Not for Distribution in Or Into the United States Or to Us

IMPORTANT NOTICE: NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES OR TO U.S. PERSONS EXCEPT TO QUALIFIED INSTITUTIONAL BUYERS (“QIBs”) AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (“RULE 144A”) THAT ARE ALSO QUALIFIED PURCHASERS (“QPs”) WITHIN THE MEANING OF SECTION 2(A)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940 (THE “INVESTMENT COMPANY ACT”) OR OTHERWISE TO PERSONS TO WHOM IT CAN LAWFULLY BE DISTRIBUTED.

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 WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED 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”)) EXCEPT (1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, (2) BY PREARRANGEMENT OR OTHERWISE, OR WITHIN THE UNITED STATES ONLY TO QIBs THAT ARE ALSO QPs IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A, (3) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.

Confirmation of your representation: In order to be eligible to view the Prospectus or make an investment decision with respect to the securities referred to herein, investors must be (i) non-U.S. persons (within the meaning of Regulation S under the Securities Act) outside the United States who are not acting for the account or benefit of U.S. persons or (ii) QIBs that are also QPs that are acquiring the securities for their own account or the account of another QIB that is also a QP. By accepting this e-mail and accessing the Prospectus, you shall be deemed to have represented to us that: (1) (A) you and any customers you represent are not U.S. persons and/or are 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 U.S. or (B) you are a QIB that is also a QP acquiring the securities referred to herein for your own account and/or for another QIB that is also a QP and (2) 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.

Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, “MiFID II”); and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor” should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No. 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and, therefore, offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

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, 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.$750,000,000 3.375% Loan Participation Notes due 2024 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.$750,000,000 3.375% Loan Participation Notes due 2024 (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 24 October 2019 (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 3.375% per annum semi-annually in arrear on the interest payment date falling on 28 April and 28 October in each year, commencing on 28 April 2020, and, provided that the Issuer receives such payment in full, the Notes will bear interest from, and including, 28 October 2019 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 14. 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 may be offered and sold (i) within the United States only to qualified institutional buyers (“QIBs”), as defined in Rule 144A under the Securities Act (“Rule 144A”), that are also qualified purchasers (“QPs”), as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940 (the “Investment Company Act”), in reliance on the exemption from registration under Section 5 of the Securities Act provided by Rule 144A or on another exemption therefrom, (the “Rule 144A Notes”) and (ii) to non U.S. persons in offshore transactions as defined in and in reliance on Regulation S (the “Regulation S Notes”). The Issuer has not been and will not be registered under the Investment Company Act. Prospective purchasers are hereby notified that sellers of the Rule 144A Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of these and certain further restrictions on offers, sales and transfers of the Notes and this distribution of the Prospectus (as defined below), see “Subscription and Sale” and “Transfer Restrictions”. This Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under Regulation (EU) 2017/1129 (the “Prospectus Regulation”). The Central Bank only approves this Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Such approval should not be considered as an endorsement of either the Issuer or the quality of the Notes that are the subject of this Prospectus. Investors should make their own assessment as to the suitability of investing in the Notes. Application has been made to the Irish Stock Exchange plc trading as Euronext Dublin (“Euronext Dublin”) for the Notes to be admitted to the official list (the “Official List”) of Euronext Dublin and trading on its regulated market (the “Regulated Market”). The Regulated Market is a regulated market for the purposes of Directive 2014/65/EU (as amended, “MiFID II”). This Prospectus will be valid until the admission of the Notes to trading on the Regulated Market of Euronext Dublin. The obligation to supplement the Prospectus in the event of significant new factors, material mistakes or material inaccuracies does not apply when the Prospectus is no longer valid. The Notes are expected to be rated “BBB-” by S&P Global Ratings Europe Limited (“S&P”) and “Baa2” by Moody’s Investors Service Ltd (“Moody’s”). 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 Moody’s 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 “Regulation S Global Note Certificate”), without interest coupons, which will be deposited with a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, S.A. (“Clearstream, Luxembourg”), and registered in the name of a nominee, on or about 28 October 2019 (the “Issue Date”). The Rule 144A Notes will initially be represented by interests in a global note certificate in registered form (the “Rule 144A Global Note Certificate” and, together with the Regulation S Global Note Certificate, the “Global Note Certificates”), which will be registered in the name of Cede & Co., as nominee of, and deposited with a custodian for, The Depository Trust Company (“DTC”) on or about the Issue Date. Beneficial interests in the Global Note Certificates will be shown on, and transfers thereof will be effected only through records maintained by, DTC, 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 Global Coordinators and Bookrunners Citigroup J.P. Morgan Société Générale Corporate & Investment Banking Joint Bookrunners Bank GPB International S.A. ING Sberbank CIB VTB Capital (Gazprombank)

Prospectus dated 24 October 2019 IMPORTANT INFORMATION ABOUT THIS PROSPECTUS

This Prospectus comprises a prospectus for the purposes of the Prospectus Regulation.

Each of the Issuer and the Company (whose registered offices are set out on pages 206 and 289 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, the information contained in this Prospectus is in accordance with the facts and makes no omission likely to affect its import.

This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Company, the 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 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 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 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 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, Citigroup Global Markets Limited (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 (available at: https://www.nornickel.com/) do not form any part of this Prospectus. The information on any websites referred to herein does not form part of this

ii Prospectus unless that information is incorporated by reference into this Prospectus, and has not been scrutinised or approved by the Central Bank.

No representation or warranty, express or implied, is made and no responsibility is accepted by the 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 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 Managers and the Trustee do not accept any responsibility as to the accuracy, completeness or verification of 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 Managers and the Trustee 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 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.

Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No. 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.

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,

iii 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.

NOTICE TO PROSPECTIVE U.S. INVESTORS

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.

THIS OFFERING IS BEING MADE IN THE UNITED STATES IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT FOR AN OFFER AND SALE OF THE NOTES WHICH DOES NOT INVOLVE A PUBLIC OFFERING. IN MAKING YOUR PURCHASE, YOU WILL BE DEEMED TO HAVE MADE CERTAIN ACKNOWLEDGMENTS, REPRESENTATIONS AND AGREEMENTS. SEE “SUBSCRIPTION AND SALE” AND “TRANSFER RESTRICTIONS”.

THIS PROSPECTUS IS BEING PROVIDED (1) TO A LIMITED NUMBER OF INVESTORS IN THE UNITED STATES THAT THE ISSUER REASONABLY BELIEVES TO BE “QIBs” THAT ARE ALSO “QPs” FOR INFORMATIONAL USE SOLELY IN CONNECTION WITH THEIR CONSIDERATION OF THE PURCHASE OF THE NOTES AND (2) 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 RUSSIAN INVESTORS

This Prospectus or information contained herein is not an offer, or an invitation to make offers, to sell, purchase, exchange or otherwise transfer any securities in the Russian Federation to or for the benefit of any Russian person or entity and does not constitute an advertisement or 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 Russian 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 the Russian Federation or made available in the Russian Federation to any persons who are not Russian QIs, unless and to the extent they are otherwise permitted to access such information under Russian law. Any securities referred to in this Prospectus have not been and will not be registered in the Russian Federation and are not intended for “offering”, “placement”, “advertising” or “circulation” (each as defined in Russian securities laws) in the Russian Federation unless and to the extent permitted by 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

v  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 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 six months ended 30 June 2019 and 2018 has been derived from the unaudited interim condensed consolidated financial statements of the Group as at and for the six months ended 30 June 2019 (the “Interim Condensed Consolidated Financial Statements”);  as at and for the six months ended 30 June 2017 has been derived from the unaudited interim condensed consolidated financial statements of the Group as at and for the six months ended 30 June 2018 (the “2018 Interim Condensed Consolidated Financial Statements”);  as at and for the year ended 31 December 2018 has been derived from the audited consolidated financial statements of the Group as at and for the year ended 31 December 2018 (the “2018 Consolidated Financial Statements”); and  as at and for the years ended 31 December 2017 and 2016 has, unless otherwise indicated, been derived from the audited consolidated financial statements of the Group as at and for the year ended 31 December 2017 (the “2017 Consolidated Financial Statements”).

The 2018 Consolidated Financial Statements and the 2017 Consolidated Financial Statements are together referred to as the “Annual Consolidated Financial Statements”, and the Interim Consolidated Financial Statements, the 2018 Interim Consolidated Financial Statements and the Annual Consolidated Financial Statements are together referred to as the “Financial Statements”.

The Annual Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The Interim Condensed Consolidated Financial Statements and 2018 Interim Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”).

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

Alternative Performance Measures

This Prospectus contains certain unaudited non-IFRS financial measures relating to the Group’s business and financial results, including Adjusted EBITDA, Adjusted EBITDA margin, net debt, net debt to Adjusted EBITDA, debt to equity, debt to capitalisation and Adjusted free cash flow. 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 Financial Statements included in this Prospectus. These non-IFRS financial measures should not be considered substitutes for the information contained in the Financial Statements included in this Prospectus. We analyse the fluctuations in our business on a real time basis. The real time measures reflect the underlying activities on a constant currency basis. Constant currency is determined by

vii using the current year historical activity calculated using the prior period average exchange rates. We believe that real time activity is an important measure of our operations as it neutralizes foreign exchange impact and illustrates the underlying change in the activity from the prior year.

Financial Statements of the Issuer

The audited financial statements of the Issuer as at and for the years ended 31 December 2017 and 2016, together with the audit reports thereon, have been filed with the Central Bank and shall be deemed to be incorporated in, and to form part of, this Prospectus. Such financial statements are located at: https://www.ise.ie/debt_documents/Issuer%202017%20Financial%20Statements_2dac87c8-dc35- 4211-ba47-7c57c1a7384b.PDF; and https://www.ise.ie/debt_documents/Issuer%202016%20Financial%20Statements_f4bdffa9-a931- 4edc-9be3-a360784b01a4.PDF, respectively.

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 2018 in accordance with the 2012 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 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” or the “Lender” are to MMC Finance Designated Activity Company. References to: “JSC Kola “GMK” are to JSC Kola Mining and Metallurgical Company; “Medvezhy Ruchey” are to assets of the South Cluster operated by LLC Medvezhy Ruchey; “Norilsk Nickel Harjavalta” are to Norilsk Nickel Harjavalta Oy; “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.

viii 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.

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.

ix Roubles per U.S. dollar Period For the period High Low Average(1) end Year ended 31 December 2016...... 83.59 60.27 67.03 60.66 Year ended 31 December 2017...... 60.75 55.85 58.35 57.60 Year ended 31 December 2018...... 69.97 55.67 62.71 69.47 Six months ended 30 June 2019...... 67.19 62.52 65.34 63.08

(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 July 2019 to October 2019 High Low July 2019...... 63.87 62.81 August 2019...... 66.78 63.42 September 2019 ...... 66.91 63.71 October 2019 (up to and including 24 October 2019) . 65.43 63.63

The exchange rate between the rouble and the U.S. dollar on 24 October 2019 was 63.79 roubles 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

x 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 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. Although on 2 July 2019 the Russian Federation signed the final act of the 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Hague Judgments Convention”), neither the Russian Federation nor any other state (except for Uruguay) has signed the Hague Judgments Convention as at the date of this Prospectus, and the Hague Judgments Convention has not yet entered into force. Consequently, as at the date of this Prospectus, the Russian Federation is not a party to any international treaty providing for the recognition and enforcement of judgments in civil cases rendered by the courts of the United Kingdom or the United States. As a result, new proceedings may have to be brought in the Russian Federation against the Group or its officers or directors.

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;

xii  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

 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 Procedure Code of the Russian Federation (the “Arbitrazh Procedure Code”) sets out the procedure for the recognition and enforcement of foreign awards by Russian courts. The Arbitrazh Procedure 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 Procedure 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 ...... 14 USE AND ESTIMATED NET AMOUNT OF PROCEEDS...... 54 CAPITALISATION...... 55 SELECTED CONSOLIDATED FINANCIAL INFORMATION ...... 57 OPERATING AND FINANCIAL REVIEW ...... 63 INDUSTRY OVERVIEW ...... 118 BUSINESS...... 131 MANAGEMENT AND CORPORATE GOVERNANCE...... 171 PRINCIPAL SHAREHOLDERS ...... 180 RELATED PARTY TRANSACTIONS...... 181 REGULATORY MATTERS...... 183 DESCRIPTION OF THE ISSUER...... 206 OVERVIEW OF THE TRANSACTION STRUCTURE AND THE SECURITY ...... 208 THE LOAN AGREEMENT...... 210 TERMS AND CONDITIONS OF THE NOTES ...... 237 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ...... 253 TRANSFER RESTRICTIONS...... 258 CLEARING AND SETTLEMENT...... 263 CERTAIN ERISA CONSIDERATIONS ...... 267 TAXATION...... 269 SUBSCRIPTION AND SALE ...... 285 GENERAL INFORMATION...... 289 GLOSSARY OF TERMS...... 292 APPENDIX – CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP ...... 298

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 a leading metals and mining company and the world’s largest producer of palladium and high-grade metal nickel and a major producer of platinum and copper, based on Company estimates using its own data and data of global supply derived from other metal producers’ reports. The Group’s production of high-grade nickel and palladium in 2018 represented 23% and 39%, respectively, of total global primary production of those metals according to Company estimates. The Company is also the world’s largest producer of platinum outside South Africa with a 10% market share. In addition, the Group produces cobalt, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium, sulphur and other products. 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, including Europe, Asia and North America. In the six months ended 30 June 2019, the Group’s total revenue amounted to U.S.$6,292 million with profit for the period of U.S.$2,997 million, Adjusted EBITDA of U.S.$3,719 million and Adjusted EBITDA margin of 59.1% (total revenue of U.S.$5,834 million with profit for the period of U.S.$1,653 million, Adjusted EBITDA of U.S.$3,079 million and Adjusted EBITDA margin of 52.8% in the six months ended 30 June 2018). In 2018, the Group’s total revenue amounted to U.S.$11,670 million with profit for the period of U.S.$3,059 million, Adjusted EBITDA of U.S.$6,231 million and Adjusted EBITDA margin of 53.4% (total revenue of U.S.$9,146 million with profit of U.S.$2,123 million, Adjusted EBITDA of U.S.$3,995 million and Adjusted EBITDA margin of 43.7% in 2017).

In 2018, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 72%, 96%, 98% and 98% of total Group production of those metals, respectively. The Group’s principal operations in Russia comprise its Polar Division and South Cluster (Medvezhy Ruchey), which was spun off from the Polar Division and is now operated by LLC Medvezhy Ruchey, both located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. LLC Medvezhy Ruchey was established in 2017 as a subsidiary of the Company to operate the assets of the South Cluster. The Polar Division and South Cluster operate fully integrated metal production operation, including mining, concentration, smelting and refining of metals, as well as a number of supporting activities. Since the Taimyr Peninsula is not connected to Russia’s rail and road network or national electricity grid, the Group owns and operates various ground, sea and river transportation assets, natural gas production and transportation assets, as well as energy generation and transmission infrastructure, which service and supply the Polar Division and South Cluster, as well as industrial and residential customers in that region.

The Polar Division and South Cluster mines are located at the three sulphide copper-nickel ore deposits, Norilsk-1, Talnakh and Oktyabrskoye (the latter two jointly comprise the Talnakh ore field). As at 31 December 2018, the total proven and probable reserves of these deposits amounted to 683,625 thousand tonnes of ore, containing 6,286 thousand tonnes of nickel, 11,858 thousand tonnes of copper, 92,864 thousand ounces of palladium and 24,600 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 polymetallic deposit containing various high-grade metals, including nickel, copper, platinum group metals (“PGMs”), gold, silver and cobalt. The grade of the metals exceed, on average, the grades of similar deposits mined by the Group’s global competitors. According to Wood Mackenzie estimates, the Company is the world’s lowest cost producer of nickel, as shown by negative nickel production cash costs on global industry cost curves, as the revenue from other metals offset the Group’s overall production cash costs.

In addition to its Polar Division and South Cluster operations, the Group operates through its subsidiary, JSC Kola “GMK”, in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts mainly underground mining operations at four deposits containing sulphide copper and nickel ores and operates an enrichment plant, a smelter 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 2018, the total proven and probable reserves of the deposits of JSC Kola “GMK” comprised 100,918 thousand tonnes of ore, containing 581 thousand tonnes of nickel, 271 thousand tonnes of copper, 93 thousand ounces of palladium and 60 thousand ounces of platinum.

The Group also owns a 50.01% interest in Bystrinsky GOK, which is located in the Zabaikalsky region of Russia. Bystrinsky GOK is operated by the Group and consolidated in its financial and operating results. Bystrinsky GOK operations are comprised of two open pit mines and a concentrator for producing copper, gold and iron concentrates. This is one of the largest greenfield projects in the Russian mining industry, covering ore mining, concentration and the shipment of end products to customers, with an expected total capital expenditure of approximately U.S.$1.8 billion (including external transportation and electricity infrastructure). As at 31 December 2018, the balance reserves of the Bystrinskoye deposit comprised 325.9 million tonnes of ore, containing 2.2 million tonnes of copper, 282 tonnes of gold, 1,218 tonnes of silver and 72 million tonnes of iron. The Group is considering potential opportunities in connection with Bystrinsky GOK (including an IPO, a spin- off and other options).

The Group also owns a nickel and cobalt refinery in Finland, which is operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of approximately 66,000 tonnes of refined nickel products, and a 50% participation interest in the Nkomati Nickel Mine in South Africa and holds licences for the development of the Honeymoon Well project: sulphide nickel deposit in Western Australia. In 2019, the Group and its operating partner, African Rainbow Minerals, reached an agreement to scale down production at Nkomati Nickel Mine with a view to consider placing the mine in care and maintenance from the second half of 2020, though no final decision has been made to this effect.

The table below shows the mineral reserves and resources (in terms of metal content) of the Group as at 31 December 2018, prepared by the Group (but not independently verified) according to the JORC Code (exclusive of the balance reserves of the Bystrinskoye deposit). 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.

2 Metal Content Nickel Copper Palladium Platinum Classification Categories (‘000 tonnes) (‘000 tonnes) (‘000 ounces) (‘000 ounces) Reserves Proven and probable Polar Division(1) 6,286 11,858 92,864 24,600 JSC Kola “GMK” 581 271 93 60 Honeymoon Well — — — — Total 6,867 12,129 92,957 24,660 Resources Measured and Indicated Polar Division(1) 11,892 22,437 195,441 55,122 JSC Kola “GMK” 2,247 1,089 488 314 Honeymoon Well 1,180 — — — Total 15,319 23,526 195,929 55,436 Inferred Polar Division(1) 3,750 7,653 59,754 15,435 JSC Kola “GMK” 909 448 184 121 Honeymoon Well 2,827 — — — Total 7,486 8,101 59,938 15,556

(1) Inclusive of Medvezhy Ruchey (South Cluster).

The Company believes that 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 exploration in the Zabaikalsk region, primarily at the Bystrinskoye gold-iron-copper deposit. On 31 October 2017, the Group initiated hot commissioning of the project at the deposit. In 2018, 7.86 million tonnes of ore was mined at the Bystrinskoye deposit. The concentrator at the Bystrinsky project was launched in 2018 as part of the hot commissioning stage and was fully commissioned in September 2019.

The Group maintains a global sales and distribution network of representative and marketing offices located in Russia and its principal export markets in Asia, Europe and North America. In 2018, the Group derived 53% and 27% of its total metal sales revenues from sales to Europe and Asia, respectively, while metal sales to North and South America and the Russian Federation and CIS accounted for 15% and 5%, respectively. Sales to those regions represented 56%, 23%, 14% and 7%, respectively, of total metal sales revenues in the 2017.

Competitive Strengths

The Group is the world’s leading producer of refined nickel and palladium and the largest producer of platinum outside South Africa with a 10% market share, based on Company estimates of global supply (based on other metal producers’ reports). In addition, based on publicly available information, the Company estimates that the Group’s share, in 2018, of global high-grade nickel production was approximately 23% and the Group’s share of global primary palladium production was approximately 39%. The Company believes that it has a number of key strengths that distinguishes it from its competitors:

 Significant Mineral Resources and Ore Reserves. The Company estimates that under the JORC Code, as at 31 December 2018, the Group had proven and probable reserves in Russia of 784.5 million tonnes of ore, with a metal content of 6.9 million tonnes of nickel (comprising approximately 7.8% of global nickel reserves, according to U.S. Geological 3 Survey), 12.1 million tonnes of copper, 93 million ounces of palladium and 24.7 million ounces of platinum, and measured and indicated resources (inclusive of proven and probable reserves) of 2,036 million tonnes of ore in Russia, with a metal content of 14.1 million tonnes of nickel (comprising approximately 10.8% of global nickel reserves, according to U.S. Geological Survey), 23.5 million tonnes of copper, 195.9 million ounces of palladium and 55.4 million ounces of platinum. At current production levels, the Company estimates that mineral resources of the Group in Russia have a life of approximately 80 years.

 First Class Ore Body. Based on Wood Mackenzie estimates, the Company believes that the Talnakh ore field in its Polar Division represents the world’s first class mineral deposit due to its unique geology. It comprises a single large polymetallic deposit with various high-grade metals, including nickel, copper, PGMs, gold, silver and cobalt. The Company believes that the grades of each of the core metals, individually, such as nickel, copper and PGMs in the Talnakh ore field are higher on average than the grades of similar deposits mined by its global competitors and, 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 than that of the Group’s global competitors.

 The World’s Lowest Cost Nickel Producer. Based on Wood Mackenzie estimates, the Company believes that the Group has the lowest nickel production costs globally (taking into account the revenues from the copper and PGM products considered by Wood Mackenzie as by-products of nickel, all of which are produced from the same ore body), and the cash production costs of all the metals it produces are substantially below current and recent historical market prices. According to the Company’s estimates, the Group has the leading positions in Adjusted EBITDA margins compared with its global diversified peers.

 Global Distribution Network and Customer Base. The Group operates a global distribution network with sales offices located in Europe, Asia, North America and Russia, the regions of the 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 it is operating on one of the world’s best polymetallic ore bodies and benefits from a low-cost position in the production of all of its core metals and, consequently, is able to achieve a high level of operating and financial performance. As at 31 December 2018, the Group’s net debt to Adjusted EBITDA ratio was 1.1x and, as at 30 June 2019, was 0.8x. As part of its financial strategy, the Group seeks to maintain its credit metrics in accordance with the “investment grade” standards of all three major international credit rating agencies. The Group is rated “BBB-” by both S&P and Fitch with a stable outlook. On 12 February 2019, the international rating agency, Moody’s, upgraded the Company’s credit rating from “Baa3” with “Positive” outlook to “Baa2” with “Stable” outlook. Additionally, the Group has a rating of “ruAAA”, the highest rating that can be received from the Russian rating agency, “Expert RA”.

 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 management has extensive experience in the operations, finance, distribution, sales, transportation and energy sectors. See “Management and Corporate Governance”.

Strategy

4 base and where the Group has competitive advantages. The Group classifies an asset as “Tier I” if it generates annual revenues in excess of U.S.$1 billion, with Adjusted EBITDA margin in excess of 40%, and has an ore reserve life in excess of 20 years.

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

Rollout based on current assets

The Group plans to unlock its potential through long-term growth based on its existing assets and the introduction of state-of-the-art technologies, including investment in developing the ore mining base of the Polar Division and South Cluster and reaching the design capacity of Bystrinsky GOK. In the long term, the Group plans to focus its production expansion on the existing “Tier I” assets. This strategy is based on expectations of growth in the commodity markets, with demand for key metals increasing. The Company believes that it has a robust operational model and extensive geological, technological and human resources, which will allow it to successfully meet growing market demand.

As part of the project to upgrade and expand the Talnakh Concentrator, the Group plans to increase the capacity of the Talnakh Concentrator from 10.2 to 18 million tonnes per annum and introduce more efficient concentration technology to process most of the Talnakh ores at the Talnakh Concentrator. These upgrades will also allow the Group to remove certain bottlenecks to mining projects, benefit from increased economies of scale and improve metal recovery rates at the concentration facilities. Total investments in the project to expand the Talnakh Concentrator is currently expected to be approximately U.S.$600 million, with the project scheduled for completion in 2023.

The South Cluster, the Group’s project to develop reserves in the northern part of the Norilsk-1 Deposit, is planned to reach total mining capacities of up to 9 million tonnes of ore per annum. The full capacity is currently expected to be achieved in 2027. Once completed, total mining capacities are expected to increase up to 9 million tonnes. Based on the Group’s preliminary estimates, investments in the development of the South Cluster will be in excess of U.S.$1 billion in the next 15 years. After reaching its target capacity, the project is expected to add over 20 tonnes of PGMs per annum.

Finding new growth opportunities

The Group seeks to sustain and expand its mineral resource base primarily through the development of 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”.

As part of this strategy, in February 2018, the Company and LLC Russian Platinum signed a non- binding memorandum of understanding to consider the establishment of a joint venture for the further development of one of the world’s largest PGM deposits, located in the Norilsk Industrial District (Maslovskoe deposit and the south flank of Norilsk-1 and the Chernogorskoe deposits). In August and September 2019, in furtherance of this project, the Company filed applications with the Federal Antimonopoly Service of Russia seeking necessary approvals required under Russian law. In addition, in October 2018, BASF and the Company announced that BASF has selected Harjavalta, Finland, as its first location for a plant for battery materials production serving the European automotive market. The plant is planned to be constructed adjacent to the nickel and cobalt refinery operated by the Group. Additionally, BASF and the Company have signed a long-term market-based supply agreement for nickel and cobalt feedstocks from the Group’s metal refinery.

5 Focus on operating and financial efficiency

The Group is focused on ensuring operating and financial efficiency. The Group’s efficiency programme includes a package of interrelated initiatives that cover the entire production chain, including production upgrade and the introduction of new production processes and practices and tools for continuous improvement, the digital transformation of industrial and management communications, the integration of efficiency improvement key performance indicators into the employee incentive system, production reconfiguration and implementation of innovative management approaches.

As part of the production upgrade, the Group plans to improve labour productivity by up to 15%, from productivity levels in 2017 budget, by 2020, improve equipment performance, adopt the practice of planning mining operations using simulation modelling systems and implement a full-scale roll-out of control systems. The Group also intends to ensure cost optimisation and higher recovery rates by fine-tuning the reagent mixes and modes of equipment operation, and improve ore conversion ratios through the enhanced enrichment of pyrrhotite tailings at the Talnakh Concentrator. The Group also plans to launch de-bottlenecking programmes across the production chain and accelerate the processing of additional secondary resources at the Nadezhda Copper Plant (the “Copper Plant”).

As part of its digital transformation, the Group will consider opportunities to continue introducing artificial intelligence technologies, robotisation systems and create digital twins of industrial facilities, as well as establishing a digital storage layer of all of the Group’s data, and cost optimisation and de- bottlenecking programmes across the production chain.

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 to reduce 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.

As part of this strategy, the Group had shut down the outdated Norilsk Nickel Plant in 2016 in conjunction with the expansion of the smelting capacity of the Nadezhda Metallurgical Plant, which reduced sulphur dioxide emissions in residential areas (in Norilsk) by 30-35%. In September 2018, the Group also launched the Sulphur Project at the Polar Division, which is a large-scale environmental project designed to achieve a reduction in sulphur dioxide emissions by the Nadezhda Metallurgical Plant and Copper Plant to the maximum permissible rates, with a goal of achieving a 75% decrease in sulphur dioxide emissions in the Norilsk Industrial District by 2023 (the “Sulphur Project”). The Nadezhda Metallurgical Plant will have new facilities for disposing sulphur-rich gases, while the capacities of the Copper Plant will be upgraded to capture sulphur dioxide and produce elemental sulphur. In addition, some of the Copper Plant’s most polluting facilities, emitting hard-to- capture off-gas, will be shut down due to their proximity to residential areas. Concurrently with the project, a number of infrastructure projects will be implemented to supply the new facilities with the necessary materials and power.

At JSC Kola “GMK”, the Group’s strategy is to optimise the smelting capacity utilisation rates at the metallurgical shop by separating the concentrate produced at JSC Kola “GMK”. In 2016, the agglomeration plant located at the Zapolyarny production site was shut down, and a copper-nickel conc briquette plant was launched, which has helped to reduce the sulphur dioxide emissions at JSC Kola “GMK” by 23%. JSC Kola “GMK” continues implementing the action plan to reduce sulphur dioxide emissions from the smelting shop at the Nickel site by upgrading the equipment (including the reconstruction of feeding and sealing systems of ore-thermal furnaces, gas dust replacement and preparation of furnace charge for smelting) and lowering smelting shop utilisation through the Outotec project, the utilisation of the concentrate separation and shipment facility at Zapolyarny and the sale of part of the concentrate produced by JSC Kola “GMK” to third parties. This is expected to 6 have an environmental impact of at least 50% reduction of sulphur dioxide emissions by 2020, as compared to 2015, at JSC Kola “GMK” and achieve maximum permissible emission rates.

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 the awareness and motivation of 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. See “Business – Mining and Metals Operations – Environment”.

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.

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.

Legal Entity Identifier of the 635400IPHIGSTULPX313 Issuer

Legal Entity Identifier of the 253400JPTEEW143W3E47 Company

Joint Global Coordinators and Citigroup Global Markets Limited, J.P. Morgan Securities Bookrunners plc and Société Générale

Joint Bookrunners Bank GPB International S.A., ING Bank N.V., London Branch, Sberbank CIB (UK) Limited and VTB Capital plc

Notes Offered U.S.$750,000,000 3.375% Loan Participation Notes due 2024.

Issue Price 100% of the principal amount of the Notes.

Issue Date 28 October 2019

Maturity Date 28 October 2024

Trustee Citicorp Trustee Company Limited

7 Paying and Transfer Agent Citibank. N. A., London Branch

Registrar Citigroup Global Markets Europe AG

Interest On each interest payment date (being 28 April and 28 October in each year and commencing on 28 April 2020 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 3.375% 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 Regulation S Notes and the Rule 144A Notes will be represented by a Regulation S Global Note Certificate and a Rule 144A Global Note Certificate, respectively. The Regulation S Global Note Certificate and the Rule 144A Global Note Certificate will be exchangeable for Definitive Certificates in the limited circumstances specified in the Regulation S Global Note Certificate and the Rule 144A Global Note Certificate.

Initial Delivery of Notes On or before the Issue Date, the Regulation S Global Note Certificate shall be registered in the name of a nominee of, and deposited with a common depositary for, Euroclear and Clearstream, Luxembourg, and the Rule 144A Global Note Certificate shall be registered in the name of Cede & Co. as nominee of, and deposited with a custodian for, DTC.

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”.

8 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 Increased Costs Notes 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 and Increased Cost with 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

9 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 Issuer for Illegality Loan 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 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 10 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  Baa2 by Moody’s. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or 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 Central Bank for the Notes to be admitted to the Official List and to Euronext Dublin for such Notes to be admitted to trading on the Regulated 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. The Notes may be sold in other jurisdictions only in compliance with applicable laws. See “Subscription and Sale”.

Governing Law and The Notes, the Trust Deed, the Agency Agreement (as Arbitration 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 and Estimated Net Amount The Issuer will use the gross proceeds of the issue of the of Proceeds Notes for the sole purpose of financing the Loan to the Company pursuant to the terms of the Loan Agreement. The estimated net proceeds of the Loan, after payment of commissions, fees, and estimated expenses, will be U.S.$746,000,000. The Company intends to use the

11 proceeds of the Loan for general corporate purposes, including capital investments and refinancing.

Security Codes Regulation S Notes:

Common Code: 206999225. International Security Identification Number (“ISIN”): XS2069992258.

Rule 144A Notes:

Common Code: 207162124.

ISIN: US55315NAC74.

CUSIP: 55315N AC7.

Clearing Systems DTC (in the case of the Rule 144A Notes) and Euroclear and Clearstream, Luxembourg (in the case of the Regulation S Notes).

Yield The annual yield of the Notes when issued is 3.375%.

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 the Loan Agreement.

The Loan

Lender MMC Finance Designated Activity Company, a company organised and existing as a designated activity 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.$750,000,000.

Interest on the Loan 3.375% per annum, payable semi-annually in arrear on 28 April and 28 October in each year starting on 28 April 2020.

12 Use of Proceeds The Company intends to use the proceeds of the Loan for general corporate purposes, including capital investments and refinancing.

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”, set out in Overview – Overview of the Offering, 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 The Loan Agreement and any non-contractual obligations Arbitration 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.

13 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. All of these factors are contingencies which may or may not occur. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the Issuer may be unable to pay interest, principal or other amounts on or in connection with any Notes for other reasons and the Issuer does not represent that the statements below regarding the risks of holding any Notes are exhaustive.

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.

Prospective investors in the Notes should consider carefully whether an investment in the Notes is suitable for them in light of the information in this Prospectus and their personal circumstances.

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 experienced some recovery 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. In 2018, the growth of China's GDP was 6.6% year on year, which represented one of the worst results since the 1990s and has contributed to a significant decline in commodity prices. Global growth has also been impacted by the recent increase in trade tensions among various countries, including between China and the United States. Furthermore, the global financial and economic crisis resulted in extreme volatility in the debt and equity markets, which led to severe reductions in liquidity, as well as to a general increase in the cost of borrowing for private sector borrowers.

The global economy continues to be subject to a number of uncertainties, including mounting government deficits, discontinuation of government stimulus programmes, deflation in certain markets, continuing high levels of unemployment in some countries, trade tensions and uncertainty caused by the possible departure of the U.K. from the European Union, as well as continued slow growth or contraction in some markets. According to World Economic Outlook, after growth in 2017 and early 2018, global economic activity slowed notably in the second half of 2018, reflecting a confluence of factors affecting major economies. If global economic conditions deteriorate or a similar economic contraction were to reoccur, the resulting contraction in demand for many of the Group’s metals, any decline in commodity prices, including the Group’s products, and any limitations on the Group’s access to capital as a 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.

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

The Group derives substantially all its revenues from the sale of metals, primarily nickel, PGMs and copper (25%, 46% and 23%, respectively, of total metal sales revenue in the six months ended 30 June 2019, and 27%, 39%, 27%, respectively, of total metal sales revenue for the year ended 31 December 2018). Over the course of 2016 to 2018, palladium displaced nickel as the largest component of the Group’s metals sales revenue as a result of changes in the global market prices for these metals. Palladium comprised 34%, 29% and 25% of total metal sales revenue in 2018, 2017 and 2016, respectively and nickel comprised 27%, 29% and 34% of total metal sales revenue in 2018, 2017 and 2016, respectively. See “Business—Overview”. 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

 the 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.

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 that of 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.

Negative economic developments in China and in the Eurozone, including trade tensions between China and the United States, are continuing to apply downward pressure on commodity prices. 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. In the first quarter of 2017, the price of nickel fluctuated between U.S.$9,380 per tonne and U.S.$11,045 per tonne, and began to decline in the second quarter of 2017 after, amongst other things, the Indonesian government issued permits for the export of unprocessed nickel ore. The price continued

15 to decline following a reduction in the output of stainless steel from China. In the second half of 2017, the price of nickel increased, primarily due to, amongst other factors, the growth of stainless steel production in China, and the commissioning of a large stainless steel plant in Indonesia and increased optimism from the investment community about the potential increase in nickel consumption by the electric car industry, peaking at U.S.$15,750 per tonne in the first half of 2018. The upward price trend continued into the second half of 2018, when it was reversed due to the trade tensions between China and the United States and concerns over the potential construction of large- scale lateritic nickel ore leaching facilities in Indonesia. The average price of nickel grew in 2018 to U.S.$13,122 (as compared to U.S.$10,411 in 2017).

The price of copper also generally declined in 2016, following a decrease in oil prices, with which copper prices have traditionally had a high correlation. In 2017, amongst other things, a strike at the Chilean mine, Escondida, and the ban on copper concentrate exports from Indonesia, as well as forecasts of a copper deficit in 2018, drove the average price of copper per tonne up to U.S.$6,166. The average price of copper (LME) was U.S.$6,523 per tonne in 2018. The Group’s metal sales revenue increased by 30% in 2018, largely as a result of higher realised metal prices, the sale of palladium stock accumulated in 2017 and higher copper production volumes. See “Operating and Financial Review—Principal Factors Affecting the Group’s Business—Commodity prices”.

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 ongoing armed conflict in Ukraine, the international reaction to Russia’s actions 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 significant civil and political crisis in Ukraine, the armed conflict in Eastern Ukraine, the referendum on the status of Crimea held in March 2014 and the execution of the agreement on the accession of the Republic of Crimea to the Russian Federation have affected Russia’s relations with the EU, the United States and certain other countries (including Canada, Australia, Japan and Norway). As a result, a number of countries have imposed various sanctions against Russia and refused to recognise the referendum 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 United States 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 sector and on defence companies. 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 United States and the EU in the term and scope of sanctions, the most recent of which were taken in September 2019 (by the EU). The U.S. has also significantly tightened export controls on the provision of certain U.S.-origin goods.

