % customers USD million % Largest customer 1 973 12 1 1,025 12 Next 9 largest customers 9 2,587 31 9 3,382 40 Total 10 3,560 43 10 4,407 52 Next 10 largest customers 10 1,154 14 10 1,091 13 Total 20 4,714 57 20 5,498 64 Remaining customers 3,545 43 3,044 36 Total 8,259 100 8,542 100

Management of the Group believes that with the exception of the bank balances indicated above there is no significant concentration of credit risk. The following table provides information about the exposure to credit risk for cash and cash equivalents, loans, irrevocable letters of credit, bank deposits and trade and other receivables:

At 31 December At 31 December 2016 2015 Cash and cash equivalents 3,301 4,054 Loans, trade and other receivables 349 225 Irrevocable letters of credit 101 121 Bank deposits 10 5 Liquidity risk Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due.

The Group has a well-developed liquidity risk management system to exercise control over its short-, medium- and long-term funding. The Group manages liquidity risk by maintaining adequate reserves, committed and uncommitted banking facilities and reserve borrowing facilities. Management continuously monitors rolling cash flow forecasts and performs analysis of maturity profiles of financial assets and liabilities, and undertakes detailed annual and quarterly budgeting procedures.

F-49 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

32. FINANCIAL RISK MANAGEMENT (CONTINUED) The following table contains the maturity profile of the Group’s borrowings (maturity profiles for other liabilities are presented in note 27) based on contractual undiscounted payments, including interest:

Due Due Due from from Due in Due in At within one to three to the Due in the Due in Due 31 December one three twelve second the third fourth the fifth there- 2016 Total month months months year year year year after Fixed rate bank loans and borrowings Principal 4,996 – – 5 741 668 1,348 976 1,258 Interest 1,882 – 76 357 417 394 306 137 195 6,878 – 76 362 1,158 1,062 1,654 1,113 1,453 Floating rate bank loans and borrowings Principal 2,899 11 134 431 445 553 222 609 494 Interest 419 4 18 71 83 73 63 43 64 3,318 15 152 502 528 626 285 652 558 Total 10,196 15 228 864 1,686 1,688 1,939 1,765 2,011

Due Due Due from from Due in Due in At within one to three to the Due in the Due in Due 31 December one three twelve second the third fourth the fifth there- 2015 Total month months months year year year year after Fixed rate bank loans and borrowings Principal 4,874 – 480 3 2 742 551 1,273 1,823 Interest 1,838 – 69 310 362 346 325 259 167 6,712 – 549 313 364 1,088 876 1,532 1,990 Floating rate bank loans and borrowings Principal 3,430 – 144 501 626 988 754 17 400 Interest 366 6 18 69 85 62 33 21 72 3,796 6 162 570 711 1,050 787 38 472 Total 10,508 6 711 883 1,075 2,138 1,663 1,570 2,462

At 31 December 2016 the Group had available financing facilities for the management of its day to day liquidity requirements of USD 2,622 million (31 December 2015: USD 1,870 million) which reflects the initiative of the Group’s prudent financial policy through the increase of undrawn committed credit facilities as an additional source of the medium term liquidity.

33. FAIR VALUE OF FINANCIAL INSTRUMENTS Management believes that the carrying value of financial instruments such as cash and cash equivalents (refer to note 20), short-term accounts receivable (refer to note 19) and payable (refer to note 27), approximates to their fair value.

Certain financial instruments such as other financial assets and finance leases obligations were excluded from fair value analysis either due to their insignificance or due to the fact that assets were acquired or liabilities were assumed close to the reporting dates and management believes that their carrying value either approximates to their fair value or may not significantly differ from each other.

F-50 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million

33. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as follows:  Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;  Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and  Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The information presented below is about loans and borrowings, whose carrying values differ from their fair values.

At 31 December 2016 At 31 December 2015 Fair value Fair value Carrying value Level 1 Carrying value Level 1 Fixed rate corporate bonds 2,962 3,171 3,197 3,210 Total 2,962 3,171 3,197 3,210

Fair value Fair value Loans and borrowings including: Carrying value Level 2 Carrying value Level 2 Floating rate loans and borrowings 2,869 2,734 3,404 3,339 Fixed rate loans and borrowings 1,990 2,121 1,655 1,722 Total 4,859 4,855 5,059 5,061

The fair value of financial liabilities presented in table above is determined as follows:

 the fair value of corporate bonds was determined based on market quotations existing at the reporting dates;  the fair value of floating rate and fixed rate loans and borrowings at 31 December 2016, was calculated based on the present value of future cash flows (principal and interest), discounted at the best management estimation of market rates, taking into consideration currency of the loan, expected maturity and risks attributable to the Group existing at the reporting date. The discount rates ranged from 4.28% to 6.63% for USD-denominated loans and borrowings (2015: from 4.00% to 5.55%) and 10.63% (2015:11.60%) for RUB-denominated loans.

F-51 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 US Dollars million 34. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES AND ASSOCIATES

Effective % held At 31 December At 31 December Subsidiaries by business segments Country Nature of business 2016 2015

Group GMK JSC “Norilsky Kombinat” Russian Federation Rental of equipment 100 100 JSC “Taimyrgaz” Russian Federation Gas extraction 100 100 JSC “Norilskgazprom” Russian Federation Gas extraction 100 100 JSC “Taimyrenergo” Russian Federation Rental of equipment 100 100 Electricity production and JSC “NTEK” Russian Federation distribution 100 100 LLC “ZSC” Russian Federation Construction 100 100 LLC “Norilsknickelremont” Russian Federation Repairs 100 100 LLC “Norilskgeologiya” Russian Federation Geological works 100 100 Production of spare LLC “Norilskyi obespechivaushyi complex” Russian Federation parts 100 100 Group KGMK Mining and JSC “Kolskaya GMK” Russian Federation Metallurgy 100 100 LLC “Pechengastroy” Russian Federation Repairs 100 100 Norilsk Nickel Harjavalta Norilsk Nickel Harjavalta OY Finland Metallurgy 100 100 Other metallurgical LLC “GRK “Bystrinskoye” Russian Federation Mining 89.33 100 Other non-metallurgical Metal Trade Overseas A.G. Switzerland Distribution 100 100 LLC “Institut Gypronickel” Russian Federation Research 100 100 JSC “TTK” Russian Federation Supplier of fuel 100 100 River shipping OJSC “Enisey River Shipping Company” Russian Federation operations 100 100 OJSC “Arkhangelsk Sea Commercial Port” Russian Federation Sea port - 74.80 LLC “Aeroport Norilsk” Russian Federation Airport 100 100 JSC “AK “NordStar” Russian Federation Aircompany 100 100

Effective % held At 31 December At 31 December Associates by business segments Country Nature of business 2016 2015 Other metallurgical Republic of Nkomati Nickel Mine South Africa Mining 50 50

35. EVENTS SUBSEQUENT TO THE REPORTING DATE On 24 January 2017 the Board of Directors of PJSC MMC Norilsk Nickel has approved the sale of an up to 39.32% stake in the Bystrinskiy Project to CIS Natural Resources Fund. The sale contract closing is subject to certain pre-conditions and necessary regulatory approvals.

On 15 February 2017 the Group increased a non-controlling interest in a related party for the consideration of USD 100 million.

F-52 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

Mining and Metallurgical Company Norilsk Nickel

Consolidated financial statements for the year ended 31 December 2015

F-53 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

INDEX Page

Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended 31 December 2015...... 1

Auditors’ report...... 2

Consolidated financial statements for the year ended 31 December 2015:

Consolidated income statement ...... 4

Consolidated statement of comprehensive income...... 5

Consolidated statement of financial position...... 6

Consolidated statement of cash flows...... 7-8

Consolidated statement of changes in equity...... 9-10

Notes to the consolidated financial statements ...... 11-52

F-54 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

Management is responsible for the preparation of the consolidated financial statements that present fairly in all material aspects the consolidated financial position of the Group at 31 December 2015 and consolidated statements of income, comprehensive income, cash flows and changes in equity for the year then ended, in accordance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for:

 selecting suitable accounting policies and applying them consistently;  making judgements and estimates that are reasonable and prudent;  stating whether IFRS have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and  preparing the consolidated financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business for the foreseeable future.

Management, within its competencies, is also responsible for:

 designing, implementing and maintaining an effective system of internal controls throughout the Group;  maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions in which the Group operates;  taking steps to safeguard the assets of the Group; and  detecting and preventing fraud and other irregularities.

F-55 JSC "KPMG" Te le pho ne +7 (495) 937 4477 10 Presnenskaya Naberezhnaya Fa x +7 (4951 937 4400/99 Moscow, Russia 123317 Internet www.kpmg.ru

Auditors' Report

To the Shareholders and Board of Directors

PJSC "Mining and Metallurgical Company Norilsk Nickel"

We have audited the accompanying consolidated financial statements of PJSC "Mining and Metallurgical Company Norilsk Nickel" (the "Company") and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2015, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for 2015, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility Our responsibility is to express an opinion on the fair presentation of these consolidated financial statements based on our audit. We conducted our audit in accordance with Russian Federal Auditing Standards and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to express an opinion on the fair presentation of these consolidated financial statements.

Entity: Public Joint Stock Company °Mining and Metallurgical Company Independent auditor: JSC "KPMG", a company incorporated under the Norilsk Nickel' Laws of the Russian Federation, a member firm of the KPMG network of independent member firms affiliated with KPMG International Registered by Administration of Taimyr Autonomous District on 4 July Cooperative ("KPMG International"), a Swiss entity. 1997, Registration Number of the State Registration Certificate issued at the time of joint-stock company foundation No.07. Registered by the Moscow Registration Chamber on 25 May 1992, Registration No. 011.585. Registered in the Unified State Register of Legal Entities on 2 Entered in the Unified State Register of Legal Entities on 13 August September 2002 by Inter-Regional Inspection No. 2 of the Ministry of 2002 by the Moscow Inter-Regional Tax Inspectorate No.39 of the Taxes and Charges of the Russian Federation in Taimyr (Dolgan- Ministry for Taxes and Duties of the Russian Federation, Registration Nenets) Autonomous District, Registration No. 1028400000298. No. 1027700125628, Certificate series 77 No. 005721432. Certificate series 84 No. 000020058. Member of the Non-commercial Partnership "Chamber of Auditors of Dudinka, Krasnoyarsk Region, Russian Federation. Russia". The Principe( Registration Number of the Entry in the State Register of Auditors and Audit Organisations: No.10301000804.

F-56 Auditors’ Report Page 2

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2015, and its financial performance and its cash flows for 2015 in accordance with International Financial Reporting Standards.