16 The economic sanctions described above have 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.

Tensions between Russia and the U.S. and EU have increased as a result of the conflict in Syria, as well as Russia’s alleged attempts to influence the 2016 U.S. presidential election, increasing the risk of imposition of additional sanctions on Russia. It is currently unclear how long the sanctions imposed on Russia will remain in place and whether new sanctions may be imposed. If the conflict in Ukraine and instability in Syria were to increase, or if any conflicts or instabilities in other countries escalate and create additional tensions between Russia and the U.S. and EU, there could be calls from Western governments for further sanctions. Any such sanctions could, in turn, 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, 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.

On 2 August 2017, U.S. President Donald Trump signed into law the Countering America’s Adversaries Through Sanctions Act (the “CAATS Act”). The CAATS Act provides for the imposition of a number of additional sanctions, including “secondary sanctions”, under which foreign persons who engage in certain activities could face adverse economic consequences in the form of denial of access to U.S. markets, denial of other U.S.-linked benefits and the blocking of all property and interests in property that are in the U.S. or in the possession or control of a U.S. person. The activities potentially subject to secondary sanctions include transactions related to the construction, modernisation and repair of energy export pipelines; transactions with the Russian intelligence and defence sectors; sanctions evasion and significant transactions with sanctions targets; privatisations personally benefitting members of the Russian government or their associates; and activities that undermine the cybersecurity of any person or government.

The CAATS Act also required the U.S. administration to submit various reports to the U.S. Congress, including reports on oligarchs and parastatal entities which was submitted on 29 January 2018 under Section 241 of the CAATS Act (the “Section 241 Report”), reports on the effects of expanding sanctions to include sovereign debt and derivative products, and reports on illicit finance, which could lead to further sanctions. The President and Chairman of the Management Board of the Company was included into the unclassified version of the Section 241 Report together with 95 other Russian businessmen and other individuals. The Section 241 Report also contains a classified section that includes other items required by Section 241 of the CAATS Act. The Section 241 Report states that it is not a sanctions list, that the inclusion of individuals or entities in it does not and in no way should be interpreted to impose sanctions on those individuals or entities, and that the inclusion of individuals or entities in the Section 241 Report does not, in and of itself, imply, give rise to or create any other restrictions, prohibitions or limitations on dealings with such persons by either U.S. or foreign persons. In its press release announcing publication of the Section 241 Report, the U.S. Department of Treasury further stated that the names of individuals in the unclassified version of the report were selected based on objective criteria drawn from publicly available sources. However, no assurance can be given that sanctions will not be imposed on any individual or entity included in the Section 241 Report or on any entities controlled by them.

On 6 April 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) added 38 Russian businessmen, officials and entities, including 6 businessmen listed in the Section 241 Report, to its List of Specially Designated Nationals and Blocked Persons (“SDN”).

These sanctions may herald a new course of implementation and interpretation of U.S. sanctions targeting Russia due to the nature of the targets, the scope of prohibitions and the potentially unpredictable ramifications. 17 In addition, in August 2018, under the Chemical and Biological Weapons Control and Warfare Elimination Act (the “CBW Act”), the U.S. Department of State introduced additional sanctions with respect to Russia. The restrictions provided for a total ban on the supply of defence articles, defence services, military design and construction services to Russia. In August 2019, the U.S. proceeded with the second round of sanctions under the CBW Act that prohibited U.S. banks from participating in the primary market for non-rouble denominated Russian sovereign bonds, from lending non-rouble denominated funds to the Russian government, added export licensing restrictions on dual-use chemical and biological items controlled by the U.S. Department of Commerce and required U.S. opposition to the extension of any loan or financial or technical assistance to Russia by international financial institutions.

On 12 September 2018, the U.S. President issued Executive Order No. 13848 (“EO 13848”) aimed at sanctioning individuals and entities that engaged in interference in a U.S. election after the date of that order or provided assistance to or are owned or controlled by them. Additional sanctions may be imposed under EO 13848 on the largest business entities of the country whose government was engaged in the election interference.

On 15 March 2019, the EU, Canada and the U.S. imposed sanctions on several Russian individuals, including navy officials and eight entities, in response to an incident in the Kerch Strait in November 2018 and the ongoing perceived role of the Russian Federation in events in Ukraine and Crimea.

U.S. Congress is considering new sanctions against Russia and Russian entities and individuals. On 13 February 2019, an updated and expanded version of the last year’s Defending American Security from Kremlin Aggression Act (the “DASKA Bill”) was introduced to the U.S. Congress. On 3 April 2019, an updated version of last year’s “Defending Elections from Threats by Establishing Redlines Act” (the “DETER Bill”) was introduced to the U.S. Congress. The DASKA Bill and the DETER Bill, if enacted as introduced, may result in additional sanctions being imposed with respect to Russia, including, among others, sanctions against Russian financial institutions and the prohibition of certain investments into Russian energy sector. Both the DASKA Bill and DETER Bill would require submission of an updated Section 241 Report to the U.S. Congress.

As the Group’s main production assets are located in the Russian Federation, if 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 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 organisations 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.

In the ordinary course of its business, the Group, like many other major Russian companies, has routine transactions with Russian persons and entities (including those holding dominant share in the market they operate) that are currently designated under EU and U.S. sanctions with respect to Russia under so called “sectoral” sanctions (such as Rostec and certain Russian state-owned banks). Although the Group’s transactions with these entities are not legally prohibited by any sanctions binding on the Group, should the sanctions regime in respect of these entities be expanded or should blocking sanctions be introduced in respect of these entities or in respect of major suppliers or other major counterparties of the Group, or the Group become unable to continue transacting with such parties, its business could be adversely affected. 18 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, or 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 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, or voluntarily comply with, 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.

None of the proceeds of the issue of the Notes will be used in any manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of EU or U.S. sanctions or to fund or facilitate activities specified or referenced in the CAATS Act that could reasonably be expected to be a basis for the imposition of sanctions or penalties on such person.

Risks relating to political and economic developments in the Eurozone.

In 2018, 2017 and 2016, Europe was the Group’s largest market in terms of revenues, accounting for 54%, 56% and 57% of total metal sales revenues, respectively. See “Business—Sales and Distribution—Product Sales”.

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 uncertainty caused by the possible impending exit of the U.K. from the European Union, known as Brexit. Financial markets and the supply of credit are likely to continue to be impacted by concerns surrounding the sovereign debts of EU countries, the possibility of further credit rating downgrades of, or defaults on, such sovereign debt, the possible impending exit of the U.K. from the European Union, concerns about a slowdown in growth in certain economies and uncertainties regarding the stability and overall standing of the European Monetary Union. Governments and regulators have implemented austerity programmes and other remedial measures to respond to the Eurozone debt crisis and stabilise the financial system, but the actual impact of such programmes and measures is difficult to predict.

To the extent that the economic conditions in the European Union worsen, 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 19 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 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 to be non-compliant. In addition, it is possible that licences applied for or issued in reliance on acts and instructions relating to subsoil rights issued 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.

20 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 and South Cluster (Medvezhy Ruchey) depend on their port facilities in Dudinka, the North Sea Route and other transportation infrastructure.

The Group’s Polar Division and South Cluster (Medvezhy Ruchey) are located on the Taimyr Peninsula, which is completely isolated from Russia’s road and railroad networks. The Polar Division and South Cluster (Medvezhy Ruchey) use 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. See “Business—Mining and Metals Operations—Other Operations—Transportation and Logistics”. 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 the delivery of raw materials, supplies or products. 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 the 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 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 through a public auction or similar competitive procedure, and there can be no assurance that the Group 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 at the current scale, or at the current expense 21 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. 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, discharge of gases and toxic chemicals, geothermal control, sinkhole formation and the ground subsidence, and other accidents and conditions resulting from drilling, blasting and transportation and the removal of material from underground mines. Hazards associated with the Group’s open-pit mining operations include the flooding of open pits, the collapse of the open pit walls, accidents associated with large open-pit mining operations and operating ore handling equipment, accidents associated with the preparation and ignition of large-scale open-pit blasting operations, production disruptions due to the 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. Furthermore, the Group may experience material plant shutdowns or periods of reduced production as a result of equipment failure. 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.

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 22 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. A longer-term business disruption could also result in a loss of customers. 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”.

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 to cause 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 discharge, as well as disposed waste such as smelter slag, contain sulphuric acid and sludge. 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 international obligations on greenhouse gases regulations, including the Paris Agreement which was ratified by Russia in September 2019, may have an adverse impact on the Group’s operations.

The Group has been disclosing its greenhouse gas emissions in its sustainability reports starting from 2016. New laws and regulations, the imposition of more stringent requirements for 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 clean-ups; curtail operations; or the pay 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 the 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 1,959 thousand tonnes to 336 thousand tonnes by 2023. See “Regulatory Matters—Environmental Regulation—Environmental Protection Programmes”. These laws and regulations may allow governmental authorities and private parties to bring lawsuits for damage 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 23 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 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 Russian competent authorities have not previously suspended the Group’s operations, no assurance can be given that they will not do so in the future, even for 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. See “Regulatory Matters—Environmental Regulation”.

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 have agreed to 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 a stake by any of the principal shareholders, mutual buyout rights exercisable by RUSAL and Whiteleave and, in addition, the parties have agreed not to take any action with respect to specified fundamental matters without the agreement of each of them, have agreed on specific rules and procedures, and, subject to certain exceptions, have agreed to maintain at specified levels dividends. 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 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. 24 The Group’s level or scope of insurance coverage may not be adequate.

The Group operates many industrial facilities in which hazardous materials and substances that have the potential to present risks to the health or safety of workers and neighbouring populations are in use. In relation to the Group’s Russian operations, the insurance industry in Russia is not as well developed as in certain other jurisdictions. It is therefore 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 banks (including state-owned) 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 banks (including state-owned). 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 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 reserves and mineral resources 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. 25 Production of finished metals at the Group’s Russian operations have in the past been impacted by 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. The development of deposits 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. In general, exploration activities are aimed at identifying resources 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.

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.

26 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 higher than initially estimated by the Group. The costs, timing and complexities of mine development and construction may increase because of the remote location of many mining properties. In addition, new mining operations could experience unexpected problems and delays during development, construction, mine start-up and the commencement of mineral production. 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 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 2018, 2017 and 2016, the Group’s aggregate capital expenditures (purchases of property, plant and equipment and intangible assets) were U.S.$1.6 billion, 27 U.S.$2 billion and U.S.$1.7 billion, respectively. In the six months ended 30 June 2019, the Group’s capital investments (purchases of property, plant and equipment and intangible assets) totalled U.S.$500 million, as compared with U.S.$536 million in the six months ended 30 June 2018. According to the Group Strategy, approved in November 2018, the Group’s total planned capital expenditure for 2019 to 2022 was expected to amount to up to U.S.$11.5 billion, of which it was expected that up to U.S.$7.5 billion would be allocated to its base investment program (which includes Talnakh mining projects, equipment replacement programs, IT and automation projects and other projects), up to U.S.$2.5 billion would be allocated to the Group’s environmental program, the Sulphur Project (with the peak in investments expected in 2020 and 2021), and up to U.S.$1.5 billion would be allocated to prospective growth projects (which include the Talnakh Concentrator upgrade, South Cluster development and other projects). For 2019, the Company expects annual capital expenditure of up to U.S.$2.2 billion and, for 2020 to 2022, according to the 2018 Group Strategy, average capital expenditure of approximately U.S.$2.6-3.0 billion per annum, including growth projects such as at the Talnakh Concentrator upgrade and the South Cluster development. See “Business—Capital Expenditure”.

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.

Furthermore, the Group had current loans and borrowings of U.S.$132 million as at 30 June 2019 (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 disposal of certain 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.

28 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. The Group’s 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.

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. While inflation amounted to 5.4% in 2016, 2.5% in 2017 and 4.3% in 2018, 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.

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

The Group’s financial results are sensitive to changes in interest rates on the floating portion of the Group's borrowings. As of 30 June 2019, the Group had U.S.$8,625 million of total current and non- current loans and borrowings outstanding, of which 46% (or U.S.$3,952 million) are subject to floating interest rates. Should interest rates increase significantly, the amount of cash required to service the Group’s debt would increase, 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

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

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 67% and 75% of the Group’s capital expenditures for 2017 and 2018, respectively, were denominated in roubles. The rouble-U.S. dollar exchange rate has fluctuated significantly in recent years, ranging from 60.27 roubles per US$1.00 to 83.59 per U.S.$1.00 in 2016; from 55.85 roubles per U.S.$1.00 to 60.75 roubles per U.S.$1.00 in 2017 and from 55.67 roubles per U.S.$1.00 to 69.97 roubles per U.S.$1.00 in 2018. See “Presentation of Financial and Other Information—Currencies and Exchange Rates” for historic exchange rate information. 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.

Failures of the Group’s IT systems or third-party intrusions into such systems could adversely affect its business

The Group’s business and operations may be negatively affected by failures of the Group’s key IT systems and equipment, unauthorised access to confidential information or a disruption of activities during the introduction of a new IT system. IT systems are vulnerable to a number of problems, such as software or hardware malfunctions, malicious hacking, cyber terrorism, physical damage to vital IT centres and computer virus infection. These factors may result in a lack of information or potential information inaccuracies that could cause disruptions in the Group’s decision-making process, as well as deterioration in the quality of the Group’s operational and financial reporting and the overall manageability of the Group. Although the Company has developed and continues to implement various Business Continuity Plans focused on operational, storage and head office elements, and is developing a Disaster Recovery Plan as part of Business Continuity Management for its IT systems, there can be no assurance that the Group’s IT systems will not fail or data will not be lost.

Although the Group has measures in place to ensure the cybersecurity of its computer systems and believes that its computer systems, networks and databases are well protected from unauthorised access, given the potential technical and financial resources of intruders, there can be no assurance that the Group’s computer systems, networks and databases will not suffer from such attacks in the future. A breach of the Group’s cybersecurity systems might 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 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

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

Wage increases may reduce the Group’s profit margins.

In 2016, the average number of employees of the Group’s Russian operations represented 99% 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 2017, labour costs (included in cost of metal sales) increased by 20% (or U.S.$232 million) driven by the rouble appreciation against the U.S. dollar and the indexation of rouble-denominated salaries and wages, which was partly offset by the decrease of production staff headcount owing primarily to a nickel plant closure and the ongoing downstream reconfiguration programme. In the future, 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. 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 99% of the Group average total number of employees in 2018, approximately 10.8% of employees were represented by a trade union or employee representative body. In 2018, the Group entered into a new collective bargaining agreement with its main trade union in Russia to last until 2021. 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”. 31 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. The Group makes voluntary contributions to sustain social assets, such as housing, hospitals and kindergartens, which were previously owned by it 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 2018, 2017 and 2016, the Group incurred export customs duties expenses on the export of products from the Russian Federation of U.S.$1 million, U.S.$1 million and U.S.$61 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 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 and duties 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 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.

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.

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 fixing or maintaining of prices and various other types 32 of anti-competitive behaviours. 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.

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 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 33 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 noncompliance 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.

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 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 34 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. Further 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 internationally. These and any future 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

The Company is a Russian company, and most of the Group’s fixed assets are located in, and a significant portion of the Group’s revenue is derived from, Russia. There are certain risks associated with an investment in Russian businesses.

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. 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 significance of the risks involved. Potential investors are urged to consult with their own legal and financial advisers 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: 35  significant volatility in its GDP;

 the impact of sanctions;

 high levels of inflation;

 increases in, or high, interest rates;

 sudden price declines in oil and other natural resources;

 instability in the local currency market;

 lack of reform in the banking sector and a weak banking system providing limited liquidity to Russian enterprises;

 budget deficits;

 the continued operation of loss-making enterprises due to the lack of effective bankruptcy proceedings;

 capital flight; and

 significant increases in poverty rates, unemployment and underemployment.

In addition, despite the campaign pursued by the Russian government against crime and corruption, the then President (and current Prime Minister) Mr. Dmitry Medvedev acknowledged in April 2012 that these measures had yielded only limited results to date. The Russian economy has been subject to abrupt downturns in the past. Furthermore, following the imposition of economic sanctions by the United States and the EU and the decline of oil prices, in 2015 Russia’s GDP declined by 2.3% in real terms. In 2016, 2017 and 2018, Russia’s GDP grew by 0.3%, 1.6% and 2.3%, respectively, according to the new statistics of Rosstat recalculated in March 2019. The Russian Ministry of Economic Development expects a slight decline in the growth of Russian GDP in 2019 with a long-term increase of Russian GDP by approximately 2% in 2020 and by approximately 3% or slightly more in each of the years 2021-2025. There is a risk that Russia’s recent growth or expected growth in the future will not continue or be achieved due to generally unfavourable economic conditions or geopolitical factors.

Instability in the Russian banking sector may also adversely affect Russia’s general economy. For example, according to the CBR, the level of past due loans to non-financial enterprises in the Russian banking sector has increased from 6.9% in February 2018 to 7.9% in February 2019. An increase in the level of underperforming loans generally weakens the level of capital for banks, which, in turn, may lead them to shrink their loan portfolios and cause debt funding to become less available for businesses outside the financial sector. Several major Russian banks, such as Trust Bank, PJSC Otkritie Financial Corporation, PJSC B&N Bank and JSCB Moscow Industrial Bank PC were recently subject of a government bailout. Risk management, corporate governance and transparency and disclosure practices of Russian banks often remain below international best practices.

Any deterioration in the general economic conditions in Russia 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.

36 Some of Russia’s physical infrastructure is in very poor condition, which could disrupt normal business activity of the Group or lead to increased costs.

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. 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 and 2015 resulted in a significant decrease of governmental revenues, which had a negative effect on the Russian economy. Commodity prices continue to be volatile, and future fluctuations in the global markets could substantially limit the Group’s access to capital and could adversely affect the financial condition of the Group’s customers. 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 that could hinder the Group’s long-term planning ability and 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 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.

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. 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.

37 A reversal of reform or government 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 and economic situation in Russia became generally more stable, which accelerated the reform process and made Russia more attractive to investment. Such stability, however, has been negatively affected by the global financial crisis, the economic sanctions imposed by the United States and the EU and the ongoing economic recession. See “— The ongoing armed conflict in Ukraine, the international reaction to Russia’s actions 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”. Moreover, in December 2011 and in 2012, there were public protests alleging voting irregularities in federal parliamentary and presidential elections and demanding political reform. In 2018, there were public protests against the increase of the retirement age.

Any significant increases in political instability could lead to 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 other charges. In some cases, the result of these prosecutions has been the imposition of prison sentences for individuals. Any similar actions by governmental authorities or events could lead to further negative effect on investor confidence in Russia’s business and legal environment, which could have a material adverse effect on 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.

The ongoing 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

38 laws have only recently become effective and many are still evolving. Consequently, certain areas of judicial practice are not yet fully settled and are therefore sometimes difficult to predict.

The recent nature of the Russian legal system can result in inconsistencies in legal interpretations and impact the enforceability of law. Among the possible risks of the current Russian legal system are:

 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;

 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.

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.

Notwithstanding recent reforms of the Russian court system, the continued evolution 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 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.

39 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% 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, subject to certain exceptions, 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% (but less than 75%) 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. 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 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 Federal Law “On Precious Metals and Precious 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 Precious Gems 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 research, exploration, mining or production of 40 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 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.

In addition, arbitrary or selective government actions directed against other Russian companies (or the consequences of such actions) may generally impact on the Russian economy, including the securities market. 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.

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 may also be held liable for damages incurred by its Russian subsidiaries, provided that (i) the Company is found to have the ability to direct the actions of such subsidiaries and (ii) the Company’s Russian subsidiaries have incurred damages as a result of the Company’s fault.

In 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 action of the Company. Accordingly, the Company could be liable in some cases for the debts of its subsidiaries, 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. 41 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. A transaction which is not so approved may be challenged in court by the Company’s director or shareholder (shareholders) holding at least 1% 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 was supposed to 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. Although during 2012-2015 Russia adopted certain changes to its legislation related to its accession to the WTO (for example, for regulation of intellectual property), it is unclear yet if and when all necessary legislative changes related to the accession will take place. In addition, the Russian Federation has implemented annual tariff reductions in line with its WTO commitments. For instance, in September 2018, there was a decrease in tariffs on certain types of goods, including aircraft and cars. If further 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 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 discussion below provides general information regarding Russian taxes and is not intended to be inclusive of all issues. Investors should seek advice from their own tax advisers as to these tax matters before investing in the Notes. See also “Taxation—Certain Russian Tax Considerations”.

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 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 42 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, Russian tax laws remain subject to frequent changes, varying and contradicting interpretations and inconsistent and selective enforcement.

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.

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, their potential interpretation by the tax authorities and the possible impact on the taxpayers.

In 2017, country-by-country reporting (“CbCR”) requirements were introduced in the Russian Tax Code. 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.

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 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.

The Russian tax authorities generally interpret the tax laws in ways that do not favour taxpayers, who often have to defend their position against the tax authorities in courts. Furthermore, in the absence of binding precedent, court rulings on tax or other related matters by different courts relating to the same or similar circumstances may also be inconsistent or contradictory. 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. 43 The practice relating to tax audits and the statute of limitations for penalties and taxes also create significant uncertainties for Russian taxpayers.

In 2017, anti-avoidance rules were introduced by Article 54.1 of the Russian Tax Code. A similar “unjustified tax benefit” concept introduced by the Plenum of the Supreme Arbitrazh Court of the Russian Federation in its Resolution No. 53 (“Resolution No. 53”) had been in existence for more than 10 years in Russian law. The “unjustified tax” benefit concept has been widely used by the Russian tax authorities to challenge the tax positions of Russian taxpayers, among other things, with respect to application of tax treaty benefits. However, the Russian Ministry of Finance in its recent letter stated that the concepts expressed in Resolution No. 53 and evolved in the relevant court practice should not be applied by the Russian tax authorities in the course of tax audits following the enactment of new anti-avoidance rules. Due to the fact that the court practice related to application of the new rules is still limited and underdeveloped, no assurance could currently be given as to the exact effect such rules may have on taxpayers.

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 condition, the Company’s ability to service 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 Federation has joined the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “Multilateral Instrument” or “MLI”). This new initiative 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. 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.

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. 44 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. On 12 May 2016, Russia signed the Multilateral Competent Authority Agreement on the exchange of financial account information, thereby joining the Standard for Automatic Exchange of Financial Account Information (Common Reporting Standard, the “CRS”). The procedures for exchange of information established by the CRS are to be used by the Russian tax authorities in addition to application of the procedures of the exchange of information established by the applicable double tax treaties.

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 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. 45 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.

Generally, no Russian withholding tax obligations should arise on interest on debt obligations owed by for a Russian borrower in connection with the issuance of traded bonds by a foreign entity (a “Eurobond structure”) by virtue of a specific exemption envisaged by the Russian Tax Code. In particular, the Russian Tax Code provides that Russian borrowers should be fully released from the obligation to withhold Russian income tax from interest payments made on debt obligations owed to foreign entities provided that certain conditions are met through the term of such debt obligation. See “Taxation—Certain Russian Tax Considerations”.

Importantly, the Russian Tax Code does not provide an exemption to the foreign interest income recipients from Russian withholding tax, although 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”.

This release from the obligation to withhold the Russian withholding tax from interest payments made to the Issuer under the Loan Agreement may be relied on until a delisting of the Rule 144A Notes from Euronext Dublin, and/or the Notes are simultaneously (i) delisted from Euronext Dublin and (ii) exchanged for duly executed and authenticated registered Notes in definitive form in the limited circumstances specified in the Global Note Certificate. In this case, the Company will be required to withhold Russian income tax on 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%, 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 in Russia, 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 46 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 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

Risks Related to Changes in Tax Law

OECD Action Plan on Base Erosion and Profit Shifting

Fiscal and taxation policy and practice is constantly evolving and recently the pace of change has increased due to a number of developments. In particular, a number of changes of law and practice are occurring as a result of the BEPS. Investors should note that certain action points which form part of the BEPS project (such as Action 4, which can deny deductions for financing costs (See "–EU Anti- Tax Avoidance Directive") or Action 6 on the prevention of treaty abuse) may be implemented in a manner which affects the tax position of the Issuer.

EU Anti-Tax Avoidance Directive

As part of its anti-tax avoidance package, and to provide a framework for a harmonised implementation of a number of the BEPS conclusions across the EU, the EU Council adopted Council Directive (EU) 2016/1164 (the “Anti-Tax Avoidance Directive”) on 12 July 2016.

The EU Council adopted Council Directive (EU) 2017/952 (the “Anti-Tax Avoidance Directive 2”) on 29 May 2017, amending the Anti-Tax Avoidance Directive, to provide for minimum standards for counteracting hybrid mismatches involving EU member states and third countries.

EU member states must implement the Anti-Tax Avoidance Directive by 2019 (subject to derogations for EU member states which have equivalent measures in their domestic law) and have until 31 December 2019 to implement the Anti-Tax Avoidance Directive 2 (except for measures relating to reverse hybrid mismatches, which must be implemented by 31 December 2021).

47 The Directives contain various measures that could, depending on their implementation in Ireland, potentially result in certain payments made by the Issuer ceasing to be fully deductible, which could increase the Issuer’s liability to tax and reduce the amounts available for payments on the Notes.

There are two measures of particular relevance.

Firstly, the Anti-Tax Avoidance Directive provides for an "interest limitation rule" which restricts the deductible interest of an entity to 30% of its earnings before interest, tax, depreciation and amortisation. However, the interest limitation only applies to the net borrowing costs of an entity (being the amount by which its borrowing costs exceed its taxable interest revenues and other economically equivalent taxable revenues).

Secondly, the Anti-Tax Avoidance Directive (as amended by the Anti-Tax Avoidance Directive 2) provides for hybrid mismatch rules. These rules are designed to neutralise arrangements where amounts are deductible from the income of one entity but are not taxable for another, or the same amounts are deductible for two entities. These rules could potentially apply to the Issuer where: (i) the interest that it pays under the Notes, and claims deductions from its taxable income for, is not brought into account as taxable income by the relevant Noteholder, either because of the characterisation of the Notes, or the payments made under them, or because of the nature of the Noteholder itself; and (ii) the mismatch arises between associated enterprises, between the Issuer and an associated enterprise or under a structured arrangement.

The exact scope of these two measures, and impact on the Issuer’s tax position, will depend on the implementation of the measures in Ireland.

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 48 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 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 49 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.

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 on the Official List and admitted to trading on the Regulated Market. 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 stable) by S&P and “Baa2” (outlook stable) by Moody’s. 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, though they have subsequently been upgraded. On 18 January 2019, Standard & Poor’s affirmed Russia’s long-term foreign currency sovereign bond rating at “BBB-” with stable outlook and, on 8 February 2019, Moody’s upgraded its sovereign debt rating for the Russian Federation to ‘Baa3’ with stable outlook. On 15 February 2019, Fitch affirmed Russia’s foreign currency sovereign debt rating for the Russian Federation at “BBB-” with positive outlook and, on 9 August 2019, upgraded it to “BBB” with stable outlook.

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 50 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.

Further Issues of Securities by the Issuer may affect the trading price of the Notes.

The Issuer may from time to time, 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. Even if such additional securities are treated for non-tax purposes as part of the same series as the Notes, such additional securities may in some cases be treated as a separate series for U.S. federal income tax purposes. In such a case, among other things, such additional securities may be treated as issued with original issue discount (“OID”) even if the Notes were not issued with OID, or such additional securities may have a greater amount of OID than the Notes for U.S. federal income tax purposes. Additionally, further issues of securities could affect the application of FATCA with respect to the Notes. These differences may affect the market value of the Notes if such additional securities are not otherwise distinguishable from the Notes.

RISKS RELATING TO THE ISSUER

Some of the Group’s operations are conducted through the Company’s subsidiaries, and, to a certain extent, the Company depends on the earning sand 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 bankruptcy, liquidation or 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.

Further Issues of Securities by the Issuer may affect the trading price of the Notes.

The Issuer may from time to time, without the consent of the Noteholders, crease 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. Even if such additional securities are treated for non-tax purposes as part of the same series as the Notes, such additional securities may in some cases 51 be treated as a separate series for U.S. federal income tax purposes. In such a case, among other things, such additional securities may be treated as issued with original issue discount (“OID”) even if the Notes were not issued with OID, or such additional securities may have a greater amount of OID than the Notes for U.S. federal income tax purposes. Additionally, further issues of securities could affect the market value of the Notes if such additional securities are not otherwise distinguishable from the Notes.

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

Centre of Main Interest

The Issuer has its registered office in Ireland. Under Regulation (EU) No. 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) (“Recast EU Insolvency Regulation”), the Issuer's centre of main interest (“COMI”) is presumed to be the place of its registered office (i.e., Ireland) in the absence of proof to the contrary and provided that the Issuer did not move its registered office within the 3 months prior to a request to open insolvency proceedings.

As the Issuer’s COMI is presumed to be Ireland, any main insolvency proceedings in respect of the Issuer would fall within the jurisdiction of the courts of Ireland. As to what might constitute “proof to the contrary” regarding the location of a company’s COMI, the key decision is that in Re Eurofood IFSC Ltd ([2004] 4 IR 370 (Irish High Court); [2006] IESC 41 (Irish Supreme Court); [2006] Ch 508; ECJ Case C-341/04 (European Court of Justice)), given in respect of the equivalent provision in the previous EU Insolvency Regulation (Regulation (EC) No. 1346/2000). In that case, on a reference from the Irish Supreme Court, the European Court of Justice concluded that “factors which are both objective and ascertainable by third parties” would be needed to demonstrate that a company's actual situation is different from that which the location of its 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 retained an Irish corporate services provider, the Issuer does not believe that factors exist that would rebut the presumption that its COMI is located in Ireland, 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 was found to be in another EU jurisdiction and not in Ireland, main insolvency proceedings would be opened in that jurisdiction instead.

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 shareholders, directors and a contingent, prospective or actual creditor of the Issuer are each entitled to petition the court for the appointment of an examiner. The examiner, once appointed, has wide powers binding on the company.

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.

52 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 was 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:

(i) the Trustee, acting on behalf of Noteholders, would not be able to enforce rights against the Issuer during the period of examinership; and

(ii) 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.

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:

(i) under the terms of the Trust Deed, the Notes will be secured in favour of the Trustee for the benefit of itself and the Noteholders by security over the Loan Agreement and sums held in the related account with the Principal Paying Agent. 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;

(ii) 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, such as the Charge, may take effect as a floating charge if a court deems that the requisite level of control was not exercised; and

(iii) 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.

53 USE AND ESTIMATED NET AMOUNT OF PROCEEDS

The Issuer will use the gross proceeds of the issue of the Notes for the sole purpose of financing the Loan to the Company pursuant to the terms of the Loan Agreement. The estimated net proceeds of the Loan, after payment of commissions, fees, and estimated expenses, will be U.S.$746,000,000. The Company intends to use the proceeds of the Loan for general corporate purposes, including capital investments and refinancing.

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.

54 CAPITALISATION

The following table sets forth the Company’s consolidated capitalisation as of 30 June 2019, comprising total non-current loans and borrowings and non-current lease liabilities and equity attributable to shareholders of the parent company, derived from the 2019 Interim Condensed 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 30 June 2019 (Amounts in millions of U.S. dollars)

Cash and cash equivalents ...... 3,488 Current loans and borrowings ...... 132 CAPITALISATION: Non-current loans and borrowings...... 8,493 Non-current lease liabilities 185 Capital and reserves...... Share capital...... 6 Share premium...... 1,254 Treasury shares ...... – Translation reserve...... (4,998) Retained earnings...... 8,259 Equity attributable to shareholders of the parent company ...... 4,521 Total non-current loans and borrowings, non-current lease liabilities and equity attributable to shareholders of the parent company...... 13,199

On 26 July 2019, the Group entered into a 67-months lease agreement and recognised lease liability in the amount of 985 million roubles (U.S.$16 million using the rouble/U.S. dollar rate on 26 July 2019).

On 8 August 2019, the Group entered into a new rouble-denominated committed credit line in the total amount of 30 billion roubles (U.S.$461 million, using the rouble/U.S. dollar rate at the date of the contract). No amounts were drawn down under this facility at the date of this Prospectus.

On 12 August 2019, the Group extended a U.S. dollar-denominated loan agreement for U.S.$200 million from October 2020 to February 2023.

On 11 September 2019, the Group extended a U.S. dollar-denominated loan agreement for U.S.$175 million from October 2019 to February 2022, U.S.$50 million of which was prepaid on the same date.

On 26 September 2019, the Extraordinary General shareholders’ meeting of the Company declared dividends in respect of the six months ended 30 June 2019 in the amount of 883.93 roubles (U.S.$13.77 using the rouble/U.S. dollar rate on 26 September 2019) per ordinary share with the total amount of U.S.$2,179 million.

In September 2019, the Company priced rouble-denominated commercial bonds in the total amount of 25 billion roubles (U.S.$388 million, using the rouble/U.S. dollar rate on the pricing date of 19 September 2019) maturing in 2024 with a coupon rate of 7.20% per annum. In the same month, the outstanding amount of rouble-denominated commercial bonds was swapped into U.S.$390 million in accordance with cross-currency interest rate swap contracts bearing a fixed interest rate.

On 14 October 2019, the Company disbursed 62.5 billion roubles in aggregate from available committed credit lines (U.S.$973 million using the rouble/U.S. dollar rate on 14 October 2019), of 55 which 17.5 billion roubles is short-term debt and 45 billion roubles is long-term debt maturing from 2021 to 2024 (with a right to make an early prepayment).

The Group expects to receive net proceeds from the offering of the Notes of approximately U.S.$746,000,000 (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.$4,000,000). See “Overview—Overview of the Offering—Use of Proceeds”.

56 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 years ended 31 December 2018, 2017 and 2016 has been derived from the Annual Consolidated Financial Statements included elsewhere in this Prospectus;

 as at and for the six months ended 30 June 2019 and 2018 has been derived from the 2019 Interim Condensed Consolidated Financial Statements included elsewhere in this Prospectus; and

 as at and for the six months ended 30 June 2017 has been derived from the 2018 Interim Condensed Consolidated Financial Statements included elsewhere in this Prospectus.

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.

Six months ended Year ended 31 December 30 June 2018 2017 2016 2019 2018 Selected Consolidated Statement of Income Data (Amounts in millions of U.S. dollars unless otherwise indicated) Revenue Metal sales ...... 10,962 8,415 7,646 5,940 5,473 Other sales ...... 708 731 613 352 361 Total revenue...... 11,670 9,146 8,259 6,292 5,834 Cost of metal sales ...... (4,536) (3,968) (3,633) (2,181) (2,195) Cost of other sales...... (622) (632) (508) (355) (334) Gross profit...... 6,512 4,546 4,118 3,756 3,305 General and administrative expenses...... (859) (759) (581) (443) (461) Selling and distribution expenses...... (92) (75) (111) (55) (35) Impairment of non-financial assets...... (50) (227) (61) (5) (6) Other operating income/(expenses) (95) (362) (84) 18 (80) Operating profit ...... 5,416 3,123 3,281 3,271 2,723 Foreign exchange gain/(loss), net...... (1,029) 159 491 548 (453) Finance costs, net...... (580) (535) (453) (89) (246) Impairment of available for sale investments...... - - (153) - - Gain/(Loss) from disposal of subsidiaries and assets classified as held for sale...... - 20 (4) - - Income from investments...... 95 77 114 43 32 Profit before tax ...... 3,902 2,844 3,276 3,773 2,056 Income tax expense...... (843) (721) (745) (776) (403) Profit for the year ...... 3,059 2,123 2,531 2,997 1,653 Attributable to: Shareholders of the parent company ...... 3,085 2,129 2,536 2,881 1,675 Non-controlling interests ...... (26) (6) (5) 116 (22) 57 Six months ended As of 31 December 30 June 2018 2017 2016 2019 2018 Selected Consolidated Statement of Financial Position Data (Amounts in millions of U.S. dollars) Non-current assets...... 10,697 12,109 10,677 12,027 11,313 Current assets...... 4,554 4,526 5,846 6,878 7,090 Assets classified as held for sale...... – – – 51 – Total Assets...... 15,251 16,635 16,523 18,956 18,403 Non-current liabilities ...... 9,420 9,625 8,645 9,693 10,499 Current liabilities ...... 2,358 2,352 3,982 4,332 3,594 Liabilities classified as held for sale...... – – – 14 – Total Liabilities ...... 11,778 11,977 12,627 14,039 14,093 Equity...... 3,473 4,658 3,896 4,917 4,310 Total Equity and Liabilities .. 15,251 16,635 16,523 18,956 18,403

Year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018 Selected Consolidated Cash Flow Statement Data (Amounts in millions of U.S. dollars unless otherwise indicated) Net cash generated from operating activities...... 6,493 1,763 3,511 2,587 3,143 Net cash used in investing activities...... (1,562) (1,936) (1,920) (381) (543) Net cash (used in)/generated from financing activities...... (4,304) (2,237) (2,399) (139) 61 Net increase/(decrease) in cash and cash equivalents...... 627 (2,410) (808) 2,067 2,661 Cash and cash equivalents at the end of the period...... 1,388 852 3,325 3,488 3,438

As of and for the year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018 Non-IFRS Measures (Amounts in millions of U.S. dollars unless otherwise indicated) Adjusted EBITDA(1) ...... 6,231 3,995 3,899 3,719 3,079 Adjusted EBITDA margin (%)(2)...... 53.4 43.7 47.2 59.1 52.8 Net debt (3) ...... 7,051 8,201 4,530 5,357 5,830 Net debt to Adjusted EBITDA(4) ...... 1.1 2.1 1.2 0.8 1.1 Debt to equity(5)...... 2.4 1.9 2.0 1.8 2.2 Debt to capitalisation(6) ...... 0.7 0.7 0.7 0.7 0.7 Adjusted free cash flow(7)...... 4,931 (173) 1,591 2,206 2,600

(1) The Group’s Adjusted EBITDA for all periods presented was calculated as profit from operations plus depreciation and amortisation, impairment of non-financial assets, foreign exchange loss/(gain), net, finance costs, net, gain/(loss) from disposal of subsidiaries and assets classified as held for sale, impairment of available-for-sale investments, income from investments and income tax expense. The Company presents Adjusted EBITDA because it considers it an important supplemental measure of the

58 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. Adjusted 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:  Adjusted 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 Adjusted EBITDA, Adjusted EBITDA does not reflect the Group’s future cash requirements for these replacements. Adjusted 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 Adjusted 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 Adjusted EBITDA only supplementally. See the Group’s consolidated statements of income and consolidated statements of cash flows included in the Financial Statements. Adjusted EBITDA disclosed in this Prospectus is calculated differently from reporting requirements for companies listed in the United States for EBITDA and equals to the Group’s EBITDA in the Financial Statements. A reconciliation of Adjusted EBITDA to profit for the periods indicated is as follows: Year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018 2017

(Amounts in millions of U.S. dollars) Profit for the period 3,059 2,123 2,531 2,997 1,653 915 Add: Income tax expense ...... 843 721 745 776 403 303 Income from investments...... (95) (77) (114) (43) (32) (34) Impairment of available-for-sale investments...... - - 153 - - - Loss/(gain) from disposal of subsidiaries and assets classified as held for sale ...... - (20) 4 - - (16) Finance costs, net ...... 580 535 453 89 246 265 Foreign exchange loss/(gain), net ...... 1,029 (159) (491) (548) 453 (21) Depreciation and amortisation...... 765 645 557 443 350 307 Impairment of non- financial assets...... 50 227 61 5 6 25 Adjusted EBITDA...... 6,231 3,995 3,899 3,719 3,079 1,744

(1) Adjusted 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, Adjusted EBITDA should not be considered as a measure of discretionary cash available to the Group to invest in the growth of its business. (2) Adjusted EBITDA margin is calculated as a percentage of revenue for the relevant period.

59 Year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018

(Amounts in millions of U.S. dollars) Revenue for the period 11,670 9,146 8,259 6,292 5,834 Adjusted EBITDA 6,231 3,995 3,899 3,719 3,079 Adjusted EBITDA margin (%) 53 44 47 59 53

(3) Net debt is calculated as the sum of non-current and current loans, borrowings and lease liabilities less cash and cash equivalents at the end of the relevant period. If, at the end of the relevant period, total non- current and current loans, borrowings and lease liabilities 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 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 a substitute 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 to non-current and current loans, borrowings and lease liabilities as of the end of the periods indicated: As of 31 December Six months ended 30 June 2018 2017 2016 2019 2018 (Amounts in millions of U.S. dollars) Non-current loans and borrowings 8,224 8,236 7,276 8,493 9,150 Non-current lease liabilities - - - 185 - Current loans and borrowings 215 817 579 132 118 Current lease liabilities - - - 35 - Total non-current and current loans, borrowings and lease liabilities (Debt)...... 8,439 9,053 7,855 8,845 9,268 less cash and cash equivalents ...... (1,388) (852) (3,325) (3,488) (3,438) Net debt...... 7,051 8,201 4,530 5,357 5,830

(4) Net debt to 12 months Adjusted EBITDA is a measure of financial leverage to demonstrate the Group’s ability to repay its debt obligations which is calculated as net debt as at the end of the relevant period divided by Adjusted EBITDA for the relevant period, including previous 12 months. As of 31 December Six months ended 30 June 2018 2017 2016 2019 2018 2017(5) (Amounts in millions of U.S. dollars) Net debt...... 7,051 8,201 4,530 5,357 5,830 n/a Adjusted EBITDA ...... 6,231 3,995 3,899 3,719 3,079 1,744 Adjusted EBITDA (for the previous 12 months) ...... 6,231 3,995 3,899 6,871 5,330 n/a Net debt to Adjusted EBITDA 1.1 2.1 1.2 0.8 1.1 n/a

(5) Derived from the 2018 Condensed Consolidated Financial Statements.

60 Adjusted EBITDA (for the previous 12 months) was calculated as follows:

 for the years 2016, 2017 and 2018, it is equal to Adjusted EBITDA for the relevant period;

 for the six months ended 30 June 2019 (U.S.$6,871 million), it is equal to Adjusted EBITDA for the six months ended 30 June 2019 (U.S.$3,719 million) plus Adjusted EBITDA for 2018 (U.S.$6,231 million) less Adjusted EBITDA for the six months ended 30 June 2018 (U.S.$3,079 million); and

 for the six months ended 30 June 2018 (U.S.$5,330 million) it is equal to Adjusted EBITDA for the six months ended 30 June 2018 (U.S.$3,079 million) plus Adjusted EBITDA for 2017 (U.S.$3,995 million) less Adjusted EBITDA for the six months ended 30 June 2017 (U.S.$1,744 million).

(6) Debt to equity is calculated as total current and non-current loans, borrowings and lease liabilities as at the end of the relevant period divided by total equity as at the end of the relevant period. As of 31 December Six months ended 30 June 2018 2017 2016 2019 2018 (Amounts in millions of U.S. dollars) Non-current loans and borrowings 8,224 8,236 7,276 8,493 9,150 Non-current lease liabilities - - - 185 - Current loans and borrowings 215 817 579 132 118 Current lease liabilities - - - 35 - Total non-current and current loans, borrowings and lease liabilities (Debt)...... 8,439 9,053 7,855 8,845 9,268 Equity...... 3,473 4,658 3,896 4,917 4.310 Debt to equity 2.4 1.9 2.0 1.8 2.2

(7) Debt to capitalisation is calculated as total current and non-current loans, borrowings and lease liabilities as at the end of the relevant period divided by total non-current loans, borrowings, lease liabilities and equity attributable to shareholders of the parent company as at the end of the relevant period. As of 31 December Six months ended 30 June 2018 2017 2016 2019 2018 (Amounts in millions of U.S. dollars) Non-current loans and borrowings 8,224 8,236 7,276 8,493 9,150 Non-current lease liabilities - - - 185 - Current loans and borrowings 215 817 579 132 118 Current lease liabilities - - - 35 - Total non-current and current loans, borrowings and lease liabilities (Debt)...... 8,439 9,053 7,855 8,845 9,268 Equity attributable to shareholders 3,223 4,327 3,822 4,521 4,029 Total non-current loans, borrowings, lease liabilities and equity attributable to shareholders of the parent company (Capitalisation) 11,662 13,380 11,677 13,366 13,297 Debt to capitalisation 0.7 0.7 0.7 0.7 0.7

61 (8) The Group calculates Adjusted 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. Adjusted free cash flow presented by the Group has been calculated by the management based on the information derived from the 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. Adjusted free cash flow is not defined by the IFRS and should not be considered in isolation or as an alternative to net income. Adjusted free cash flow disclosed in this Prospectus is calculated differently from reporting requirements for companies listed in the United States for free cash flow. The following table shows a reconciliation of free cash flow to the consolidated statement of cash flows.

Year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018 (Amounts in millions of U.S. dollars) Net cash generated from operating activities...... 6,493 1,763 3,511 2,587 3,143 Net cash used in investing activities ...... (1,562) (1,936) (1,920) (381) (543) Adjusted free cash flow. 4,931 (173) 1,591 2,206 2,600

See “Presentation of Financial and Other Information”.

62 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 2018, 2017 and 2016, as of and for the six months ended 30 June 2018 and 2019 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 Financial Statements. The following should be read in conjunction with the Financial Statements and the related notes included in this Prospectus. Investors should not rely solely on the information contained in this section.

Overview

In 2018, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 72%, 96%, 98% and 98% of total Group production of those metals, respectively. The Group’s principal operations in Russia comprise its Polar Division and South Cluster, both located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia, which main activities include mining at three sulphide copper and nickel ore deposits, enrichment, smelting and refining 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 and South Cluster, as well as industrial and residential customers in that region. In addition to its Polar Division and South Cluster operations, the Group operates through its subsidiary, JSC Kola “GMK”, in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts mainly underground mining operations at four deposits containing sulphide copper and nickel ores and operates an enrichment plant, a smelter and a refinery. The Group also owns a 50.01% interest in Bystrinsky GOK, which is located in the Zabaikalsky region of Russia. Bystrinsky GOK is operated by the Group and consolidated in its financial and operating results. Bystrinsky GOK operations are comprised of two open pit mines and a concentrator.

The Group also owns a nickel and cobalt refinery in Finland, which is operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of approximately 66,000 tonnes of refined nickel products. The Group’s other international mining assets include a 50% participation interest in the Nkomati Nickel Mine in South Africa and the Honeymoon Well deposit in Australia. 63 In the six months ended 30 June 2019, the Group (excluding metals produced by the Nkomati Nickel Mine and metals purchased from third parties) sold 113 thousand tonnes of nickel, 223 thousand tonnes of copper, 1,537 thousand troy ounces of palladium and 390 troy ounces of platinum, as compared with 101 thousand tonnes on nickel, 201 thousand tonnes of copper, 1528 thousand troy ounces of palladium and 353 thousand troy ounces of platinum in the six months ended 30 June 2018. In 2018, the Group (excluding metals produced by the Nkomati Nickel Mine and metals purchased from third parties) sold 217 thousand tonnes of nickel, 455 thousand tonnes of copper, 2,974 thousand troy ounces of palladium and 668 thousand troy ounces of platinum, as compared with 216 thousand tonnes of nickel, 386 thousand tonnes of copper, 2,450 thousand troy ounces of palladium and 667 thousand ounces of platinum in 2017. In 2018, nickel, copper, palladium and platinum accounted for 27%, 27%, 34% and 5%, 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, palladium, platinum and copper (25%, 40%, 6% and 23%, respectively, of total metal sales revenue in the six months ended 30 June 2019). The Group generally trades the production by reference to current market prices, including through sales under long-term contracts. Consequently, the price of commodities is the most important factor influencing the Group’s revenues. Commodity prices are significantly affected by changes in global economic conditions and are highly related to the industry cycles. Commodity product prices, including nickel, copper, palladium and platinum produced by the Group, can vary significantly in response to the fluctuations in worldwide supply and demand balance, as well as a range of various factors, for example, general economic trends and speculative activities. Metal prices are also related to the availability and, therefore, costs of metal scrap materials and substitute commodity products.

The global economic downturn in 2008 has had an extensive adverse impact on the global commodity markets, resulting in significant price volatility and the effects of the downturn continued to some degree into the periods under review. Most recently, the escalated trade war between the United States and China and the slower pace of economic development of European countries has put downward pressure on global commodity prices.

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

Average annual price Average price for the six for years ended 31 December months ended 30 June 2018 2017 2016 2019 2018 Nickel (U.S. dollar per tonne)...... 13,122 10,411 9,609 12,315 13,871 Copper (U.S. dollar per tonne)...... 6,523 6,166 4,863 6,165 6,917 Palladium (U.S. dollar per troy ounce)...... 1,029 869 613 1,410 1,007 Platinum (U.S. dollar per troy ounce)...... 880 949 989 832 941

64 Source: LME (nickel and copper); LBMA (palladium and platinum)

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 end of the year, peaking at U.S.$11,700 per tonne in November 2016. In the first quarter of 2017, the price fluctuated between U.S.$9,380 per tonne and U.S.$11,045 per tonne, declining in the second quarter of 2017 primarily after the announcement of the Indonesian government that it was commencing the issuance of permits for export of unprocessed nickel ore, combined with the reduction of stainless steel output in China. In the second half of 2017, the price of nickel increased as a result of a number of factors, including production growth in the Chinese stainless industry, the commission of a large stainless plant in Indonesia and an increased optimism from the investment community about the potential increase in nickel consumption by the electric car industry, peaking at U.S.$15,750 per tonne in the first half of 2018. The upward price trend continued into the second half of 2018, and then reversed due to the U.S.-China trade tensions and concerns over a potential construction of low-cost large-scale laterite nickel ore leaching facilities in Indonesia. However, the average nickel price in 2018 grew to U.S.$13,122, as compared to U.S.$10,411 in 2017. In early 2019, the LME nickel price began to show some signs of recovery. The price averaged U.S.$12,315 per tonne in the first half of 2019, dominated by the strong output expansion in China and Indonesia driven by the availability of relatively cheap high-grade ore. Continued nickel demand in the battery industry stimulated by growing electric vehicles production and the recently announced reinforcement of a nickel export ban in Indonesia were the key factors behind the increasing price in the third quarter of 2019.

The copper price also declined in 2016, following a fall in oil price, with which copper traditionally had a high correlation. In 2017, a strike at the Chilean mine Escondida, released ban of copper concentrate export in Indonesia, as well as pessimistic forecasts claiming a copper deficit for the upcoming year, resulted in an average price at the U.S.$6,166 per tonne level. A slight decline in copper prices in the first quarter of 2018, as a result an outcome of lower imports in China and higher metal exchange inventories, reversed in the second quarter, peaking at U.S.$7,300, the highest level over the last four and a half years. The year’s lowest price level of U.S.$5,823 in September 2018, resulting from the risk of a trade war between the U.S. and China, was followed by the stabilisation in the range of U.S.$6,070 and U.S.$6,330. In the first half of 2019, copper price made an attempt to consolidate at the level of U.S.$6,500 on expectations of an imminent trade deal between the U.S. and China, but as the prospects for any near term resolution of the conflict got pushed back, the metal price plummeted below U.S.$5,500 per tonne in the third quarter of 2019.

In 2016, despite fluctuations, the price of palladium experienced an overall increase. In 2017, the price continued to increase, exceeding U.S.$1,058 per troy ounce, the highest price reached over the last 16 years. After a decrease in the price of palladium in the first half of 2018, the price stabilised at approximately U.S.$1,100 per troy ounce, primarily due to the lack of palladium in metal spot markets. In the first half of 2019, the price consolidated above U.S.$1,400 per troy ounce, hitting the all-time high of U.S.$1,604 per troy ounce in May, primarily due to the tightening of environmental regulations in Europe, China and the U.S., a shift to gasoline hybrids, SUVs and light trucks and a structural market deficit. The average price of palladium in the first half of 2019 was U.S.$1,410 per troy ounce.

In 2016, the price of platinum fluctuated between U.S.$800 and U.S.$1,200 per troy ounce. In 2017, the price of platinum remained volatile, and was U.S.$937 at the end of the year. In 2018, the price fell to U.S.$880 per troy ounce, primarily due to reduced demand for diesel and, consequently, diesel engines, and a reduced demand for platinum-containing jewellery. In the first half of 2019, the price of platinum fluctuated between U.S.$800 to U.S.$900 per troy ounce amid an increased demand for platinum from the investment community and the suspension of interest rate rises from the U.S. Federal Reserve. The average price of platinum the first half of 2019 was U.S.$832 per troy ounce.

65 The Group’s metal sales revenue in 2018 increased by 30%, as compared with 2017, largely as a result of higher realised metal prices, sales of palladium stock accumulated in 2017 and higher copper production volumes. See “Risk Factors—Risks associated with the Group’s business and industry— 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. Labour costs comprise one of the single largest components of the Group’s cash operating costs, representing approximately 35% in 2018 and 36% in 2017. Approximately 98% of the Group’s workforce is based in Russia. In 2017, labour costs increased by 20% to U.S.$1,377 million, despite a reduction in the headcount due to the disposal of non-core assets and the implementation of a programme to improve labour productivity and reduce costs, owing to the rouble appreciation against the U.S. Dollar and the indexation of rouble- denominated salaries and wages. In 2018, labour costs decreased by 6% to U.S.$1,311 million due to the rouble’s depreciation against the U.S. Dollar and the continuation of a headcount reduction pursuant to the 2018-2020 efficiency and cost optimisation programme. 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 2018 and 2017, for example, the Group generated 95% and 93%, respectively, of its metal sales revenue from sales outside of Russia and CIS 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 the Nkomati Nickel Mine) of those metals in those periods. Revenue from nickel, copper, palladium and platinum represented 28%, 27%, 34% and 5%, respectively, in 2018 and 28%, 29%, 29% and 8%, respectively, in 2017, of the Group’s total metal sales revenue. 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 2017 and 2018, the Rouble experienced depreciation against a number of major currencies, including the U.S. Dollar and Euro, due to a substantial decrease in oil prices, slowing growth and contraction of Russia’s GDP, the imposition of economic sanctions and capital outflows. The volatility of the Rouble slightly decreased against world currencies compared with the period of 2015 to 2016, but remained in the range of 55.85 roubles to 60.75 roubles per U.S.$1.00 in 2017 and from 55.67 roubles to 69.97 roubles per U.S.$1.00 in 2018.

The table below shows the average exchange rate of the rouble against the U.S. dollar for the periods indicated.

66 Year ended 31 December Six months ended 30 June 2018 2017 2016 2019 2018 Average exchange rate (roubles per U.S. dollar) ...... 62.71 58.35 67.03 65.34 59.35

Source: CBR

See “Risk Factors—Fluctuations in currency exchange rates may have an adverse effect on the Group’s business”.

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 African assets

On 17 October 2014, the Group entered into binding agreements to sell its assets in South Africa, comprising its 50% participation interest in the Nkomati Nickel Mine and its 85% stake in Tati Nickel (together, “African assets”) to BCL Investments (“BCL”). The total consideration for the assets amounted to U.S.$337 million subject to certain adjustments under the agreement; however, it was further reduced to approximately U.S.$277 million. Under the terms of the agreements, the buyers would assume all attributable decommissioning rehabilitation obligations related to the assets.

On 2 April 2015, the Group sold its 85% stake in Tati Nickel. 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 U.S.$20 million. The financial result from the disposal includes the negative impact due to a write down of the historical amount of the foreign currency translation reserve representing cumulative exchange differences between the presentation currency—the U.S. dollar and the Botswana Pula.

Finalisation of the sale of the Nkomati Nickel Mine was subject to completion of certain conditions precedent, which were achieved in September 2016. However, BCL failed to meet its obligations according to the agreement and was put into voluntary liquidation and claimed that the conditions precedent for the sale were not achieved in September 2016. Later in December 2018, the Group terminated the share sale agreement as it no longer required the BCL group to purchase the Group’s interest in Nkomati. The Group has filed legal claims against BCL in LCIA (London) and against the Government of Botswana in Botswanan court seeking to recover the damages incurred as a result of BCL’s breach of its obligations.

67 Disposal of Russian assets

On 6 April 2017, the Group sold its interest in a subsidiary which owns real estate for a consideration of U.S.$113 million. Proceeds from disposal of the subsidiary in the amount of U.S.$95 million were recognised in the consolidated statement of cash flows, net of disposed cash and cash equivalents of U.S.$16 million and transaction costs of U.S.$2 million. Gain on disposal in the amount of U.S.$16 million was recognised in the consolidated income statement.

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

In December 2015, the Company entered into an agreement for the sale of up to 13.33% interest in the Bystrinsky project to Highland Fund, a consortium of Chinese investors, for a total consideration up to U.S.$100 million. In July 2016, the Group sold a 10.67% share in the Bystrinsky project for U.S.$80 million to Highland Fund. In May 2017, the Group sold a 2.66% share in the Bystrinsky project for U.S.$21 million to Highland Fund. In October 2017, the Group sold a 36.66% share in the Bystrinsky project for U.S.$275 million to a related party. On the date of this Prospectus, the Group owns a 50.01% interest in the Bystrinsky project and remains the operator of the project.

During the year ended 31 December 2016, the Group sold 1,250,075 treasury shares to Crispian Investments Limited, a non-controlling 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.

Recent Developments

On 26 July 2019, the Group entered into a 67-months lease agreement and recognised a lease liability in the amount of RUB 985 million (U.S.$16 million using the rouble/U.S. dollar rate on 26 July 2019).

On 8 August 2019, the Group entered into a new RUB-denominated committed credit line in the total amount of 30 billion roubles (U.S.$461 million using the rouble/U.S. dollar rate at the date of the contract). No amounts were drawn down under this facility at the date of this Prospectus.

On 12 August 2019, the Group extended a U.S. dollar-denominated loan agreement for U.S.$200 million from October 2020 to February 2023.

On 11 September 2019, the Group extended a U.S. dollar-denominated loan agreement for U.S.$175 million from October 2019 to February 2022, U.S.$50 million of which was prepaid on the same date.

On 26 September 2019, the Extraordinary General shareholders’ meeting of the Company declared dividends in respect of the six months ended 30 June 2019 in the amount of 883.93 roubles (U.S.$13.77, using the RUB/U.S.$ rate on 26 September 2019) per ordinary share with the total amount of U.S.$2,179 million.

68 In September 2019, the Company priced rouble-denominated commercial bonds in the total amount of 25 billion roubles (U.S.$388 million, using the rouble/U.S. dollar rate on the pricing date, which was 19 September 2019) maturing in 2024 with a coupon rate of 7.20% per annum. In the same month, the outstanding amount of rouble-denominated commercial bonds was swapped into U.S.$390 million in accordance with cross-currency interest rate swap contracts bearing a fixed interest rate.

On 14 October 2019, the Company disbursed 62.5 billion roubles in aggregate from available committed credit lines (U.S.$973 million using the rouble/U.S. dollar rate on 14 October 2019), of which 17.5 billion roubles is short-term debt and 45 billion roubles is long-term debt maturing from 2021 to 2024 (with a right to make an early prepayment).

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 94% in the six months ended 30 June 2019 and 2018, and 94%, 92% and 93% in the years ended 31 December 2018, 2017, 2016 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, nickel concentrate and others) 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 comprise cost of sales of transportation and energy and utilities services.

Selling and distribution expenses

Selling and distribution expenses include export customs duties, marketing and transportation expenses, staff and other costs. In September 2016, as part of the Russian Federation WTO accession package, PGM customs duties were eliminated.

69 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 operating income/(expenses), net

Other operating income/(expenses), net include net income earned during the pre-commissioning stage, social expenses, change in allowances, and other expenses.

Finance costs

Finance costs include fair value gain/(loss) on the cross-currency interest rate swap, changes in fair value of non-current liabilities, interest expense net of amounts capitalised and unwinding of discount on provisions and other, net.

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, Finland, Switzerland and Cyprus. The Group recently sold most of its 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.

70 Results of Operations for the six months ended 30 June 2019 and 2018

The following table sets forth a summary of the Group’s consolidated financial results for the six months ended 30 June 2019 and 2018.

Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Revenue Metal sales ...... 5,940 5,473 9 Other sales...... 352 361 (2) Total revenue...... 6,292 5,834 8 Cost of metal sales ...... (2,181) (2,195) (1) Cost of other sales...... (355) (334) 6 Gross profit...... 3,756 3,305 14 General and administrative expenses...... (443) (461) (4) Selling and distribution expenses...... (55) (35) 57 Impairment of non-financial assets...... (5) (6) (17) Other operating income/(expenses), net...... 18 (80) n/a Operating profit ...... 3,271 2,723 20 Foreign exchange gain/(loss), net ...... 548 (453) n/a Finance costs, net...... (89) (246) (64) Income from investments...... 43 32 34 Profit before tax ...... 3,773 2,056 84 Income tax expense...... (776) (403) 93 Profit for the period...... 2,997 1,653 81 Attributable to: Shareholders of the parent company...... 2,881 1,675 72 Non-controlling interest...... 116 (22) n/a

Revenue

The Group’s consolidated revenue increased by U.S.$458 million, or 8%, to U.S.$6,292 million in the six months ended 30 June 2019 from U.S.$5,834 million in the six months ended 30 June 2018, primarily due to higher revenue from metal sales.

Revenue from metal sales

In the six months ended 30 June 2019, revenue from metal sales increased by U.S.$467 million, or 9%, to U.S.$5,940 million from U.S.$5,473 million in the six months ended 30 June 2018. The increase was driven by output growth of all key metals and a higher palladium price.

71 The table below shows a breakdown of revenue from metal sales for the periods indicated.

Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Nickel...... 1,499 1,494 — including semi-products...... 100 86 16 Copper...... 1,385 1,405 (1) including semi-products...... 108 69 57 Palladium ...... 2,374 1,950 22 including semi-products...... 101 38 3x Platinum...... 330 335 (1) including semi-products...... 15 9 67 Other metals...... 352 289 22 Total ...... 5,940 5,473 9

In the six months ended 30 June 2019, revenue from sales of nickel, copper, palladium and platinum increased by U.S.$404 million, or 8%, to U.S.$5,588 million from U.S.$5,184 million in the six months ended 30 June 2018.

Revenue from sales of other metals increased by U.S.$63 million, or 22%, to U.S.$352 million from U.S.$289 million in the six months ended 30 June 2018.

The table below shows the average realised sales price of refined nickel, copper, palladium and platinum produced by the Group in the periods indicated.

Six months ended 30 June 2019 2018 Change (%) Nickel (U.S.$ per tonne) ...... 12,781 14,141 (10) Copper (U.S.$ per tonne)...... 6,221 6,989 (11) Palladium (U.S.$ per troy ounce)...... 1,406 1,032 36 Platinum (U.S.$ per troy ounce) ...... 829 930 (11)

The table below shows for the periods indicated the volume of sales of nickel, copper, palladium and platinum of Group.

Six months ended 30 June 2019 2018 Change (%) Nickel, thousand tonnes(1) ...... 113 101 12 from own Russian feed ...... 108 98 10 from third-party feed...... 2 1 100 in semi-products(3)...... 3 2 50 Copper, thousand tonnes(1), (2)...... 223 201 11 from own Russian feed ...... 205 191 7 in semi-products(3)...... 18 10 80 Palladium, koz(1)...... 1,537 1,528 1 from own Russian feed ...... 1,485 1,505 (1) in semi-products(3)...... 52 23 2x Platinum, koz(1) ...... 390 353 10 from own Russian feed ...... 380 349 9 in semi-products(3)...... 10 4 3x

(1) All information is reported on the 100% basis, excluding sales of metals purchased from third parties and semi-products purchased from Nkomati. 72 (2) Excludes semi-products produced by GRK “Bystrinskoye”. (3) Metal volumes represent metals contained in semi-products.

Nickel

Nickel sales contributed 25% to the Group’s total metal revenue in the six months ended 30 June 2019, down from 27% in the six months ended 30 June 2018. The decrease of 2 p.p. was driven by diverging palladium and nickel price trends as realised nickel price was down, while palladium was up.

In the six months ended 30 June 2019, nickel revenue remained almost unchanged and amounted to U.S.$1,499 million. Lower realised nickel price (U.S.$137 million) was positively offset by higher sales volume (U.S.$142 million).

The average realised price of refined nickel decreased by 10% to U.S.$12,781 per tonne in the six months ended 30 June 2019, as compared to U.S.$14,141 per tonne in the six months ended 30 June 2018.

Sales volume of refined nickel produced from own Russian feed increased by 10% (or 10 thousand tonnes) to 108 thousand tonnes, owing to the increase in production volumes of JSC Kola “GMK”.

Sales volume of nickel produced from third-party feed approximately doubled on a year-on-year basis to 2 thousand tonnes, primarily due to the increase of nickel matte processing supplied by Boliden AB to Norilsk Nickel Harjavalta.

In the six months ended 30 June 2019, sales of nickel in semi-products increased by 16% year-on-year to U.S.$100 million, primarily owing to higher sales volume of semi-products.

Copper

In the six months ended 30 June 2019, copper sales accounted for 23% of the Group’s total metal sales, decreasing by 1% (or U.S.$20 million) year-on-year to U.S.$1,385 million, primarily owing to lower realised price (U.S.$152 million), which was partly offset by higher sales volume (U.S.$132 million).

The average realised price of refined copper decreased by 11% from U.S.$6,989 per tonne in the six months ended 30 June 2018 to U.S.$6,221 per tonne in the six months ended 30 June 2019.

Physical volume of refined copper sales from the Group’s own Russian feed increased by 7% (or 14 thousand tonnes) to 205 thousand tonnes (excluding copper in concentrates produced by GRK “Bystrinskoye”), owing to both processing of Polar Division ore with higher copper grade, as well as less stockpiling of metal in the six months ended 30 June 2019.

Revenue from copper in semi-products in the six months ended 30 June 2019 increased by 57% to U.S.$108 million, primarily owing to higher sales volume of semi-products.

Palladium

In the six months ended 30 June 2019, palladium remained the largest contributor to the Group’s total revenue, accounting for 40% (an increase by 4 p.p. year-on-year). Palladium revenue increased by 22% (or U.S.$424 million) to U.S.$2,374 million due to higher realised price (U.S.$571 million), which was amplified by increased sales volume (U.S.$27 million). An additional U.S.$185 million of revenue was received in the six months ended 30 June 2019 from the resale of metal purchased from third parties (as compared to U.S.$359 million in the six months ended 30 June 2018).

73 The average realised price of refined palladium increased by 36% from U.S.$1,032 per troy ounce in the six months ended 30 June 2018 to U.S.$1,406 per troy ounce in the six months ended 30 June 2019.

Physical volume of refined palladium sales from the Group’s own Russian feed in the six months ended 30 June 2019 slightly decreased by 1% (or 20 thousand troy ounces) to 1,485 thousand troy ounces. The reduction in sales volume was due to the base effect of the six months ended 30 June 2018, when the sale of own metals was higher as it included the metal from stock accumulated in the Group’s Palladium Fund in 2017. This was partly compensated by higher production volume due to release of PGM work-in-progress inventory.

Revenue of palladium in semi-products in the six months ended 30 June 2019 increased by approximately three times to U.S.$101 million from U.S.$38 million in the six months ended 30 June 2018, primarily owing to higher sales volume of semi-products.

Platinum

In the six months ended 30 June 2019, platinum sales slightly decreased by 1% (or U.S.$5 million) to U.S.$330 million and remained at 6% of the Group’s total metal revenue. The decline of realised platinum price (U.S.$36 million) was almost completely offset by higher sales volume (U.S.$31 million).

Physical volume of refined platinum sales from the Group’s own Russian feed in the six months ended 30 June 2019 increased by 9% (or 31 thousand troy ounces) to 380 thousand troy ounces, primarily due to release of PGM work-in-progress inventory.

Revenue of platinum in semi-products in the six months ended 30 June 2019 increased approximately two times to U.S.$15 million from U.S.$9 million year-on-year, primarily due to higher sales volume of semi-products.

Other metals

In the six months ended 30 June 2019, revenue from other metals increased by 22% (or U.S.$63 million) to U.S.$352 million, primarily owing to higher revenue from rhodium (up by 78%) and gold (up by 28%).

Other sales

In the six months ended 30 June 2019, other sales decreased by 2% to U.S.$352 million. The negative impact owing to the Russian rouble depreciation was partly offset in real terms, primarily due to the increase of oil products sales.

Cost of Metal Sales

Cost of metal sales decreased in the six months ended 30 June 2019 by 1%, or U.S.$14 million, to U.S.$2,181 million from U.S.$2,195 million in the six months ended 30 June 2018. The main factors contributing to it were as follows:

 a decrease in cash operating costs by 5% (or U.S.$89 million);

 an increase in depreciation and amortisation by 5% (or U.S.$15 million); and

 a change in metal inventories year-on-year leading to cost of metal sales increase by U.S.$60 million.

The table below shows a breakdown of cost of metal sales for the periods indicated.

74 Six months ended 30 June 2019 Six months ended 30 June 2018 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Total cash operating costs.. 1,773 84 1,862 85 Depreciation and amortisation ...... 340 16 325 15 Total production costs ..... 2,113 100 2,187 100 Decrease in metal inventories ...... 68 8 Cost of metal sales...... 2,181 2,195

Cash operating costs

In the six months ended 30 June 2019, cash operating costs of the Group decreased by U.S.$89 million, or 5%, to U.S.$1,773 million in the six months ended 30 June 2019 from U.S.$1,862 million in the six months ended 30 June 2018. The positive effect of the Russian rouble depreciation (U.S.$148 million) was partly offset by inflationary growth of cash operating costs (U.S.$56 million).

In the six months ended 30 June 2019, 92% of the Group’s total cash operating costs were attributable to the operations of its Russian entities, as compared with 94% in the six months ended 30 June 2018.

The table below shows a breakdown of cash operating costs for the periods indicated.

Six months ended 30 June 2019 2018 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Labour...... 615 35 660 35 Materials and supplies...... 275 16 325 17 Purchases of raw materials and semi-products ...... 246 14 259 14 Purchases of refined metals for resale...... 192 11 196 11 Third-party services ...... 96 5 91 5 Mineral extraction tax and other levies...... 110 6 110 6 Electricity and heat energy...... 77 4 74 4 Fuel ...... 48 3 45 2 Transportation expenses...... 38 2 32 2 Sundry costs...... 76 4 70 4 Total cash operating costs ...... 1,773 100 1,862 100

Labour

In the six months ended 30 June 2019, labour costs comprised 35% of total cash operating costs, as compared with 35% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, labour costs decreased by U.S.$45 million, or 7%, to U.S.$615 million from U.S.$660 million in the six months ended 30 June 2018 driven by the following:

 U.S.$64 million – cost decrease owing to the Russian rouble depreciation against U.S. dollar; and

75  U.S.$19 million – an increase in real terms primarily driven by the indexation of rouble- denominated salaries and wages in line with the terms of collective bargaining agreement.

Purchases of raw materials and semi-products

In the six months ended 30 June 2019, purchases of raw materials and semi-products comprised 14% of total cash operating costs, as compared with 14% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, purchases of raw materials and semi-products decreased by 5% (or U.S.$13 million) to U.S.$246 million, driven by the following:

 U.S.$19 million – cost decrease owing to the Russian rouble depreciation against U.S. dollar;

 U.S.$21 million – cost decrease owing to lower volumes of Rostec concentrate processing; and

 U.S.$19 million – cost increase owing to higher volumes of purchased semi-products from third parties for processing at Norilsk Nickel Harjavalta.

Purchases of refined metals for resale

In the six months ended 30 June 2019, purchases of refined metals for resale comprised 11% of total cash operating costs, as compared with 11% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, expenses related to purchase of refined metals decreased by 2% year-on-year to U.S.$192 million.

Materials and supplies

In the six months ended 30 June 2019, materials and supplies comprised 16% of total cash operating costs, as compared with 17% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, materials and supplies expenses decreased by 15% (or U.S.$50 million) to U.S.$275 million, driven by the following factors:

 U.S.$28 million – the positive effect of the Russian rouble depreciation;

 U.S.$12 million – inflationary growth of materials and supplies expenses; and

 U.S.$34 million – a decrease in consumption primarily owing to reduction in repairs.

Third-party services

In the six months ended 30 June 2019, third-party services comprised 5% of total cash operating costs, as compared with 5% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, cost of third-party services increased by 5% (or U.S.$5 million) to U.S.$96 million, mainly driven by:

 U.S.$8 million – the positive effect of the Russian rouble depreciation; and

 U.S.$13 million – costs increase primarily due to higher PGM refining costs due to release of PGM work-in-progress inventory.

76 Mineral extraction tax and other levies

In the six months ended 30 June 2019, mineral extraction tax (“MET”) and other levies comprised 6% of total cash operating costs, as compared with 6% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, MET and other levies were unchanged and amounted to U.S.$110 million. The positive effect of Russian rouble depreciation was offset by higher MET payments driven by increased volumes of ore mined at the Polar Division.

Electricity and heat energy

In the six months ended 30 June 2019, electricity and heat energy comprised 4% of total cash operating costs, as compared with 4% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, electricity and heat energy expenses increased by U.S.$3 million to U.S.$77 million. The positive effect of the Russian rouble depreciation was offset by energy price inflation.

Fuel

In the six months ended 30 June 2019, fuel comprised 3% of total cash operating costs, as compared with 2% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, fuel expenses increased by 7% (or U.S.$3 million) to U.S.$48 million, driven by the following:

 U.S.$4 million – the positive effect of the Russian rouble depreciation; and

 U.S.$7 million – primarily higher oil price.

Transportation expenses

In the six months ended 30 June 2019, transportation expenses comprised 2% of total cash operating costs, as compared with 2% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, transportation expenses increased by 19% (or U.S.$6 million) to U.S.$38 million, driven by the following:

 U.S.$2 million – the positive effect of the Russian rouble depreciation; and

 U.S.$8 million – costs increase driven primarily by higher volumes of third-party transportation services in Norilsk industrial region.

Sundry costs

In the six months ended 30 June 2019, sundry costs comprised 4% of total cash operating costs, as compared with 4% in the six months ended 30 June 2018.

In the six months ended 30 June 2019, sundry costs increased by 9% (or U.S.$6 million) to U.S.$76 million.

Depreciation and amortisation

In the six months ended 30 June 2019, depreciation and amortisation expenses increased by 5% (or U.S.$15 million) to U.S.$340 million.