Moscow, Russian Federation

F-57 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Year ended Year ended Notes 31/12/2015 31/12/2014 Revenue Metal sales 6 7,883 10,896 Other sales 659 973 Total revenue 8,542 11,869 Cost of metal sales 7 (3,179) (4,805) Cost of other sales (592) (869) Gross profit 4,771 6,195 General and administrative expenses 9 (554) (812) Selling and distribution expenses 8 (139) (335) Impairment of property, plant and equipment 14 (284) (130) Other net operating expenses 10 (288) (172) Operating profit 3,506 4,746 Foreign exchange loss, net (865) (1,594) Finance costs 11 (326) (179) Loss from disposal of subsidiaries and assets classified as held for sale 21 (302) (213) Income from investments, net 12 215 94 Share of profits of associates 16 50 Impairment of available for sale investments including impairment losses reclassified from other comprehensive income – (244) Profit before tax 2,244 2,660 Income tax expense 13 (528) (660) Profit for the year 1,716 2,000 Attributable to: Shareholders of the parent company 1,734 2,003 Non-controlling interests (18) (3) 1,716 2,000 EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 22 11.0 12.7

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-58 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Year ended Year ended 31/12/2015 31/12/2014 Profit for the year 1,716 2,000 Other comprehensive income/(loss) Items to be reclassified to profit or loss in subsequent periods: Increase in fair value of available-for-sale investments 74 1 Realised gain on disposal of available-for-sale investments (73) (1) Reclassification of foreign currency translation reserve on disposed assets classified as held for sale to profit or loss 326 544 Effect of translation of foreign operations (26) 26 Other comprehensive income to be reclassified to profit or loss in subsequent periods, net 301 570 Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency (868) (4,182) Remeasurements of defined benefit plans - 35 Other comprehensive loss not to be reclassified to profit or loss in subsequent periods, net (868) (4,147) Other comprehensive loss for the year (567) (3,577) Total comprehensive income/(loss) for the year, net of tax 1,149 (1,577) Attributable to: Shareholders of the parent company 1,173 (1,516) Non-controlling interests (24) (61) Total comprehensive income/(loss) for the year, net of tax 1,149 (1,577)

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-59 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2015 US Dollars million

ASSETS Notes 31/12/2015 31/12/2014 Non-current assets Property, plant and equipment 14 6,392 7,011 Intangible assets 50 43 Investment property 15 83 - Investments in associates - 17 Other financial assets 16 62 204 Other taxes receivable 17 - 6 Deferred tax assets 13 42 53 Other non-current assets 117 130 - 6,746 7,464 Current assets Inventories 18 1,698 1,726 Trade and other receivables 19 167 275 Advances paid and prepaid expenses 55 63 Other financial assets 16 1 87 Income tax receivable 234 127 Other taxes receivable 17 199 178 Cash and cash equivalents 20 4,054 2,793 6,408 5,249 Assets classified as held for sale 21 217 436 6,625 5,685 TOTAL ASSETS 13,371 13,149 EQUITY AND LIABILITIES Capital and reserves Share capital 22 6 6 Share premium 1,254 1,254 Treasury shares 22 (196) - Translation reserve (5,348) (4,787) Retained earnings 6,523 8,295 Equity attributable to shareholders of the parent company 2,239 4,768 Non-controlling interests 22 25 2,261 4,793 Non-current liabilities Loans and borrowings 23 7,142 5,678 Provisions 25 357 274 Deferred tax liabilities 13 205 216 Other long-term liabilities 30 6 7,734 6,174 Current liabilities Loans and borrowings 23 1,124 652 Trade and other payables 26 1,008 908 Dividends payable 27 698 4 Employee benefit obligations 24 215 252 Provisions 25 205 156 Derivative financial instruments 2 5 Income tax payable 5 23 Other taxes payable 17 95 99 3,352 2,099 Liabilities associated with assets classified as held for sale 21 24 83 3,376 2,182 TOTAL LIABILITIES 11,110 8,356 TOTAL EQUITY AND LIABILITIES 13,371 13,149

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-60 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Year ended Year ended 31/12/2015 31/12/2014 OPERATING ACTIVITIES Profit before tax 2,244 2,660 Adjustments for: Depreciation and amortisation 506 805 Impairment of property, plant and equipment 284 130 Impairment of available for sale investments — 244 Loss on disposal of property, plant and equipment 20 28 Share of profits of associates (16) (50) Loss from disposal of assets classified as held for sale 302 213 Change in provisions and allowances 120 69 Finance costs and income from investments, net 137 85 Foreign exchange loss, net 865 1,594 Other 27 (8) 4,489 5,770 Movements in working capital: Inventories (340) 94 Trade and other receivables 74 237 Advances paid and prepaid expenses (2) (7) Other taxes receivable (62) 162 Employee benefit obligations 42 (16) Trade and other payables 152 515 Provisions (4) (21) Other taxes payable 28 38 Cash generated from operations 4,377 6,772 Income tax paid (672) (825) Net cash generated from operating activities 3,705 5,947

INVESTING ACTIVITIES Proceeds from sale of associate 10 — Purchase of property, plant and equipment (1,626) (1,277) Purchase of other financial assets — (9) Purchase of intangible assets (28) (21) Purchase of other non-current assets (31) (35) Loans issued (27) — Net change in deposits placed 91 (106) Proceeds from sale of other financial assets 204 91 Proceeds from disposal of property, plant and equipment 1 20 Proceeds from disposal of assets classified as held for sale — 24 Interest received 101 88 Dividends received 5 3 Net cash used in investing activities (1,300) (1,222)

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-61 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2015 (CONTINUED) US Dollars million

Year ended Year ended 31/12/2015 31/12/2014 FINANCING ACTIVITIES Proceeds from loans and borrowings 3,192 1,916 Repayments of loans and borrowings (727) (1,343) Financial lease payments (1) — Dividends paid (2,859) (3,281) Interest paid (376) (259) Buy-out of non-controlling interest (31) (12) Acquisition of own shares from shareholders (196) — Net cash used in financing activities (998) (2,979) Net increase in cash and cash equivalents 1,407 1,746 Cash and cash equivalents at beginning of the period 2,793 1,621 Cash and cash equivalents of disposal group at beginning of the period 5 9 Less: cash and cash equivalents of disposal group at end of the period (38) (5) Effects of foreign exchange differences on balances of cash and cash equivalents (113) (578) Cash and cash equivalents at end of the period 4,054 2,793

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-62 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Equity attributable to shareholders of the parent company Non- Share Share Treasury Translation Retained controlling Notes Capital premium shares reserve earnings Total interests Total Balance at 1 January 2014 6 1,254 – (1,230) 9,589 9,619 131 9,750 Profit for the year – – – – 2,003 2,003 (3) 2,000 Other comprehensive income/(loss) – – – (3,557) 38 (3,519) (58) (3,577) Total comprehensive income/(loss) for the year – – – (3,557) 2,041 (1,516) (61) (1,577) Decrease in non-controlling interest – – – – 14 14 (54) (40) due to increase in ownership of subsidiary Increase in non-controlling interests – – – – – – 9 9 due to cancellation of dividends in subsidiary Dividends 27 – – – – (3,349) (3,349) – (3,349) Balance at 31 December 2014 6 1,254 – (4,787) 8,295 4,768 25 4,793

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-63 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015 (CONTINUED) US Dollars million

Equity attributable to shareholders of the parent company Non- Share Share Treasury Translation Retained controlling Notes Capital premium shares reserve earnings Total interests Total Balance at 1 January 2015 6 1,254 – (4,787) 8,295 4,768 25 4,793 Profit for the year – – – – 1,734 1,734 (18) 1,716 Other comprehensive loss – – – (561) – (561) (6) (567) Total comprehensive income/(loss) for the year – – – (561) 1,734 1,173 (24) 1,149 Non-controlling interest on disposal of assets classified as held for sale – – – – – – 12 12 Decrease in non-controlling interest due to increase in ownership of subsidiary – – – – (9) (9) 9 – Acquisition of own shares from shareholders 22 – – (196) – – (196) – (196) Dividends 27 – – – – (3,497) (3,497) – (3,497) Balance at 31 December 2015 6 1,254 (196) (5,348) 6,523 2,239 22 2,261

The accompanying notes on pages 11 – 52 form an integral part of the consolidated financial statements

F-64 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

1. GENERAL INFORMATION

Organisation and principal business activities Public Joint Stock Company “Mining and Metallurgical Company Norilsk Nickel” (the “Company” or “MMC Norilsk Nickel”) was incorporated in the Russian Federation on 4 July 1997. The principal activities of the Company and its subsidiaries (the “Group”) are exploration, extraction, refining of ore and nonmetallic minerals and sale of base and precious metals produced from ore. Further details regarding the nature of the business and structure of the Group are presented in note 33.

Major production facilities of the Group are located in Taimyr and Kola Peninsulas of the Russian Federation and in Finland. The registered office’s location is Russian Federation, Krasnoyarsk region, Dudinka, postal address: 2, Gvardeyskaya square, Norilsk, Russian Federation.

BASIS OF PREPARATION

Statement of compliance The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

Basis of measurement The consolidated financial statements of the Group are prepared on the historical cost basis, except for: ● mark-to-market valuation of by-products, in accordance with IAS 2 Inventories; ● mark-to-market valuation of certain classes of financial instruments, in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

2. CHANGES IN ACCOUNTING POLICIES Reclassification At 31 December 2015 management presented semi-products sales separately within metal sales in order to better align metal revenue structure with management accounts and reporting (refer to note 6). Information for the year ended 31 December 2014 has been reclassified to conform with the current period presentation. Certain other items presented in the consolidated financial statements were also reclassified to conform with current year presentation.

F-65 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Standards and interpretations effective in the current year In the preparation of these consolidated financial statements the Group has adopted all new and revised International Financial Reporting Standards and Interpretations issued by International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for adoption in annual periods beginning on 1 January 2015.

Adoption of an Interpretation and amendments to the existing Standards detailed below did not have significant impact on the accounting policies, financial position or performance of the Group:

● IFRS 2 Share-based Payment (amended); ● IFRS 3 Business Combinations (amended); ● IFRS 7 Financial Instruments: Disclosures (amended); ● IFRS 8 Operating Segments (amended); ● IFRS 9 Financial Instruments (amended); ● IFRS 13 Fair Value Measurement (amended); ● IAS 16 Property, Plant and Equipment (amended); ● IAS 19 Employee Benefits(amended); ● IAS 24 Related Party Disclosures (amended); ● IAS 38 Intangible Assets (amended); ● IAS 40 Investment Property (amended).

Standards and interpretations in issue but not yet effective At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations or amendments to them were in issue but not yet effective:

Effective for annual periods Standards and Interpretations beginning on or after IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (amended) 1 January 2016 IFRS 7 Financial Instruments: Disclosures (amended) 1 January 2016 IFRS 9 Financial Instruments (amended) 1 January 2018 IFRS 10 Consolidated Financial Statements (amended) 1 January 2016 IFRS 11 Joint Arrangements (amended) 1 January 2016 IFRS 12 Disclosure of Interests in Other Entities (amended) 1 January 2016 IFRS 14 Regulatory Deferral Accounts 1 January 2016 IFRS 15 Revenue from Contracts with Customers 1 January 2018 IFRS 16 Leases 1 January 2019 IAS 1 Presentation of Financial Statements (amended) 1 January 2016 IAS 7 Statement of Cash Flows (amended) 1 January 2017 IAS 12 Income Taxes (amended) 1 January 2017 IAS 16 Property, Plant and Equipment (amended) 1 January 2016 IAS 19 Employee Benefits(amended) 1 January 2016 IAS 27 Separate Financial Statements (amended) 1 January 2016 IAS 28 Investments in Associates and Joint Ventures (amended) 1 January 2016 IAS 34 Interim Financial Reporting (amended) 1 January 2016 IAS 38 Intangible Assets (amended) 1 January 2016 IAS 41 Agriculture (amended) 1 January 2016

Management of the Group expects that all of the above standards and interpretations will be adopted in the Group’s consolidated financial statements for the respective periods. The impact of adoption of those standards and interpretations on the consolidated financial statements of future periods is currently being assessed by management.