77 The positive effect of the Russian rouble depreciation amounted to U.S.$28 million.

Depreciation charges increased by U.S.$43 million, mainly due to transfers from construction in progress to production assets.

Decrease in metal inventories

In the six months ended 30 June 2019, the comparative effect of change in metal inventory amounted to U.S.$60 million resulting in an increase of cost of metal sales, primarily driven by the comparative effect of change in finished goods inventories.

Cost of other sales

In the six months ended 30 June 2019, cost of other sales increased by U.S.$21 million, or 6%, to U.S.$355 million from U.S.$334 million in the six months ended 30 June 2018, primarily due to higher sales of oil products, which was partly offset by the positive effect of rouble depreciation.

Selling and distribution expenses

In the six months ended 30 June 2019, selling and distribution expenses increased by U.S.$20 million to U.S.$55 million primarily due to the increase of marketing expenses (U.S.$13 million).

The table below shows a breakdown of selling and distribution expenses for the periods indicated.

Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Transportation expenses...... 22 18 22 Marketing expenses ...... 22 9 2x Staff costs...... 7 6 17 Other ...... 4 2 100 Total ...... 55 35 57

General and administrative expenses

In the six months ended 30 June 2019, general and administrative expenses decreased by U.S.$18 million, or 4%, to U.S.$443 million from U.S.$461 million in the six months ended 30 June 2018. The positive effect of the Russian rouble depreciation amounted to U.S.$38 million. Changes of the general and administrative expenses in real terms were primarily driven by the following:

 U.S.$20 million – an increase in staff costs mainly due to salary indexation, roll out of industrial automatisation and new IT systems; and

 U.S.$11 million – a reduction of property tax owing to changes in tax legislation in 2019.

The table below shows a breakdown of general and administrative expenses for the periods indicated.

Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Staff costs...... 301 306 (2) Third-party services ...... 41 45 (9) Taxes other than mineral extraction tax and income tax ...... 38 51 (25)

78 Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Depreciation and amortisation ...... 33 20 65 Transportation expenses...... 8 6 33 Rent expenses...... 1 11 (91) Other ...... 21 22 (5) Total ...... 443 461 (4)

Impairment of non-financial assets

In the six months ended 30 June 2019, impairment of non-financial assets amounted to U.S.$5 million, as compared with U.S.$6 million in the six months ended 30 June 2018.

Other operating income/(expenses), net

In the six months ended 30 June 2019, other net operating income/(expenses) increased by U.S.$98 million to U.S.$18 million, driven by the following factors:

 net income generated by GRK “Bystrinskoye” from products sale during the hot commissioning stage (U.S.$136 million); and

 an increase of social expenses (U.S.$14 million).

Foreign exchange gain/(loss), net

In the six months ended 30 June 2019, foreign exchange gain of U.S.$548 million was driven by the Russian rouble appreciation against the U.S. dollar as at 30 June 2019 as compared with 31 December 2018. In the six months ended 30 June 2018, foreign exchange loss was driven by the Russian rouble depreciation against the U.S. dollar as at 30 June 2018 as compared with 31 December 2017.

Finance costs

In the six months ended 30 June 2019, finance costs decreased by U.S.$157 million, or 64%, to U.S.$89 million from U.S.$246 million in the six months ended 30 June 2018. This was primarily related to a change in the fair value of cross-currency interest rate swaps in the reporting period due to stronger rouble against the U.S. dollar as of 30 June 2019, as compared to the exchange rate as of 31 December 2018, and also due to reduction in the amount of interest expense, net of amounts capitalised by 15%.

In the six months ended 30 June 2019, the average cost of the Group’s debt portfolio remained unchanged despite amendments made to a number of bilateral loans for a total amount of U.S.$637 million aimed at extending duration of the debt portfolio.

The table below shows a breakdown of finance costs for the periods indicated.

79 Six months ended 30 June 2019 2018 Change (%) (Amounts in millions of U.S. dollars) Interest expense net of amounts capitalised...... 162 191 (15) Unwinding of discount on provisions ...... 42 52 (19) Fair value gain on the cross-currency interest rate swap ...... (117) — (100) Other, net ...... 2 3 (33) Total ...... 89 246 (64)

Income tax

In the six months ended 30 June 2019, income tax expense increased by U.S.$373 million, or 93%, to U.S.$776 million, as compared with U.S.$403 million in the six months ended 30 June 2018. The increase in income tax expense was primarily due to the increase of taxable profit.

The Group’s effective tax rate in the six months ended 30 June 2019 was 20.6%, as compared with 19.6% in the six months ended 30 June 2018. The Group’s effective tax rate in the six months ended 30 June 2019 was above the Russian statutory tax rate of 20%, which was primarily driven by non- deductible social expenses.

80 Results of Operations for the Years ended 31 December 2018 and 2017

The following table sets forth a summary of the Group’s consolidated financial results for the years ended 31 December 2018 and 2017.

Year ended 31 December 2018 2017 Change (%) (Amounts in millions of U.S. dollars) Revenue Metal sales ...... 10,962 8,415 30 Other sales...... 708 731 (3) Total revenue...... 11,670 9,146 28 Cost of metal sales ...... (4,536) (3,968) 14 Cost of other sales...... (622) (632) (2) Gross profit...... 6,512 4,546 43 General and administrative expenses...... (859) (759) 13 Selling and distribution expenses...... (92) (75) 23 Impairment of non-financial assets...... (50) (227) (78) Other operating income and expenses ...... (95) (362) (74) Operating profit ...... 5,416 3,123 73 Foreign exchange (loss)/gain, net ...... (1,029) 159 n/a Finance costs...... (580) (535) 8 Gain from disposal of subsidiaries...... — 20 (100) Income from investments...... 95 77 23 Profit before tax ...... 3,902 2,844 37 Income tax expense...... (843) (721) 17 Profit for the year...... 3,059 2,123 44 Shareholders of the parent company...... 3,085 2,129 45 Non-controlling interest...... (26) (6) 333

Revenue

In 2018, total revenue increased by U.S.$2,524 million, or 28%, to U.S.$11,670 million from U.S.$9,146 million in 2017, primarily due to higher revenue from metal sales.

Revenue from metal sales

In 2018, revenue from metal sales increased by U.S.$2,547 million, or 30%, to U.S.$10,962 million from U.S.$8,415 million in 2017 on the back of improved metal prices, higher copper output and sale of palladium from earlier accumulated stocks.

The table below shows a breakdown of revenue from metal sales for the periods indicated.

81 Year ended 31 December 2018 2017(1) Change (%) (Amounts in millions of U.S. dollars) Nickel...... 3,013 2,416 25 including semi-products...... 175 113 55 Copper...... 2,977 2,422 23 including semi-products...... 144 141 2 Palladium ...... 3,674 2,434 51 including semi-products...... 98 87 13 Platinum...... 596 654 (9) including semi-products...... 20 31 (35) Other metals...... 702 489 44 Total ...... 10,962 8,415 30

(1) In 2018, the Group changed the presentation of certain information in its income statement relating to revenue from metal sales, including certain products, and reclassified comparative amounts for the year ended 31 December 2017 to conform to the presentation of the financial information for the year ended 31 December 2018. The information provided in the table above is presented to reflect the reclassification and is derived from the 2018 Consolidated Financial Statements. See Note 6 to the 2018 Consolidated Financial Statements.

In 2018, revenue from sales of nickel, copper, palladium and platinum increased by U.S.$2,334 million, or 29%, to U.S.$10,260 million from U.S.$7,926 million in 2017.

Revenue from sales of other metals increased by U.S.$213 million, or 44%, to U.S.$702 million from U.S.$489 million in 2017.

The table below shows the average realised sales price of refined nickel, copper, palladium and platinum produced by the Group in the periods indicated.

Year ended 31 December 2018 2017 Change (%)

Nickel (U.S.$ per tonne) ...... 13,531 10,704 26 Copper (U.S.$ per tonne)...... 6,566 6,202 6 Palladium (U.S.$ per troy ounce)...... 1,025 858 19 Platinum (U.S.$ per troy ounce) ...... 877 949 (8)

The table below shows for the periods indicated the volume of sales of nickel, copper, palladium and platinum of Group.

82 Year ended 31 December Change 2018 2017 (%) Nickel, thousand tonnes(1) ...... 217 216 — from own Russian feed ...... 208 206 1 from third-party feed...... 2 9 (78) in semi-products(3)...... 7 1 7x Copper, thousand tonnes(1), (2)...... 455 386 18 from own Russian feed ...... 431 365 18 from third-party feed...... — 3 (100) in semi-products(3)...... 24 18 33 Palladium, koz(1)...... 2,974 2,450 21 from own Russian feed ...... 2,913 2,353 24 from third-party feed...... — 52 (100) in semi-products(3)...... 61 45 36 Platinum, koz(1) ...... 668 667 — from own Russian feed ...... 657 639 3 from third-party feed...... — 18 (100) in semi-products(3)...... 11 10 10

(1) All information is reported on the 100% basis, excluding sales of metals purchased from third parties and semi- products purchased from Nkomati. (2) Excludes semi-products produced by GRK “Bystrinskoye”. (3) Metal volumes represent metals contained in semi-products.

Nickel

Nickel sales contributed 27% to the Group’s total metal revenue in 2018, as compared to 29% in 2017. The decrease by 2 p.p. was driven by an increase of copper and palladium sales volumes, which were partly offset by nickel price outperforming other metals’ prices.

In 2018, nickel revenue increased by 25% year-on-year (or U.S.$597 million) to U.S.$3,013 million, primarily due to higher realised metal price.

The average realised price of refined nickel produced from own feed increased by 26% to U.S.$13,531 per tonne in 2018 (as compared to U.S.$10,704 per tonne in 2017).

Sales volume of refined nickel produced from own Russian feed increased by 1% (or 2 thousand tonnes) to 208 thousand tonnes.

Sales volume of nickel produced from third-party feed decreased by 78% year-on-year to 2 thousand tonnes as Norilsk Nickel Harjavalta reduced the processing volumes of third-party feed.

In 2018, sales of nickel in semi-products increased by 55% year-on-year to U.S.$175 million, primarily owing to higher sales volume of semi-products.

Copper

In 2018, copper sales accounted for 27% of the Group’s total metal sales, increasing by 23% (or U.S.$555 million) year-on-year to U.S.$2,977 million, primarily owing to higher sales volume (U.S.$435 million), as well as higher realised price (U.S.$120 million).

The average realised price of refined copper increased by 6% from U.S.$6,202 per tonne in 2017 to U.S.$6,566 per tonne in 2018.

83 Physical volume of refined copper sales from the Group’s own Russian feed increased by 18% (or 66 thousand tonnes) to 431 thousand tonnes (excluding copper in concentrates produced by GRK “Bystrinskoye”), owing to higher copper production from concentrate purchased from Rostec.

Sales of refined copper produced from third-party feed were completely ceased (a reduction of 3 thousand tonnes).

Revenue from copper in semi-products in 2018 slightly increased by 2% to U.S.$144 million.

Palladium

In 2018, palladium remained the largest contributor to the Group’s total revenue, accounting for 34% (an increase by 5 p.p. year-on-year). Palladium revenue increased by 51% (or U.S.$1,240 million) to U.S.$3,674 million. The positive impact of higher sales volume (U.S.$526 million) was amplified by the increased realised price (U.S.$406 million).

The average realised price of refined palladium produced from own feed increased by 19% from U.S.$858 per troy ounce in 2017 to U.S.$1,025 per troy ounce in 2018.

Physical volume of refined palladium sales from the Group’s own Russian feed in 2018 increased by 24% (or 560 thousand troy ounces) to 2,913 thousand troy ounces. The increase in sales volume was driven by the sale of own metals from stock accumulated in the Group’s Palladium Fund in 2017.

Refined palladium sales from third-party feed were completely ceased as processing of low-margin third-party feed was terminated in 2018.

Revenue of palladium in semi-products in 2018 increased by 13% to U.S.$98 million.

Additional U.S.$593 million to the palladium revenue in 2018 was contributed by the resale of metal purchased from third parties (as compared to U.S.$285 million in 2017).

Platinum

In 2018, platinum sales (5% of the Group’s total metal revenue) decreased by 9% (or U.S.$58 million) to U.S.$596 million following the decline of realised platinum price (U.S.$51 million), which was exacerbated by lower sales volume (U.S.$7 million).

Physical volume of refined platinum sales from the Group’s own Russian feed in 2018 increased by 3% (or 18 thousand troy ounces) to 657 thousand troy ounces.

Revenue of platinum in semi-products in 2018 decreased by 35% to U.S.$20 million, primarily due to the decrease of sales volume of platinum in purchased semi-products.

Other metals

In 2018, revenue from other metals increased by 44% (U.S.$213 million) to U.S.$702 million, primarily owing to higher revenue from cobalt (up by 91%), rhodium (up by 84%) and gold (up by 11%).

Other sales

In 2018, other sales decreased by 3% to U.S.$708 million primarily owing to the Russian rouble depreciation (U.S.$47 million). The revenue increase in real terms was primarily driven by the increase in fuel and gas prices and higher revenue from services provided by transport subsidiaries of the Group to third parties.

84 Cost of Metal Sales

Cost of metal sales increased in 2018 by U.S.$568 million, or 14%, to U.S.$4,536 million from U.S.$3,968 million in 2017. The main factors contributing to it were:

 a decrease in cash operating costs by 2% (or U.S.$81 million);  an increase in depreciation charges by 4% (or U.S.$23 million); and  a change in metal inventories year-on-year, primarily due to sales of palladium accumulated in 2017 (cost of metal sales increased by U.S.$626 million).

The table below shows a breakdown of cost of metal sales for the periods indicated.

Year ended Year ended 31 December 2018 31 December 2017 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Total cash operating costs...... 3,774 85 3,855 86 Depreciation and amortisation ... 653 15 630 14 Total production costs ...... 4,427 100 4,485 100 Decrease/(increase) in metal inventories ...... 109 (517) Cost of metal sales...... 4,536 3,968

Cash operating costs

In 2018, total cash operating costs decreased by 2% (or U.S.$81 million) to U.S.$3,774 million.

The positive effect of the Russian rouble depreciation (U.S.$200 million) was partly offset by the inflationary growth of cash operating costs (U.S.$104 million).

Cost increase driven by the processing of Rostec concentrate (U.S.$193 million) was partly offset by lower volumes of refined metals purchased for resale (U.S.$100 million) and headcount reduction (U.S.$58 million) as part of the 2018-2020 efficiency and cost optimisation programme.

In 2018, 93% of the Group’s total cash operating costs were attributable to the operations of its Russian entities, as compared with 93% in 2017.

85 The table below shows a breakdown of cash operating costs for the periods indicated.

Year ended Year ended 31 December 2018 31 December 2017(1) Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Labour...... 1,311 35 1,392 36 Materials and supplies...... 727 19 732 19 Purchases of raw materials and semi- products ...... 436 12 297 8 Purchases of refined metals for resale...... 430 11 530 14 Mineral extraction tax and other levies...... 212 6 221 6 Third-party services ...... 200 5 242 6 Electricity and heat energy...... 143 4 143 4 Fuel ...... 87 2 81 2 Transportation expenses...... 70 2 65 2 Sundry costs...... 158 4 152 4 Total cash operating costs ...... 3,774 100 3,855 100

(1) In 2018, the Group changed the presentation of certain information in its income statement relating to cost of metal sales, including certain cash operating costs, and reclassified comparative amounts for the year ended 31 December 2017 to conform to the presentation of the financial information for the year ended 31 December 2018. The information provided in the table above is presented to reflect the reclassification and is derived from the 2018 Consolidated Financial Statements. See Note 7 to the 2018 Consolidated Financial Statements.

Labour

In 2018, labour costs decreased by 6% (or U.S.$81 million) to U.S.$1,311 million amounting to 35% of the Group’s total cash operating costs, driven by the following:

 U.S.$89 million – cost decrease owing to the Russian rouble depreciation against the U.S. dollar;

 U.S.$58 million – cost decrease following the headcount reduction as part of the 2018-2020 efficiency and cost optimisation programme; and

 U.S.$66 million – an increase in real terms, primarily driven by the indexation of rouble- denominated salaries and wages in line with collective bargaining agreement.

Purchases of raw materials and semi-products

In 2018, purchases of raw materials and semi-products increased by 47% (or U.S.$139 million) to U.S.$436 million, driven by the following:

 U.S.$193 million – cost increase owing to the processing of copper concentrate purchased from Rostec;

 U.S.$24 million – cost decrease owing to lower volumes of semi-products purchased from Nkomati; and

 U.S.$23 million – cost reduction owing to lower volumes of purchased semi-products from third parties for processing at Norilsk Nickel Harjavalta.

86 Purchases of metals for resale

In 2018, expenses related to purchase of metals for resale decreased by 19% (or U.S.$100 million) to U.S.$430 million, owing to lower metal volumes acquired by the Group’s Palladium Fund.

Materials and supplies

In 2018, materials and supplies expenses decreased by 1% (or U.S.$5 million) to U.S.$727 million, driven by the following factors:

 U.S.$48 million – cost decrease due to the positive effect of the Russian rouble depreciation;

 U.S.$32 million – an inflationary growth in materials and supplies expenses; and

 U.S.$14 million – an increase in consumption of process materials that was partly offset by a reduction in repairs.

Third-party services

In 2018, cost of third-party services decreased by 17% (or U.S.$42 million) to U.S.$200 million, mainly driven by:

 U.S.$15 million – the positive effect of the Russian rouble depreciation; and

 U.S.$27 million – costs decrease primarily due to lower repairs and outsourced concentrates recovery.

Mineral extraction tax and other levies

In 2018, mineral extraction tax and other levies decreased by 4% (or U.S.$9 million) to U.S.$212 million, driven by the depreciation of the Russian rouble.

Electricity and heat energy

In 2018, electricity and heat energy expenses were flat year-on-year and amounted to U.S.$143 million. The positive effect of the Russian rouble depreciation was partly offset by energy price inflation.

Fuel

In 2018, fuel expenses increased by 7% (or U.S.$6 million) to U.S.$87 million, driven by the following:

 U.S.$5 million – cost decrease due to the positive effect of the Russian rouble depreciation; and

 U.S.$11 million – higher oil prices.

Transportation expenses

In 2018, transportation expenses increased by 8% (or U.S.$5 million) to U.S.$70 million, driven by the following:

 U.S.$4 million – cost decrease due to the positive effect of the Russian rouble depreciation; and

87  U.S.$7 million – costs increase driven by outsourcing of JSC Kola “GMK” transportation activities and increase in metal production volumes.

Sundry costs

In 2018, sundry costs increased by 4% (or U.S.$6 million) to U.S.$158 million.

Depreciation and amortisation

In 2018, depreciation and amortisation expenses increased by 4% (or U.S.$23 million) to U.S.$653 million.

The positive effect of the Russian rouble depreciation amounted to U.S.$37 million.

Depreciation charges increased by U.S.$60 million, mainly due to transfers from construction in progress to production assets at the Group’s operating subsidiaries in Russia and completion of downstream reconfiguration in the second half of 2017.

Decrease/(increase) in metal inventories

In 2018, the comparative effect of change in metal inventory amounted to U.S.$626 million, resulting in an increase of cost of metal sales, driven by the following:

 U.S.$510 million – cost increase due to the comparative effect of change in finished goods inventories, owing primarily to the sale of palladium stock accumulated in 2017; and

 U.S.$116 million – cost increase as a result of the comparative effect of slower growth of work-in-progress inventory relative to the prior year that resulted in cost increase.

Cost of other sales

In 2018, cost of other sales decreased by U.S.$10 million to U.S.$622 million.

The Russian rouble depreciation contributed to the reduction of the cost of other sales by U.S.$41 million.

Cost of other sales increased in real terms by U.S.$31 million primarily due to inflation, higher volumes of services provided by the Group’s transportation subsidiaries, indexation of rouble-denominated salaries and wages and growth of other services.

Selling and distribution expenses

In 2018, selling and distribution expenses increased by 23% (or U.S.$17 million) to U.S.$92 million, primarily due to an increase of marketing expenses (U.S.$17 million), including sponsorship of various sport activities.

88 The table below shows a breakdown of selling and distribution expenses for the periods indicated.

Year ended 31 December 2018 2017(1) Change (%) (Amounts in millions of U.S. dollars) Transportation expenses...... 39 38 3 Marketing expenses ...... 31 14 2x Staff costs...... 14 13 8 Other ...... 8 10 (20) Total ...... 92 75 23

(1) In 2018, the Group changed the presentation of certain information in its income statement relating to selling and distribution expenses, including certain costs, and reclassified comparative amounts for the year ended 31 December 2017 to conform to the presentation of the financial information for the year ended 31 December 2018. The information provided in the table above is presented to reflect the reclassification and is derived from the 2018 Consolidated Financial Statements. See Note 9 to the 2018 Consolidated Financial Statements.

General and administrative expenses

In 2018, general and administrative expenses increased by 13% (or U.S.$100 million) to U.S.$859 million. The positive effect of Russian rouble depreciation amounted to U.S.$50 million. General and administrative expenses increased in real terms, primarily due to the following:

 U.S.$95 million – an increase in staff costs, mainly due to one-off payments related to bonuses paid for the completion of key projects, changes in the Management Board, as well as salary indexation; and

 U.S.$29 million – higher property tax, owing to changes in tax legislation in 2018 and additions of property, plant and equipment on the books of the Polar Division and GRK “Bystrinskoye”.

The table below shows a breakdown of general and administrative expenses for the periods indicated.

Year ended 31 December 2018 2017(1) Change (%) (Amounts in millions of U.S. dollars) Staff costs ...... 541 478 13 Taxes other than mineral extraction Tax and income tax ...... 103 79 30 Third-party services ...... 93 97 (4) Depreciation and amortisation ...... 38 32 19 Rent expenses...... 23 25 (8) Transportation expenses...... 9 8 13 Other ...... 52 40 30 Total ...... 859 759 13

(1) In 2018, the Group changed the presentation of certain information in its income statement relating to general and administrative expenses, including certain costs, and reclassified comparative amounts for the year ended 31 December 2017 to conform to the presentation of the financial information for the year ended 31 December 2018. The information provided in the table above is presented to reflect the reclassification and is derived from the 2018 Consolidated Financial Statements. See Note 8 to the 2018 Consolidated Financial Statements.

89 Impairment of non-financial assets

In 2018, impairment of non-financial assets amounted to U.S.$50 million, as compared with U.S.$227 million in 2017. This was largely due to the impairment in relation to the Nkomati Nickel Mine. For further details, see Note 14 to the 2018 Consolidated Financial Statements.

Other operating income and expenses

In 2018, other net operating expenses decreased by U.S.$267 million to U.S.$95 million, driven by the following factors:

 a decrease of social expenses (U.S.$96 million), primarily owing to the completion of large- scale one-off social projects; and  net income earned by GRK “Bystrinskoye” from products sales during the hot commissioning stage (U.S.$106 million).

Foreign exchange (loss)/gain, net

In 2018, foreign exchange loss of U.S.$1,029 million was driven by the Russian rouble depreciation against the U.S. dollar as at 31 December 2018 as compared with 31 December 2017. In 2017, foreign exchange gain was driven by the Russian rouble appreciation against the U.S. dollar as at 31 December 2017 as compared with 31 December 2016.

Finance costs

An increase in finance costs by 8% year-on-year to U.S.$580 million was mainly driven by changes in fair value of derivative contracts, namely cross-currency interest rate swaps, and non-current liabilities. Interest expense on borrowings (net of amounts capitalised) marginally decreased.

The Group managed to maintain the average cost of debt at the prior-year level despite an increase of base interest rates (LIBOR) in the reporting period, as the result of a number of debt optimisation initiatives, including:

 refinancing of some relatively expensive bilateral credit lines with the proceeds of 5-year U.S.$2.5 billion syndicated term loan secured by the Company at the end of 2017 at an interest rate of LIBOR 1M+1.50% per annum;  decrease in the effective interest rate on a number of existing credit lines totalling U.S.$755 million; and  early termination of relatively expensive GRK “Bystrinskoye” Project Finance Loan in August 2018.

The table below shows a breakdown of finance costs for the periods indicated.

90 Year ended 31 December 2018 2017 Change (%) (Amounts in millions of U.S. dollars) Interest expense on borrowings net of amounts capitalised ...... 384 386 (1) Unwinding of discount on provisions and payables ...... 100 133 (25) Changes in fair value of cross- currency interest rate swap ...... 51 — 100 Changes in fair value of non-current liabilities ...... 46 — 100 Other, net ...... (1) 16 n/a Total ...... 580 535 8

Income tax

In 2018, income tax expense increased by 17% to U.S.$843 million, driven mostly by the increase of taxable profit, partly offset by the Russian rouble depreciation against the U.S. dollar in 2018.

The effective income tax rate in 2018 of 21.6% was above the Russian statutory tax rate of 20%, which was primarily driven by non-deductible social expenses.

91 Results of Operations for the Years ended 31 December 2017 and 2016

The following table sets forth a summary of the Group’s consolidated financial results for the years ended 31 December 2017 and 2016.

Year ended 31 December 2017 2016 Change (%) (Amounts in millions of U.S. dollars) Revenue...... Metal sales ...... 8,415 7,646 10 Other sales...... 731 613 19 Total revenue...... 9,146 8,259 11 Cost of metal sales ...... (3,968) (3,633) 9 Cost of other sales...... (632) (508) 24 Gross profit...... 4,546 4,118 10 General and administrative expenses (759) (581) 31 Selling and distribution expenses.... (75) (111) (32) Impairment of non-financial assets. (227) (61) 4x Other net operating expenses ...... (362) (84) 4x Operating profit ...... 3,123 3,281 (5) Foreign exchange gain, net ...... 159 491 (68) Finance costs...... (535) (453) 18 Impairment of available for sale investments ...... — (153) (100) Gain/(loss) from disposal of subsidiaries and assets classified as held for sale ...... 20 (4) n/a Income from investments, net...... 77 114 (32) Profit before tax ...... 2,844 3,276 (13) Income tax expense...... (721) (745) (3) Profit for the year...... 2,123 2,531 (16) Shareholders of the parent company...... 2,129 2,536 (16) Non-controlling interest...... (6) (5) 20

Revenue

In 2017, total revenue increased by U.S.$887 million, or 11%, to U.S.$9,146 million from U.S.$8,259 million in 2016, primarily due to higher revenue from metal sales.

Revenue from metal sales

In 2017, revenue from metal sales increased by U.S.$769 million, or 10%, to U.S.$8,415 million from U.S.$7,646 million in 2016 on the back of higher realised metal prices.

92 The table below shows a breakdown of revenue from metal sales for the periods indicated.

Year ended 31 December 2017 2016 Change (%) (Amounts in millions of U.S. dollars) Nickel...... 2,304 2,625 (12) Copper...... 2,281 1,839 24 Palladium ...... 2,346 1,888 24 Platinum...... 623 654 (5) Semi-products ...... 424 216 2x Other metals...... 437 424 3 Total ...... 8,415 7,646 10

In 2017, revenue from sales of nickel, copper, palladium and platinum increased by U.S.$548 million, or 8%, to U.S.$7,554 million from U.S.$7,006 million in 2016.

Revenue from sales of semi-products increased by U.S.$208 million to U.S.$424 million from U.S.$216 million in 2016.

Revenue from sales of other metals increased by U.S.$13 million, or 3%, to U.S.$437 million from U.S.$424 million in 2016.

The table below shows the average realised sales price of refined nickel, copper, palladium and platinum produced by the Group in the periods indicated.

Year ended 31 December 2017 2016 Change (%) Nickel (U.S.$ per tonne) 10,704 9,701 10 Copper (U.S.$ per tonne) 6,202 4,911 26 Palladium (U.S.$ per troy ounce) 858 614 40 Platinum (U.S.$ per troy ounce) 949 977 (3)

The table below shows for the periods indicated the volume of sales of nickel, copper, palladium and platinum of the Group.

93 Year ended 31 December Change 2017 2016 (%) Nickel, thousand tonnes(1) ...... 215 271 (21) from own Russian feed ...... 206 229 (10) from third-party feed...... 9 42 (79) Copper, thousand tonnes(1) ...... 368 374 (2) from own Russian feed ...... 365 369 (1) from third-party feed...... 3 5 (40) Palladium, koz(1)...... 2,405 2,779 (13) from own Russian feed ...... 2,353 2,758 (15) from third-party feed...... 52 21 2x Platinum, koz(1) ...... 657 669 (2) from own Russian feed ...... 639 661 (3) from third-party feed...... 18 8 2x Semi-products, nickel, thousand tonnes(1)...... 17 13 31 Semi-products, copper, thousand tonnes(1)...... 28 15 87 Semi-products, palladium, koz(1)...... 138 115 20 Semi-products, platinum, koz(1) ...... 48 43 12

(1) All information is reported on the 100% basis, excluding sales of refined metals purchased from third parties. (2) Metal volumes represent metals contained in semi-products.

Nickel

Nickel sales accounted for 27% of the Group’s total metal revenue in 2017, down from 34% in 2016. The decrease by 7 p.p. was driven by the reduction of sales volumes following a decrease in metal production from third-party feed and stronger performance of palladium and copper relative to nickel price.

In 2017, nickel revenue decreased by 12% (or U.S.$321 million) to U.S.$2,304 million, primarily due to lower sales volumes (U.S.$593 million) owing to the decrease of nickel production from third-party feed and the higher base effect as temporary metal stock was sold in 2016, which was partly offset positively by higher nickel price (U.S.$267 million).

Additional U.S.$5 million to nickel revenue in 2017 was contributed by the re-sale of purchased metal to fulfil the Group’s contractual obligations.

The average realised nickel price increased by 10% to U.S.$10,704 per tonne in 2017 from U.S.$9,701 per tonne in 2016.

Sales volume of refined nickel produced by the Group from its own Russian feed decreased by 10% (or 23 thousand tonnes) to 206 thousand tonnes. The decrease was primarily driven by the sale of metal from a temporary stock in 2016.

Sales volume of nickel produced from third-party feed decreased by 79% in 2017 to 9 thousand tonnes as Norilsk Nickel Harjavalta started the processing of the Group’s own Russian feed.

Copper

In 2017, copper sales accounted for 27% of the Group’s total metal sales, increasing by 24% (or U.S.$442 million) to U.S.$2,281 million, primarily owing to higher realised copper price (U.S.$483 million) and increased sales volume (U.S.$41 million).

94 The average realised copper price increased by 26% from U.S.$4,911 per tonne in 2016 to U.S.$6,202 per tonne in 2017.

The physical volume of refined copper sales from the Group’s own Russian feed decreased by 1% (or 4 thousand tonnes) to 365 thousand tonnes. The decrease owing to the higher base effect as copper from temporary metal stock was sold in 2016 was partly positively offset by the copper sales produced from concentrate purchased from Rostec.

The volume of copper sales from third-party feed decreased by 2 thousand tonnes to 3 thousand tonnes in 2017.

Palladium

In 2017, palladium became the largest contributor to the Group’s revenue, accounting for 28% of the Group’s total metal revenue (up by 3 p.p.). The palladium revenue increased by 24% (or U.S.$458 million) to U.S.$2,346 million. The positive impact of higher realised price (U.S.$681 million) was partly negatively offset by the reduction of sales volume (U.S.$324 million) mainly owing to the higher base effect as temporary metal stock was sold in 2016 and stock accumulation in 2017 in the Group’s Palladium Fund.

The average realised price of refined palladium increased by 40% from U.S.$614 per troy ounce in 2016 to U.S.$858 per troy ounce in 2017.

Additional U.S.$285 million to the palladium revenue in 2017 was contributed by the re-sale of purchased metal to fulfil the Group’s contractual obligations (as compared with U.S.$184 million in 2016).

Platinum

In 2017, platinum sales accounted for 7% of the Group’s total metal revenue and decreased by 5% (or U.S.$31 million) to U.S.$623 million, due to lower volumes of platinum sales, owing to the higher base effect as metal stock was sold in 2016 (U.S.$11 million) and lower realised platinum price (U.S.$20 million) down by 3% from U.S.$977 per ounce in 2016 to U.S.$949 per ounce in 2017.

Other metals

In 2017, revenue from other metals increased by 3% (or U.S.$13 million) to U.S.$437 million, owing to the increase in rhodium (up by 30%) and cobalt (up by 8%) sales, which was partly negatively offset by lower revenue from gold (down by 9%) and silver (down by 5%).

Semi-products

In 2017, semi-products revenue (primarily copper cake and nickel concentrate) increased by U.S.$208 million (or 96%) to U.S.$424 million, and accounted for 5% of the Group’s total metal revenue. This increase was mainly driven by higher physical sales to third parties instead of processing these semi-products at the Group’s own refineries.

Other sales

In 2017, other sales increased by 19% to U.S.$731 million, primarily owing to the Russian rouble appreciation (U.S.$80 million) and an increase in revenue in real terms driven by the increase in the prices of services provided to third parties (U.S.$13 million) and higher revenue from transport and consumer services subsidiaries of the Group, which was partly negatively offset by the divestiture of non-core assets.

95 Cost of Metal Sales

In 2017, the cost of metal sales increased by 9% (or U.S.$335 million) to U.S.$3,968 million, owing to:

 an increase in cash operating costs by 33% (U.S.$965 million);  an increase in depreciation charges by 38% (U.S.$174 million); and  the change in metal inventories year-on-year (cost of metal sales decreased by U.S.$804 million).

The table below shows a breakdown of cost of metal sales for the periods indicated.

Year ended 31 December Year ended 31 December 2017 2016 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Total cash operating costs...... 3,852 86 2,887 86 Depreciation and amortisation ..... 630 14 456 14 Total production costs ...... 4,482 100 3,343 100 (Increase)/decrease of metal inventories ...... (514) 290 Cost of metal sales...... 3,968 3,633

Cash operating costs

In 2017, total cash operating costs increased by 33% (or U.S.$965 million) to U.S.$3,852 million. The negative effect of currencies appreciation (the Russian rouble and the South African rand) amounted to U.S.$312 million.

The inflationary growth of cash operating costs (U.S.$115 million) was exacerbated by an increase in metal purchase costs (U.S.$346 million) and an increase of MET (U.S.$83 million) resulting from the change in legislation in 2017. MET increased following the cancellation of PGM export duties in September 2016.

Cash operating costs structure in 2017 and 2016 was affected by the consolidation of 50% of Nkomati Nickel Mine joint operation.

96 The table below shows a breakdown of cash operating costs for the periods indicated.

Year ended Year ended 31 December 2017 31 December 2016 Group % of total Group % of total (Amounts in millions of U.S. dollars, except percentages) Labour...... 1,377 36 1,145 40 Materials and supplies...... 703 18 520 18 Purchases of raw materials and semi-products...... 297 8 292 10 Purchases of refined metals for resale...... 530 14 184 6 Mineral extraction tax and other levies...... 221 6 122 4 Third-party services ...... 204 5 170 6 Electricity and heat energy...... 132 3 101 4 Fuel ...... 81 2 60 2 Production costs related to joint operation ...... 93 2 79 3 Transportation expenses...... 64 2 71 2 Sundry costs...... 150 4 143 5 Total cash operating costs ...... 3,852 100 2,887 100

Labour

In 2017, labour costs increased by 20% (or U.S.$232 million) to U.S.$1,377 million, amounting to 36% of the Group’s total cash operating costs, driven by the following:

 U.S.$162 million – cost increase owing to the Russian rouble appreciation against the U.S. dollar;  U.S.$50 million – cost decrease following the decrease of production staff headcount, owing primarily to the Nickel plant closure and the Group’s ongoing downstream reconfiguration programme; and  U.S.$119 million – other increase in real terms, primarily driven by the indexation of rouble- denominated salaries and wages.

Purchases of raw materials and semi-products

In 2017, expenses on the purchase of raw materials and semi-products increased by 2% (or U.S.$5 million) to U.S.$297 million, driven by the following:

 U.S.$58 million – cost increase owing to higher semi-products prices;

 U.S.$140 million – cost increase owing to the processing of copper concentrate purchased from Rostec;

 U.S.$82 million – cost increase owing to purchase of semi-products from the Nkomati Nickel Mine for further resale to third parties; and

 U.S.$275 million – cost reduction resulting from the decrease of purchased semi-products from third parties for processing at Norilsk Nickel Harjavalta as part of the ongoing downstream reconfiguration programme.

97 Purchases of refined metals for resale

In 2017, expenses on the purchase of metals for resale increased by approximately three times (or U.S.$346 million) to U.S.$530 million from U.S.$184 million in 2016. The increase in metal purchase was primarily due to piling up metal stocks to meet additional demand of the Group’s key clients, primarily palladium.

Materials and supplies

In 2017, expenses on materials and supplies increased by 35% (or U.S.$183 million) to U.S.$703 million, driven by the following:

 U.S.$62 million – the negative effect of the Russian rouble appreciation;

 U.S.$11 million – inflationary growth in materials and supplies; and

 U.S.$110 million – cost increase in line with the ongoing downstream reconfiguration programme.

Third-party services

In 2017, cost of third-party services increased by 20% (or U.S.$34 million) to U.S.$204 million.

The negative effect of the Russian rouble appreciation amounted to U.S.$18 million.

The cost increase owing to higher volumes of repairs, tolling services, and other production services (U.S.$37 million) was mostly offset by a cost decrease due to the termination of Nkomati Nickel Mine concentrate processing (U.S.$21 million).

Mineral extraction tax and other levies

In 2017, MET and other levies increased by 81% (or U.S.$99 million) to U.S.$221 million.

The negative effect of the Russian rouble appreciation amounted to U.S.$18 million.

Cash cost increase in real terms by U.S.$81 million was primarily driven by the higher MET resulting from a change in legislation (U.S.$83 million) resulting in the cancellation of PGM export duties in 2016 for metals produced by the Group.

The change in MET rate in January 2017 was mostly compensated by the cancellation of PGM export duties in September 2016.

Electricity and heat energy

In 2017, electricity and heat energy expenses increased by 31% (or U.S.$31 million) to U.S.$132 million, driven by the following:

 U.S.$10 million – the negative effect of the Russian rouble appreciation; and

 U.S.$22 million – an increase in expenses owing to the Group’s higher consumption of energy due to the ongoing downstream reconfiguration programme (the Polar Division feed processing at JSC Kola “GMK”, which purchases electricity from third parties) and inflationary growth in energy tariffs.

98 Fuel

In 2017, fuel expenses increased by 35% (or U.S.$21 million) to U.S.$81 million, driven by the following:

 U.S.$8 million – the negative effect of the Russian rouble appreciation; and

 U.S.$15 million – higher fuel oil and other oil products prices.

Production costs related to joint operation

In 2017, production costs related to joint operation increased by 18% (or U.S.$14 million) to U.S.$93 million, driven by the following:

 U.S.$8 million – the negative effect of the South African rand appreciation; and

 U.S.$6 million – an increase in expenses owing to the higher sales volume of Nkomati concentrates.

Transportation expenses

In 2017, transportation expenses decreased by 10% (or U.S.$7 million) to U.S.$64 million, driven by the following:

 U.S.$7 million – the negative effect of the Russian rouble appreciation; and

 U.S.$14 million – costs decrease driven by transportation of the Nkomati Nickel Mine concentrate to third parties instead of Norilsk Nickel Harjavalta production facilities.

Sundry costs

In 2017, sundry costs increased by 5% (or U.S.$7 million) to U.S.$150 million, driven by the following:

 U.S.$19 million – the negative effect of the Russian rouble appreciation; and

 U.S.$12 million – a decrease in insurance expenses owing to the renegotiation of property insurance agreements on the same insurance cover terms.

Depreciation and amortisation

In 2017, depreciation and amortisation increased by 38% (or U.S.$174 million) to U.S.$630 million.

The Russian rouble appreciation amounted to an increase in depreciation and amortisation by U.S.$62 million.

Depreciation charges increased in real terms by U.S.$112 million mainly due to additions to production assets at the Group’s operating subsidiaries in Russia in the second half of 2016 and in 2017.

(Increase)/decrease of metal inventories

In 2017, the comparative effect of change in metal inventory amounted to U.S.$804 million resulting in a decrease in cost of metal sales, driven by the following:

99  U.S.$729 million – the sale of metal from temporary stock in 2016 as part of the Group’s reconfiguration programme, as well as an accumulation of palladium stock and other metals stock in 2017 to meet additional demand of the Group’s key customers; and

 U.S.$75 million – the comparative effect of change in work-in-progress, primarily due to higher accumulation of work-in-progress at Russian subsidiaries of the Group in 2017 as part of the Group’s ongoing downstream reconfiguration programme and due to the commencement of Rostec copper concentrate processing in 2017.

Cost of other sales

In 2017, cost of other sales increased by 24% (or U.S.$124 million) to U.S.$632 million. The Russian rouble appreciation amounted to the increase in cost of other sales by U.S.$72 million.

Cost of other sales increased in real terms by U.S.$52 million, comprising a U.S.$96 million increase in expenses resulting from higher transportation services, indexation of rouble-denominated salaries and wages and growth of other services, which was partly positively offset by the sale of non-core assets resulting in a cost reduction (U.S.$44 million).

Selling and distribution expenses

Selling and distribution expenses decreased by 32% (or U.S.$36 million) to U.S.$75 million due to the cancellation of PGM export duties in September 2016 as part of the Russian Federation’s WTO membership terms (U.S.$60 million cost reduction), which was partly negatively offset by the increase of transportation expenses, primarily due to an increase of semi-product sales.

The table below shows a breakdown of selling and distribution expenses for the periods indicated.

Year ended 31 December 2017 2016 Change (%) (Amounts in millions of U.S. dollars) Transportation expenses...... 38 23 65 Marketing expenses ...... 14 7 100 Staff costs...... 13 13 — Export duties ...... 1 61 (98) Other ...... 9 7 29 Total ...... 75 111 (32)

General and administrative expenses

In 2017, general and administrative expenses increased by 31% (or U.S.$178 million) to U.S.$759 million. The rouble appreciation contributed to the cost increase by U.S.$71 million. General and administrative expenses increased in real terms due to the following:

 U.S.$38 million – an increase in staff, mainly due to salaries indexation;

 U.S.$30 million – an increase in costs resulting from the automatisation of production processes and roll out of new IT systems, including U.S.$17 million of staff costs; and

 U.S.$20 million – higher property tax and amortisation charges.

The table below shows a breakdown of general and administrative expenses for the periods indicated.

100 Year ended 31 December 2017 2016 Change (%) (Amounts in millions of U.S. dollars) Staff costs...... 478 376 27 Taxes other than mineral extraction tax and income tax...... 79 58 36 Third-party services ...... 72 55 31 Depreciation and amortisation ...... 32 20 60 Rent expenses...... 25 19 32 Transportation expenses...... 8 6 33 Other ...... 65 47 38 Total ...... 759 581 31

Impairment of non-financial assets

In 2017, loss from impairment of non-financial assets amounted to U.S.$227 million, as compared with U.S.$61 million in 2016. This was largely due to the impairment in relation to the Nkomati Nickel Mine. For further details, see Note 14 to the 2017 Consolidated Financial Statements.

Other net operating expenses

In 2017, other net operating expenses increased by U.S.$278 million to U.S.$362 million, owing to one-off social expenses, including an estimated provisional cost of the long-term social agreement with the government of the Zabaikalsky Krai and expenses attributed to the development of a skiing resort in Sochi.

Other increases of other net operating expenses were primarily driven by changes in allowances for doubtful debts, obsolete and slow-moving inventory and other current assets in line with annual stock counts, as well as reversal of a provision for reconfiguration of production facilities in 2016.

Finance costs

In 2017, finance costs increased by U.S.$82 million, or 18%, to U.S.$535 million from U.S.$453 million in 2016.

The table below shows a breakdown of finance costs for the periods indicated.

Year ended 31 December 2017 2016 Change (%) (Amounts in millions of U.S. dollars) Interest expense on borrowings net of amounts capitalised ...... 386 403 (4) Unwinding of discount on provisions and payables ...... 133 46 189 Other ...... 16 4 4x Total ...... 535 453 18

The increase in finance costs by 18% year-on-year to U.S.$535 million was mainly driven by the increase of unwinding of discount on provisions and payables.

In 2017, interest expense on borrowings net of amount capitalized decreased by U.S.$17 million to U.S.$386 million as the average cost of debt decreased due to the consistent implementation of financial policy targets that enabled it to partially offset the multiple increase in base rates (LIBOR) in the current period.

The main factors of the decrease in the average cost of debt were: 101  a reduction of funding cost of more expensive rouble-denominated debt in credit portfolio by its substitution by U.S. dollar-denominated debt in the six months ended 30 June 2017, together with the reduction of the interest rate of the bilateral rouble-denominated credit line in the amount of 60 billion roubles in October 2017;

 partial refinancing of more expensive bilateral credit lines by proceeds of 5-year syndicated facility in the amount of U.S.$2.5 billion, under which the Company has achieved one of the lowest interest rates of LIBOR 1M+1.50% per annum available for Russian corporates on international syndicated market since 2008 for the transactions of such size and term. In addition, the Company managed to reduce interest rates under the rest of U.S. dollar- denominated bilateral credit lines within the Group’s portfolio; and

 in July 2017, the Company reached an agreement with PJSC Sberbank to reduce the interest rate under GRK “Bystrinskoye” project financing by issuing a guarantee on behalf of the Company to secure performance obligations of GRK “Bystrinskoye”.

Income tax

In 2017, income tax expense decreased by 3% to U.S.$721 million, driven mostly by the decrease in taxable profit, which was partly offset by the Russian rouble appreciation against the U.S. dollar in 2017.

The effective income tax rate in 2017 of 25.3% was above the Russian statutory tax rate of 20%, which was primarily driven by non-deductible social expenses, as well as an increase in provisions for impairment of property, plant and equipment.

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 30 June 2019, the Group had total cash and cash equivalents of U.S.$3,488 million (as of 31 December 2018, 2017 and 2016, U.S.$1,388 million, U.S.$852 million and U.S.$3,325 million, respectively) and total current and non-current loans and borrowings of U.S.$8,625 million (as of 31 December 2018, 2017 and 2016, U.S.$8,417 million, U.S.$9,053 million and U.S.$7,855 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 expenditures, including the purchase of equipment and modernisation of facilities, as well as acquisitions. The Company may also be allocating its funds to dividend payments, working capital requirements and repayment of borrowings. 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. 102 In the six months ended 30 June 2019, the Group’s capital investments (purchases of property, plant and equipment and intangible assets) totalled U.S.$500 million, as compared with U.S.$536 million in the six months ended 30 June 2018 (U.S.$.1,553 million, U.S.$2,002 million and U.S.$1,714 million for 2018, 2017 and 2016, respectively). See “Business—Mining and Metals Operations—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:

Six months ended Year ended 31 December 30 June Selected Cash Flow Statement Data 2018 2017 2016 2019 2018 (Amounts in millions of U.S. dollars unless otherwise indicated) Net cash generated from operating activities...... 6,493 1,763 3,511 2,587 3,143 Net cash used in investing activities ..... (1,562) (1,936) (1,920) (381) (543) Adjusted free cash flow 4,931 (173) 1,591 2,206 2,600 Net cash used in financing activities..... (4,304) (2,237) (2,399) (139) 61 Net increase/(decrease) in cash and cash equivalents ...... 627 (2,410) (808) 2,067 2,661 Effect of foreign exchange differences of cash and cash equivalents ...... (91) (63) 35 58 (75) Cash and cash equivalents at the end of the period ...... 1,388 852 3,325 3,488 3,438

In the six months ended 30 June 2019, Adjusted free cash flow stood at U.S.$2,206 million, a decrease of U.S.$394 million compared to U.S.$2,600 million in the six months ended 30 June 2018, primarily as a result of lower cash generated from operating activities. In the six months ended 30 June 2019, net cash generated from operating activities decreased by 18% to U.S.$2.6 billion, primarily driven by the increase of working capital in the six months ended 30 June 2019 (as compared to the decrease in the six months ended 30 June 2018).

In 2018, Adjusted free cash flow increased by U.S.$5,104 million to U.S.$4,931 million from a negative free cash flow balance of U.S.$173 million as a result of higher cash generated from operating activities and lower capital expenditure. In 2018, net cash generated from operating activities increased by approximately four times to U.S.$6.5 billion, primarily driven by the increase in Adjusted EBITDA and decrease of working capital in 2018 (as compared to the increase in 2017).

In 2017, Adjusted free cash flow fell by U.S.$1,764 million into an Adjusted free cash flow deficit of U.S.$173 million as a result of lower cash generated from operating activities. In 2017, net cash generated from operating activities decreased by U.S.$1,748 million, primarily driven by the increase of working capital in 2017 (as compared to a slight decrease in 2016).

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.

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.

103 In the six months ended 30 June 2019, net cash generated from operating activities decreased by 18% to U.S.$2,587 million due to the increase of working capital in the same period, as compared with U.S.$3,143 million in the six months ended 30 June 2018 (in which there was a decrease in working capital).

In 2018, net cash generated from operating activities increased by U.S.$4,730 million to U.S.$6,493 million, as compared with U.S.$1,763 million in 2017. The increase was primarily driven by the increase in Adjusted EBITDA and decrease of working capital in 2018 (compared to an increase in 2017).

In 2017, net cash generated from operating activities decreased by U.S.$1,748 million to U.S.$1,763 million, as compared with U.S.$3,511 million in 2016. The decrease was primarily attributable to the increase in working capital in 2017 following the optimisation of trade financing terms, partial payment of payables due to Rostec and an increase of metal stock.

Investing activities

In the six months ended 30 June 2019, net cash used in investing activities decreased by 30%, or U.S.$162 million, to U.S.$381 million as compared with U.S.$543 million in the six months ended 30 June 2018. This was due to a decrease in capital investments and other non-current assets.

In 2018, net cash used in investing activities was U.S.$1,562 million, as compared with net cash used in investing activities of U.S.$1,936 million in 2017. This decrease was due to the completion of Talnakh Concentrator modernisation and the construction of the Chita project, as well as the projects related to the development of Pelyatkinskoye gas condensate field.

In 2017, net cash used in investing activities was U.S.$1,936 million, as compared with net cash used in investing activities of U.S.$1,920 million in 2016. The key changes in net cash used in investing activities in 2017 included the effect of increased capital expenditure including, in particular, the entering of the Chita project into its final construction stage, the launch of the Bystrinsky concentrator into hot commissioning at the end of 2017 and the entry into active construction of upgrades to the nickel refining facilities at JSC Kola “GMK”, which was mostly offset by a reduction in the amount of cash used in, among other things, issuing loans and purchasing other financial assets.

Financing activities

In the six months ended 30 June 2019, net cash used in financing activities was a negative balance of U.S.$139 million (versus U.S.$61 million of cash generated from financing activities in the six months ended 30 June 2018), primarily due to the lower amounts of cash received from loans issued by the Group, as well as lower amounts of cash used in the repayment of loans and borrowings, as well as interest.

In 2018, net cash used in financing activities was U.S.$4,304 million, as compared with net cash used in financing activities of U.S.$2,237 million in 2017. The main factor which contributed to the increase in net cash used in financing activities in 2018 was the decrease in proceeds from loans and borrowings.

In 2017, net cash used in financing activities amounted to U.S.$2,237 million, as compared with net cash used in financing activities of U.S.$2,399 million in 2016. The decrease of net cash used in financing activities in 2017 was driven by:

 higher cash generated from proceeds less repayments from loans and borrowings in 2017 versus 2016; and

 higher dividends paid in 2017.

104 Liquidity

Historically, the Group has relied on cash from operating activities as the main source of liquidity.

As of 30 June 2019, the Group had cash and cash equivalents of U.S.$3,488 million (U.S.$1,388 million, U.S.$852 million and U.S.$3,325 million as of 31 December 2018, 2017 and 2016, respectively). The amount at 30 June 2019 included:

 current accounts in a total amount of U.S.$559 million, of which U.S.$525 million was held in U.S. dollars and other foreign currencies and U.S.$34 million was held in roubles;

 bank deposits in a total amount of U.S.$2,913 million, of which U.S.$1,321 million was held in U.S. dollars and other foreign currencies and U.S.$1,592 million was held in roubles; and

 other cash and cash equivalents of U.S.$16 million.

On 26 September 2019, the Extraordinary General shareholders’ meeting of the Company declared interim dividends in respect of the six months ended 30 June 2019 in the amount of 883.93 roubles (U.S.$13.77 using rouble/U.S. dollar rate on 26 September 2019) per ordinary share with the total amount of U.S.$2,179 million.

On 10 June 2019, the Annual General shareholders’ meeting of the Company declared dividends for the year ended 31 December 2018 in the amount of 792.52 roubles (U.S.$12.19) per share with the total amount of U.S.$1,928 million. The dividends were paid to the shareholders in July 2019.

On 19 September 2018, the Extraordinary General shareholders’ meeting of the Company declared interim dividends in respect of the six months ended 30 June 2018 in the amount of 776.02 roubles (U.S.$11.45) per share with the total amount of U.S.$1,813 million. The dividends were paid to the shareholders in October 2018 in the amount of U.S.$1,841 million recognised in the consolidated cash flow statement, using prevailing rouble/U.S. dollar rates on the payment dates.

On 28 June 2018, the Annual General shareholders’ meeting of the Company declared dividends for the year ended 31 December 2017 in the amount of 607.98 roubles (U.S.$9.63) per share with the total amount of U.S.$1,524 million. The dividends were paid to the shareholders in July 2018 in the amount of U.S.$1,527 million recognised in the consolidated cash flow statement, using prevailing rouble/U.S. dollar rates on the payment dates.

On 29 September 2017, the Extraordinary General shareholders’ meeting of the Company declared interim dividends in respect of the six months ended 30 June 2017 in the amount of 224.20 roubles (U.S.$3.84) per share with the total amount of U.S.$607 million. The dividends were paid to the shareholders in October 2017 in the amount of U.S.$610 million recognised in the consolidated statement of cash flows, using prevailing rouble/U.S. dollar rates on the payment dates.

On 9 June 2017, the Annual General shareholders’ meeting of the Company declared dividends for the year ended 31 December 2016 in the amount of 446.10 roubles (U.S.$7.83) per share with the total amount of U.S.$1,239 million. The dividends were paid to the shareholders in July 2017 in the amount of U.S.$1,188 million recognised in the consolidated statement of cash flows, using prevailing rouble/U.S. dollar rates on the payment dates.

On 16 December 2016, the Extraordinary General shareholders’ meeting of the Company declared interim dividends in respect of the nine months ended 30 September 2016 in the amount of 444.25 roubles (U.S.$7.21) per share with the total amount of U.S.$1,141 million. The dividends were paid to the shareholders in January 2017 in the amount of U.S.$1,172, million using the prevailing rouble/U.S. dollar exchange rates on the payments dates.

105 On 10 June 2016, the Annual General shareholders’ meeting of the Company declared dividends for the year ended 31 December 2015 in the amount of 230.14 roubles (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 rouble/U.S. dollar rates on the payments dates.

Loans and borrowings and lease liabilities

As of 30 June 2019, the Group had total current and non-current loans and borrowings and current and non-current lease liabilities of U.S.$8,845 million (U.S.$8,439 million, U.S.$9,053 million and U.S.$7,855 million as of 31 December 2018, 2017 and 2016, respectively). The table below shows a breakdown of the Group’s loans and borrowings and lease liabilities as of 30 June 2019.

Average nominal rate during the six Fixed or months ended Amount as of floating 30 June 2019 30 June 2019 Type Currency interest Rate (%) Maturity (U.S.$ million) Unsecured loans: U.S. dollar floating 3.98 2019-2024 3,793 rouble fixed 8.30 2021 951 rouble floating 8.50 2019 127 Euro floating 0.85 2019-2028 32 Total unsecured loans: 4,903 Secured loans: rouble fixed 9.75 2021-2022 10 Total loans 4,913

Bonds U.S. dollar fixed 5.24 2020-2023 3,474 rouble fixed 11.60 2026 238 Total bonds...... 3,712 Total loans and borrowings ...... 8,625 Less: current portion due within twelve months and presented as current loans and borrowings (132) Non-current loans and borrowings 8,493 Lease liabilities U.S. dollar 4.87 2020-2029 144 rouble 8.49 2020-2099 54 Euro 2.02 2020-2050 21 Other 4.24 2020-2022 1 Total lease liabilities ...... 220 Less: current lease liabilities...... (35) Non-current lease liabilities ...... 185

The table below shows the maturity profile of the Group’s bank borrowings, based on contractual undiscounted payments, excluding interest as of 30 June 2019:

106 Due in Three More One to to than One three twelve Second Third Fourth Fifth five Type of bank loan Total month months months year year year year years (Amounts in millions of U.S. dollars) Fixed rate Principal...... 4,684 — — — 985 1,461 2,000 — 238 Floating rate ...... ————————— Principal...... 3,973 — 63 67 1,079 1,270 1,282 196 16 TOTAL (principal amounts) ...... 8,657 — 63 67 2,064 2,731 3,282 196 254

A summary of the Group’s principal outstanding borrowings is set out below.

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. During 2016-2018 the Company amended the terms of the facility agreement to extend the final maturity date and reduce the interest rate. As of 30 June 2019, the amount outstanding was U.S.$100 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. During 2015-2019, the Company amended the terms of the facility agreement to reduce the principal amount of the loan down to U.S.$237 million, extend the final maturity date and amend an interest rate. As of 30 June 2019, the amount outstanding was U.S.$237 million.

Citi Facility Agreement. In July 2017, the Company (as borrower) and Citi Bank (as lender) entered into a credit agreement in the aggregate principal amount of U.S.$175 million with a maturity period of 3 years. The principal amount outstanding under the loan bears interest at a floating rate based on LIBOR plus a spread. As of 30 June 2019, the amount outstanding was U.S.$175 million.

Bank of America Merrill Lynch Facility Agreement. In October 2017 the Company (as borrower) and Bank of America Merrill Lynch (as lender) entered into a credit agreement in the aggregate principal amount of U.S.$200 million with a maturity period of 3 years. The principal amount outstanding under the loan bears interest at a floating rate based on LIBOR plus a spread. As of 30 June 2019, the amount outstanding was U.S.$200 million.

Sberbank Facility. In October 2017, the Company (as borrower) and Sberbank of Russia (as lender) amended the terms of 60 billion roubles term loan signed in July 2015 reducing the interest rate and extending the final maturity of the loan. In August 2018, the amount outstanding was swapped to U.S.$892 million in accordance with cross-currency interest rate swap contracts bearing a fixed interest rate. As of 30 June 2019, the amount outstanding was 60 billion roubles (U.S.$951 million using the rouble/U.S. dollar rate on 30 June 2019 or U.S.$892 million under the swap contracts).

ING Facility. In November 2017, 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. In November 2018, the Company amended terms of the facility agreement reducing the interest rate. As of 30 June 2019, the amount outstanding was U.S.$200 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

107 Euler Hermes Aktiengesellschaft. As of 30 June 2019, the amount outstanding was EUR30.2 million (U.S.$34.4 million).

UniCredit Bank Facility. In June 2019, the Company (as borrower) and UniCredit Bank Spa and AO UniCredit Bank (as lenders) 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. As of 30 June 2019, the amount outstanding was U.S.$400 million.

Rouble-denominated commercial paper. In February 2016, the Company issued rouble-denominated commercial bonds in a total amount of 15 billion roubles (U.S.$238 million as of 30 June 2019) maturing in 2026 with a coupon rate of 11.60% per annum.

Syndicated Facility. On 15 December 2017, the Company (as borrower) entered into a facility agreement with a principal amount of U.S.$2.5 billion with a maturity period of 5 years with a syndicate of banks including Crédit Agricole Corporate and Investment Bank, AO UniCredit Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., China Construction Bank Corporation, Seoul Branch, Commerzbank Aktiengesellschaft, Filiale Luxemburg, Industrial And Commercial Bank of China Limited, Nordea Bank AB (publ), Sumitomo Mitsui Banking Corporation Europe Limited, ING Bank, a branch of ING-DiBa AG, Mizuho Bank, Ltd., HSBC Bank plc, AO Raiffeisenbank, Citibank NA, Jersey Branch, JPMorgan Chase Bank, N.A., London Branch, Všeobecná úverová banka, a.s., CIB Bank Ltd. The facility bears interest at a floating rate based on LIBOR 1M+1.50%. As of 30 June 2019, the amount outstanding was U.S.$2.5 billion.

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 were used for general corporate purposes and capital investments.

U.S.$500 million Notes due 2022. On 8 June 2017, the Company received gross proceeds of U.S.$500 million under a loan granted by the Issuer following the issuance by the Issuer of U.S.$500 million 3.85 per cent. loan participation notes due 2022. The proceeds were 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.$807 million as of 30 June 2019 (U.S.$544 million as of 31 December 2018).

The Group is a party to a number of lease contracts with variable lease payments that do not depend on an index or market rental rates, and hence are not recognised as lease liabilities. As of 30 June 2019, total future non-discounted variable lease payments under such contracts with the maturity up to 2067 amounted to U.S.$184 million.

As of 30 June 2019, future lease payments for leased items not transferred to the lessee and not recognised as lease liabilities amounted to U.S.$158 million. 108 The Group adopted IFRS 16 (Leases), commencing from 1 January 2019. Since the initial application of IFRS 16 Leases the Group has recognised additional lease liabilities (both current and non-current) of U.S.$ 204 million (see below). These leases were classified as operating leases, applying IAS 17 Leases, and not recognised as lease liabilities before 1 January 2019.

Future minimum lease payments due under non-cancellable operating lease agreements for aircrafts were as follows:

As of 31 December As of 31 December 2018 2017 (Amounts in millions of U.S. dollars) Due within one year...... 32 38 Due within one to five years ...... 95 97 Due in more than five years...... 95 18 Total ...... 222 153

Future minimum lease payments due under non-cancellable operating lease agreements for land, buildings and other assets were as follows:

As of 31 December As of 31 December 2018 2017 (Amounts in millions of U.S. dollars) Due within one year...... 44 36 Due within one to five years ...... 128 103 Thereafter...... 217 138 Total ...... 389 277

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 Financial Statements.

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. 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 2018 2017

Russian Rouble/U.S. Dollar 31 December ...... 69.47 57.60 Average for the year ended 31 December...... 62.71 58.35

South African Rand/U.S. Dollar 31 December ...... 14.35 12.36 Average for the year ended 31 December...... 13.18 13.30

109 At 31 December At 31 December 2018 2017 Euro/U.S. Dollar 31 December ...... 0.87 0.84 Average for the year ended 31 December...... 0.85 0.89

Chinese Yuan/U.S. Dollar 31 December ...... 6.88 6.51 Average for the year ended 31 December...... 6.62 6.70

Revenue recognition

Metal sales revenue

Revenue from metal sales is recognised at a point of time when control over the asset is transferred to a customer and represents the 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. A gain or loss on forward contracts that are expected to be settled by physical delivery or on net basis is measured at fair value recognised in revenue and disclosed separately from revenue from contracts with customers.

As a practical expedient, the Group does not adjust the promised amount of consideration for the effects of a significant financing component of the contracts where the period between when the Group transfers a promised good or service to a customer and the customer pays for that good or service will be one year or less.

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. Mark-to-market adjustment on provisionally priced contracts is recorded in revenue.

Other revenue

Revenue from contracts with customers on sale of goods, other than metals, is recognised at a point of time when control over the asset is transferred to the customer in accordance with the shipping terms specified in the sales agreements.

Revenue from service contracts is recognised over-time when the services are rendered.

Dividends and interest income

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

Finance costs

Finance costs mostly comprise interest expense on borrowings and unwinding of discount on decommissioning obligations.

110 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.

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 also 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.

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.

Property, plant and equipment and mine development costs

Mining assets

Mine development costs are capitalised and comprise expenditures directly related to:

111  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 directly attributable borrowings costs.

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 depreciation 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 and interest capitalised.

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 commercial 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 1 to 50 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:

 buildings, structures and utilities 2 – 50 years

 machinery, equipment and transport 1 – 25 years

 other non-mining assets 1 – 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; and

112  finance charges capitalised during construction period where such costs are financed by borrowings.

Depreciation of these assets commences when the assets are put into operation.

Inventories

Refined metals

Main produced metals include nickel, copper, palladium, platinum; by-products include cobalt, 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 initially measured at net realisable value.

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 percentage of completion.

Materials and supplies

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

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 present value, are recognised at the moment when the legal or constructive obligation in relation to such costs arises and the future costs can be reliably estimated. These costs are 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.

Critical accounting 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

113 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 non-financial assets;

 provisions and allowances;

 decommissioning obligations;

 income taxes; and

 contingencies.

Useful economic lives of property, plant and equipment

The carrying value of the Group’s mining assets, classified within property, plant and equipment, is depreciated 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 depreciation of mining assets. 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 non-financial 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.

114 Provisions and allowances

The Group creates an allowance for obsolete and slow-moving inventories. 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 provisions for social commitments, tax and other provisions. Provisions represent 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. Provisions are recognised, based on present values, for decommissioning and land restoration costs as soon as the obligations arise. 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.

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.

115 The Group performs thorough analysis of its interest rate risk exposure regularly. Various scenarios are simulated. The table below details the financial results sensitivity to a 2 percentage points increase in floating interest rate. The sensitivity analysis is prepared assuming that the amount of loans and borrowings at floating rates outstanding at the reporting date was outstanding for the whole year.

Year ended 31 December 2018 2017 (Amounts in millions of U.S. dollars) Loss before tax ...... 77 70

Changes in interest rates impact the value of cross-currency interest swap as follows: a 1% increase in the rouble interest rate results in a loss of U.S.$20 million and a 1% decrease in U.S. dollar interest rate results in a loss of U.S.$23 million. Management believes that the Group’s exposure to interest rate risk fluctuations does not require additional hedging activities.

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 U.S. dollars and therefore the Group is exposed primarily to U.S. dollar currency risk. Foreign exchange risk arising from other currencies is assessed by management of the Group as immaterial.

At 31 December 2018 At 31 December 2017 Other Other U.S.$ EUR currencies U.S.$ EUR currencies Cash and cash equivalents ...... 1,234 13 74 609 28 121 Trade and other receivables.... 265 3 4 384 4 4 Other assets...... 380 73 8 141 297 15 Total assets ...... 1,879 89 86 1,134 329 140 Trade and other payables...... 249 114 10 290 80 14 Loans and borrowings ...... 7,308 19 3 7,684 5 — Other liabilities ...... 160 19 — 136 23 — Total liabilities ...... 7,717 152 13 8,110 108 14

Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if the risk of a potential loss is at an acceptable level. The Group estimates the financial impact of exchange rate fluctuations on U.S. dollar-denominated monetary assets and liabilities in respect of the Group entities where functional currency is the Russian rouble, as follows:

U.S. Dollar 20% strengthening against rouble For the year ended For the year ended 31 December 2018 31 December 2017

Loss before...... 1,344 1,395

Given that the Group’s exposure to currency risk for the monetary assets and liabilities is offset by the revenue denominated in U.S. dollars, management believes that the Group’s exposure to currency risk is acceptable. The Group does not apply hedge instruments. The Group applies derivative financial

116 instruments including cross-currency interest swaps in order to manage currency risk by matching cash flows from revenue denominated in U.S. dollars and financial liabilities denominated in roubles.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a 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.

Before dealing with a new counterparty, management assesses the creditworthiness of a potential customer or a 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 publicly available information.

117 INDUSTRY OVERVIEW

The Group’s main products are nickel, copper, palladium and platinum, which accounted for 29%, 29%, 29% and 8%, respectively, of total metal sales revenues in 2017 and 27%, 27%, 34% and 5%, respectively, in 2018. In the six months ended 30 June 2019, nickel, copper, palladium and platinum accounted for 25%, 23%, 40% and 6% of total metal sales revenues (as compared with 27%, 26%, 36% and 6% in the six months ended 30 June 2018, respectively).

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 70% of global consumption of nickel in 2018. The addition of nickel makes steel stronger and more resistant to corrosion. Nickel is also used to produce special alloys, for electroplating, in the chemical industry and in the manufacture of rechargeable power cells.

In 2018, the nickel deficit grew on the back of strong industrial demand (primarily for stainless steel production growth in Indonesia and cathode materials for lithium-ion batteries which shifted demand towards more nickel-intensive formulations). The increase in demand, combined with a steady drawdown of exchange stocks, drove the price of nickel up sharply in the first half of 2018. The increased output of low-grade nickel in forms of NPI and ferronickel, which increased by 16% in 2018, could not offset the deficit stemming from growing demand and the decline in high-grade nickel. In contrast to NPI, the production of high-grade nickel decreased by 2% (or 22 thousand tonnes) in 2018, driven primarily by lower output in Canada.

In recent years the global nickel market has been principally affected by the continuing reduction in nickel production from sulphide ores. These deposits are depleting and there are high costs associated with the launch of new nickel mining operations, typically with lower nickel grades. However, developments on the supply side were dominated by strong expansion of NPI output in China and Indonesia, driven by the availability of relatively cheap high-grade ore, which additionally benefitted NPI smelters’ margins.

Historically, nickel production operations have been highly integrated. As a result of the nature of nickel production process 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 to the sale of 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, 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 2018 were Indonesia, the Philippines, New Caledonia, Russia, Canada, Australia, China, Cuba, and Brazil. 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 31 December 2018:

118 Nickel mine production (‘000 tonnes) Reserves (in million Country 2018 2017 tonnes) Indonesia...... 602 407 257 Philippines ...... 345 339 120 New Caledonia...... 216 215 74 Russia...... 202 208 828 Canada ...... 179 209 1,323 Australia...... 157 158 778 China...... 95 95 186 Cuba...... 54 54 112 Brazil...... 49 69 258 Colombia...... 48 45 42 South Africa...... 46 48 98 Madagascar ...... 39 42 181 Dominican Republic ...... 18 16 70 Other Countries...... 233 237 603 TOTAL (rounded) ...... 2,283 2,142 4,930

Source: Wood Mackenzie.

The supply of mined nickel in 2018 increased by 141 thousand tonnes, or 7%, to 2,283 thousand tonnes from 2,142 thousand tonnes in 2017.

The principal refined nickel producing countries in 2018 were China, Japan, Russia, 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 2018 2017 China...... 702 628 Japan ...... 165 166 Russia...... 151 156 Canada ...... 133 154 Australia...... 114 112 Norway...... 91 87 Brazil...... 65 69 New Caledonia...... 83 74 Finland ...... 61 60 South Korea ...... 51 59 Colombia...... 43 41 UK...... 37 37 South Africa...... 39 43 Other Countries...... 444 348 TOTAL (rounded) ...... 2,179 2,034

Source: Company data

In 2018, global refined nickel production increased to 2,179 thousand tonnes, as compared to 2,034 thousand tonnes in 2017, due to the increased mine production, growing consumption, predominantly driven by China and other Asian countries.

119 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, EMEA, and the United States:

Consumption (‘000 tonnes) Country 2018 2017 China...... 1,209 1,180 Other Asia...... 587 431 Europe, Middle East and Africa...... 386 383 USA ...... 159 155 TOTAL (rounded) ...... 2,341 2,149

Source: Company data

The table below shows a breakdown of primary nickel consumption by application in 2018.

Application Percentage of Total Stainless steel...... 73% Alloys...... 8% Plating ...... 6% Other industries...... 13% Total ...... 100

Source: Company data

According to the Company’s estimates, primary nickel consumption increased by 192 thousand tonnes, or 9%, to 2,341 thousand tonnes in 2018 from 2,149 thousand tonnes in 2017, largely driven by an increase in stainless steel output and batteries. In 2017, nickel was primarily used for the production of stainless steel (73%), 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 products:

 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 are the Group, Vale, Glencore and Jinchuan;

 Low-grade nickel (nickel pig iron, ferronickel and utility nickel): this production type is consumed mainly in the stainless steel industry. The main producers include Tsingshan Group, Eramet, Shangdon Xinhai and Sumitomo Metal Mining.

120 The table below shows a breakdown by producer of primary nickel production in 2018:

Producer Percentage of Total Tsingshan Group...... 11% Vale...... 10% Norilsk Nickel...... 10% Jinchuan ...... 7% Glencore...... 7% Shangdon Xinhai...... 5% Sumitomo Metal Mining...... 4% BHP...... 3% Jiangsu Delong...... 3% Anglo American...... 3% Others...... 37% Total ...... 100

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

The table below shows a breakdown by producer of high-grade metal nickel production in 2018:

Producer Percentage of Total Norilsk Nickel...... 23% Vale...... 16% Jinchuan ...... 16% Glencore...... 15% BHP Billiton...... 9% Sherritt ...... 7% Sumitomo Metal Mining...... 7% Other ...... 7% Total ...... 100

Source: Company data

Pricing

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

Average annual nickel price 2018 2017 2016 2015 2014 Nickel (U.S.$ per tonne) ...... 13,122 10,441 9,609 11,807 16,867

Source: LME

The average nickel price in 2018 was U.S.$13,122 per tonne, an increase of 26%, as compared with 2017. An expected boom in the electric cars’ sector and major outflows from the London Metal Exchange (LME)’s stocks triggered by the increased demand contributed to higher nickel prices in late 2017 through June 2018. In the second half of 2018, the escalating U.S.-China trade war reversed the trend, and in October 2018, market concerns over a potential construction of large-scale lateritic nickel ore leaching facilities in Indonesia pushed prices further down.

121 A slight nickel deficit is expected in 2019, narrowing to approximately 60 thousand tonnes, as Indonesia and China continue to grow their NPI output. The Indonesian export ban scheduled in 2020 will put around 10% of global nickel production at risk, which could substantially alter the global supply landscape. Batteries for electric vehicles continue to be the key demand growth driver in medium and long term supported by the carbon-free mainstream narrative.

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 those deposits are found in Australia, Indonesia, the Philippines 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 exploited depend on specific mining and geological conditions and are largely similar to methods exploited for the extraction of other minerals.

Concentration

Rich copper-nickel sulphides with 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 ore. 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.

Production processes may differ significantly depending on the quality of 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

122 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 2017 and 2018, the refined copper market was well balanced. By the end of 2018, it moved to a slight deficit, to approximately 0.1% of the total market volume, or 30 thousand tonnes, and is expected to be in a deficit of about 200 thousand tonnes in 2019. Total exchange inventories dropped by 35% year-on-year to 351 thousand tonnes by the end of 2018, and increased to 521 thousand tonnes by the end August 2019, representing just eight days of global consumption, with off-exchange inventories decreasing.