F-66 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation Subsidiaries The consolidated financial statements incorporate financial statements of the Company and its subsidiaries, from the date that control effectively commenced until the date that control effectively ceased. Control is achieved where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

All intra-group balances, transactions and any unrealised profits or losses arising from intra-group transactions are eliminated in full on consolidation.

Changes in the Group’s ownership interest in a subsidiary that do not result in the Group losing control are accounted for within the equity.

Associates An associate is an entity over which the Group exercises significant influence, but not control or joint control, through participation in financing and operating policy decisions, in which it normally owns between 20% and 50% of the voting equity. Associates are equity accounted for from the date significant influence commenced until the date that significant influence effectively ceased.

Investments in associates are carried at cost, including goodwill, as adjusted for the Group’s share of post- acquisition changes in associate’s retained earnings and other movements in reserves. The carrying value of investments in associates is reviewed on a regular basis and if any impairment in value has occurred, it is written down in the period in which these circumstances are identified. The results of associates are equity accounted for based on their most recent financial statements.

F-67 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Where an investment in a subsidiary or an associate is made, any excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the fair value of the identifiable assets acquired and the liabilities assumed at the acquisition date is recognised as goodwill. Goodwill in respect of subsidiaries is disclosed separately and goodwill relating to associates is included in the carrying value of the investment in associates. Goodwill is reviewed for impairment at least annually. If impairment has occurred, it is recognised in the consolidated income statement during the period in which the circumstances are identified and is not subsequently reversed.

If, after reassessment, the net amounts of the identifiable assets acquired and liabilities assumed at the acquisition date exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised in the consolidated income statement immediately as a bargain purchase gain.

Acquisition-related costs are generally recognised in the consolidated income statement as incurred.

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss, is recognised in the consolidated income statement. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in comprehensive income are reclassified to the consolidated income statement where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (a maximum of twelve months from the date of acquisition), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Assets classified as held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered primarily through a sale transaction rather than through continuing use. This condition is regarded as met only when sale is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition and management has committed to the sale.

Non-current assets and disposal groups classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Assets held for sale and related liabilities are presented in the consolidated statement of financial position separately from other assets and liabilities. Comparative information related to assets held for sale is not amended in the consolidated statement of financial position for the prior period.

Functional and presentation currency The individual financial statements of each Group entity are presented in its functional currency. The Russian Rouble (“RUB”) is the functional currency of the Company, all of its subsidiaries located in the Russian Federation and all foreign subsidiaries of the Group, except for the following subsidiaries operating with a significant degree of autonomy:

Subsidiary Functional currency Norilsk Nickel Harjavalta Oy US Dollar MPI Nickel Limited Australian Dollar Norilsk Nickel Cawse Proprietary Limited Australian Dollar Tati Nickel Mining Company Proprietary Limited (sold in April 2015) Botswana Pula Norilsk Nickel Africa Proprietary Limited South African Rand

F-68 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

The presentation currency of the consolidated financial statements of the Group is US Dollar (“USD”). Using USD as a presentation currency is common practice for global mining companies. In addition, USD is a more relevant presentation currency for international users of the consolidated financial statements of the Group. The Group also issues consolidated financial statements to comply with Law 208-FZ, which use the Russian Rouble as the presentation currency (refer to note 1).

The translation into presentation currency is made as follows: ● all assets and liabilities, both monetary and non-monetary, are translated at closing exchange rates at the dates of each statement of financial position presented; ● income and expense items are translated at the average exchange rates for the period; ● all equity items are translated at the historical exchange rates; ● all resulting exchange differences are recognised as a separate component in other comprehensive income; and ● in the consolidated statement of cash flows, cash balances at beginning and end of each period presented are translated at exchange rates at the respective dates. All cash flows are translated at the average exchange rates for the periods presented, with the exception of borrowings, dividends and advances received, gains and losses from disposal of subsidiaries, which are transated using the prevailing exchange rates at the dates of transactions; ● resulting exchange differences are presented in the consolidated statement of cashflows as effects of foreign exchange differences on balances of cash and cash equivalents. Foreign currency transactions Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the exchange rates prevailing at the date of transactions. All monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at each reporting date. Non-monetary items carried at historical cost are translated at the exchange rates prevailing at the date of transactions. Non- monetary items carried at fair value are translated at the exchange rate prevailing at the date on which the most recent fair value was determined. Exchange differences arising from changes in exchange rates are recognised in the consolidated income statement.

Exchange rates used in the preparation of the consolidated financial statements were as follows:

31/12/2015 31/12/2014 Russian Rouble/US Dollar 31 December 72.88 56.26 Average for the year ended 31 December 60.96 38.42 Botswana Pula/US Dollar 31 December 11.36 9.68 Average for the year ended 31 December 10.26 9.04 Australian Dollar/US Dollar 31 December 1.37 1.23 Average for the year ended 31 December 1.33 1.11 South African Rand/US Dollar 31 December 15.55 11.61 Average for the year ended 31 December 12.69 10.84 Hong Kong dollar/US Dollar 31 December 7.75 7.75 Average for the year ended 31 December 7.75 7.75

F-69 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million Revenue recognition Metal sales revenue Revenue from metal sales is recognised when the significant risks and rewards of ownership are transferred to the buyer and represents invoiced value of all metal products shipped to customers, net of value added tax. Revenue from contracts that are entered into and continue to meet the Group’s expected sale requirements designated for that purpose at their inception, and are expected to be settled by physical delivery, are recognised in the consolidated financial statements as and when they are delivered.

Certain contracts are provisionally priced so that price is not settled until a predetermined future date based on the market price at that time. Revenue from these transactions is initially recognised at the current market price. Provisionally priced metal sales are marked-to-market at each reporting date using the forward price for the period equivalent to that outlined in the contract. This mark-to-market adjustment is recorded in revenue.

Other revenue Revenue from sale of goods, other than metals, is recognised when significant risks and rewards of ownership are transferred to the buyer in accordance with the shipping terms specified in the sales agreements.

Revenue from service contracts is recognised when the services are rendered and the outcome can be reliably measured.

Dividends and interest income Dividends from investments are recognised when the Group’s right to receive payment has been established. Interest income is accrued based on effective interest method.

Leases Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance leases are capitalised as property, plant and equipment at the lower of fair value or present value of future minimum lease payments at the date of acquisition, with the related lease obligation recognised at the same value. Assets held under finance leases are depreciated over their estimated economic useful lives or over the term of the lease, if shorter. If there is reasonable certainty that the lessee will obtain ownership at the end of the lease term, the period of expected use is the useful life of the asset.

Finance lease payments are allocated using the effective interest rate method, between the lease finance cost, which is included in finance costs, and the capital repayment, which reduces the related lease obligation to the lessor.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are expensed in the period in which they are incurred.

F-70 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million Finance costs Finance costs mostly comprise interest expense on borrowings and unwinding of discount on decommissioning obligations.

Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Employee benefits Remuneration to employees in respect of services rendered during a reporting period is recognised as an expense in that period.

Defined contribution plans The Group contributes to the following major defined contribution plans:

● Pension Fund of the Russian Federation; ● Mutual accumulated pension plan.

Share appreciation rights At 31 December 2014 the Group terminated its share appreciation rights programme and settled substantially all of the outstanding obligations.

Income tax expense Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax Current tax is based on taxable profit for the year. Taxable profit differs from profit for the year as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

F-71 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences, and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if a temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit.

Property, plant and equipment and mining development costs Mining assets Mine development costs are capitalised and comprise expenditures directly related to:

● acquiring mining and exploration licences; ● developing new mining operations; ● estimating revised content of minerals in the existing ore bodies; and ● expanding capacity of a mine.

Mine development costs include interest capitalised during the construction period, when financed by borrowings.

Mine development costs are transferred to mining assets and start to be depreciated when a new mine reaches commercial production quantities.

Depreciation of mining assets is charged from the date on which a new mine reaches commercial production quantities and is included in the cost of production. Mining assets are depreciated on a straight-line basis over the lesser of their economic useful lives or the life of mine, varying from 2 to 45 years.

F-72 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Non-mining assets Non-mining assets include metallurgical processing plants, buildings, infrastructure, machinery and equipment and other non-mining assets. Non-mining assets are stated at cost less accumulated depreciation and impairment losses.

Non-mining assets are depreciated on a straight-line basis over their economic useful lives.

Depreciation is calculated over the following economic useful lives:

● plant, buildings and infrastructure 5 – 50 years ● machinery and equipment 3 – 30 years ● other non-mining assets 2 – 20 years

Capital construction-in-progress Capital construction-in-progress comprises costs directly related to construction of buildings, processing plant, infrastructure, machinery and equipment, it also includes amounts of irrevocable letters of credit opened for future fixed assets deliveries and secured with deposits placed in banks. Cost also includes finance charges capitalised during construction period where such costs are financed by borrowings. Depreciation of these assets commences when the assets are put into production. Research and exploration expenditure Research and exploration expenditure, including geophysical, topographical, geological and similar types of expenditure, is capitalised, if it is deemed that such expenditure will lead to an economically viable capital project, and begins to be amortised over the life of mine, when commercial viability of the project is proved. Otherwise it is expensed in the period in which it is incurred.

Research and exploration expenditure written-off before development and construction starts is not subsequently capitalised, even if a commercial discovery subsequently occurs.

Investment property Investment property recognised at historical cost less accumulated depreciation. Investment property is depreciated on a straignt-line basis. Intangible assets, excluding goodwill Intangible assets are recorded at cost less accumulated amortisation and impairment losses. Intangible assets mainly include patents, licences, software and rights to use software and other intangible assets.

Amortisation of patents, licenses and software is charged on a straight-line basis over 1 – 10 years.

F-73 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Where an impairment loss subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the original carrying amount that would have been determined had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the consolidated income statement immediately. Inventories Refined metals Main produced metals include nickel, copper, palladium, platinum; by-products include gold, rhodium, silver and other minor metals. Main products are measured at the lower of net cost of production or net realisable value. The net cost of production of main products is determined as total production cost, allocated to each joint product by reference to their relative sales value. By-products are measured at net realisable value, through a mark-to-market valuation.

Materials and supplies Materials and supplies are valued at the weighted average cost less allowance for obsolete and slow-moving items. Financial assets Financial assets are recognised when the Group has become a party to the contractual arrangement of the instrument and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: ● financial assets at fair value through profit or loss ● held-to-maturity investments; ● available-for-sale financial assets; and ● loans and receivables.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest basis for debt securities other than those financial assets designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss where the financial asset is either held for trading or it is designated as at fair value through profit or loss.

F-74 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

A financial asset is classified as held for trading if:

● it has been acquired principally for the purpose of selling in the near future; or ● it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or ● it is a derivative.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Available-for-sale financial assets

Available-for-sale financial assets mainly include investments in listed and unlisted equity securities, that are not classified in other categories.

Listed equity securities held by the Group that are traded in an active market are measured at their market value. Gains and losses arising from changes in fair value are recognised in other comprehensive income in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the consolidated income statement. Where an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investment revaluation reserve is included in the consolidated income statement for the period.

Investments in unlisted equity securities that do not have a quoted market price in an active market are recorded at management’s estimate of fair value.

Impairment of financial assets

F-75 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance for doubtful debts. When trade and other receivables are considered uncollectible, it is written off against the allowance. Subsequent recoveries of amounts previously written off are credited against the allowance. Changes in the allowance are recognised in the consolidated income statement.