The key factors affecting the production of copper in recent years included the decreasing grades and quality of both operational deposits and new deposits. The increase in production of copper in Africa and Asia has resulted in a larger proportion of global supply originating from regions with higher levels of perceived political risk. While key copper producers are continuing to increase investment in recently developed copper mining projects (such as Las Bambas in Peru, Oyu Tolgoi in Mongolia, and Caserones and Sierra Gorda in Chile), 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, Germany, South Korea).

The principal producers of mined copper are located in Chile, Peru, China, Democratic Republic of Congo, the United States, Australia, Zambia, Russia, Mexico, and Indonesia.

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 and manufacture of copper concentrates and other copper products have been traditionally 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 2019:

Copper mine production (‘000 tonnes) Reserves Country 2017 2018 (mln tonnes) Chile...... 5,851 5,530 170 Peru ...... 2,395 2,411 83 China...... 1,615 1,530 26 USA ...... 1,257 1,309 48 Democratic Republic of Congo ...... 1,343 1,147 20 Australia...... 907 877 88 Zambia ...... 861 790 19 Indonesia...... 668 627 51 Mexico ...... 723 734 50 Russia...... 803 765 61 Other Countries...... 3,697 5,090 214 Total (rounded) ...... 20,120 20810 830

Source: Company data, Wood Mackenzie, USGS

123 Consumption

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

Consumption (‘000 tonnes) Country 2016 2015 China...... 11,797 11,182 USA ...... 1,818 1,800 Germany...... 1,220 1,241 Japan ...... 1,019 1,010 South Korea ...... 643 700 Italy ...... 546 550 India ...... 508 466 Turkey...... 497 494 UAE ...... 404 403 Taiwan ...... 382 498

Source: Company data

The table below shows a breakdown of final use of refined copper in 2018:

Percentage of Total Application Power grids ...... 24% Construction...... 30% Transport and Machinery...... 21% Consumer goods...... 25% Total ...... 100%

Source: Company data

Global consumption of refined copper increased by 0.7 million tonnes, or 3%, to 23.7 million tonnes in 2018 from 23 million tonnes in 2017. 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 2018:

Producer Percentage of Total Codelco ...... 9% BHP Billiton...... 9% Freeport...... 8% Glencore...... 7% Anglo American...... 3% Antofagasta ...... 4% Southern Copper ...... 4% Rio Tinto...... 3% KGHM ...... 3% First Quantum ...... 3% Norilsk Nickel...... 2%

124 Others...... 45% Total ...... 100%

Source: Company data, companies’ reports

Mined copper output increased in 2018, as compared with 2017, largely as a result of recovered production in Chile (facing a significant drop due to strikes a year earlier) and a significant increase in production in Africa and Indonesia (following the lifted state ban on concentrate exports), as well as the development of Chinese domestic mining industry. In 2018, the global output of refined copper increased by 0.56 million tonnes, or 2.4%, to 23.6 million tonnes from 23.0 million tonnes in 2017, mainly as a result of an increase in production in China and North America, while production in the rest of Asia (excluding China) and other regions decreased.

Pricing

The table below shows the average copper price for the periods indicated:

Year ended 31 December 2018 2017 2016 2015 2014 Copper (U.S.$ per tonne)...... 6,523 6,166 4,863 5,494 6,862

Source: LME

The average copper price in 2018 was U.S.$6,523 per tonne, an increase of 6%, as compared with 2017. Prices increased in the six months ended 30 June 2018 amid expectations of strikes at copper mines in Chile and Peru and strong copper demand from EV manufacturers, and then fell in the second half of 2018 on the back of failed strikes and the escalating U.S.-China trade tensions causing concerns over weaker demand.

Overview of key production processes

Copper Ore Mining

The majority of copper produced worldwide 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 by underground mining. In addition, 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 copper production from mined ore is summarised below.

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 millimetres. 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%.

125 Metallurgy

The concentrate produced by flotation is mixed with fluxes (silica or calcium carbonate) and smelted to form a copper matte – a mixture of copper and iron sulphides with a copper content up to 60%. A portion of iron is removed in the process in 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 copper production, although it is rarely used 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 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 primarily used in catalytic converters, particularly in diesel-powered vehicles, as well as in jewellery.

In 2018, the palladium market recorded the ninth year of deficit in terms of supply and demand balance as a result of accelerated growth in demand for the metal in the automobile industry. The global palladium market deficit in 2018 amounted 26 tonnes, as compared with 25 tonnes in 2017.

In 2018, as a result of a continuing decrease in sales of diesel-powered vehicles and weak sales of platinum jewellery in China, the global platinum market recorded a third year of surplus. However, significant demand increases in glass, chemical, and petroleum industries partially offset the offtake reduction by other industries. The platinum market surplus in 2018 amounted 7 tonnes as compared with 11 tonnes in 2017.

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 production disruptions in South Africa. In addition, the production of PGMs in Zimbabwe has been influenced by frequently changing and unpredictable taxation laws. PGMs in Russia and Canada are predominantly found in base metal deposits. As a result, volumes of PGMs produced in Russia and Canada are determined by mining

126 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 concentration of PGM reserves in South Africa, Russia, Canada, the United States and Zimbabwe, the PGM market is principally dominated by five companies (Anglo American Platinum, the Group, Sibany-Stillwater, Impala Platinum, 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 2019:

Production of refined metal (tonnes) Reserves Palladium Platinum PGM Country 2018 2017 2018 2017 (tonnes) South Africa...... 77 81 139 139 63,000 Russia...... 83 85 21 23 3,900 Canada ...... 21 19 7 8 310 USA ...... 14 13 4 4 900 Other countries...... 18 18 20 20 NA TOTAL (rounded) ...... 214 217 191 194 67,800

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 2018 2017 2018 2017 European Union ...... 73 69 65 70 China...... 77 79 72 63 Japan ...... 43 44 30 30 North America ...... 93 93 34 34 Other countries...... 49 46 47 47

Source: Company data

The table below shows a breakdown of primary palladium consumption by application in 2018:

Application Percentage of Total Automotives...... 80% Electronics...... 7% Healthcare ...... 3% Jewellery ...... 2% Chemical Catalyst ...... 5% 127 Other ...... 3% Total ...... 100

Source: Company data

In 2018, the overall industrial consumption of palladium increased by 6 tonnes, or 2%, to 337 tonnes from 331 tonnes in 2017. At the same time, in 2018 primary palladium consumption decreased by 2 tonnes, or 1%, to 239 tonnes.

The table below shows a breakdown of primary platinum consumption by application in 2018:

Application Percentage of Total Automotives...... 40% Jewellery ...... 29% Chemical Catalyst ...... 11% Glass...... 6% Electronics...... 3% Other ...... 11% Total ...... 100

Source: Company data

In 2018, overall industrial consumption of platinum increased by 3 tonnes, or 1%, to 251 tonnes from 248 tonnes in 2017. Primary platinum consumption increased by 1 tonnes, or 1%, to 184 tonnes in 2018.

Supply

The Group is the world’s largest producer of palladium, accounting for 39% of global primary production in 2018. 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 2018:

Producer Percentage of Total Norilsk Nickel...... 39% Anglo American ...... 22% Impala Platinum...... 13% Sibanye-Stillwater Mining...... 7% Lonmin...... 4% NAP ...... 3% Vale...... 3% Others...... 9% Total ...... 100

Source: Company data and companies’ reports published before 1 April 2019.

In 2018, the global supply of primary palladium decreased by 3 tonnes, or 2%, to 214 tonnes, as compared to 217 tonnes in 2017.

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 2018:

Producer Percentage of Total Anglo American...... 39%

128 Impala Platinum...... 25% Lonmin...... 11% Norilsk Nickel...... 10% Northam ...... 9% Others...... 6% Total ...... 100

Source: Company data and companies’ reports published before 1 April 2019.

In 2018, production of primary platinum decreased by 3 tonne, or 2%, to 191 tonnes from 194 tonnes in 2017.

Pricing

The table below shows the respective average prices of palladium and platinum for the periods indicated.

Year ended 31 December 2018 2017 2016 2015 2014 Palladium (U.S.$ per ounce)...... 1,029 869 613 691 803 Platinum (U.S.$ per ounce)...... 880 949 989 1,053 1,385

Source: LPPM (fixing a.m. and p.m.)

The average palladium price in 2018 was U.S.$1,029 per troy ounce, an increase of 18%, as compared with 2017. In 2018, palladium prices grew for a third consecutive year on the back of increased consumption in car-making industry amid tightened environmental standards across the world and limited metal production. The deficit was offset by supplies of previously accumulated reserves.

The average platinum price in 2018 was U.S.$880 per troy ounce, a decrease of 7% as compared with 2017. The decrease primarily resulted from the decline in consumption in the automotive and jewellery industries and weakness in investor demand.

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 are 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.

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 or palladium metal content of approximately 70-90%, with the remainder comprised of other heavy metals. Once obtained, the concentrate undergoes after treatment and then refining. 129 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.

130 BUSINESS

Overview

According to Wood Mackenzie estimates, the Company is the world’s lowest cost producer of nickel, as shown by negative nickel production cash costs on global industry cost curves, as the revenue from other metals offset the Group’s overall production cash costs.

In addition to its Polar Division and South Cluster operations, the Group operates through its subsidiary, JSC Kola “GMK”, in the Murmansk region on the Kola Peninsula. JSC Kola “GMK” conducts mainly underground mining operations at four deposits containing sulphide copper and nickel ores and operates an enrichment plant, a smelter and a nickel refinery. In addition to processing its own mined materials, JSC Kola “GMK” also refines high-grade nickel matte supplied 131 by the Polar Division. As at 31 December 2018, the total proven and probable reserves of the deposits of JSC Kola “GMK” comprised 100,918 thousand tonnes of ore, containing 581 thousand tonnes of nickel, 271 thousand tonnes of copper, 93 thousand ounces of palladium and 60 thousand ounces of platinum.

The Group also owns a nickel and cobalt refinery in Finland, which is operated by its wholly-owned subsidiary, Norilsk Nickel Harjavalta, with an annual capacity of approximately 66,000 tonnes of refined nickel products, and a 50% participation interest in the Nkomati Nickel Mine in South Africa and holds licences for the development of the Honeymoon Well project: sulphide nickel deposit in Western Australia. In 2019, the Group and its operating partner, African Rainbow Minerals, reached an agreement to scale down production at Nkomati Nickel Mine with a view to consider placing the mine in care and maintenance from the second half of 2020, though no final decision has been made to this effect.

Metal Content Nickel Copper Palladium Platinum Classification Categories (‘000 tonnes) (‘000 tonnes) (‘000 ounces) (‘000 ounces) Reserves Proven and probable Polar Division(1) 6,286 11,858 92,864 24,600 JSC Kola “GMK” 581 271 93 60 Honeymoon Well — — — — Total 6,867 12,129 92,957 24,660 Resources Measured and Indicated Polar Division(1) 11,892 22,437 195,441 55,122 JSC Kola “GMK” 2,247 1,089 488 314 Honeymoon Well 1,180 — — — Total 15,319 23,526 195,929 55,436 Inferred Polar Division(1) 3,750 7,653 59,754 15,435 JSC Kola “GMK” 909 448 184 121 Honeymoon Well 2,827 — — — Total 7,486 8,101 59,938 15,556

(1) Inclusive of Medvezhy Ruchey (South Cluster).

132 The Company believes that 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 exploration in the Zabaikalsk region, primarily at the Bystrinskoye gold-iron-copper deposit. On 31 October 2017, the Group initiated hot commissioning of the project at the deposit. In 2018, 7.86 million tonnes of ore was mined at the Bystrinskoye deposit. The concentrator at the Bystrinsky project was launched in 2018 as part of the hot commissioning stage and was fully commissioned in September 2019.

Competitive Strengths

 Significant Mineral Resources and Ore Reserves. The Company estimates that under the JORC Code, as at 31 December 2018, the Group had proven and probable reserves in Russia of 784.5 million tonnes of ore, with a metal content of 6.9 million tonnes of nickel (comprising approximately 7.8% of global nickel reserves, according to U.S. Geological Survey), 12.1 million tonnes of copper, 93 million ounces of palladium and 24.7 million ounces of platinum, and measured and indicated resources (inclusive of proven and probable reserves) of 2,036 million tonnes of ore in Russia, with a metal content of 14.1 million tonnes of nickel (comprising approximately 10.8% of global nickel reserves, according to U.S. Geological Survey), 23.5 million tonnes of copper, 195.9 million ounces of palladium and 55.4 million ounces of platinum. At current production levels, the Company estimates that mineral resources of the Group in Russia have a life of approximately 80 years.

133  Global Distribution Network and Customer Base. The Group operates a global distribution network with sales offices located in Europe, Asia, North America and Russia, the regions of the 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”.

Strategy

The Group’s seeks to achieve a high and sustainable return on investment by efficiently operating the “Tier I” assets it owns in the regions that have the geological potential to expand its mineral resource base and where the Group has competitive advantages. The Group classifies an asset as “Tier I” if it generates annual revenues in excess of U.S.$1 billion, with Adjusted EBITDA margin in excess of 40%, and has an ore reserve life in excess of 20 years.

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

Rollout based on current assets

The South Cluster, the Group’s project to develop reserves in the northern part of the Norilsk-1 Deposit, is planned to reach total mining capacities of up to 9 million tonnes of ore per annum. The 134 full capacity is currently expected to be achieved in 2027. Once completed, total mining capacities are expected to increase up to 9 million tonnes. Based on the Group’s preliminary estimates, investments in the development of the South Cluster will be in excess of U.S.$1 billion in the next 15 years. After reaching its target capacity, the project is expected to add over 20 tonnes of PGMs per annum.

Finding new growth opportunities

Focus on operating and financial efficiency

As part of the production upgrade, the Group plans to improve labour productivity by up to 15%, from productivity levels in 2017, by 2020, improve equipment performance, adopt the practice of planning mining operations using simulation modelling systems and implement a full-scale roll-out of control systems. The Group also intends to ensure cost optimisation and higher recovery rates by fine-tuning the reagent mixes and modes of equipment operation, and improve ore conversion ratios through the enhanced enrichment of pyrrhotite tailings at the Talnakh Concentrator. The Group also plans to launch de-bottlenecking programmes across the production chain and accelerate the processing of additional secondary resources at the Copper Plant.

Sustainable development and social responsibility

135 will include the decommissioning of obsolete facilities, in conjunction with its increased focus on upstream production.

As part of this strategy, the Group had shut down the outdated Norilsk Nickel Plant in 2016 in conjunction with the expansion of the smelting capacity of the Nadezhda Metallurgical Plant, which reduced sulphur dioxide emissions in residential areas (in Norilsk) by 30-35%. In September 2018, the Group also launched the Sulphur Project at the Polar Division, which is a large-scale environmental project designed to achieve a reduction in sulphur dioxide emissions by the Nadezhda Metallurgical Plant and Copper Plant to the maximum permissible rates, with a goal of achieving a 75% decrease in sulphur dioxide emissions in the Norilsk Industrial District by 2023. The Nadezhda Metallurgical Plant will have new facilities for disposing sulphur-rich gases, while the capacities of the Copper Plant will be upgraded to capture sulphur dioxide and produce elemental sulphur. In addition, some of the Copper Plant’s most polluting facilities, emitting hard-to-capture off-gas, will be shut down due to their proximity to residential areas. Concurrently with the project, a number of infrastructure projects will be implemented to supply the new facilities with the necessary materials and power.

At JSC Kola “GMK”, the Group’s strategy is to optimise the smelting capacity utilisation rates at the metallurgical shop by separating the concentrate produced at JSC Kola “GMK”. In 2016, the agglomeration plant located at the Zapolyarny production site was shut down, and a copper-nickel conc briquette plant was launched, which has helped to reduce the sulphur dioxide emissions at JSC Kola “GMK” by 23%. JSC Kola “GMK” continues implementing the action plan to reduce sulphur dioxide emissions from the smelting shop at the Nickel site by upgrading the equipment (including the reconstruction of feeding and sealing systems of ore-thermal furnaces, gas dust replacement and preparation of furnace charge for smelting) and lowering smelting shop utilisation through the Outotec project, the utilisation of the concentrate separation and shipment facility at Zapolyarny and the sale of part of the concentrate produced by JSC Kola “GMK” to third parties. This is expected to have an environmental impact of at least 50% reduction of sulphur dioxide emissions by 2020, as compared to 2015, at JSC Kola “GMK” and achieve maximum permissible emission rates.

History and Development

The Norilsk Mining and Metallurgical Combine was founded in 1938. Development of the mines and processing plants continued throughout the Soviet era during which the Combine was 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 Mining and Metallurgical Combine, “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 Norilsk Mining and Metallurgical Combine named after Zavenyagin OJSC that formed part of the RAO Norilsk Nickel group.

In 2001, Norilsk Mining Company OJSC was renamed into OJSC Mining and Metallurgic Company Norilsk Nickel and increased its charter capital via a share issue under a closed subscription among the shareholders of RAO Norilsk Nickel payable in RAO Norilsk Nickel shares. As a result of the 136 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 Moscow Exchange (and its predecessors). In addition, in 2001, the Company established a sponsored Level I ADR programme.

In 2003, following amendments made to the Russian Law “On State Secrecy” in 2002, the Company launched public disclosure of operating performance and ore reserves and mineral resources. 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 was 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 one 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, adopted in 2013, 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 failed to complete due to the voluntary liquidation of the purchaser, which commenced in October 2016) and the Honeymoon Well deposit in Australia. In 2019, the Group and its operating partner, African Rainbow Minerals, reached an agreement to scale down production at Nkomati Nickel Mine with a view to consider placing the mine in care and maintenance from the second half of 2020, though no final decision has been made to this effect. The Australian and African assets were acquired by the Group in 2007 as part of the acquisition of LionOre and included a 85% stake in Tati Nickel in Botswana, a 50% stake in the 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 gold assets of North Eastern Goldfields Operations (“NEGO”), nickel assets of 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 March 2016, the Group established Global Palladium Fund L.P. The strategic objective of the Fund is to enhance market liquidity through purchases of third-party palladium stockpiles and making them available to the Group’s strategic end-user customers, as well as the promotion of the industrial use of the metal, aiming to strengthen the Group’s leading position in the global palladium industry.

137 On 15 April 2016, the Group sold its aircraft 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.

In April 2016, the Board of Directors of the Company approved the support of the Olympic skiing resort Rosa Khutor in Sochi, Russia, by providing a 3-year financing programme to acquire the 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 joined the United Nations Global Compact, the UN framework corporate social responsibility initiative promoting sustainability of businesses.

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.

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 2017, the Group sold a 36.66% interest in the Bystrinsky project to CIS NRF Holdings Limited, a Russia-focused natural resources fund, in which Olderfrey indirectly holds economic rights. In the same year, Highland Fund (through United Resources Limited) increased its stake in the Bystrinsky project to 13.33%. The Group owns a 50.01% interest in the Bystrinsky project, remains the operator of the project and is considering potential opportunities in connection with Bystrinsky GOK (including an IPO, a spin-off and other options).

On 31 October 2017, the Group launched hot commissioning operations at Bystrinsky GOK (Bystrinsky mining and processing plant).

In February 2018, the Company and LLC Russian Platinum signed a non-binding memorandum of understanding to consider the establishment of a joint venture for the further development of disseminated ore deposits in the Norilsk Industrial District. The memorandum provides that the Company and LLC Russian Platinum will each hold a 50% interest in the joint venture. The Company will contribute to the joint venture its subsidiary, which holds a license for Maslovskoe deposit, while LLC Russian Platinum will contribute its subsidiaries, holding licenses for the south flank of Norilsk-1, the Chernogorskoe deposit and the Zimnee deposit. The joint venture aims at becoming one of the world’s largest producers of PGMs with a target annual production volume of approximately 70-100 tonnes of PGMs. In August and September 2019, in furtherance of this project, the Company filed applications with the Federal Antimonopoly Service of Russia seeking necessary approvals required under Russian law.

In October 2018, BASF and the Company announced that BASF has selected Harjavalta, Finland, as its first location for a plant for battery materials production serving the European automotive market. The plant is planned to be constructed adjacent to the nickel and cobalt refinery operated by the Group. Additionally, BASF and the Company have signed a long-term market-based supply agreement for nickel and cobalt feedstocks from the Group’s metal refinery.

The concentrator at the Bystrinsky project was launched in 2018 as part of the hot commissioning stage and was fully commissioned in September 2019.

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.

138 The following chart shows the organisational structure of the main companies within the Group.

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.

MINING AND METALS OPERATIONS

The Group’s operations in Russia mainly comprise the Polar Division, South Cluster (Medvezhy Ruchey), JSC Kola “GMK” and GRK “Bystrinskoye”, in which the Group owns a 50.01% interest. In 2018, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 72%, 96%, 98% and 98% 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.

139 Mining, Ore Enrichment, Smelting and Refined Metal Production

The Group extracts and processes ores in Russia to produce nickel, copper and PGMs in Russia and Finland.

Group Ore Extraction

In 2018, the Group extracted 36.2 million tonnes of ore, of which 91% was extracted by the Group’s operations in Russia (28.5 million tonnes of ore, of which 88% was extracted by the Group’s operations in Russia, in 2017). 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 2018 2017 Ore Nickel Copper PGM Ore Nickel Copper PGM Change (mt)(1) (%) (%) (g/t) (mt)(1) (%) (%) (g/t) (%)(2) Russia: (3) Polar Division and Medvezhy Ruchey ...... 17.3 1.3 2.2 6.7 17.4 1.3 2.2 6.8 (1) JSC Kola “GMK” ...... 7.9 0.6 0.2 0.1 7.6 0.5 0.2 0.1 4 Total Russia...... 25.2 25.0 1 South Africa...... 3.1 0.3 0.1 − 3.5 0.3 0.1 − (11) TOTAL ...... 28.3 28.5 (1)

Year ended 31 December 2016 Ore Nickel Copper PGM (mt)(1) (%) (%) (g/t) Russia: (3) Polar Division and Medvezhy Ruchey ...... 17.2 1.2 2.1 6.8 JSC Kola “GMK” ...... 7.6 0.5 0.2 0.1 Total Russia...... 24.8 South Africa...... 2.8 0.4 0.1 − TOTAL ...... 27.6

(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 the Nkomati Nickel Mine. (2) Refers to the change in volumes of ore extraction on a period-to-period basis. (3) Does not reflect gold-copper-iron ore extracted from operations of GRK “Bystrinskoye”, which amounted to 7.9 million tonnes in 2018.

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 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:

Year ended 31 December 2018 2017 Enrichment Smelting Enrichment Smelting Ni Cu PGM Ni Cu PGM Ni Cu PGM Ni Cu PGM (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

Russia:(4) Polar Division and Medvezhy Ruchey (1) 81.5 94.6 82.7 94.6 94.4 95.9 79.9 94.7 81.5 93.9 94.0 95.6 JSC Kola “GMK”(2) 69.5 74.1 − 98.0 97.6 94.0 69.8 75.4 − 98.2 97.4 96.7 Finland(3) − − − 97.9 99.7 99.8 − − − 98.5 99.7 99.3 South Africa 65.9 88.4 − − − − 70.7 90.9 − − − −

140 Year ended 31 December 2016 Enrichment Smelting Ni (%) Cu (%) PGM (%) Ni (%) Cu (%) PGM (%) Russia:(4) Polar Division and Medvezhy Ruchey(1) 77.1 94.2 77.7 93.4 94.1 95.0 JSC Kola “GMK”(2) 69.0 73.6 − 98.0 97.1 93.4 Finland:(3) − − − 98.3 99.7 99.4 South Africa 70.6 89.5 − − − −

(1) PGM recovery rates for the Polar Division and Medvezhy Ruchey (South Cluster) 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) Includes recovery data from the smelter operated by Boliden AB. (4) Does not reflect data from operations of GRK “Bystrinskoye”.

Group Metal Production

In 2018, the Group produced 218.8 thousand tonnes of nickel, 473.7 thousand tonnes of copper, 2,729 thousand ounces of palladium and 653 thousand ounces of platinum, as compared with 217.1 thousand tonnes of nickel, 401.1 thousand tonnes of copper, 2,780 thousand ounces of palladium and 670 thousand ounces of platinum in 2017 and 235.7 thousand tonnes of nickel, 360.2 thousand tonnes of copper, 2,618 thousand ounces of palladium and 644 thousand ounces of platinum in 2016. In the six months ended 30 June 2019, the Group produced 109.7 thousand tonnes of nickel, 251.3 thousand tonnes of copper, 1,553 thousand ounces of palladium and 388 thousand ounces of platinum, as compared with 103.5 thousand tonnes of nickel, 229.6 thousand tonnes of copper, 1,395 thousand ounces of palladium and 335 thousand ounces of platinum in the six months ended 30 June 2018.

The following table sets out the total commercial metal production of the Group’s operations for the periods indicated:

Six months ended 30 June Change (Tonnes or as stated)(1) 2019(1) 2018(1) (%) Russia (Polar Division and JSC Kola “GMK”) Nickel ...... 80,039 75,541 6 Copper ...... 223,160 215,481 4 Palladium (‘000 ounces)...... 1,497 1,367 10 Platinum (‘000 ounces)...... 380 331 15 Russia (GRK “Bystrinskoye”) (5) Copper ...... 20,253 5,022 303 Gold (‘000 ounces)...... 87 21 313 Iron ore concentrate (‘000 tonnes)...... 505 26 1,842 Finland(3) Nickel ...... 29,643 27,982 6 Copper ...... 7,891 9,066 (13) Palladium (‘000 ounces)...... 36.3 28.3 28 Platinum (‘000 ounces)...... 8.2 4 105 South Africa Nickel in concentrate...... 3,792 3,285 15 Copper in concentrate...... 1,971 1,444 36 Palladium in concentrate (‘000 ounces) ...... 19 15 29 Platinum in concentrate (‘000 ounces) ...... 8 6 33 TOTAL Nickel...... 109,682 103,523 6 Copper...... 251,304 229,569 9 141 Palladium (‘000 ounces)...... 1,533 1,395 10 Platinum (‘000 ounces)...... 388 335 16

(1) The information for the six months ended 30 June 2019 and 2018 has been derived from the preliminary production results of the Group for six months ended 30 June 2019, as published on 31 July 2019.

Six months ended 30 June Change (Tonnes or as stated)(1) 2018(1) 2017(1) (%) Russia (Polar Division and JSC Kola “GMK”) Nickel ...... 75,541 75,853 0 Copper ...... 215,481 189,703 14 Palladium (‘000 ounces)...... 1,367 1,307 5 Platinum (‘000 ounces)...... 331 313 6 Russia (GRK “Bystrinskoye”) (5) ...... Copper ...... 5,022 − n/a Gold (‘000 ounces)...... 21 − n/a Iron ore concentrate (‘000 tonnes)...... 26 − n/a Finland (4) ...... Nickel ...... 27,982 27,052 3 Copper ...... 9,066 5,220 74 Palladium (‘000 ounces)...... 28.3 27 4 Platinum (‘000 ounces)...... 4 7 (43) South Africa...... Nickel in concentrate...... 3,285 4,639 (29) Copper in concentrate...... 1,444 2,262 (36) Palladium in concentrate (‘000 ounces) ...... 15 24 (38) Platinum in concentrate (‘000 ounces) ...... 6 10 (40) TOTAL...... Nickel...... 103,523 102,905 1 Copper(5) ...... 229,569 194,923 18 Palladium (‘000 ounces)...... 1,395 1,334 5 Platinum (‘000 ounces)...... 335 320 5

(1) The information for the six months ended 30 June 2018 and 2017 has been derived from the preliminary production results of the Group for the six months ended 30 June 2018, as published on 31 July 2018.

Year ended 31 December Change (Tonnes or as stated)(1) 2018 2017 (%) Russia (Polar Division and JSC Kola “GMK”) Nickel ...... 158,005 157,396 0 Copper ...... 436,201 387,640 13 Palladium (‘000 ounces)...... 2,671 2,738 (2) Platinum (‘000 ounces)...... 642 660 (3) Russia (GRK “Bystrinskoye”) (5) Copper ...... 19,417 − n/a Gold (‘000 ounces)...... 90 − n/a Iron ore concentrate (‘000 tonnes)...... 346 − n/a Finland (2) (3) Nickel ...... 60,765 59,716 2 Copper ...... 18,036 13,441 34 Palladium (‘000 ounces)...... 58 42 38 Platinum (‘000 ounces)...... 11 10 10 South Africa(3) Nickel in concentrate...... 6,597 8,006 (18) Copper in concentrate...... 3,055 4,504 (32) Palladium in concentrate (‘000 ounces) ...... 33 46 (28)

142 Platinum in concentrate (‘000 ounces) ...... 13 20 (35) TOTAL Nickel...... 218,770 217,112 1 Copper...... 473,654 401,081 18 Palladium (‘000 ounces)...... 2,729 2,780 (2) Platinum (‘000 ounces)...... 653 670 (3)

Year ended 31 December Change (Tonnes or as stated)(1) 2017 2016 (%) Russia (Polar Division and JSC Kola “GMK”) Nickel ...... 157,396 182,095 (14) Copper ...... 387,640 350,619 11 Palladium (‘000 ounces)...... 2,738 2,554 7 Platinum (‘000 ounces)...... 660 622 6 Finland (2) (3) Nickel ...... 59,716 53,654 11 Copper ...... 13,441 9,598 40 Palladium (‘000 ounces)...... 42 64 (34) Platinum (‘000 ounces)...... 10 22 (55) South Africa(3) Nickel in concentrate...... 8,006 8,486 (6) Copper in concentrate...... 4,504 4,007 12 Palladium in concentrate (‘000 ounces) ...... 46 40 15 Platinum in concentrate (‘000 ounces) ...... 20 15 33 TOTAL Nickel...... 217,112 235,749 (8) Copper(5) ...... 401,081 360,217 11 Palladium (‘000 ounces)...... 2,780 2,618 6 Platinum (‘000 ounces)...... 670 644 4

(1) All data provided is based on 100% ownership, with the exception of the 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 Nkomati Nickel Mine is processed at Norilsk Nickel Harjavalta’s refinery in Finland and is included in the results of that entity. (4) Production results include processing of nickel concentrate from Russian feed and purchased materials. (5) Production results of GRK “Bystrinskoye”, in which the Group owns a 50.01% interest, are reported as metal contained in saleable concentrate on a 100% basis and fully consolidated in total operational results of the Group.

Group metal production targets

In 2018, the Company developed a 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 production from own feedstock for 2018 for its four main metals, together with the targets (expressed as a range) for annual production beyond 2025, respectively:

Metal(1) 2018 2025+ Nickel (‘000 tonnes) ...... 217 >240 Copper (‘000 tonnes) ...... 454 >460 Platinum (‘000 ounces)...... 653 4,180 (Platinum Palladium (‘000 ounces) ...... 2,729 and Palladium)

(1) Excluding GRK “Bystrinskoye” and Nkomati Nickel Mine. 143 Mining and Metals Operations at Norilsk Nickel Russia

The Group’s operations in Russia mainly comprise the Polar Division, and South Cluster, both located on the Taymir Peninsula, as well as its JSC Kola “GMK” subsidiary and GRK “Bystrinskoye”, in which the Group owns a 50.01% interest. In 2018, production of nickel, copper, palladium and platinum at the Group’s Russian operations represented 72%, 96%, 98% and 98% of total Group production of those respective metals, as compared with 72%, 97%, 98% and 99%, respectively, in 2017 and 77%, 97%, 98% and 97%, respectively, in 2016.

Polar Division and South Cluster

The Group’s Polar Division and South Cluster are located above the Arctic Circle on the Taimyr Peninsula in the Krasnoyarsk region of Russia. The Polar Division and South Cluster conduct 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 concentrators and two 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”.

Ore mining

The Group’s Polar Division conducts mining operations at the Talnakh ore field, comprising the Oktyabrskoye deposit and the Talnakh deposit, whereas South Cluster conducts mining operations at the Norilsk ore field, comprising the Zapolyarny underground mine and Medvezhy Ruchey open pit (South Cluster) at the Norilsk-1 deposit. These deposits contain sulphide copper-nickel ores from which nickel, copper, palladium and platinum, as well as cobalt, gold and other joint metals are extracted.

The following table sets forth the different types of copper-nickel sulphide ores found at the deposits that the Polar Division and Medvezhy Ruchey mine, 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, cuprous Komsomolskaya mine Underground Rich, cuprous and disseminated Talnakh deposit Mayak mine Underground Rich, disseminated Komsomolskaya mine Underground Cuprous and disseminated Skalisty mine Underground Rich, cuprous Norilsk-1 Deposit Medvezhy Ruchey Open Disseminated Zapolyarny mine Underground Disseminated

Underground development at the Polar Division is conducted by layer and chamber systems of development with backfilling. At the Zapolyarny mine, operated by LLC Medvezhy Ruchey, underground development operations involve the collapse of embedded rocks and sublevel caving.

The following table sets out the total volumes of ore mined at the Polar Division and South Cluster (Medvezhy Ruchey) for the periods indicated:

144 Year ended 31 December 2018-2017 2017-2016 Change Change Total ore mined (‘000 tonnes) 2018 2017 2016 (%) (%) Rich ...... 6,756 6,593 6,192 2.5 6.5 Cuprous...... 6,792 7,166 7,081 (5.2) 1.2 Disseminated ...... 3,776 3,619 3,972 4.3 (8.9) Total...... 17,324 17,378 17,244 (0.3) 0.8

Polar Division 15,650 15,742 15,209 (0.6) 3.5 Rich ...... 6,756 6,593 6,192 2.5 6.5 Cuprous...... 6,792 7,166 7,081 (5.2) 1.2 Disseminated ...... 2,102 1,983 1,936 6.0 2.4 Medvezhy Ruchey...... 1,674 1,636 2,036 2.3 (19.6) Disseminated ...... 1,674 1,636 2,036 2.3 (19.6)

In 2018, the Polar Division and Medvezhy Ruchey (South Cluster) extracted 17,324 thousand tonnes of ore, a decrease of 0.3% in comparison to 2017, when the Polar Division and Medvezhy Ruchey (South Cluster) extracted 17,378 thousand tonnes of ore. The extraction of rich and cuprous ore amounted to 6,756 thousand tonnes and 6,792 thousand tonnes, respectively, an increase of 2.5% and a decrease of 5.2%, respectively, as compared with 6,593 thousand tonnes and 7,166 thousand tonnes, respectively, extracted in 2017. The increase in the extraction of rich ores was primarily due to the increase in ores mined at the Taimyrsky and Skalisty mines, while the decrease in the extraction of cuprous ores was primarily due to an increase in the production of rich and disseminated ores. The extraction of disseminated ore increased by 157 thousand tonnes in 2018, representing an increase of 4.3%, as compared with 2017. The increase resulted from an increase in ores mined at Mayak mine and Medvezhy Ruchey mine.

In 2017, the Polar Division and Medvezhy Ruchey extracted 17,378 thousand tonnes of ore, an increase of 0.8%, compared with 17,245 thousand tonnes of ore extracted in 2016. The extraction of cuprous ore increased by 85 thousand tonnes in 2017, as compared with 2016, primarily as a result of an increase in ores mined at the Oktyabrsky and Komsomolsky mines. The extraction of disseminated ore decreased by 353 thousand tonnes in 2017, representing a decrease of 8.9%, as compared with 2016, primarily as a result of a decrease in ores mined at Medvezhy Ruchey mine. The extraction of rich ore increased by 401 thousand tonnes in 2017, representing an increase of 6.5%, as compared with 2016, primarily as a result of an increase in ores mined at the Taimyrsky and Skalisty mines.

Enrichment

Ores extracted from the deposits mined by the Polar Division and Medvezhy Ruchey (South Cluster) are enriched at the Group’s Talnakh and Norilsk Concentrators, which are located in the Norilsk industrial district. The Talnakh Concentrator processes rich, cuprous and disseminated ores mined at the Oktyabrskoye and Talnakh deposits to produce nickel, copper and pyrrhotite concentrates, and has an annual capacity to process 10.2 million tonnes of ore. The Norilsk Concentrator processes the disseminated ores from the Talnakh, Oktyabrskoye and Norilsk-1 deposits and cuprous ores from the Talnakh and Oktyabrskoye deposits to produce nickel and copper concentrates. The Norilsk Concentrator has an annual capacity to process 9.3 million tonnes of ore. Condensed concentrates from the Talnakh and Norilsk Concentrators are transferred by pulp line for further processing at the Polar Division and Medvezhy Ruchey’s (South Cluster’s) metallurgical facilities. The Group is currently upgrading the Talnakh Concentrator to increase its annual capacity to up to 18 million tonnes of ore. See “—Capital Expenditure”.