Derecognition of financial assets

Financial liabilities

The Group classifies financial liabilities into loans and borrowings, trade and other payables. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

F-76 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Effective interest method

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Derivative financial instruments

The Group primarily uses derivative financial instruments to manage its exposure to the risk of changes in metal prices.

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. The resulting gain or loss is recognised in the consolidated income statement immediately.

The Group does not apply hedge accounting.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, cash deposits in banks, brokers and other financial institutions and highly liquid investments with original maturities of three months or less and demands deposits, which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Provisions

Provisions are recognised when the Group has a legal or constructive obligations as a result of a past event for which it is probable that an outflow of economic benefits will be required to settle the obligations, and the amount of the obligations can be reliably estimated.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Decommissioning obligations

Decommissioning obligations include direct asset decommissioning costs as well as related land restoration costs.

Future decommissioning obligations, discounted to net present value, are recognised as soon as the legal or constructive obligation to incur such costs arises (generally when the related asset is put into operation) and the future cost can be reliably estimated. This cost is capitalised as part of the initial cost of the related asset (i.e. a mine) and is depreciated over the useful life of the asset. The unwinding of the decommissioning obligations is included in the consolidated income statement as finance costs. Decommissioning obligations are periodically reviewed in light of current laws and regulations, and adjustments are made as necessary.

F-77 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCE OF ESTIMATION UNCERTAINTY

The most significant areas requiring the use of management estimates and assumptions relate to:

● useful economic lives of property, plant and equipment; ● impairment of assets, including fair value of assets held for sale; ● allowances; ● decommissioning obligations; ● income taxes; and ● contingencies.

Useful economic lives of property, plant and equipment

The Group’s mining assets, classified within property, plant and equipment, are amortised on a straight-line basis over the lesser of their economic useful lives or the life of mine. When determining the life of a mine, assumptions that were valid at the time of estimation, may change when new information becomes available.

The factors that could affect the estimation of the life of mine include the following:

● changes in proved and probable ore reserves; ● the grade of mineral reserves varying significantly from time to time; ● differences between actual commodity prices and commodity price assumptions used in the estimation and classification of ore reserves; ● unforeseen operational issues at mine sites; and ● changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange rates could possibly adversely affect the economic viability of ore reserves.

Impairment of assets

The Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets are impaired or indication of reversal of impairment. In making the assessment for impairment, assets that do not generate independent cash flows are allocated to an appropriate cash-generating unit. Management necessarily applies its judgement in allocating assets that do not generate independent cash flows to appropriate cash-generating units, and also in estimating the timing and value of the underlying cash flows within the value-in-use calculation. Subsequent changes to the cash- generating unit allocation or to the timing of cash flows could impact the carrying value of the respective assets.

F-78 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

Allowances

The Group creates allowance for doubtful debts to account for estimated losses resulting from the inability of customers to make the required payments. When evaluating the adequacy of an allowance for doubtful debts, management bases its estimate on current overall economic conditions, ageing of the accounts receivable balances, historical write-off experience, customer creditworthiness and changes in payment terms. Changes in the economy, industry or specific customer conditions may require adjustments to the allowance for doubtful debts recorded in the consolidated financial statements.

The Group also creates an allowance for obsolete and slow-moving raw materials and supplies. In addition, certain finished goods of the Group are carried at net realisable value. Estimates of net realisable value of inventories are based on the most reliable evidence available at the time the estimates are made. These estimates take into consideration fluctuations of price or cost directly relating to events occurring subsequent to the statement of financial position date to the extent that such events confirm conditions existing at the end of the period.

Decommissioning obligations

The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates decommissioning obligations based on management’s understanding of the current legal requirements in the various jurisdictions in which it operates, terms of the license agreements and internally generated engineering estimates. Provision is made, based on net present values, for decommissioning and land restoration costs as soon as the obligation arises. Actual costs incurred in future periods could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision.

Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining provision for income taxes due to the complexity of legislation in some jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events.

F-79 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

5. SEGMENTAL INFORMATION Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the Management Board. Management has determined the following operating segments: ● “GMK Group” segment, which includes mining and metallurgy operations, transport services, energy, repair and maintenance services located at Taimyr Peninsula; ● “Group KGMK” segment, which includes mining and metallurgy operations, energy, exploration activities located at Kola Peninsula; ● “NN Harjavalta” segment, which includes refinery operations located in Finland; ● “Other metallurgical” segment, which includes other metallurgy operations and exploration activities located in Russia and abroad; ● “Other non-metallurgical” segment, which includes metal and other trading, supply chain management, transport services, energy and utility, research and other activities located in Russia and abroad. Corporate activities of the Group do not represent an operating segment, include primarily headquarters’ general and administrative expenses and treasury operations of the Group and are included in unallocated line. Assets classified as held for sale and liabilities associated with assets classified as held for sale are also included in unallocated line. The amounts in respect of operating segments in the disclosure below are stated before intersegment eliminations, excluding: ● balances of intercompany loans and borrowings and interest accruals; ● intercompany investments; ● accrual of intercompany dividends; ● intercompany metal sales and unrealised profit on metal inventory balance. ● Amounts are measured on the same basis as those in the consolidated financial statements. The following tables present revenue, measure of segment profit or loss (EBITDA) and other segmental information from continuing operations regarding the Group’s reportable segments for the years ended 31 December 2015 and 2014, respectively. Other Other non- GMK Group NN Harja- metallur- metallur- Elimi- Year ended 31/12/2015 Group KGMK valta gical gical nations Total Revenue from external customers 6,532 615 757 17 621 – 8,542 Inter-segment revenue 58 158 – 13 561 (790) – Total revenue 6,590 773 757 30 1,182 (790) 8,542 Segment EBITDA 4,429 257 72 (12) (64) – 4,682 Unallocated (386) Consolidated EBITDA 4,296 Depreciation and amortisation (506) Impairment of property, plant and equipment (284) Finance costs (326) Foreign exchange loss, net (865) Other income and expenses (71) Profit before tax 2,244 Other segmental information Purchase of property, plant and 1,353 146 24 100 31 – 1,654 equipment and intangible assets Depreciation and amortisation of 418 37 42 1 8 – 506 segment assets Impairment of property, plant and 272 – – 11 1 – 284 equipment

F-80 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

5. SEGMENTAL INFORMATION (CONTINUED)

NN Other Other non- GMK Group Harja- metallur- metallur- Elimi- Year ended 31/12/2014 Group KGMK valta gical gical nations Total Revenue from external customers 8,853 873 986 75 1,082 – 11,869 Inter-segment revenue 84 227 – 79 915 (1,305) – Total revenue 8,937 1,100 986 154 1,997 (1,305) 11,869

Segment EBITDA 5,625 346 70 (61) 78 – 6,058 Unallocated (377) Consolidated EBITDA 5,681 Depreciation and amortisation (805) Impairment of property, plant and equipment (130) Finance costs (179) Foreign exchange loss, net (1,594) Other income and expenses (313) Profit before tax 2,660 Other segmental information Purchase of property, plant and 1,026 123 7 103 39 – 1,298 equipment and intangible assets Depreciation and amortisation of 680 71 20 5 29 – 805 segment assets Impairment of property, plant and 140 (17) – 2 5 – 130 equipment

The following tables present assets and liabilities of the Group’s operating segments at 31 December 2015 and 31 December 2014, respectively.

NN Other GMK Group Harja- metallur- Other non- Elimi- Year ended 31/12/2015 Group KGMK valta gical metallurgical nations Total Inter-segment assets 344 90 128 23 137 (722) – Segment assets 6,949 510 346 317 814 – 8,936 Total segment assets 7,293 600 474 340 951 (722) 8,936 Unallocated 4,435 Total group assets 13,371 Inter-segment liabilities 178 17 1 4 522 (722) – Segment liabilities 1,020 78 69 157 740 – 2,064 Total segment liabilities 1,198 95 70 161 1,262 (722) 2,064 Unallocated 9,046 Total group liabilities 11,110

F-81 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

5. SEGMENTAL INFORMATION (CONTINUED)

Other GMK Group NN Harja- metallur- Other non- Elimi- Year ended 31/12/2014 Group KGMK valta gical metallurgical nations Total Inter-segment assets 147 83 171 3 77 (481) – Segment assets 7,536 530 527 235 820 – 9,648 Total segment assets 7,683 613 698 238 897 (481) 9,648 Unallocated 3,501 Total group assets 13,149 Inter-segment liabilities 89 16 41 10 325 (481) – Segment liabilities 1,010 77 110 156 603 – 1,956 Total segment liabilities 1,099 93 151 166 928 (481) 1,956 Unallocated 6,400 Total group liabilities 8,356

The Group’s non-current assets are primarily located in the Russian Federation and Finland.

6. METAL SALES

The Group’s metal sales to external customers are detailed below (based on external customers’ locations):

Year ended 31/12/2015 Semi- Other Total Nickel Copper Palladium Platinum products metals Europe 4,698 1,453 1,448 1,182 327 72 216 Asia 2,110 1,153 249 384 180 109 35 North America 613 232 22 209 76 12 62 Russian Federation and CIS 462 172 197 32 48 - 13 7,883 3,010 1,916 1,807 631 193 326 Year ended 31/12/2014 Europe 5,469 2,025 1,623 1,206 371 49 195 Asia 3,508 1,963 400 703 310 97 35 North America 957 402 13 292 127 75 48 Russian Federation and CIS 962 246 432 20 61 - 203 10,896 4,636 2,468 2,221 869 221 481

F-82 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

7. COST OF METAL SALES

Year ended Year ended 31/12/2015 31/12/2014 Cash operating costs Labour 1,131 1,536 Purchases of metals for resale and semi-products 718 829 Materials and supplies 450 537 Third party services 186 403 Electricity and heat energy 131 191 Mineral extraction tax and other levies 117 194 Transportation expenses 75 87 Fuel 66 128 Sundry costs 137 162 Total cash operating costs 3,011 4,067 Depreciation and amortisation 476 698 (Increase)/decrease in metal inventories (308) 40 Total 3,179 4,805

8. SELLING AND DISTRIBUTION EXPENSES

Year ended Year ended 31/12/2015 31/12/2014 Export duties 88 225 Labour 19 23 Marketing expenses 15 66 Transportation expenses 8 15 Other 9 6 Total 139 335

9. GENERAL AND ADMINISTRATIVE EXPENSES

Year ended Year ended 31/12/2015 31/12/2014 Labour 352 465 Third party services 55 111 Taxes other than mineral extraction tax and income tax 54 98 Depreciation and amortisation 19 27 Rent 19 10 Transportation expenses 4 16 Other 51 85 Total 554 812

F-83 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

10. OTHER NET OPERATING EXPENSES

Year ended Year ended 31/12/2015 31/12/2014 Expenses on reconfiguration of production facilities 116 – Social expenses 114 71 Change in allowance for slow-moving and obsolete inventory 5 23 Change in allowance for value added tax recoverable 4 14 Change in allowance for doubtful debts (3) 42 Excess of decrease in decommissioning obligations over assets net book value – (12) Other 52 34 Total 288 172

11. FINANCE COSTS

Year ended Year ended 31/12/2015 31/12/2014 Interest expense on borrowings net of amounts capitalised 281 135 Unwinding of discount on provisions 44 43 Other 1 1 Total 326 179

12. INCOME FROM INVESTMENTS, NET

Year ended Year ended 31/12/2015 31/12/2014 Interest income on bank deposits 107 83 Realised gain on disposal of investments 75 3 Other 33 8

Total 215 94

F-84 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

13. INCOME TAX EXPENSE

Year ended Year ended 31/12/2015 31/12/2014 Current income tax expense 506 722 Deferred tax expense/(benefit) 22 (62) Total income tax expense 528 660

Year ended Year ended 31/12/2015 31/12/2014 Profit before tax 2,244 2,660 Income tax at statutory rate of 20% 449 532 Allowance for deferred tax assets 71 48 Non-deductible impairment of financial assets - 48 Utilisation of previously unrecognised deferred tax asset (96) - Non-taxable gain from disposal of financial assets (14) (22) Non-deductible loss from disposal of assets held for sale 59 43 Effect of different tax rates of subsidiaries operating in other jurisdictions 37 (40) Tax effect of other permanent differences 22 51 Total 528 660

The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 40%. Deferred tax balances

Recognised in Effect of Recognised in other comre- Classified translation to income hensive as held presentation 31/12/2014 statement income for sale currency 31/12/2015 Property, plant and equipment 228 24 - - (51) 201 Inventories 39 73 - - (20) 92 Trade and other receivables (9) (1) - - 2 (8) Decommissioning obligations (56) (20) - - 15 (61) Loans and borrowings, trade and other payables (5) (16) - - 5 (16) Other assets (15) (1) - - 7 (9) Other liabilities - 10 - - (5) 5 Tax loss carried forward (19) (47) - 10 15 (41) Net deferred tax liability 163 22 - 10 (32) 163

F-85 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

13. INCOME TAX EXPENSE (CONTINUED) Recognised in Reclassified other from other Effect of Recognised in compre- comprehensive translation to income hensive income to presentation 31/12/2013 statement income profit and loss currency 31/12/2014 Property, plant and equipment 383 (62) - - (93) 228 Inventories 140 (41) - - (60) 39 Trade and other receivables (21) 5 - - 7 (9) Decommissioning obligations (67) 7 - - 4 (56) Loans and borrowings, trade and other payables (37) 18 (7) - 21 (5) Other assets (37) 10 - 2 10 (15) Other liabilities ------Tax loss carried forward (5) (1) - - (13) (19) Net deferred tax liability 356 (64) (7) 2 (124) 163

Certain deferred tax assets and liabilities have been offset to the extent they relate to taxes levied in the same jurisdiction and on the Group’s entities which can pay taxes on a consolidated basis. Deferred tax balances (after offset) presented in the consolidated statement of financial position were as follows:

31/12/2015 31/12/2014 Deferred tax liability 205 216 Deferred tax asset (42) (53) Net deferred tax liabilities 163 163

Unrecognised deferred tax assets

Deferred tax assets have not been recognised as follows: 31/12/2015 31/12/2014 Deductible temporary differences 78 193 Tax loss carry-forwards 187 222

Total 265 415

At 31 December 2015 deferred tax asset in amount of USD 138 million related to tax loss arising on disposal of OJSC “Third Generation Company of the Wholesale Electricity Market” (“OGK-3 (31 December 2014: USD 179 million) was not recognised as it was incurred by the Company prior to setting up of the tax consolidation group. This deferred tax asset can be utilized only if the Company exits the tax consolidation group within nine years after the exit (2014: within nine years after the exit). Unrecognised deferred tax assets in the amount of USD 49 million related to other tax losses will expire in ten years (31 December 2014: USD 43 million – ten years).

During the year ended 31 December 2015 previously unrecognised deferred tax assets arising on an impairment of available-for-sale investments in securities in amount of USD 96 million was utilised, following changes in tax legislation.

At 31 December 2015, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 1,191 million (31 December 2014: USD 1,581 million) associated with investments in subsidiaries, because management believes that it is in a position to control the timing of reversal of such differences.

F-86 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

14. PROPERTY, PLANT AND EQUIPMENT

Mining Non-mining assets assets and Buildings, Machinery, Capital mine structures equipment construc- developme and and tion- in- nt cost utilities transport Other progress Total Cost Balance at 1 January 2014 9,540 3,445 4,463 180 2,103 19,731 Additions 860 - - ─ 738 1,598 Reclassified between groups (3) 1 33 (30) (1) - Transfers - 229 296 10 (535) - Change in decommissioning provision (65) 72 - ─ - 7 Reclassified to assets held for sale (1,732) (11) (105) (119) (144) (2,111) Disposals (52) (13) (53) (4) (30) (152) Effect of translation to presentation currency (3,506) (1,501) (1,784) (32) (855) (7,678)

Balance at 31 December 2014 5,042 2,222 2,850 5 1,276 11,395 Additions 1,032 - - ─ 832 1,864 Reclassified between groups 39 (2) (101) 89 (25) - Transfers - 165 234 10 (409) - Change in decommissioning provision 63 25 - ─ - 88 Reclassified from/(to) assets held for sale 104 (3) (2) 30 9 138 Reclassified to investment property - (8) (2) (2) - (12) Disposals (106) (10) (73) (2) (17) (208) Effect of translation to presentation currency (1,299) (506) (587) (28) (358) (2,778)

Balance at 31 December 2015 4,875 1,883 2,319 102 1,308 10,487

Accumulated depreciation and impairment

Balance at 1 January 2014 (4,390) (1,487) (2,258) (108) (266) (8,509) Charge for the year (277) (184) (338) (12) - (811) Reclassified between groups 1 (10) 29 (20) - - Reclassified to assets held for sale 1,731 11 105 119 141 2,107 Disposals 41 13 42 ─ 4 100 Impairment loss (43) 7 - ─ (94) (130) Effect of translation to presentation currency 1,195 673 893 20 78 2,859

Balance at 31 December 2014 (1,742) (977) (1,527) (1) (137) (4,384) Charge for the year (180) (150) (222) (8) - (560) Reclassified between groups (32) (5) 86 (49) - - Reclassified (from)/to assets held for sale (83) 2 5 ─ (12) (88) Disposals 98 7 67 2 14 188 Impairment loss (7) (124) (8) ─ (145) (284) Effect of translation to presentation currency 428 235 322 12 36 1,033

Balance at 31 December 2015 (1,518) (1,012) (1,277) (44) (244) (4,095) Carrying value

31 December 2014 3,300 1,245 1,323 4 1,139 7,011

31 December 2015 3,357 871 1,042 58 1,064 6,392

F-87 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

At 31 December 2015 capital construction-in-progress included USD 107 million of irrevocable letters of credit opened for fixed assets purchases (31 December 2014: USD 60 million), representing security deposits placed in banks. For the year ended 31 December 2015 purchases of property, plant and equipment in the consolidated statement of cashflows includes USD 103 million related to these irrevocable letters of credit (for the year ended 31 December 2014: nil).

Capitalized borrowing costs for the year ended 31 December 2015 amounted to USD 153 million (for the year ended 31 December 2014: USD 145 million). Capitalization rate used to determine the amount of borrowing costs equals to 5.14% per annum (2014: 3.98%).

At 31 December 2015 mining assets and mine development cost included USD 2,026 million of mining assets under development (31 December 2014: USD 2,033 million).

Impairment

During the year ended 31 December 2015 the Group revised its intention on the further use of the gas extraction assets. As a result, these assets were assessed as a separate cash generating unit. At 31 December 2015 the Group identified indicators of the impairment of gas production assets and determined their reсoverable amount based on the value-in-use estimate. As a result, impairment loss in the amount of USD 266 million was recognized in Impairment of property, plant and equipment in the consolidated income statement. The most significant estimates and assumptions used in determination of value in use are as follows:

● Future сash flows were projected based on budgeted amounts, taking into account actual results for the previous years. Forecasts were assessed up to 2100. Measurements were performed based on discounted cash flows expected to be generated by gas–producting assets. ● Management estimates prices for natural gas and gas-concentrate based on commodities price forecasts. Commodities price forecast was based on consensus forecast. ● Production forecasts were primarily based on internal production reports available at the date of impairment test and management’s assumptions regarding future production levels. ● The amounts and timing of capital investments were based on management’s forecast. ● Inflation indices and foreign currency rate forecasts were sourced from Economist Intelligence Unit report. Inflation used was projected within 4-7%. Forecast for exchange rates was made based on expected RUR and USD inflation indices. ● A pre-tax nominal RUR discount rate of 17.4% was estimated by the reference to the weighted average cost of capital for the Group and reflects management’s estimates of the risks specific to production units.

During the year ended 31 December 2015 additional impairment losses in the amount of USD 18 million (for the year ended 31 December 2014: USD 130 million) were recognised in respect of specific individual assets, primarily construction-in-progress and related equipment for installation.

At 31 December 2015 no indicators of a reversal of previously recognised impairment losses have been identified.

15. INVESTMENT PROPERTY

During the year ended 31 December 2015 management of the Group reclassified certain assets located in the Russian Federation (primarily, office property) in the amount of USD 83 million previously presented within assets classified as held for sale and held for use to the investment property based on their intended use. Investment property is recognised in the consolidated statement of financial position at historical cost less accumulated depreciation. Carrying value of investment property approximates its fair value.

F-88 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

16. OTHER FINANCIAL ASSETS

31/12/2015 31/12/2014 Non-current Loans issued and other receivables 57 31 Bank deposits 5 7 Available-for-sale investments in securities - 166 Total non-current 62 204

Current Loans issued and other receivables 1 2 Bank deposits - 85 Total current 1 87

Available-for-sale investments in securities

During the year ended 31 December 2015 the Group sold its 12.35% stake in PJSC Inter RAO UES for the total consideration in the amount of USD 204 million. Gain on disposal in the amount of USD 75 million was recognised in the consolidated income statement.

During the year ended 31 December 2014 as a result of continuing decline in prices, impairment loss on available-for-sale investments of USD 123 million was recognised in the consolidated income statement.

During the year ended 31 December 2014, investments in companies which own various real estate properties were fully impaired based on the available DCF models and management assessment of their recoverability. Impairment loss in amount of USD 121 million was recognised in the consolidated income statement.

Bank deposits

Interest rate on long-term RUB-denominated deposits held in banks was 5.1% (31 December 2014: 5.1%) per annum.

F-89 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

17. OTHER TAXES

31/12/2015 31/12/2014 Taxes receivable Value added tax recoverable 186 154 Export duties - 11 Other taxes 14 20 200 185 Less: Allowance for value added tax recoverable (1) (1) Total 199 184 Less: Non-current portion of other taxes receivable - (6) - Other taxes receivable 199 178 Taxes payable Value added tax 45 40 Social security contributions 23 23 Property tax 10 14 Mineral extraction tax 7 8 Other 10 14 Other taxes payable 95 99

18. INVENTORIES

31/12/2015 31/12/2014 Refined metals 541 389 Semi-products 58 - Work-in-process 605 787 Total metal inventories 1,204 1,176 Materials and supplies 520 592 Less: Allowance for obsolete and slow-moving items (26) (42) Net materials and supplies 494 550 Inventories 1,698 1,726

19. TRADE AND OTHER RECEIVABLES

31/12/2015 31/12/2014 Trade receivables from metal sales 86 213 Other receivables 135 154 221 367 Less: Allowance for doubtful debts (54) (92) Trade and other receivables, net 167 275

In 2015 and 2014, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest bearing.

At 31 December 2015 and 2014, there were no material trade accounts receivable which were overdue or individually determined to be impaired.