In 2018, the Polar Division and Medvezhy Ruchey’s (South Cluster’s) enrichment plants processed an aggregate of 17.2 million tonnes of extracted ores, a decrease of 0.3 million tonnes, as compared with 17.5 million tonnes of extracted ores processed in 2017. In 2018, the Talnakh Concentrator processed 10.4 million tonnes of extracted ores, an increase of 0.4 million tonnes, as compared with 10.0 million tonnes of extracted ores processed in 2017. The recovery rate of nickel in nickel concentrate increased by 1.5% as compared with 2017, primarily due to the completion of the debugging stage of the 145 technological process at the TOF 2PK. The Norilsk Concentrator processed 6.8 million tonnes of ore, a decrease of 0.7 million tonnes, as compared with 7.5 million tonnes of ore in 2017, primarily due to the redistribution of ore to the TOF. At the Norilsk Concentrator, the recovery rate of nickel from nickel concentrate increased by 0.2%, as compared with 2017, primarily due to improvements in processing efficiency and the high quality of extracted ores.

In 2017, the Norilsk Concentrator became part of LLC Medvezhy Ruchey. In 2017, the Polar Division and Medvezhy Ruchey’s (South Cluster’s) enrichment plants processed in aggregate 17.5 million tonnes of extracted ores, an increase of 0.8 million tonnes, as compared with 16.7 million tonnes of extracted ores processed in 2016. In 2017, the amount of ore processed at the Norilsk Concentrator decreased by 0.6 million tonnes, as compared with 2016, due to the redistribution of ore to the TOF, while the recovery rate of nickel in nickel concentrate increased by 0.8% to 71.7%, as compared with 2016, primarily due to improvements in processing efficiency and the high quality of extracted ore. In 2017, the amount of ore processed at the Talnakh Concentrator increased by 1.4 million tonnes, as compared with 2016, and the recovery rate of nickel in nickel concentrate increased by 2.2%, to 81.7%, as compared with 2016, due to the achievement of full design capacity by the TOF 2PK project.

Smelting

The metallurgical facilities of the Polar Division include the Nadezhda Metallurgical Plant, as well as the Copper Plant. The Group decommissioned the Nickel Plant in August 2016 to concentrate nickel refining facilities at the Nadezhda Metallurgical Plant. See “—Capital Expenditure”.

The Nadezhda Metallurgical Plant processes all the nickel and pyrrhotite concentrates produced by the Talnakh and Norilsk Concentrators, as well as nickel slag produced by the Copper Plant, in order to produce nickel matte and elemental sulphur.

The Copper Plant processes copper concentrates produced by the Norilsk and Talnakh Concentrators as well as third-party copper feedstock, to produce commercial copper cathodes, elemental sulphur and sulphuric acid. The Copper Plant includes a metallurgical shop, which recycles sludge from the copper electrolysis shops and dried copper sludge from JSC Kola “GMK” to produce precious metals concentrate, metallic silver, selenium and tellurium.

In September 2018, the Group launched the Sulphur Project at the Polar Division, a large-scale environmental project designed to achieve a reduction in sulphur dioxide emissions by the Nadezhda Metallurgical Plant and Copper Plant to the maximum permissible rates, with a goal of achieving a 75% decrease in sulphur dioxide emissions in the Norilsk Industrial District by 2023. Under the project, the Nadezhda Metallurgical Plant will have new facilities for disposing of sulphur-rich gases, while the Copper Plant will see an upgrade of its capacities that capture sulphur dioxide and produce elemental sulphur. In addition, some of the Copper Plant’s most polluting facilities that emit off-gas that is hard to capture will be shut down due to their proximity to the residential area. Concurrently with the project, a number of infrastructure projects will be implemented to supply the new facilities with all the necessary materials and power.

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 each of the Nadezhda Metallurgical Plant, Nickel Plant and the Copper Plant for the periods indicated:

146 Year ended 31 December Capacity utilisation levels (%) 2018 2017 2016 Nadezhda Metallurgical Plant...... 98.1 100.7 95.3 Norilsk Nickel Plant(1) Ore thermal furnace ...... - - 76 Nickel electrolysis shop ...... - - 82 Copper Plant Vanukov furnace...... 100 98.9 83.1 Copper electrolysis shop...... 100.5 87.2 79.4

(1) Nickel Plant was decommissioned in August 2016. The table above reflects capacity utilisation level to that time.

In 2018, the average recovery rate for nickel, copper and PGMs at the Group’s metallurgical plants at the Polar Division were 94.6%, 94.4%, and 95.9%, respectively, as compared with 93.9%,94.0% and 95.6%, respectively, in 2017 and 93.4%, 94.1% and 95.0%, respectively, in 2016.

JSC Kola “GMK”

Kola “GMK” is a wholly owned subsidiary of the Company and a significant production asset of the Company.

JSC Kola “GMK” is located in Russia on the Kola Peninsula in Murmansk region and is fully integrated into the transportation infrastructure of the North Western federal district of Russia. 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 mainly underground 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 2018, JSC Kola “GMK” extracted 7,899 thousand tonnes of ore, an increase of 256 thousand tonnes, or 3.4%, as compared with 7,643 thousand tonnes of ore extracted in 2017 and an increase of 3.7%, as compared with 2016.

Enrichment

The ore extracted from the deposits mined by JSC Kola “GMK” is processed at its Kola Enrichment Plant to produce combined (copper and nickel) concentrate. The concentrate is then transferred to the bracketing section for further processing in the smelting shop into high-grade matte. In 2018, the Kola Enrichment Plant processed 7.9 million tonnes of ore, an increase of 0.3 million tonnes, as compared with 2017. In 2018, the average recovery rates for nickel and copper at the Kola

147 Enrichment Plant were 69.5% and 74.1% respectively, as compared with 69.8% and 75.4%, respectively, in 2017 and 69.0% and 73.6%, respectively, in 2016.

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, and include refining, smelting and electrolysis shops. The main products produced at the Monchegorsk refinery are electrolytic nickel and copper, carbonyl nickel, cobalt concentrate and electrolytic cobalt, crushed high-grade matte, nickel and copper matte and precious metals concentrates. The refining process also produces sulphuric acid. In 2018, the average recovery rates for nickel, copper and PGMs at the Monchegorsk refinery were 98%, 97.6% and 94%, respectively, as compared with 98.2%, 97.4% and 96.7%, respectively, in 2017 and 97%, 97.1% and 93.4%, respectively, in 2016. The Group outsources the refining of precious metals concentrates produced by JSC Kola “GMK” under tolling agreements to OJSC Krascvetmet.

In 2018, the Group continued implementing technological improvements to the smelting capacities of JSC Kola “GMK” and continued to maintain key technological equipment.

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 (%) 2018 2017 2016 Nickel ore smelting furnace...... 64.6 64.7 62.2 Nickel electrolysis shop ...... 90.8 92.7 88.86 Carbonyl nickel division...... 62.5 39.8 37.50 Copper metallurgical shop ...... 88.9 90.2 81.71

GRK “Bystrinskoye”

GRK “Bystrinskoye” (Bystrinsky GOK), in which the Group owns a 50.01% interest, is estimated to be the largest project from early stage exploration to commissioning in the Russian metals industry, covering ore mining, concentration and shipment of end products to customers. The design mining and processing capacity of Bystrinsky GOK is approximately 10 million tonnes of ore per annum. The construction of Bystrinsky GOK started in 2013. In October 2017, the Company launched the hot commissioning phase of the project, with the target to reach its design capacity after 2020. The concentrator at the Bystrinsky project was launched in 2018 as part of the hot commissioning stage and was fully commissioned in September 2019.

Bystrinsky GOK is located in the Gazimuro-Zavodsky District of the Zabaikalsky Kray, southeast of Gazimursky Zavod in the Ildikan valley (350 kilometres from Chita). The closest residential areas are Novoshirokinsky, 14 kilometres northeast of the facility, and Gazimursky Zavod, a district capital 25 kilometres to the northwest. The Naryn 1-Gazimursky Zavod railway line was built to facilitate mining in the southeast of the Zabaikalsky Kray.

Ore mining

Bystrinsky GOK mines gold-iron-copper ores. The following table shows the deposits that Bystrinsky GOK mines, together with an indication of the method of extraction.

Deposit and pit/mine Type of pit/mine Type of ore Bystrinskoe deposit...... Open pit gold-iron-copper

In 2018, Bystrinsky GOK extracted 7.9 million tonnes of ore.

148 Enrichment

Construction of Bystrinsky GOK began in 2015, with the concentrator intended to process ores of the Bystrinskoye Deposit to produce copper, magnetite and gold concentrates. The key processing stages include crushing, milling, flotation, thickening, filtration and packaging. The concentrator is designed to have two separate processing streams, one of which was launched in November 2017 and the second one was launched in April 2018 as part of the hot commissioning stage. The concentrator was fully commissioned in September 2019. Copper and magnetite concentrates are sold to third parties, while gold concentrates are further processed at the Group’s Polar Division.

In 2018, Bystrinsky GOK processed 3.8 million tonnes of extracted ores, produced 76.5 thousand tonnes of copper concentrate, 346.2 thousand tonnes of magnetite concentrate and 92.4 tonnes of gold concentrate.

Bystrinsky GOK has the capacity to process 10,000 thousand tonnes of ore per year.

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:

Six months ended 30 June Change Amount (tonnes unless indicated) 2019(1) 2018(1) (%) Polar Division Nickel ...... 0 0 0 Copper ...... 179,722 175,930 2 Palladium (‘000 ounces)...... 461 432 7 Platinum (‘000 ounces)...... 114 111 3 JSC Kola “GMK” Nickel ...... 80,039 75,541 6 Copper ...... 43,438 39,551 10 Palladium (‘000 ounces)...... 1,036 935 11 Platinum (‘000 ounces)...... 266 220 21 TOTAL ...... Nickel ...... 80,039 75,541 6 Copper(2) ...... 223,160 215,481 4 Palladium (‘000 ounces) ...... 1,497 1,367 10 Platinum (‘000 ounces)...... 380 331 15

Year ended 31 December 2018-2017 2017-2016 Change Change Amount (tonnes unless indicated) 2018 2017 2016 (%) (%) Polar Division Nickel ...... 0 0 50,860 0 (100) Copper ...... 353,131 306,859 280,347 15 9 Palladium (‘000 ounces)...... 987 956 1,703 3 (44) Platinum (‘000 ounces)...... 260 259 449 0 (42) JSC Kola “GMK” Nickel ...... 158,005 157,396 131,235 0 20 Copper ...... 83,070 80,781 70,272 3 15 Palladium (‘000 ounces)...... 1,684 1,782 851 (5) 109 Platinum (‘000 ounces)...... 382 401 173 (5) 132 TOTAL

149 Year ended 31 December 2018-2017 2017-2016 Change Change Amount (tonnes unless indicated) 2018 2017 2016 (%) (%) Nickel ...... 158,005 157,396 182,095 0 (14) Copper ...... 436,201 387,640 350,619 13 11 Palladium (‘000 ounces) ...... 2,671 2,738 2,554 (2) 7 Platinum (‘000 ounces)...... 642 660 622 (3) 6

(1) Total figures of copper do not include data from operations of GRK “Bystrinskoye”.

In the six months ended 30 June 2019, the Group’s main Russian operations (the Polar Division, Medvezhy Ruchey (South Cluster) and JSC Kola “GMK”) produced 80,039 tonnes of nickel, an increase of 6% as compared with 75,541 tonnes of nickel produced in the six months ended 30 June 2018, largely as a result of expansion of carbonyl nickel production capacities at JSC Kola “GMK”. The Group’s main Russian operations accounted for 223,160 tonnes of copper in the six months ended 30 June 2019, an increase of 4% as compared with 215,481 tonnes of copper in the six months ended 30 June 2018, mainly as a result of increased mined ore volumes with higher grades at the Polar Division and higher volumes of copper concentrate at JSC Kola “GMK”. Palladium and platinum production increased by 10% and 15%, respectively, to 1,497 thousand ounces of palladium and 380 thousand ounces of platinum in the six months ended 30 June 2019 as compared with 1,367 thousand ounces of palladium and 331 thousand ounces of platinum in the six months ended 30 June 2018. The increase of palladium and platinum production was primarily due to an increase of accumulated work- in-progress inventory at Krasnoyarsk precious metals refinery.

In 2018, the Group’s main Russian operations produced 158,005 tonnes of nickel, which was slightly above the volume of nickel produced in 2017. The Group’s main Russian operations produced 436,201 tonnes of copper in 2018, an increase of 13% as compared with 387,640 tonnes of copper produced in 2017, largely as a result of the increase of processed volumes of concentrate purchased from Rostec, and the Talnakh Concentrator reaching its design parameters after modernisation. The Group’s main Russian operations produced 2,671 thousand ounces of palladium in 2018, a decrease of 2% as compared with 2,738 thousand ounces of palladium produced in 2017. Platinum production amounted to 642 thousand ounces in 2018, resulting in a decrease of 3% as compared with 660 thousand ounces of palladium produced in 2017, from 2016.

In 2017, the Group’s main Russian operations produced 157,396 tonnes of nickel, a decrease of 14% as compared with 182,095 tonnes of nickel produced in 2016, largely as a result of reconfiguration of downstream production facilities, which included the shutdown of the Group’s Nickel Plant, and an increase of processing volumes of Russian feed (nickel matte) produced at the Polar Division at the refineries of JSC Kola “GMK” and Norilsk Nickel Harjavalta. The Group’s main Russian operations produced 387,640 tonnes of copper in 2017, an increase of 11% as compared with 350,619 tonnes of copper produced in 2016. The Group’s Russian operations produced 2,738 thousand ounces of palladium in 2017, an increase of 7% as compared with 2,554 thousand ounces of palladium produced in 2016. Platinum production increased by 6% to 660 thousand ounces in 2017.

The following table sets out the total volumes of production of copper, gold and iron ore concentrate at GRK “Bystrinskoye” for the periods indicated:

Six months ended 30 June Amount (tonnes unless indicated) 2019(1) 2018(1) Change (%) Russia (GRK “Bystrinskoye”) Copper ...... 20,253 5,022 303 Gold (‘000 ounces) ...... 87 21 313 Iron ore concentrate (‘000 tonnes)...... 505 26 1842

(1) The information for the six months ended 30 June 2019 and 2018 has been derived from the preliminary production results of the Group for the six months ended 30 June 2019, as published on 31 July 2019. 150 Year ended 31 December Amount (tonnes unless indicated) 2018 2017 Change (%) Russia (GRK “Bystrinskoye”) Copper ...... 19,417 − n/a Gold (‘000 ounces) ...... 90 − n/a Iron ore concentrate (‘000 tonnes)...... 346 − n/a

In the six months ended 30 June 2019, the enrichment plant at GRK “Bystrinskoye” increased its output of copper, gold and iron ore concentrates by 303%, 313% and 1,842%, respectively, from the six months ended 30 June 2018. It is expected that during 2020, the enrichment plant at GRK “Bystrinskoye” will reach its ore production design capacity of 10 million tonnes per annum.

Metals and mining operations outside of Russia

Following the sale of some of the Group’s 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 a 50% participation interest in the Nkomati Nickel Mine in Africa 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 JSC Kola “GMK”. It has the capacity to produce approximately 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 six months ended 30 June 2019, Norilsk Nickel Harjavalta produced 29,643 tonnes of nickel, 7,891 tonnes of copper, 36 thousand ounces of palladium and 8 thousand ounces of platinum, as compared with 27,982 tonnes of nickel, 9,066 tonnes of copper, 28 thousand ounces of palladium and 4 thousand ounces of platinum in the six months ended 30 June 2018. 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 2018, Norilsk Nickel Harjavalta produced 60,765 tonnes of nickel, 18,036 tonnes of copper, 58 thousand ounces of palladium and 11 thousand ounces of platinum, as compared with 59,716 tonnes of nickel, 13,441 tonnes of copper, 42 thousand ounces of palladium and 10 thousand ounces of platinum in 2017 and 53,654 tonnes of nickel, 9,598 tonnes of copper, 64 thousand ounces of palladium and 22 thousand ounces of platinum in 2016. The refining capacity utilisation level at Harjavalta was 92% in 2018, as compared with 90% in 2017 and 81% in 2016. The increase in nickel, copper, palladium and platinum production levels in 2018 as compared with 2017 was primarily 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.

Australia

The Group holds an exploration licence for the Honeymoon Well nickel-sulphide ore deposit and adjacent exploration tenements in Western Australia. As at 31 December 2018, the Group has 151 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 2018. 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 6,867 12,129 92,957 24,660 Resources Measured and Indicated 15,319 23,526 195,929 55,436 Inferred 7,486 8,101 59,938 15,556

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 northern part of the Norilsk-1 Deposit, which contains disseminated ores. As at 31 December 2018, the total proven and probable reserves of these deposits comprised 683,625 thousand tonnes of ore, containing 6,286 thousand tonnes of nickel, 11,858 thousand tonnes of copper, 92,864 thousand ounces of palladium and 24,600 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 2018, the total proven and probable reserves of these deposits comprised 100,918 thousand tonnes of ore, containing 581 thousand tonnes of nickel, 271 thousand tonnes of copper, 93 thousand ounces of palladium and 60 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 2018 (exclusive of the balance reserves of the Bystrinskoye deposit).

152 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...... 51,627 2.52 3.10 6.25 1.30 0.23 7.89 1,299 1,603 10,380 2,156 385 13,100 Cuprous...... 19,770 0.97 3.93 9.56 2.32 0.64 12.01 192 776 6,073 1,472 405 7,633 Disseminated...... 251,174 0.43 1.05 2.92 0.88 0.19 3.98 1,109 2,701 24,129 7,310 1,608 32,931 Total Talnakh ore field (combined ore types)...... 328,571 0.79 1.55 3.84 1.04 0.23 5.08 2,600 5,080 40,582 10,938 2,398 53,664 Norilsk-1 Deposit (disseminated ore)...... 21,628 0.35 0.51 3.95 1.58 0.18 5.82 76 110 2,744 1,101 122 4,045 Probable ore reserves Talnakh ore field Rich...... 79,629 2.90 3.95 7.11 1.40 0.26 9.05 2,308 3,145 18,199 3,581 664 23,160 Cuprous...... 61,380 0.75 3.17 7.12 1.86 0.52 9.20 461 1,944 14,057 3,666 1,017 18,153 Disseminated...... 170,613 0.46 0.88 2.60 0.75 0.18 3.56 780 1,499 14,273 4,100 995 19,515 Total Talnakh ore field (combined ore types)...... 311,622 1.14 2.11 4.64 1.13 0.27 6.07 3,549 6,588 46,529 11,347 2,676 60,828 Norilsk-1 Deposit (disseminated ore)...... 21,804 0.28 0.37 4.29 1.73 0.19 6.34 61 80 3,009 1,214 135 4,445 Total proven and probable ore reserves... 683,625 0.92 1.73 4.23 1.12 0.24 5.60 6,286 11,858 92,864 24,600 5,331 122,982 Measured and indicated mineral resources Talnakh ore field Rich...... 113,786 3.23 4.25 7.96 1.60 0.29 10.10 3,675 4,840 29,123 5,845 1,069 36,950 Cuprous...... 68,710 0.98 4.08 9.40 2.40 0.66 12.04 674 2,806 20,755 5,297 1,467 26,588 Disseminated...... 1,379,059 0.52 1.03 2.89 0.84 0.19 3.91 7,107 14,231 128,151 37,193 8,304 173,160 Total Talnakh ore field (combined ore types)...... 1,561,555 0.73 1.40 3.55 0.96 0.22 4.71 11,456 21,877 178,029 48,335 10,840 236,698 Norilsk-1 Deposit (disseminated ore)...... 147,010 0.30 0.38 3.68 1.44 0.15 5.42 436 560 17,412 6,787 725 25,598 Total measured and indicated mineral resources ...... 1,708,565 0.70 1.31 3.56 1.00 0.21 4.78 11,892 22,437 195,441 55,122 11,565 262,296 Total inferred mineral resources...... 440,898 0.85 1.74 4.22 1.09 0.25 5.54 3,750 7,653 59,754 15,435 3,545 78,321

JSC KOLA “GMK” (Disseminated ore) Proven ore reserves ...... 45,074 0.58 0.25 0.03 0.02 0.01 0.05 261 112 42 30 13 73 Probable ore reserves ...... 55,844 0.57 0.28 0.03 0.02 0.01 0.05 320 159 51 30 16 82 Total proven and probable ore reserves... 100,918 0.58 0.27 0.03 0.02 0.01 0.05 581 271 93 60 29 155 Total measured and indicated mineral resources ...... 327,777 0.69 0.33 0.05 0.03 0.02 0.08 2,247 1,089 488 314 177 862 Total inferred mineral resources...... 144,211 0.63 0.31 0.04 0.03 0.01 0.07 909 448 184 121 60 320

153 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 2018. 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 1,180 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

According to the Group Strategy, approved in November 2018, the Group’s total planned capital expenditure for 2019 to 2022 was expected to amount to up to U.S.$11.5 billion, of which it was expected that up to U.S.$7.5 billion would be allocated to its base investment program (which includes Talnakh mining projects, equipment replacement programs, IT and automation projects and other projects), up to U.S.$2.5 billion would be allocated to the Group’s environmental program, the Sulphur Project (with the peak in investments expected in 2020 and 2021), and up to U.S.$1.5 billion would be allocated to prospective growth projects (which include the Talnakh Concentrator upgrade, South Cluster development and other projects). For 2019, the Company expects annual capital expenditure of up to U.S.$2.2 billion and, for 2020 to 2022, according to the 2018 Group Strategy, average capital expenditure of approximately U.S.$2.6-3.0 billion per annum, including growth projects such as at the Talnakh Concentrator upgrade and the South Cluster development.

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 certain 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.

154 Brownfield projects

The main brownfield projects at the Polar Division include:

 At the Oktyabrsky mine: 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 2018, capital expenditures amounted to U.S.$40 million.

 At the Taimyrsky mine: 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 2018, capital expenditures amounted to U.S.$71 million.

 At the Komsomolsky mine: 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 2018, capital expenditures amounted to U.S.$44 million.

Greenfield projects

The main greenfield projects at the Polar Division comprise the Skalisty mine and the upgrade and expansion of the Talnakh Concentrator.

The Skalisty mine is in the process of construction, with approximately 60% of the works completed. The estimated total capital expenditures (between 2016 and 2023) of the project is U.S.$2.2 billion. The expected ore production in 2019 is 2.3 million tonnes per year. In 2018, ore production reached 2 million tonnes per year. The Group expects that this project will reach design capacity of 2.4 million tonnes per year by 2024.

The Group’s project to further upgrade the concentration facilities at the Talnakh Concentrator aims to remove bottlenecks to mining projects, improve performance through economies of scale and improve metal recovery rates. The project contemplates an increase in annual capacity of the plant from 10.2 to 18 million tonnes of ore per annum by 2023. 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 a reduction in the volume of sulphur emitted during the smelting process. The estimated total cost of the project is approximately U.S.$600 million.

The Group is also developing the South Cluster, which is comprised of the Norilsk Concentrator to the north of the Norilsk-1 Deposit, and Zapolyarny mine open pit and underground mining operations. In 2017, the Company established LLC Medvezhy Ruchey, a subsidiary that operates the assets of the South Cluster. As part of the South Cluster project, ore production is planned to be increased up to 9 million tonnes per annum. The estimated total cost of the project over the next 15 years is currently expected to be in excess of U.S.$1 billion. The Group expects that the project will reach its design capacity starting in 2027.

Maslovskoye deposit

The Maslovskoye deposit is located within the Norilsk industrial district, approximately 12 kilometres south of the Norilsk-1 Deposit. The feasibility study of the permanent exploration conditions and the report on calculating the reserves of the Maslovskoye deposit received a positive assessment by the Government Reserve Commission of the Federal Subsurface Management Agency of the Russian

155 Federation. The estimated ore reserves have been approved at the amount of approximately 207 million tonnes.

In February 2018, the Company and LLC Russian Platinum signed a non-binding memorandum of understanding to consider the establishment of a joint venture for the further development of disseminated ore deposits in the Norilsk Industrial District. The memorandum provides that the Company and LLC Russian Platinum will each hold a 50% interest in the joint venture. The Company will contribute to the joint venture its subsidiary, which holds a license for Maslovskoe deposit, while LLC Russian Platinum will contribute its subsidiaries, holding licenses for the southern flank of Norilsk- 1, the Chernogorskoe deposit and the Zimnee deposit. The joint venture aims at becoming one of the world’s largest producers of PGMs, with a target annual production volume of approximately 70-100 tonnes of PGMs. In August and September 2019, in furtherance of this project, the Company filed applications with the Federal Antimonopoly Service of Russia seeking necessary approvals required under Russian law.

Exploration and Development

Under the Group’s strategy, its exploration and development activities are currently focused in and around the Group’s Polar Division in the Zabaikalsk region. The main strategy objectives, as stated in the Exploration Strategy 2019, related to greenfield projects are focused on finding projects that generate synergetic effect for the development of existing production sites and infrastructure utilisation that could present new growth opportunities for the Group.

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 deep horizons and flanks of the Oktyabrskoye and Talnakh deposits.

In 2014, the Company started prospecting in the Lebyazhninskaya, Razvedochnaya, Mogenskaya, Khalilskaya, Nizhne-Khalilskaya and Nirungdinskaya areas in the Norilsk industrial district. In 2017, the Group started prospecting in the Western flank of the Oktyabrskoye deposit. Currently, exploration continues in all areas.

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. The project benefits from the recently constructed railroad needed to facilitate the development of the mineral resource potential of the southeast of the Zabaikalsk region and 220kv power line constructed pursuant to an agreement reached with Federal Grid Company. The project 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 gold-iron-copper deposit is located in the Gazimur-Zavodsky district of the Zabaikalsky region. 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 standalone assessment of the project future financial performance and is fully repaid as of the date of this Prospectus. In the same year, the Group sold a 10.67% share in the Bystrinsky project to Highland

156 Fund for U.S.$80 million. In May 2017, the Group sold a further 2.66% share in the Bystrinsky project for U.S.$21 million to Highland Fund. In 2017, the Group sold a 36.66% interest in the Bystrinsky project to CIS NRF Holdings Limited, a Russia-focused natural resources fund, in which Olderfrey indirectly holds economic rights. In the same year, Highland Fund increased its stake in the Bystrinsky project to 13.33%. The Group owns a 50.01% interest in the Bystrinsky project, remains the operator of the project and is considering potential opportunities in connection with Bystrinsky GOK (including an IPO, a spin-off and other options).

In October 2017, the Company launched the hot commissioning phase of the project, with the target to reach its design capacity after 2020. In 2018, 7.86 million tonnes of ore was mined at the Bystrinskoye deposit.

In 2018, the Bystrinsky project accounted for 4% of the Group’s total copper end products. Copper and magnetite concentrates are sold to third parties, while gold concentrates are further processed at the Group’s Polar Division.

The concentrator at the Bystrinsky project was launched in 2018 as part of the hot commissioning stage and was fully commissioned in September 2019.

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 2017, the right to use the deposit was suspended at the request of the Group for five years until 31 December 2022.

In 2015, the Company started prospecting in the Zapadno-Shakhtaminskaya, Tsentralno- Shakhtaminskaya and Chingitayskaya areas. Currently, exploration in all three areas is completed. No mineral deposits meeting the Company’s criteria for first-class assets have been discovered.

Historical Capital Expenditure

In 2018, 2017 and 2016, the aggregate capital investments (purchases of property, plant and equipment and intangible assets) of the Group amounted to U.S.$1.6 billion, U.S.$2 billion and U.S.$1.7 billion, respectively.

In 2018, the Group invested U.S.$696 million in the development, construction, reconstruction and modernisation of the Polar Division, including U.S.$218 million for the development of Skalisty mine, U.S.$71 million for the annual increase of ore mining on Taymyrsky mine, U.S.$44 million for the maintenance of the current ore mining volume on Komsomolskaya mine and U.S.$40 million for the maintenance of the current ore mining volume on Oktyabrsky mine. In addition, the Group invested U.S.$168 million in the implementation of the Bystrinsky project, U.S.$292 million in the development, construction, reconstruction and modernization of JSC Kola “GMK”, U.S.$49 million in South Cluster project development and U.S.$145 million in reconstruction and modernization of enterprises of energy and gas supply in the Norilsk industry district. The remainder of the Group’s capital expenditure in 2018 was allocated to capital repair, implementation of digitalisation projects and non-industry facilities.

In 2017, the Group invested U.S.$860 million in the development, construction, reconstruction and modernisation of the Polar Division, including U.S.$216 million for the development of Skalisty mine, U.S.$93 million for the annual increase of ore mining on Taymyrsky mine, U.S.$18 million for the maintenance of current ore mining volume on Komsomolskaya mine and U.S.$69 million for the maintenance of current ore mining volume on Oktyabrsky mine. In addition, the Group invested U.S.$449 million in the implementation of the Bystrinsky project and U.S.$228 million in the development, construction, reconstruction and modernisation of JSC Kola “GMK”. The remainder of

157 the Group’s capital expenditure in 2017 was allocated to capital repair, implementation of digitalisation projects and non-industry facilities.

In 2016, the Group invested U.S.$634 million in the mining enterprise development, including U.S.$361 million for the construction, reconstruction and modernisation of the Polar Division and U.S.$269 million for the implementation of the Bystrinsky project. In addition, 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, and the Group also invested U.S.$58 million in the development of smelting operations in the Polar Division and at JSC Kola “GMK” and U.S.$172 million in the development of power generating facilities. The remainder of the Group’s capital expenditures was primarily allocated to 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 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 LLC Maslovskoye Sulphide Maslovskoye deposit Krasnoyarsk 31.01.2019 01.06.2035 copper- nickel region ores LLC Medvezhy Copper- nickel Norilsk-1 Deposit Krasnoyarsk 13.07.2017 31.12.2037 Ruchey ores region LLC Medvezhy Refinement Tailing storage No.1 of Krasnoyarsk 13.07.2017 30.09.2021 Ruchey tailings of Norilsk Concentrator region sulphide copper- nickel ores JSC Kola “GMK” Sulphide Zhdanovskoye deposit Murmansk 30.12.1998 30.12.2031 copper- nickel region ores JSC Kola “GMK” Sulphide Kaula, Kotselvaara- Murmansk 08.02.2017 31.12.2024 copper- nickel Kammikivy and region ores Semiletka deposits JSC Kola “GMK” Sulphide Zapolyarnoye deposit Murmansk 30.12.1998 31.12.2030 copper- nickel region ores 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

158 Type of ore / Geographic Issuance Expiration Licence holder resource Name of deposit(s) Location date date 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 2021 and 2037. 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”.

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 Size of the Expiration Licence holder Ores studied and name of deposit site (km2) Issuance date date Company Sulphide copper- Krasnoyarsk region, 99 14.11.2014 15.11.2021 nickel ores Razvedochnaya area Company Sulphide copper- Krasnoyarsk region, 99 14.11.2014 15.11.2021 nickel ores Mogenskaya area Company Sulphide copper- Krasnoyarsk region, 99 14.11.2014 15.11.2021 nickel ores Lebyazhninskaya area Company Sulphide copper- Krasnoyarsk region, 52 18.07.2017 31.07.2024 nickel ores Western flank of the Oktyabrskoye deposit LLC Sulphide copper- Krasnoyarsk region, 100 14.11.2014 15.11.2021 Norilskgeology nickel ores Khalilskaya area LLC Sulphide copper- Krasnoyarsk region, 100 14.11.2014 15.11.2021 Norilskgeology nickel ores Nirungdinskaya area LLC Sulphide copper- Krasnoyarsk region, 100 14.11.2014 15.11.2021 Norilskgeology nickel ores Nizhne-Khalilskaya area LLC Copper, gold and Zabaikalsk region, 89 18.03.2015 31.03.2020 Vostokgeology associated Tsentralno- components Shakhtaminskaya area LLC Copper, gold, Zabaikalsk region, 97 18.03.2015 31.03.2020 Vostokgeology molybdenum and Zapadno- associated Shakhtaminskaya area components

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”.

159 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 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 4-4.5 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 October. 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 2018, the total waterborne cargo turnover of Dudinka Port was 3.5 million tonnes, including 1.3 million tonnes of cargo shipped via the Northern Sea Route and 2.2 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 2018, the Company's ships transported 1.4 million tonnes of cargo. In total, 66 voyages were made from Dudinka, including 10 direct voyages to ports of Europe (carrying metal products slated for export).

160 The Yenisei tanker exports gas condensate to ports of Europe from the Pelyatkinskoye gas condensate field. In 2018, the Yenisei tanker made 7 voyages from Dudinka and transported 89 thousand tonnes of cargo for the Group (gas condensate) and 133 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, all of which are owned by the Group. Gas produced at these fields is also sold directly to the Polar Division for use at its plants, while gas condensate are sold for export to Europe. In 2018, renewables accounted for 43.6% of total power consumed by the Group and 51.4% of power consumption in the Norilsk Industrial District.

The Group's investment programme embraces several large-scale priority projects to fully unlock the potential of renewable power sources and ensure energy savings. The total capital expenditure programme of U.S.$800 million for 2018-2022 includes modernization of energy infrastructure at the hydro plants and power units at the thermal plants.

Major projects include:

 reconstruction of the thermoelectric power stations TPS-2; and

 replacement of hydroelectric units and introduction of an automated dispatch system at Ust- Khantayskaya HPP.

The project for the replacement of all hydraulic components of Ust-Khantayskaya HPP is intended to ensure:

 an increase in the power capacity of the station, an increase in the production of electric power with reduced negative effects on the environment; and

 more efficient use of hydro-power resources, the optimization of conditions for the joint operation of water reservoirs of Ust-Khantayskaya and Kureyskaya hydroelectric power stations.

The project comprises seven stages, each of the stages includes reconstruction of one unit of hydraulic- turbine and generator equipment of hydraulic components, including main and ancillary equipment. The project is expected to be completed in 2021.

In 2017, the Group entered into an agreement for the reconstruction of one of thermoelectric power stations (TPS-2). This project includes a full scope of works for the replacement of two energy units to increase their power capacity by 150%. The project is in active implementation stage, installation and construction works are being conducted. The first energy unit is expected to be put into operation in 2020, and the second in 2022.

The Group’s other operations, including the JSC Kola “GMK”’s facilities (which have access to Russia’s national power grid), obtain their energy requirements from third-party suppliers.

161 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 support to drilling and blasting operations at the Group’s mining sites. The Polar Division is also responsible for the provision of the Group’s employees with meals and the food distribution network 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 also retains local independent contractors to perform repairs and maintenance works at its Russian operations, although some repairs and maintenance works are performed using the Group’s own resources.

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 management 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 and ecology management system operates in accordance with the requirements of the ISO 9001 and ISO 14001 international standards. In 2018, the Group confirmed the compliance of its quality and ecology management system with the ISO 9001:2015 and ISO 14001:2015 international standards based on the results of a supervisory re-certification audit performed by Bureau Veritas. The Group is certified for production, project management, storage, delivery including sea transportation and sales of products (nickel, copper, cobalt, precious metals, sulphur, selenium, tellurium). The Group’s compliance with these international standards has also been accredited by UKAS (United Kingdom).

The Group’s quality management systems for its production facilities at JSC Kola “GMK” and Norilsk Nickel Harjavalta are certified as compliant with ISO 9001:2015, ISO 14001:2015 and OHSAS 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 Nickel and Cobalt Products” at Norilsk Nickel Harjavalta. The Group’s quality management system for its research and development operations conducted by Gipronickel is certified as compliant with ISO 9001:2015 by the Swiss SGS certification authority.

162 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 Metals Trading (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:

163 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 2018, 2017 and 2016, the Group achieved an average premium for sales of nickel exceeding the corresponding average LME price for the relevant period by 2.6%, 2.2% and 1.9%, respectively. The Group’s sales strategy focuses on concluding sales contracts directly with end users and local distributors, which account for more than 78% sales in 2018. The long-term contracts with a term of at least one year represented approximately 51%, 38%, 74% and 41% of the Group’s sale contracts with end-users in 2018 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 407 customers. In 2018, the Group concluded over 1.3 thousand delivery contracts and made over 6.5 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.

164 In 2018, 54% of the Group’s metal sales revenues derived from sales to Europe, with 27%, 15% and 4% from Asia, North America and Russia and CIS, respectively, as compared with 56%, 23%, 14% and 7% from these respective regions in 2017 and 57%, 23%, 10% and 10% from these respective regions in 2016. The Group’s international metal sales generated U.S.$10,416 million in revenues, representing 95% of the Group’s total metal sales revenue in 2018, as compared with international metal sales revenues of U.S.$7,858 million, representing 93% of the Group’s total metal sales revenue, in 2017 and international metal sales revenues of U.S.$6,854 million, representing 90% of the Group’s total metal sales revenue, in 2016.

The table below shows the average realised prices of refined metals produced by the Group. 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 troy ounce.