F-90 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

19. TRADE AND OTHER RECEIVABLES (CONTINUED)

The average credit period on sales of other products and services for the year ended 31 December 2015 was 27 days (2014: 24 days). No interest was charged on these receivables.

Included in the Group’s other receivables at 31 December 2015, were debtors with a carrying value of USD 45 million (31 December 2014: USD 23 million) that were past due but not impaired. Management of the Group believes that these amounts are recoverable in full.

The Group did not hold any collateral for accounts receivable balances.

Ageing of other receivables past due but not impaired was as follows:

31/12/2015 31/12/2014 Less than 180 days 34 20 180-365 days 11 3 45 23

Movement in the allowance for doubtful debts was as follows: Year ended Year ended 31/12/2015 31/12/2015 Balance at beginning of the year 92 118 Change in allowance (3) 42 Accounts receivable written-off (16) (6) Disposed on disposal of subsidiaries - (1) Effect of translation to presentation currency (19) (61) Balance at end of the year 54 92

20. CASH AND CASH EQUIVALENTS

31/12/2015 31/12/2014 Current accounts - foreign currencies 525 782 - RUB 43 111 Bank deposits - foreign currencies 2,598 1,747 - RUB 879 152 Other cash and cash equivalents 9 1 Total 4,054 2,793

F-91 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

21. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES

In December 2013, the Group made a decision to dispose of the following assets: ● Nkomati Nickel Mine, a South Africa mining company, which is an associate of the Group. ● Assets located in Western Australia. ● Certain other non-core assets located in the Russian Federation.

During the year ended 31 December 2014, management of the Group made a decision to dispose of Tati Nickel Mining Company, a subsidiary of the Group, located in Botswana.

During the year ended 31 December 2015, management of the Group made a decision to dispose of OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian Federation.

During the year ended 31 December 2015, management of the Group made a decision to reclassify certain other non-core assets located in the Russian Federation from assets classified as held for sale to investment property (refer to note 15) or to the assets classified as held for use. Reclassification does not have significant effect on current and previous period operations of the Group.

Management of the Group is actively searching for buyers for all of the assets classified as held for sale and/or is waiting for necessary regulatory approvals, and expects that disposals will be completed during the next twelve months. Disposal of these assets is consistent with the Group’s long-term strategy.

All of the above assets classified as held for sale have been measured at the lower of their fair values less costs to sell and their carrying values. The Group has assessed fair value of assets classified as held for sale at 31 December 2015 and 31 December 2014 based on price offers available. Assets classified as held for sale have been included in Level 2 of fair value hierarchy.

Management of the Group concluded that the sale of assets in Western Australia and South Africa and disposal of other assets referred to above does not constitute discontinued operations.

At 31 December 2015 and 31 December 2014 major classes of assets and liabilities related to assets classified as held for sale are presented below:

31/12/2015 31/12/2014 Property, plant and equipment 7 168 Investments in associates 154 207 Intangible assets - 1 Deferred tax assets 10 - Inventories - 27 Trade and other receivables 3 18 Other financial assets 1 10 Cash and cash equivalents 42 5 Total assets 217 436 Decommissioning obligations - (24) Deferred tax liabilities (1) (2) Employee benefit obligations (1) (8) Loans and borrowings (21) - Trade and other payables (1) (49) Total liabilities (24) (83) Net assets 193 353

F-92 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

21. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES (CONTINUED)

Disposal of Tati Nickel Mining Company during the year ended 31 December 2015

On 2 April 2015, the Group sold its 85% stake in TNMC located in Botswana. The carrying value of the Group’s share in net assets including decommissioning obligations at the date of disposal was negative in the amount of USD 20 million. Financial result from the disposal includes negative impact due to write down of the historical amount of the foreign currency translation reserve representing cumulative exchange differences between the presentation currency – the US dollar and the Botswana Pula.

Disposal of assets located in Western Australia during the year ended 31 December 2014

On 7 May 2014, the Group sold goldfields assets in Western Australia held by North Eastern Goldfields Operations (“NEGO”), a subsidiary of the Group, for a cash consideration of USD 19 million (AUD 20 million). The carrying value of assets including decommissioning obligations at the date of disposal was negative in the amount of USD 28 million. Gain on disposal in the amount of USD 47 million was recognised in the consolidated income statement.

On 4 July 2014 the Group announced that it entered into binding agreements to sell its nickel assets Black Swan and Silver Swan in Western Australia held by MPI Nickel Pty Ltd and Black Swan Nickel Pty Ltd, subsidiaries of the Group. On 27 March 2015 the Group completed the transaction. The Group recognised disposal of assets in the consolidated financial statements for the year ended 31 December 2014. Gain on disposal in the amount of USD 48 million primarily due to write down of decommissioning obligations was recognised in the consolidated income statement.

On 12 November 2014, the Group sold Lake Johnston Nickel Project (“LJNP”) in Western Australia held by Lake Johnston Pty Ltd and Lake Johnston Operations Pty Ltd, subsidiaries of the Group. Gain on disposal in the amount of USD 81 million primarily due to write down of decommissioning obligations was recognised in the consolidated income statement.

On 17 December 2014, the Group sold nickel assets Avalon and Cawse (“A&C”) in Western Australia held by Norilsk Nickel Avalon Pty Ltd and Norilsk Nickel Cawse Pty Ltd, subsidiaries of the Group. Gain on disposal in the amount of USD 158 million primarily due to write down of decommissioning obligations was recognised in the consolidated income statement.

Financial result from the disposal of the Australian assets includes negative impact due to a write down of the foreign currency translation reserve representing cumulative exchange differences between the presentation currency – the US dollar, and the Australian dollar.

F-93 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

22. SHARE CAPITAL

Authorised and issued ordinary shares

2015 2014 At 1 January 158,245,476 158,245,476 Acquisition of own shares from shareholders (1,250,075) - At 31 December 156,995,401 158,245,476

During the period from 1 July to 31 December 2015 the Group acquired 1,250,075 ordinary shares for a cash consideration of USD 196 million.

Earnings per share

Year ended Year ended 31/12/2015 31/12/2014 Basic earnings per share (US Dollars per share): 11.0 12.7

The earnings and weighted average number of shares used in the calculation of earnings per share are as follows:

Year ended Year ended 31/12/2015 31/12/2014 Profit for the year attributable to shareholders of the parent company 1,734 2,003

Year ended Year ended 31/12/2015 31/12/2014 Weighted average number of shares on issue 158,245,476 158,245,476

Less: weighted average number of treasure shares (489,575) - Weighted average number of outstandign shares 157,755,901 158,245,476

As at 31 December 2015 and 31 December 2014, the Group had no securities, which would have a dilutive effect on earnings per share of ordinary stock.

F-94 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

23. LOANS AND BORROWINGS

Average Fixed or nominal floating rate in Currency interest rate 2015, % Maturity 31/12/2015 31/12/2014 Unsecured loans USD floating 2.79% 2016-2025 3,404 3,253 RUB fixed 12.65% 2019-2021 1,655 708 Other floating 9.30% 2015 – 29 5,059 3,990 Corporate Bonds USD fixed 5.23% 2018-2022 2,717 1,719 RUB fixed 7.90% 2016 480 621

3,197 2,340 Finance leasing USD fixed 7.82% 2019 10 – Total 8,266 6,330 Less: current portion due within twelve months and presented as short- term borrowings (1,124) (652) Long-term loans and borrowings 7,142 5,678

The Group is obliged to comply with a number of restrictive financial and other covenants, including maintaining certain financial ratios and restrictions on pledging and disposal of certain assets.

24. EMPLOYEE BENEFIT OBLIGATIONS

31/12/2015 31/12/2014 Accrual for annual leave 136 150 Wages and salaries 96 94 Defined benefit obligations - 5 Share appreciation rights - 2 Other 5 7 Total obligations 237 258 Less: non-current obligations (22) (6) Current obligations 215 252

Defined contribution plans

Amounts recognised within continuing operations in the consolidated income statement in respect of defined contribution plans were as follows:

Year ended Year ended 31/12/2015 31/12/2014 Pension Fund of the Russian Federation 287 376 Mutual accumulated pension plan 8 12 Other 6 7 Total 301 395

F-95 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

25. PROVISIONS

31/12/2015 31/12/2014 Current provisions Tax provision 127 140 Provision for social commitments 12 14 Decommissioning obligations - 1 Other provisions 66 1 Total current provisions 205 156 Non-current provisions Decommissioning obligations 308 227 Provision for social commitments 38 47 Other long-term provisions 11 - Total non-current provisions 357 274 Total 562 430

Decommis- Social sioning commitments Tax Other Total Balance at 1 January 2014 443 144 154 3 744 Provision accrued 101 - - - 101 Settlements during the year - (22) - (2) (24) Liabilities directly associated with assets classified as held for sale (24) - - - (24) Change in estimates (106) (14) - - (120) Unwinding of discount 36 7 - - 43 Effect of translation to presentation currency (222) (54) (14) - (290) Balance at 31 December 2014 228 61 140 1 430 Provision accrued - 3 4 95 102 Settlements during the year - (13) (3) - (16) Change in estimate 122 11 - (1) 132 Unwinding of discount 35 6 - 3 44 Effect of translation to presentation currency (77) (18) (14) (21) (130) Balance at 31 December 2015 308 50 127 77 562

Decommissioning obligations

Key assumptions used in estimation of decommissioning obligations were as follows:

31/12/2015 31/12/2014 Discount rates Russian entities 9.3% – 10.4% 9.9% – 15.3% Discount rates non-Russian entities 3% – 8% 3% – 9% Expected closure date of mines up to 2056 up to 2059 Expected inflation over the period from 2016 to 2019 4.6% – 8.7% 4.9% – 9.2% Expected inflation over the period from 2020 onwards 5.30% 4.80%

Present value of expected cost to be incurred for settlement of decommissioning obligations was as follows: 31/12/2015 31/12/2014 Due from second to fifth year 170 152 Due from sixth to tenth year 49 28 Due from eleventh to fifteenth year 16 10 Due from sixteenth to twentieth year 5 7 Due thereafter 68 31 Total 308 228

F-96 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

25. PROVISIONS (CONTINUED) In 2015 the Group approved a programme for reconfiguration of production facilities located in the Taimyr Peninsula. The programme starts in 2016 and also includes activites related to closure and liquidation of the Nickel plant which in the the past were partially provided for within the Decommisioning obligations. The revised provision was calculated based on the best estimate of the amount and timing of future expenditures included in the detailed liquidation programme, and accounted for accordingly. Furher, additional expenses on reconfiguration of production facilities were recognised within Other net operating expenses.

Social commitments

In 2010 the Group entered into several multilateral agreements with the Government of the Russian Federation, the Krasnoyarsk Regional Government and the Norilsk Municipal Authorities for construction of pre-schools and other items of social infrastructure in Norilsk and Dudinka, and resettlement of families currently residing in these cities to other Russian regions with more favorable living conditions during 2015–2020. The provision represents present value of the best estimate of the future outflow of economic benefits to settle these obligations. 26. TRADE AND OTHER PAYABLES

31/12/2015 31/12/2014 Financial liabilities Trade payables 173 245 Payables for acquisition of property, plant and equipment 93 109 Other creditors 138 108 Total financial liabilities 404 462 Non-financial liabilities Advances received 604 446 Total non-financial liabilities 604 446 Total 1,008 908

The maturity profile of the Group’s financial liabilities was as follows:

31/12/2015 31/12/2014 Due within one month 175 242 Due from one to three months 198 146 Due from three to twelve months 31 74 Total 404 462

27. DIVIDENDS

On 13 May 2015, the Annual General shareholder’s meeting declared final dividends for the year ended 31 December 2014 in the amount of RUB 670.04 (USD 13.2) per share with the total amount of USD 2,083 million. The dividends were paid to the shareholders in May and June 2015 in the amount of USD 2,126 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates.

On 14 September 2015, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 6 months ended 30 June 2015 in the amount of RUB 305.07 (USD 4.49) per share with the total amount of USD 710 million, including USD 4 million in respect of Treasury shares. The dividends were paid to the shareholders from September to December 2015 in the amount of USD 731 million, recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates.

On 19 December 2015, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 9 months ended 30 September 2015 in the amount of RUB 321.95 (USD 4.51) per share with the total amount of USD 714 million, including USD 6 million in respect of Treasury shares.

F-97 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

27. DIVIDENDS (CONTINUED)

The dividends in respect of 9 months ended 30 September 2015 were paid to the shareholders in January 2016 in the amount of USD 665 million using prevailing RUB/USD rates on the payment dates.

On 6 June 2014, the Annual General shareholder’s meeting declared final dividends for the year ended 31 December 2013 in the amount of RUB 248.48 (USD 7.1) per share with the total amount of USD 1,127 million. The dividends were paid to the shareholders in June and July 2014 in the amount of USD 1,146 million recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates.

On 11 December 2014, the Extraordinary General shareholder’s meeting declared interim dividends in respect of the 9 months ended 30 September 2014 in the amount of RUB 762.34 (USD 14.05) per share with the total amount of USD 2,222 million. The dividends were paid to the shareholders in December 2014 in the amount of USD 2,135 million recognised in the consolidated cash flow statement using prevailing RUB/USD rates on the payment dates.

28. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES

Related parties include shareholders, associates and entities under common ownership and control of the Group’s major shareholders and key management personnel. The Company and its subsidiaries, in the ordinary course of their business, enter into various sale, purchase and service transactions with related parties. Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Sale of goods and services Purchase of goods and services

Year ended Year ended Year ended Year ended Transactions with related parties 31/12/2015 31/12/2014 31/12/2015 31/12/2014 Entities under common ownership and - 2 19 22 control of the Group’s major shareholders Associates of the Group 6 1 242 398 Total 6 3 261 420

Accounts receivable, investments and Accounts payable, loans and cash borrowings received Outstanding balances with related parties 31/12/2015 31/12/2014 31/12/2015 31/12/2014 Entities under common ownership and control of the Group’s major shareholders - 2 - 1 Associates of the Group 2 3 25 54 Total 2 5 25 55 Terms and conditions of transactions with related parties

Sales to and purchases from related parties of electricity, heat energy and natural gas supply were made at prices established by the Federal Tariff Service, government regulator responsible for establishing and monitoring prices on the utility and telecommunication markets in the Russian Federation.

Compensation of key management personnel

Key management personnel of the Group consists of members of the Management Board and the Board of Directors. For the year ended 31 December 2015 remuneration of key management personnel of the Group included salary and performance bonuses amounted to USD 61 million (for the year ended 31 December 2014: USD 37 million).

F-98 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

29. COMMITMENTS Capital commitments

At 31 December 2015, contractual capital commitments amounted to USD 798 million (31 December 2014: USD 1,058 million).

Operating leases

The land in the Russian Federation on which the Group’s production facilities are located is owned by the state. The Group leases land through operating lease agreements, which expire in various years through 2064. According to the terms of lease agreements rent fees are revised annually by reference to an order issued by the relevant local authorities. The Group entities have a renewal option at the end of lease period and an option to buy land at any time, at a price established by the local authorities. During the year ended 31 December 2014 the Group entered into a long-term operating lease agreement for its headquarters building. Future minimum lease payments due under non-cancellable operating lease agreements for land and buildings were as follows: 31/12/2015 31/12/2014 Due within one year 31 25 From one to five years 128 110 Thereafter 79 84

Total 238 219 At 31 December 2015, the Group entered into nine aircraft lease agreements. The respective lease agreements have an average life of eight-years with renewal option at the end of the term. There are no restrictions placed upon the lessee by entering into these agreements. At 31 December 2014, nine aircraft lease agreements belonged to entities classified as held for sale. Future minimum lease payments due under non-cancellable operating lease agreements for aircrafts were as follows: 31/12/2015 31/12/2014 Due within one year 37 34 From one to five years 89 66 Thereafter - 2

Total 126 102

The Group’s commitments are funded from its own cash resources. 30. CONTINGENCIES Litigation

At 31 December 2015 the Group has unresolved legal disputes with the state authorities due to non-approval of the reduction of the negative environmental impact charge in relation to the environmental protection expenditure incurred by the Group. Management believes that the Group complied with all relevant regulations to be eligible for the reduction and that no provision for these disputes is required. Additionally, the Group is involved in other legal disputes in the ordinary course of its operations, with the probability of their unfavorable resolution being assessed as possible. At 31 December 2015, total claims under unresolved litigation amounted to approximately USD 53 million (31 December 2014: USD 51 million).

F-99 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

30. CONTINGENCIES (CONTINUED) Taxation contingencies in the Russian Federation The Russian Federation currently has a number of laws related to various taxes imposed by both federal and regional governmental authorities. Applicable taxes include value-added (VAT), corporate income tax, mandatory social security contributions, together with others. Tax returns, together with other legal compliance areas (for example, customs and currency control matters), are subject to review and investigation by a number of authorities which are authorised by law to impose severe fines, penalties and interest charges. Generally, tax returns remain open and subject to inspection for a period of three years following the fiscal year. While management of the Group believes that it has adequately provided for tax liabilities based on its interpretation of current and previous legislation, the risk remains that tax authorities in the Russian Federation could take differing positions with regard to interpretive issues. This uncertainty may expose the Group to additional taxation, fines and penalties. Transfer pricing legislation enacted in the Russian Federation starting from 1 January 2012 provides for major modifications making local transfer pricing rules closer to OECD guidelines, but creating additional uncertainty in practical application of tax legislation in certain circumstances. These transfer pricing rules provide for an obligation for the taxpayers to prepare transfer pricing documentation with respect to controlled transactions and prescribe the basis and mechanisms for accruing additional taxes and interest in case prices in the controlled transactions differ from the market level. Currently there is lack of practice of applying the transfer pricing rules by the tax authorities and courts, however, it is anticipated that transfer pricing arrangements will be subject to very close scrutiny potentially having effect on the financial results and the financial position of the Group. Environmental matters The Group is subject to extensive federal, state and local environmental controls and regulations in the countries in which it operates. The Group’s operations involve pollutant emissions to air and water objects as well as formation and disposal of production wastes. Management of the Group believes that its mining and production technologies are in compliance with all current existing environmental legislation in the countries in which it operates. However, environmental laws and regulations continue to evolve. The Group is unable to predict the timing or extent to which those laws and regulations may change. Such change, if it occurs, may require that the Group modernise technology to meet more stringent standards. Russian Federation risk As an emerging market, the Russian Federation does not possess a fully developed business and regulatory infrastructure including stable banking and judicial systems which would generally exist in a more mature market economy. The economy of the Russian Federation is characterised by a currency that is not freely convertible outside of the country, currency controls, low liquidity levels for debt and equity markets, and continuing inflation. As a result, operations in the Russian Federation involve risks that are not typically associated with those in more developed markets. Stability and success of Russian economy and the Group’s business mainly depends on the effectiveness of economic measures undertaken by the government as well as the development of legal system. The recent conflict in Ukraine and related events has increased the perceived risks of doing business in the Russian Federation. The imposition of economic sanctions on Russian individuals and legal entities has resulted in increased economic uncertainty including more volatile equity markets, a depreciation of the Russian Ruble, a reduction in both local and foreign investment inflows and a significant tightening in the availability of credit. The consolidated financial statements reflect management’s assessment of the impact of the Russian business environment on the financial results and the financial position of the Group.

F-100 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

31. FINANCIAL RISK MANAGEMENT Capital risk management

The Group manages its capital structure in order to safeguard the Group’s ability to continue as a going concern and to maximise the return to shareholders through the optimisation of debt and equity balance.

As at 15 March 2016 the Сompany maintains BBB- investment grade ratings, assigned by rating agencies S&P's and Fitch, despite S&P’s downgrade of Russian sovereign rating below the investment grade level to BB+ on 26 January 2015. The Company’s rating from Moody’s is restrained by Russia's country ceiling at Ba1 level.

Financial risk factors and risk management structure

In the normal course of its operations, the Group is exposed to a variety of financial risks: market risk (including interest rate and currency risk), credit risk and liquidity risk. The Group has an explicit risk management structure aligned with internal control procedures that enable it to assess, evaluate and monitor the Group’s exposure to such risks.

Interest rate risk

2% LIBOR increase impact Year ended Year ended 31/12/2015 31/12/2014 Loss 68 66

Management believes that the Group’s exposure to interest rate risk fluctuations does not require additional hedging activities.

F-101 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

31. FINANCIAL RISK MANAGEMENT (CONTINUED)

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument denominated in foreign currency will fluctuate because of changes in exchange rates.

The major part of the Group’s revenue and related trade accounts receivable is denominated in US dollars and therefore the Group is exposed primarily to USD currency risk. Foreign exchange risk arising from other currencies is assessed by management of the Group as immaterial.

31/12/2015 31/12/2014 Other Other USD HKD USD HKD currencies currencies Cash and cash equivalents 2,068 1,009 32 1,406 1,008 80 Trade and other receivables 88 - 8 168 - 6 Other assets 95 - 115 - - 136 Total assets 2,251 1,009 155 1,574 1,008 222 Trade and other payables 200 - 82 257 - 94 Loans and borrowings 6,121 - - 4,997 - - Other liabilities 11 - 5 39 - - Total liabilities 6,332 - 87 5,293 - 94

Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if a risk for a potential loss is at an acceptable level. The Group calculates the financial impact of exchange rate fluctuations on USD-denominated monetary assets and liabilities in respect of the Group entities where functional currency is the Russian Rouble. The following table presents the decrease of the Group’s profit before tax to a 20% weakening of the Russian Rouble against USD.

US Dollar 20% impact Year ended Year ended 31/12/2015 31/12/2014 Loss 816 744

Given that the Group’s exposure to currency risk at the monetary assets and liabilities level is offset by the revenue denominated in USD, management believes that the Group’s exposure to currency risk is acceptable. The Group does not apply hedge instruments.

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, deposits with banks as well as credit exposures to customers, including outstanding uncollateralised trade and other receivables. The Group’s exposure to credit risk is continuously monitored and controlled.

F-102 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

31. FINANCIAL RISK MANAGEMENT (CONTINUED)

A dealing with new counterparty, management assesses the creditworthiness of a potential customer or financial institution. Where the counterparty is rated by major independent credit-rating agencies, this rating is used to evaluate creditworthiness; otherwise it is evaluated using an analysis of the latest available financial statements of the counterparty and other publically available information.

The balances of ten major counterparties are presented below. The banks have a minimum of ВВ+ credit rating.

Outstanding balance Cash and cash equivalents 31/12/2015 31/12/2014 Bank A 1,009 1,003 Bank B 948 525 Bank C 632 343 Bank D 369 246 Bank E 312 214 3,270 2,331 Trade receivables Company A 17 37 Company B 10 16 Company C 8 14 Company D 6 13 Company E 5 12 46 92

The Group is not economically dependent on a limited number of customers because majority of its products are highly liquid and traded on the world commodity markets. Metal and other sales to the Group’s customers are presented below:

Year ended 31/12/2015 Year ended 31/12/2014 Number of Turnover Number of Turnover % % customers USD million customers USD million Largest customer 1 1,025 12 1 1,051 9 Next 9 largest customers 9 3,382 39 9 4,111 35 Total 10 4,407 51 10 5,162 44 Next 10 largest customers 10 1,091 13 10 1,573 13 Total 20 5,498 64 20 6,735 57 Remaining customers 3,044 36 5,134 43 Total 8,542 100 11,869 100

Management of the Group believes that except as indicated above in respect of bank balances there is no significant concentration of credit risk.

The maximum exposure to credit risk for cash and cash equivalents, loans, irrevocable letters of credit, representing security deposits placed in banks, and trade and other receivables is as follows:

31/12/2015 31/12/2014 Cash and cash equivalents 4,054 2,793 Loans, trade and other receivables 225 308 Irrevocable letters of credit 121 71 Bank deposits 5 92

F-103 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

31. FINANCIAL RISK MANAGEMENT (CONTINUED)

Liquidity risk

Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due.

The Group has a well-developed liquidity risk management structure to exercise control over its short-, medium- and long-term funding. The Group manages liquidity risk by maintaining adequate reserves, committed and uncommitted banking facilities and reserve borrowing facilities. Management continuously monitors rolling cash flow forecasts and performs analysis of maturity profiles of financial assets and liabilities, and undertakes detailed annual and quarterly budgeting procedures.

Presented below is the maturity profile of the Group’s borrowings (maturity profiles for other liabilities presented in note 26) based on contractual undiscounted payments, including interest:

Due from Due from Due one to three to Due in the Due in the 31/12/2015 within one three twelve second Due in the fourth Due in the Due there- Total month months months year third year year fifth year after Fixed rate bank loans and borrowings Principal 4,874 - 480 3 2 742 551 1,273 1,823 Interest 1,838 - 69 310 362 346 325 259 167 6,712 - 549 313 364 1,088 876 1,532 1,990 Floating rate bank loans and borrowings Principal 3,430 - 144 501 626 988 754 17 400 Interest 366 6 18 69 85 62 33 21 72 3,796 6 162 570 711 1,050 787 38 472 Total 10,508 6 711 883 1,075 2,138 1,663 1,570 2,462

Due from Due from Due one to three to Due in the Due in the 31/12/2014 within one three twelve second Due in the fourth Due in the Due there- Total month months months year third year year fifth year after Fixed rate bank loans and borrowings Principal 3,057 - - - 623 - 750 711 973 Interest 960 - 47 180 202 178 161 138 54 4,017 - 47 180 825 178 911 849 1,027 Floating rate bank loans and borrowings Principal 3,313 35 - 622 601 599 880 576 - Interest 204 4 14 52 54 43 29 8 - 3,517 39 14 674 655 642 909 584 - Total 7,534 39 61 854 1,480 820 1,820 1,433 1,027

At 31 December 2015 the Group had available financing facilities for the management of its day to day liquidity requirements of USD 2,847 million (31 December 2014: USD 2,157 million) which reflects the initiative of the Groups’s prudent financial policy through the increase of undrawn commited credit facilities as an additional source of medium term liquidity.

F-104 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

32. FAIR VALUE OF FINANCIAL INSTRUMENTS

Management believes that the carrying value of financial instruments such as cash and cash equivalents (refer to note 20), short-term accounts receivable (refer to note 19) and payable (refer to note 26), short-term loans given (refer to note 16), long-term available-for-sale investments (refer to note 16) which values were mainly determined with reference to quoted market prices, approximates their fair value.

Certain financial instruments such as long-term accounts receivable, long-term promissory notes receivable and finance leases obligations were excluded from fair value analysis either due to their insignificance or due to the fact that assets were acquired or liabilities were assumed close to the reporting dates and management believes that their carrying value either approximates their fair value or may not significantly differ from each other.

Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as follows: ● Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; ● Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and ● Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

At 31 December 2015, the Group had derivative financial instruments amounting to USD 2 million (31 December 2014: USD 5 million) recognised within Level 2.

Presented below is information about loans and borrowings, whose carrying values differ from their fair values.

31/12/2015 31/12/2014 Carrying Fair value Carrying Fair value Fixed-rate corporate bonds value Level 1 value Level 1 3,197 3,210 2,340 2,152 Total 3,197 3,210 2,340 2,152

Carrying Fair value Carrying Fair value Loans and borrowings including: value Level 2 value Level 2 Variable-rate loans and borrowings 3,404 3,339 3,282 3,108 Fixed-rate loans and borrowings 1,655 1,722 708 622 Total 5,059 5,061 3,990 3,730

The fair value of financial assets and liabilities presented in table above is determined as follows: ● the fair value of corporate bonds was determined based on market quotations existing at the reporting dates; ● the fair value of variable-rate and fixed rate loans and borrowings at 31 December 2015, was calculated based on the present value of future cash flows (principal and interest), discounted at the best management estimation of market rates, taking into consideration currency of the loan, expected maturity and risks attributable to the Group existing at the reporting date. The discount rates ranged from 4.00% to 5.55% for USD-denominated loans and borrowings (2014: from 2.50% to 4.50%) and 11.60% (2014: 15.81%) for RUB-denominated loans.

F-105 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 US Dollars million

33. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES AND ASSOCIATES Effective % held Subsidiaries by business segments Country Nature of business 31/12/2015 31/12/2014 Group GMK JSC “Norilsky Kombinat” Russian Federation Rental of equipment 100 100 OJSC “Taimyrgaz” Russian Federation Gas extraction 100 99.8 OJSC “Norilskgazprom” Russian Federation Gas extraction 100 56.2 OJSC “Taimyrenergo” Russian Federation Rental of equipment 100 100 JSC “Norilsko-Taimyrskaya Electricity production Russian Federation 100 100 Energeticheskaya Kompaniya” and distribution LLC “Zapoliarnaya stroitelnaya Russian Federation Construction 100 100 companiya” LLC “Norilsknickelremont” Russian Federation Repairs 100 100 LLC “Norilskgeologiya” Russian Federation Geological works 100 100 LLC “Norilskyi obespechivaushyi Production of spare Russian Federation 100 100 complex” parts Group KGMK Mining and JSC “Kolskaya Mining and Russian Federation 100 100 Metallurgy Metallurgical Company” JSC “Pechengastroy” Russian Federation Construction 100 100 Norilsk Nickel Harjavalta Norilsk Nickel Harjavalta OY Finland Metallurgy 100 100 Other metallurgical LLC “GRK “Bystrinskoye” Russian Federation Mining 100 100 Other non-metallurgical OJSC “RAO “Norilsk Nickel” Russian Federation Investment holding 100 100 Metal Trade Overseas A.G. Switzerland Distribution 100 100 LLC “Institut Gypronickel” Russian Federation Science 100 100 CJSC “Taimyrskaya Toplivnaya Russian Federation Supplier of fuel 100 100 Kompaniya” OJSC “Enisey River Shipping River shipping Russian Federation 100 84.2 Company” operations OJSC “Arkhangelsk Sea Commercial Russian Federation Sea port 74.8 74.8 Port”1 LLC “Aeroport Norilsk” Russian Federation Airport 100 100 OJSC “Aviakompania “Taimyr” Russian Federation Aircompany 100 100 Effective % held Associates by business segments Country Nature of business 31/12/2015 31/12/2014 Other metallurgical Republic of South Nkomati Nickel Mine Mining 50 50 Africa

34. EVENTS SUBSEQUENT TO THE REPORTING DATE

In January 2016 the Group obtained a 5 year syndicated committed revolving credit facility with Industrial and Commercial Bank of China Limited, Bank of China Limited, Shanghai Branch, China Construction Bank Corporation, Beijing Branch as original lenders and Bank ICBC (JSC) as agent amounted to USD 730 million and obtained a 5 year loan from ING Bank in the amount of USD 100 million.

In February 2016 the Group redeemed exchage-traded bonds including payment of coupon income in the amount of USD 499 million and completed placement of 10 year non-convertible interest-bearing documentary exchange bearer bonds amounted to USD 199 million.

In December 2015 the Group has entered into binding agreements with Highland Fund to sell 13.33% share in Bystrinskoye project for USD 100 million. The sale is subject to regulatory approvals and is expected to be closed after the consolidated financial statements approval date.

1 During the year ended 31 December 2015 classified as assets held for sale

F-106 BORROWER or COMPANY PJSC MMC Norilsk Nickel 1st Krasnogvardeyskiy proezd, 15 Moscow 115184 Russian Federation

ISSUER MMC Finance Designated Activity Company 2nd Floor, Palmerston House Fenian Street Dublin 2 Ireland

JOINT LEAD MANAGERS Bank GPB International S.A. Citigroup Global Markets ICBC Standard Bank Plc 15, rue Bender Limited 20 Gresham Street L-1229 Luxembourg Citigroup Centre London EC2V 7JE Grand Duchy of Luxembourg 33 Canada Square United Kingdom Canary Wharf London E14 5LB United Kingdom

SIB (Cyprus) Limited Mizuho International plc Société Générale 27 Pindarou Street Mizuho House 29, boulevard Haussmann Alpha Business Centre 30 Old Bailey 75009 Paris 1st Floor, Block B London EC4M 7AU France CY-1060 United Kingdom Nicosia Cyprus VTB Capital plc 14 Cornhill London EC3V 3ND United Kingdom

LEGAL ADVISERS TO THE BORROWER As to U.S. and English law As to Russian law (other than as to Russian tax matters) Debevoise & Plimpton LLP Debevoise & Plimpton LLP 65 Gresham Street Business Center Mokhovaya London EC2V 7NQ Ulitsa Vozdvizhenka, 4/7 United Kingdom Stroyeniye 2 Moscow 125009 Russian Federation

LEGAL ADVISERS TO THE JOINT LEAD MANAGERS AND TRUSTEE As to U.S. and English law As to Russian law Linklaters LLP Linklaters CIS One Silk Street Paveletskaya Square 2/2 London EC2Y 8HQ Moscow 115054 United Kingdom Russian Federation

265 LEGAL ADVISERS TO THE ISSUER As to Irish law Arthur Cox Ten Earlsfort Terrace Dublin 2 Ireland

AUDITORS TO THE BORROWER JSC KPMG Naberezhnaya Tower, Block C, Floor 31 10 Presnenskaya Naberezhnaya Moscow 123112 Russian Federation

TAX ADVISOR As to Russian tax matters PwC White Square Office Center 10 Butyrsky Val Moscow 125047 Russian Federation

TRUSTEE PAYING AGENT AND REGISTRAR TRANSFER AGENT Citicorp Trustee Company Citibank, N.A., London Citigroup Global Markets Limited Branch Deutschland AG Citigroup Centre Citibank N.A. London Reuterweg 16 Canada Square 6th Floor, Citigroup Centre 60323 Frankfurt Canary Wharf Canada Square Germany London E14 5LB Canary Wharf United Kingdom London E14 5LB United Kingdom

LISTING AGENT Arthur Cox Listing Services Limited Ten Earlsfort Terrace Dublin 2 Ireland

266