Year ended 31 December 2018-2017 2017-2016 2018 2017 2016 Change (%) Change (%)

Nickel...... 13,531 10,704 9,701 26 10 Copper...... 6,566 6,202 4,911 6 26 Palladium ...... 1,025 858 614 19 40 Platinum...... 877 949 977 (8) (3)

The table below shows a breakdown by geographical region of the revenues from refined metal sales of the Group for the periods indicated:

Semi- Revenues from sales by products Other geographical region Total Nickel Copper Palladium Platinum (1) metals

Year ended 31 December 2018 Europe...... 5,868 1,323 2,356 1,216 514 459 Asia ...... 2,929 1,090 386 1,313 41 99 North and South America...... 1,619 348 26 1,111 34 100 Russian Federation and CIS ...... 546 252 209 34 7 44 Total revenues...... 10,962 3,013 2,977 3,674 596 702

Year ended 31 December 2017 Europe...... 4,753 1,084 2,130 756 449 334 Asia ...... 1,939 804 115 825 119 76 North and South America...... 1,166 313 – 807 – 46 Russian Federation and CIS ...... 557 215 177 46 86 33 Total revenues...... 8,415 2,416 2,422 2,434 654 489

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 North and South 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

165 and is derived from the 2018 Consolidated Financial Statements. See Note 6 to the 2018 Consolidated Financial Statements.

The table below shows the Group’s sales by metals produced by the Group for the periods indicated:

Year ended 31 December 2018-2017 2017-2016 Metal 2018 2017 2016 Change (%) Change (%) FINISHED PRODUCTS Polar Division and JSC Kola “GMK” Nickel (‘000 tonnes) ...... 150 155 218 (3) (29) Copper (‘000 tonnes(2) ...... 431 368 374 17 (2) Palladium (‘000 ounces)...... 2,913 2,405 2,779 21 (13) Platinum (‘000 ounces)...... 657 657 669 - (2) Finland Nickel (‘000 tonnes)...... 60 60 53 - 13 TOTAL FINISHED PRODUCTS...... Nickel (‘000 tonnes) ...... 210 215 271 (2) (21) Copper (‘000 tonnes)(2) ...... 431 368 374 17 (2) Palladium (‘000 ounces) ...... 2,913 2,405 2,779 21 (13) Platinum (‘000 ounces) ...... 657 657 669 - (2) - - SEMI-PRODUCTS(1) Polar Division and JSC Kola “GMK”...... Nickel (‘000 tonnes)...... 7 1 - 600 100 Copper (‘000 tonnes)(2)...... 8 5 - 60 100 Palladium (‘000 ounces)...... 8 3 - 167 100 Platinum (‘000 ounces) ...... 1 - - 100 - Finland ...... Copper (‘000 tonnes)...... 16 13 10 - (2) Palladium(‘000 ounces)...... 53 42 57 26 (26) Platinum (‘000 ounces)...... 10 10 21 - (52) GROUP TOTAL(2)...... Nickel (‘000 tonnes) ...... 217 216 271 - (20) Copper (‘000 tonnes) ...... 455 386 384 18 1 Palladium (‘000 ounces) ...... 2,974 2,450 2,836 21 (14) Platinum (‘000 ounces) ...... 668 667 690 - (3)

(1) Metal volumes are given in respect of metals contained in semi-products. (2) Excludes metals and semi-products purchased from third parties and Nkomati and semi-products produced by GRK “Bystrinskoye”.

In 2018, the Group’s largest customer accounted for 13% of the Group’s total revenue, and the Group’s next nine largest customers together accounted for 30% of its total revenue for that period. In 2018, none of the Group’s total revenue were attributable to sales through the LME.

In 2017, the Group’s largest customer accounted for 14% of the Group’s total revenue, and the Group’s next nine largest customers together accounted for 32% of its total revenue for that period. In 2017, none of the Group’s total revenue were attributable to sales through the LME.

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, none of the Group’s total revenue were attributable to sales through the LME.

166 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 over 73% of primary nickel consumption in 2018), and, consequently, the Group’s main customers include stainless steel producers.

In 2018, 44% of the Group’s nickel sales, in terms of revenue, were in Europe, 36% in Asia, 12% in North and South America and 8% in Russia and CIS, as compared with 45%, 33%, 13% and 9% in these respective regions in 2017 and 44%, 42%, 8% and 6% in these respective regions in 2016. Sales to stainless steel producers and other specialty steel producers accounted for 54% of the total sales volume of nickel in 2018, producers of alloys 31%, producers of coating 5% and other customers 10%.

Copper

In 2018, 79% of the Group’s copper sales, in terms of revenue, were in Europe, 7% in Russia and CIS, 13% were in Asia and 1% were in North and South America, as compared with 88%, 7%, 5% and 0% in these respective regions in 2017 and 84%, 16%, 0% and 0% in these respective regions in 2016. Sales to producers of cables and rolled copper alloys accounted for 42% of the total sales volume of copper in 2018 and other customers 58%.

PGMs

In 2018, 33% of the Group’s palladium sales, in terms of revenue, were in Europe, 36% in Asia, 30% in North and South America and 1% in Russia and CIS, as compared with 31%, 34%, 33% and 2% in these respective regions in 2017 and 44%, 25%, 26% and 5% in these respective regions in 2016. In 2018, 83% of the Group’s total sales volumes of palladium was sold to automobile manufacturers, 6% to manufacturers in the chemical industry, 3% for use in dentistry, 1% for use in jewellery, 6% to producers of electronics and 1% to other customers.

In 2018, 86% of the Group’s platinum sales, in terms of revenue, were in Europe, 7% in Asia, 6% in North and South America and 1% in Russia and CIS, as compared with 69%, 18%, 0% and 13% in these respective regions in 2017 and 64%, 4%, 0% and 32% in these respective regions in 2016. In 2018, 37% of the Group’s total sales volumes of platinum was sold to automobile manufacturers, 2% to manufacturers in the chemical and petrochemical industry, 2% to jewellery producers, 1% to electronics producers, 1% to manufacturers in the medical appliances industry and 57% 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 1,765 thousand tonnes in 2018, whereas JSC Kola “GMK” sulphur dioxide emissions decreased by approximately 30% to 104 thousand tonnes. The Group is required under a regulation issued by the authorities of Krasnoyarsk Territory to reduce these emissions to 336 thousand tonnes by 2023 (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 the following principal areas:

167  the phased reduction of pollutant emissions to the atmosphere, with priority attention given to sulphur dioxide and solid substances;

 the consistent 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;

 the prevention of pollution during the carriage of goods by sea and the operation of ships;

 rational use of natural resources and the introduction of environmentally friendly technologies; and

 conservation of biological diversity in the regions of presence of its production activities.

The Group’s projects to reduce sulphur dioxide emissions include:

 the renovation of concentration capacities, including implementation of modern technologies, to reduce the volume of sulphur in concentrate and prevent losses of base metals;

 the reconfiguration of production capacities in the Polar Division and modernisation of converter processing technology, which, the Company believes, will allow it to decrease the volume of exhaust gases that contain sulphur dioxide obtained in the course of enrichment and smelting; 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”). 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. In 2018, the EMS continued to operate as part of the Corporate Integrated Quality and Environmental Management System (“CIMS”). The system’s compliance with ISO 14001:2015 international standard has been confirmed on a regular basis by an independent certification body conducting annual surveillance audits. In November 2018, Bureau Veritas Certification (“BVC”), an international certification body, ran a compliance audit of the CIMS and confirmed its compliance with ISO 9001:2015 and ISO 14001:2015 standards. In addition to the audit conducted by BVC, throughout 2018 the Company conducted internal audits within the framework of the CIMS.

The Group monitors on an ongoing 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 CIMS and environmental policy. In 2018, 2017 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:

168  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

 business interruption insurance, which is based on the reimbursement of fixed costs (except for loss of profits coverage).

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. The Group’s construction projects are protected by Contractors’ All Risks (CAR) insurance coverage. Norilsk Nickel Harjavalta maintains operational, project and corporate insurance programmes, including for business interruption. See “Risk Factors—Risks Associated with the Group’s Business and Industry—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 2018 2017 2016 Russia...... 74,926 77,991 81,081 USA ...... 10 10 10 Europe...... 330 326 311 Asia...... 13 13 13 Australia...... 5 5 5 South Africa...... 617 605 586 Other ...... 0 0 0 TOTAL ...... 75,901 78,950 82,006

In 2018, the average number of employees of the Group was 75,901, of which 99% was employed at its Russian operations. The number of employees in 2018 decreased as compared with 2017 by approximately 3,000 people, largely as a result of the implementation of a programme to increase labour productivity and reduce costs.

The average monthly salary of the Group’s employees in Russia in 2018 was U.S.$1,780, as compared with U.S.$1,784 in 2017. 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 2018, there were 32 industrial accidents at the Group’s operations, including 6 fatalities, and its Lost Time Injury Frequency Rate (“LTIFR”) was 0.23, as compared with 60 industrial accidents at the Group’s operations, including 8 fatalities, and a LTIFR of 0.44 in 2017. In 2016, there were 56 industrial accidents at the Group’s operations, including 13 fatalities, and its LTIFR was 0.35.

169 In 2018, the Group conducted 45 internal audits of occupational safety and health management, and 105 employees were dismissed for the violation of cardinal safety rules, as compared to 149 in 2017.

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.

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. Further in December 2018, the Group terminated its agreement to sell its interest in Nkomati to BCL due to BCL’s material breach of its obligations under the agreement. As a result, the Group no longer requires BCL group to purchase the Group’s interest in the Nkomati joint venture, but instead the Group intends to continue to seek damages from BCL. In February 2019, the Group obtained permission from the Court of Appeal of the Republic of Botswana to proceed with an arbitration in the London Court of International Arbitration (LCIA) against BCL group. In addition, in October 2017, the Group filed a claim against the Government of Botswana seeking to declare it responsible for the liabilities of BCL group under the transaction in relation to Nkomati.

The Group does not believe that legal or arbitration proceedings related to the sale of the Group’s 50% 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. In 2019, the Group and its operating partner African Rainbow Minerals reached an agreement to scale down production at Nkomati Nickel mine with a view to consider placing the mine on care and maintenance from the second half of 2020, though no final decision has been made to this effect.

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 ongoing development of the Russian legal system and Russian legislation creates an uncertain environment for investment and for business activity”.

170 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. Seven 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 2019. 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 (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 Alexey Bashkirov ...... 1977 Non-Executive Director Evgeny Shvarts ...... 1958 Independent Non-Executive Director Marianna Zakharova...... 1976 Executive Director Maxim Poletaev...... 1971 Independent Non-Executive Director Robert Edwards...... 1966 Independent Non-Executive Director Roger Llewelyn Munnings ...... 1950 Independent Non-Executive director Sergey Barbashev ...... 1962 Executive Director Sergey Bratukhin ...... 1971 Independent Non-Executive Director Sergey Volk ...... 1969 Independent Non-Executive Director Stalbek Mishakov ...... 1970 Non-Executive Director Vyacheslav Solomin ...... 1975 Non-Executive Director

Mr. Gareth Peter Penny. Chairman and member of the Board of Directors since March 2013. From 2016 to 2018, Mr. Penny served as 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 and a Member of the Board of Directors at Amulet Diamond Corporation. 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.

171 Mr. Andrei Bougrov. Deputy Chairman of the Board of Directors and a member of the Management Board since 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 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, Member of the Management Board at RUIE and a member of Non-profit partnership “National Council on Corporate Governance”. 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 OJSC RusHydro. From 2010 to 2013, 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 and at RUIE. From 2015 to 2016, Mr. Bougrov was a member of the Investment Committee of RusHydro. Since 2018, he has been the Chairman of the Board of non-financial reporting at RUIE, and a member of the Expert Advisory Board on Corporate Governance of Ministry of Economic Development of the Russian Federation. In addition, Mr. Bougrov is a member of the Advisory Council of the Russo-British Chamber of Commerce. 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. Alexey Bashkirov. Member of the Board of Directors since March 2013. Since 2016, Mr. Bashkirov has served as Managing Director at Winter Capital Advisors and as CEO at Translaininvest. In addition, Mr. Bashkirov is a trustee of the Non-profit amateur hockey foundation “Night Time Hockey League”. Since 2018, he has been CEO, Chairman of the Management Board at LLC Interros Holding Company and, from 2015 to 2018, he was Deputy CEO and member of the Management Board of LLC Interros Holding Company. 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 to 2015, as member of the Management Board. 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. From 2016 to 2018, Mr. Bashkirov was a member of the Board of Directors of iGlass Technology Inc. Mr. Bashkirov graduated from the Moscow State Institute of International Relations (MGIMO) in 1999 with a degree in international economic relations.

Mr. Evgeny Shvarts. Member of the Board of Directors since June 2019. From 2018 to 2019, Mr. Shvarts served as Director of Conservation policy of Department for Conservation Policy at WWF Russia, and from 2016 to 2019, held the position of Director for Conservation Policy at WWF Russia. Since 1993, Mr. Shvarts has been a Member of the Board of the Charity Foundation, Biodiversity Conservation Centre (BCC), and from 2007 to 2016, a Director of Department for Conservation Policy at WWF Russia. Mr. Shvarts graduated from the Lomonosov Moscow State University in 1982 with a degree in Biology/Zoology and Botany. In 1987, he became Candidate of Geographical Sciences at the Institute of Geography of the Academy of Sciences USSR. Mr. Shvarts obtained his Doctorate of Science in 2003 from the Institute of Geography of the Academy of Sciences.

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 Company).

172 Ms. Zakharova graduated with honours from the Peoples’ Friendship University of Russia with a Master of Law degree in 2000.

Mr. Maxim Poletaev. Member of the Board of Directors since June 2019. Since 2018, Mr. Poletaev has served as Advisor to President at PJSC Sberbank of Russia, and, from 2013 to 2018, was First Deputy Chairman of the Management Board at PJSC Sberbank of Russia. Mr. Poletaev has been Chairman of the Board of Directors at Fortenova Grupa d.d. (Zagreb, Croatia) as well as a Member of the Board of Directors at United Company RUSAL Plc since 2019. Mr. Poletaev graduated from the Yaroslavl State University with a degree in accounting and business analysis.

Mr. Robert Edwards. Member of the Board of Directors since June 2013. Since 2018, he has served as a member of the Board of Directors at Chaarat Gold Holdings Limited and as director at Scriptfert New Zealand Ltd. In 2016, Mr. Edwards also served as a Non-executive Chairman of Sierra Rutile Limited (SRX). From 2014 to 2018, Mr. Edwards was a 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, 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. Roger Llewelyn Munnings. Member of the Board of Directors since 2018. Since 2010, Mr. Munnings has served as an Independent Director and Chairman of Board Audit on Finance and Risks Committee of PJSC JFC Sistema. From 2008 to 2014, Mr. Munnings was Chairman of Audit Committee Institute in the Russian Federation and from 2005 to 2014, also served as Deputy Chairman of the Executive Board, Association of European Businesses in the Russian Federation. Mr. Munnings was a Member of the Board of Directors at Moscow School of Political Studies (now Moscow School of Civic Education) from 2009 to 2014. Since 2003, Mr. Munnings has served as a Member and then as Chairman of the Board of Directors at Russo – British Chamber of Commerce. From 2011 to 2014, Mr. Munnings was a Member of the Advisory Council at Oracle Capital Group. Since 2013, has served as an Advisory Council Member at International Business Leaders Forum Autonomos non-profit organisation, as well as a Member of the Board of Trustees at Kino Klassika Limited and a Member of non-profit partnership “National Council on Corporate Governance”. Since 2015, Mr. Munnings has held the position of an Independent Director and Chairman of Board HR on Compensation Committee of PJSC Lukoil and, since 2017, has also served as a Member of Council of National Representatives at the Association of European Businesses in the Russian Federation and as a Director at 3 Lansdown Crescent Limited. Mr. Munnings graduated from the University of Oxford with an M.A. in Politics, Philosophy and Economics. Mr. Munnings is a fellow of the Institute of Chartered Accounts in England and Wales.

Mr. Sergey Barbashev. Member of the Board of Directors since 2011. Since 2018, Mr. Barbashev has served as Senior Vice President and Head of Corporate Security and also as a Member of the Management Board at PJSC MMC Norilsk Nickel. From 2008 to 2018, Mr. Barbashev was the General Director and the Chairman of the Management Board at LLC Interros Holding Company and, since 2008, has also served as a 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. From 2015 to 2018, Mr. Barbashev served as Director of the Branch Office of Olderfrey Holdings Limited and, from 2016 to 2018, served as the Director of Olderfrey Holdings Limited. Since 2016, Mr. Barbashev has served as a Member of the Board of Endowment Fund for Education and Culture (former name – Endowment Fund for Education, Science and Culture). Mr. Barbashev received his M.A. in law from the Moscow Higher Police School of the Ministry of Internal Affairs of the USSR.

173 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). 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 and, from 2007 to 2017, was a member of the Board of Directors at Dallesprom. 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. Sergey Volk. Member of the Board of Directors since 2019. Since 2018, Mr. Volk has served as Member of Supervisory Board at Mercator d.d. (Ljubljana, Slovenia), and since 2019 has also been a Member of the Board of Directors at Fortenova Grupa d.d. (Zagreb, Croatia). Since 2016, Mr. Sergey Volk has served as Senior banker of Sberbank Russia, and, from 2013 to 2016, consultant in consulting and business projects. Mr. Volk graduated from The University of Texas at Austin with a Master’s degree in Business Management with financial specialization.

Mr. Stalbek Mishakov. Member of the Board of Directors since June 2012. Since 2019, Mr. Mishakov has served as Sector Lead at Joint Stock Company RUSAL Management. From 2013 to 2018, he served as the Deputy General Director of En+ Management LLC and from 2010 to 2018 was an advisor to the General Director of CJSC RUSAL Global Management B.V. From 2013 to 2016, Mr. Mishakov served as member of the Board of Directors of United Company RUSAL Plc, and from 2018 to 2019, Mr. Mishakov served as a Sector Lead at 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. Vyacheslav Solomin. Member of the Board of Directors since 2019. Mr. Solomin has served as Executive Director at En+ Management LLC, as Director at En+ Holding Limited, and as Director at United Company RUSAL Plc since 2018. From 2014 to 2018, Mr. Solomin was a CEO at JCS EuroSibEnergo and, since 2011, has served as Director at YES ENERGO LIMITED. Mr. Solomin graduated from the Far Eastern Federal University with a degree specializing in World economy.

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.

174 Year of Name Birth Position Vladimir Potanin...... 1961 President Chairman of the Management Board Sergey Barbashev ...... 1962 Senior Vice President, Head of Corporate Security Sergey Batekhin...... 1965 Senior Vice-President Sales, Commerce and Logistics Sergey Dubovitsky...... 1978 Vice President, Strategy & Strategic Projects Andrey Bougrov ...... 1952 Senior Vice-President Sergey Dyachenko ...... 1962 First Vice-President Chief Operating Officer Sergey Malyshev...... 1969 Senior Vice-President Chief Financial Officer Vladislav Gasumyanov ...... 1959 Senior Vice-President Public-private Partnerships Elena Kondratova ...... 1972 Vice-President Chief of Staff Nina Plastinina...... 1961 Vice-President Internal Control and Risk Management 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, Vladimir Potanin Foundation (former name – Non-profit charitable organisation “Vladimir Potanin Charity Fund”), non-profit partnership National Board on Corporate Governance, Supervisory Boards of Saint Petersburg State University, Member of the Board of Trustees of Saint Petersburg University and the Graduate School of Management of Saint Petersburg University, Moscow State Institute of International Relations (MGIMO), MGIMO Endowment Fund, State Hermitage Museum, Deputy Chairman of the Board of Trustees of the Russian International Olympic University (RIOU), Chairman of the Board of Trustees of the Night Hockey League, a non-profit amateur hockey foundation, Chairman of the Supervisory Board of the Norilsk Development Agency, Member of the Board of Trustees of the Moscow Church Construction Foundation, Member of the Board of Trustees of the Russian Geographical Society, Chairman of the Board of Trustees of the Autonomous Non-Profit Entity ROZA Club for Sport Development and Support, Board of Trustees of the Russian-American Business Cooperation Council, Board of Trustees of the Solovki Archipelago Preservation and Development Foundation, Trustee of the Solomon R. Guggenheim Foundation (New York), and Member of the Board of Endowment Fund for Education and Culture (former name – Endowment Fund for Education, Science and Culture). 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. In 2007–2014, he sat on the Supervisory Board of the Sochi 2014 Organising Committee. Mr. Potanin graduated in 1983 from the Moscow State Institute of International Relations (MGIMO) with a degree in international economics.

175 Mr. Sergey Barbashev. Senior Vice President, Head of Corporate Security and a Member of the Management Board since 2018. Please refer to “Board of Directors” for a brief biography of Mr. Barbashev.

Mr. Sergey Batekhin. Senior Vice President for Sales, Procurement, and Innovation since 2018. Mr. Batekhin was Senior Vice-President - Sales, Commerce and Logistics from 2016 to 2018, 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, and 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. Since 2018, Mr. Batekhin has served as a Member of the Board of Directors at Kontinental Hockey League, since 2019, has been a Member of the Board of Directors at Jokerit Hockey Club Oy and a Chairman of the Presidium of the Night Hockey League Amateur Hockey Foundation. 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.

Mr. Sergey Dubovitsky. Vice President, Strategy & Strategic Projects and a Member of the Management Board since 2018. Mr. Dubovitsky was previously Vice President for Strategic Planning at the Group between 2016 and 2019 and Head of the Strategic Planning Department from 2016 to 2016. From 2005 to 2013, Mr. Dubovitsky worked for McKinsey & Co in Strategy in the oil and gas industry, and from 2000 to 2005, held various positions with the Ministry for Foreign Affairs. Mr. Dubovitsky graduated from the School of International Information of Moscow State Institute of International Relations (MGIMO) and obtained a Master’s degree of Business Administration from INSEAD Business School.

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. From 2013 to 2014, Mr. Dyachenko was 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. Mr. Dyachenko has been a Member of the Executive Committee at NKOMATI since 2017 and a Member of the Board of Trustees at North Caucasian Institute of Mining and Metallurgy (State Technological University) since 2019 and a Member of the Supreme Mining Council at non-profit Partnership “Miners of Russia” since 2016. Since 2017, Mr. Dyachenko has served as a Member of the Directors of each of MPI Nickel Pty Ltd, Norilsk Nickel Cawse Pty Ltd, Norilsk Nickel Avalon Pty Ltd, Norilsk Nickel Wildara Pty Ltd, Norilsk Nickel Africa (Pty) Ltd and Norilsk Nickel Mauritius. From 2010 to 2013, Mr. Dyachenko was the Chief Operating Officer of the Kazakhmys Group of companies, also between 2017 and 2018, Mr. Dyachenko was the Member of the Board of Directors of Norilsk Nickel Harjavalta Oy. 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).

176 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. He was a 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 from the Moscow State Textile Academy (degree in mechanical engineering) in 1993, from the Finance Academy under the Government of the Russian Federation (mastering finance and credit) in 1998 and from the Russian Academy of the Presidential State Service (mastering in State and Municipal management) in 2007.

Mr. Vladislav Gasumyanov. Senior Vice-President – Public-Private Partnerships and, from 2018 to 2019, State Secretary – Vice-President of Government Relations, from 2015-2018, Vice-President – Corporate Security and, from 2012 to 2015, Head of the Security in Corporate Security Directorate. Mr. Gasumyanov has been a member of the Management Board of the Company since 2014. From 2017 to 2019, Mr. Gasumyanov was a Member of the Board of Directors at FC Dynamo Moscow. Since 2019, Mr. Gasumyanov has served as well as a Presidium Member at National Association for International Information Security at Non-profit organisation “National Association for International Information Security”. From 2014 to 2016, he also served as a member of the Board of Directors of OJSC Yenisei River Shipping Company. 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. Since 2017, Mr. Gasumyanov has served as a Member of the Board of Directors at Norilsk Nickel Africa (Pty) Ltd and Norilsk Nickel Mauritius, and a member of the Executive Committee at Nkomati, as well as the Head of the Chair of Corporate Security of MIEP MGIMO, Russian Ministry of Foreign Affairs. 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.

Ms. Nina Plastinina. Vice-President – Internal Control and Risk Management since 2016, and from 2015 to 2016, Vice-President – Internal Audit and, from 2013 to 2015, Head of Internal Control Department. Ms. Plastinina was a 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. 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 in mechanical engineering. Ms. Plastinina also holds a postgraduate degree from the Bauman Moscow Technical Institute in economics and organisation of production operations.

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 a Supervisory Board Member, Management Board Member of the Autonomous non-profit organization “Norilsk Development Agency” since 2017. From 2015 to 2016, Vice-President – Head of Social Policy

177 and Public Relations Unit of the Company and, from 2013 to 2015, 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. Since 2011, Ms. Zelkova has been Chairman of the Management Board of the Hermitage Endowment Fund. From 1999 to 2014, she was CEO and between 2014 and 2018 she was President of the non-profit charitable organisation “Vladimir Potanin Charity Fund”. Since 2014, Ms. Zelkova has been Chair of Board of the Vladimir Potanin Foundation (former name – Non-profit charitable organisation “Vladimir Potanin Charity Fund”). She is also the Member of the Board of Directors of the MGIMO Endowment Fund since 2007. 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. From 2012 to 2018, she was a Member of the Presidential Council for culture and art. 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 2011 to 2016, Ms. Zelkova was the Supervisory Board Member of Autonomous Non-Profit Organization “Russian International Olympic University”. In addition, she is a member of the Board of Trustees of several organizations: Non-state-owned Educational Independent Non-profit Organization “Pavlovo School” since 2009; Federal State Budgetary Institution “Russian Academy of Education” since 2015 and Endowment Foundation for Education and Culture since 2016. 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. Mishakov and Solomin. 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, Mishakov and Solomin 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 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 seven of the current Directors of the Company (the Chairman of the Board, Gareth Penny, as well as Evgeny Shvarts, Maxim Poletaev, Robert Edwards, Roger Llewelyn Munnings, Sergey Bratukhin, and Sergey Volk) 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

178 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 and Sustainable Development Committee

The Audit and Sustainability Committee is chaired by Roger Munnings, an Independent Non-Executive Director of the Company, and includes Messrs. Bashkirov, Bratukhin, Solomin and Edwards. The Audit and Sustainability 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 and sustainable development issuers. 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 Robert Edwards, an Independent Non-Executive Director of the Company, and includes Messrs. Bashkirov, Bratukhin, Mishakov, and Poletaev. 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 Poletaev, an Independent Non-Executive Director of the Company, and includes Messrs. Penny, Bashkirov, Bratukhin and Shvarts. 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. Bratukhin, Volk, Munnings and Mishakov. 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.

179 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)...... 34.6 United Company RUSAL Plc(2) ...... 27.8 Other ...... 37.6 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 decreased to below 5%.

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 have agreed to 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 a stake by any of the principal shareholders, mutual buyout rights exercisable by RUSAL and Whiteleave and, in addition, the parties have agreed not to take any action with respect to specified fundamental matters without the agreement of each of them, have agreed on specific rules and procedures, and, subject to certain exceptions, have agreed to maintain at specified levels dividends. 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.

180 RELATED PARTY TRANSACTIONS

The following is a summary of the Group’s transactions with related parties (as determined under IFRS) for the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016. For further details, see Note 19 of the 2019 Interim Consolidated Financial Statements, Note 28 to the 2018 Consolidated Financial Statements and Note 28 to the 2017 Consolidated Financial Statements.

In the periods under review, the Group’s transactions with related parties have comprised primarily transactions with entities under ownership and control of the Group’s major shareholders and key management personnel. In the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, the Group’s joint operations comprised the Nkomati Nickel Mine.

In October 2017, the Group sold a 36.66% share in the Bystrinsky project for U.S.$275 million to CIS NRF Holdings Limited, a Russia-focused natural resources fund, in which Olderfrey indirectly holds economic rights. On the date of this Prospectus, the Group owns a 50.01% interest in the Bystrinsky project and remains the operator of the project.

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 to acquire shares in 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

In the six months ended 30 June 2019, no sales of goods and services to related parties was recorded, as compared with U.S.$5 million in the six months ended 30 June 2018 (including U.S.$1 million of sales of goods and services to entities under the joint operation of the Group). In the six months ended 30 June 2019, purchases of assets and services and other operating expenses amounted to U.S.$109 million, as compared with U.S.$113 million in the six months ended 2018. Sales and purchases of goods and services with related parties in the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016 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 Antimonopoly Service and Ministry of Tariff Regulation of the Krasnoyarsk region). In addition, purchases from related parties also included the purchase of nickel concentrate from the Nkomati Nickel Mine for further processing at the Group’s nickel refinery in Finland in 2017, and at the Kola Division in 2018.

In 2018, revenue from sale of goods and services and participating shares to related parties was U.S.$7 million, as compared with U.S.$280 million in 2017 (comprising U.S.$1 million of sales to entities under the joint operation of the Group) and U.S.$15 million in 2016 (including U.S.$2 million of sales to entities under the joint operation of the Group).

In 2018, purchases of assets and services and other operating expenses from related parties amounted to U.S.$150 million (including U.S.$86 million of purchases from entities under the joint operation of the Group), as compared with U.S.$222 million in 2017 (including U.S.$107 million of purchases from entities under the joint operation of the Group) and U.S.$346 million in 2016 (including U.S.$169 million of purchases from entities under the joint operation of the Group).

Compensation of Key Management Personnel

In 2018, remuneration of key management personnel was U.S.$109 million, comprising salary and performance bonuses. In 2017, remuneration of key management personnel was U.S.$103 million,

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

182 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”);

 Law of the Russian Federation “On Subsoil” No. 2395-1 dated 21 February 1992, as amended (the “Subsoil Law”);

 the Precious Metals Law No. 41-FZ dated 26 March 1993;

 Federal Law “On Technical Regulation” No. 184-FZ dated 27 December 2002, as amended (the “Technical Regulation Law”);

 Federal Law “On Licensing of Certain Types of Activities” No. 128-FZ dated 8 August 2001 (the “Old Licensing Law”);

 Federal Law “On Licensing of Certain Types of Activities” No. 99-FZ dated 4 May 2011, as amended (the “Licensing Law”);

 Federal Law “On Environmental Protection” No. 7-FZ dated 10 January 2002, as amended (the “Environmental Protection Law”);

 Federal Law “On Industrial Safety of Hazardous Industrial Facilities” No. 116-FZ dated 21 July 1997, as amended (the “Safety Law”);

 Federal Law “On Currency Regulation and Currency Control” No. 173-FZ dated 10 December 2003, as amended (the “Russian Currency Law”); and

 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 Licencing

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 and the

183 regulations issued thereunder. Licensing of use of subsoil plots is carried out in accordance with the Subsoil Law and related rules and regulations, 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 of a subsoil plot (“research licences”); (ii) licences for exploration of a subsoil plot and production of natural resources (“production licences”); and (iii) so- called combined licences for geological research, exploration and production of natural resources (“combined licences”).

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 (“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 research 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 or a tender 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 or tenders in respect of subsoil plots of federal importance.

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 research 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 research 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

184 accordance with which advanced exploration and mining operations may be conducted simultaneously with geological study.

Research 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 research 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 a combined licence for the deposit). Geological exploration in respect of subsoil plots located in the Arctic area of the Russian Federation and Far-Eastern Federal District of the Russian Federation (including the Zabaikalsky Krai) that do not contain balance reserves may be permitted for geological research purposes upon application. The application can also be used for permissions for the subsoil plots adjacent to the deposits under development and their underlying beds for geological research purposes.

Extension of Licences

Until January 2000, the Russian Government’s Committee for Geology and Subsoil Use typically granted research licences for up to five years, production licences for up to 20 years and combined licences 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 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 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. As of the date of this Prospectus, the Group has extended its main production licences in accordance with the agreed and approved project documentation.

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

185 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.

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. The Group obtained these permissions from the Russian Government upon the transfer of rights for the use of subsoil plots of federal importance which included the Norilsk-1 deposit and the Maslovskoye deposit to LLC Medvezhy Ruchey and LLC Maslovskoye, respectively.

Maintenance of Licences

Licences granted under the Subsoil Law contain information on, among other things, the licence holder, issuing authority, description of boundaries of subsoil plots, term of the licence and terms and conditions for the use of subsoil plots, as well as the payments to be made by the licence holder under the terms of the licence.

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 (only in respect of licences issued under an auction or tender procedure).

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.

186 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.

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 (“Rosprirodnadzor”) and the Federal Service for Ecological, Technological and Nuclear Supervision (“Rostekhnadzor”) can fine a licensee for failing to comply with a subsoil licence and requirements of subsoil protection and efficient subsoil use, and 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

 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 re-issue 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. The term for curing the violation is usually to 3 to 12 months. If the issue has been resolved, the licensing authorities may decide not to terminate the licence but may still take other action against the licensee.

The subsoil user or its officers (as applicable) can also be held administratively or criminally liable for violations of the terms of a licence.

Mining Allotments

Under the Subsoil Law, Rosnedra provides a subsoil plot to a subsoil user as a “mining allotment”, in other words, a geometric block of subsoil. 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), 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.

187 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

 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 (refining organisations) 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

188 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 refining organisations 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 Union). For instance, a licence is required for the export of raw silver, gold, platinum and 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. 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 or 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.

189 Security

Any entities engaged in the geological research, 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 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

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:

190  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 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, as amended (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. Rosnedra currently issues licences for the use of underground water (except for the subsoil plots of local importance). 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 research licences or combined licences, the requirements described above do not apply and the subsoil user is entitled to produce underground water upon approval of the underground water reserves and technical design.

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

191 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 discharges 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.

By Resolution “On the Acceptance of the Paris Agreement” No. 1228 dated 21 September 2019 the Russian Government accepted the Paris Agreement dated 12 December 2015, which was signed on behalf of the Russian Federation on 22 April 2016. As a result, the Paris Agreement now has binding legal effect in Russia.

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 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 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 scale of the environmental impact of their operations. Companies must then submit these standards and limits for waste disposal for approval by 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

192 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 discharges and for pollution in excess of these limits. The fees may be increased by statutory approved coefficients. Multiples that may reach up to 25 for emissions and discharges 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.

In addition, Russia has introduced a quota system in relation to pollution emissions for the period from 2020 to 2024 in twelve Russian cities, namely Bratsk, Krasnoyarsk, Lipetsk, Magnitogorsk, Mednogorsk, Nizhny Tagil, Novokuznetsk, Norilsk, Omsk, Chelyabinsk, Cherepovets and Chita. Upon recommendation of the head of the regional government of the respective Russia’s constituent entities, the Russian Government is expected to approve a complex step plan for the reduction of air pollutant emissions in those cities. Companies with facilities that will be affected by the experimental quota system must develop step plans for the reduction of air pollutant emissions. If a company is not able to comply with the quota allocation programme, compensatory measures will be triggered.

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 are required to 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 control, which includes implementation of a programme of industrial environmental control and reporting on the results of the industrial environmental control to 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

Rosprirodnadzor, Rostekhnadzor, the Russian Federal Service for Hydrometeorology and Environmental Monitoring, 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

193 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.

Land conservation and restoration

The Group strives to conduct its activities aimed at restoration of disturbed lands, such as re-cultivation, restoration, regeneration and other methods of rehabilitation, in accordance with the Rules of Conducting Recultivation and Conservation of Land approved by Resolution of the Russian Government No. 800 dated 10 July 2018. 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 the Krasnoyarsk region to reduce the annual volume of sulphur dioxide emissions from its operations at the Polar Division from their level of 1,959 thousand tonnes to 336 thousand tonnes by 2023.

The Environmental Protection Law provides for measures of state support of 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 payments’ adjustments for negative impact on the environment and in case of implementation of environmental measures. 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.

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

194 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 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 (the “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 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 categorises 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.

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, Rosreestr maintains 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

195 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.

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 utilises 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 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 Labour Code of the Russian Federation No. 197-FZ dated 30 December 2001 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 Rostekhnadzor of accidents; and maintain these systems in good working order.

196 Declarations of Industrial Safety

In some cases, companies operating industrial sites must also prepare industrial safety declarations, which summarise 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. 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, an internal regulation on industrial safety management system and an internal regulation on industrial control.

State Control over Industrial Safety

Rostekhnadzor has broad authority in the field of industrial safety. In the event of an accident, a special commission led by a representative of 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. 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

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% 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% 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%, or any one of five or fewer entities with a total market share of more than 70% (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%), will be deemed to be in a dominant position to the extent that, for a period of at least one year

197 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%, 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%.

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, and setting different prices for the same goods.

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%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% or more than 75% 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% 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% of the voting shares (or a 50% interest) in a company registered outside Russia which delivered goods to the Russian territory in the amount exceeding 1 billion roubles 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 7 billion roubles; or

 the total revenues of such persons for the preceding calendar year exceed 10 billion roubles and in each case the total asset value of the target (and its group) exceeds 400 million roubles.

Mergers and acquisitions within the same group are exempt from pre-transactional clearance by the FAS, subject to compliance with specified reporting requirements.

198 Under the amendments to the Competition Law introduced in 2015, joint venture agreements between competing parties 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 7 billion roubles, or if the total revenues of the parties to the agreement (or their group) for the preceding calendar year exceed 10 billion roubles.

Regulation of Natural Monopolies

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% 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 assets exceeds 10% of the natural monopoly’s own capital (as calculated in accordance with its latest approved balance sheet);

 a natural monopoly whose revenue from the natural monopolistic activities exceeds 1% 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% of the natural monopoly’s own capital (as calculated in accordance with its latest approved balance sheet); and

 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, (b) the book value of such assets exceeds 10% of the natural monopoly’s own capital (as calculated in accordance with its latest approved balance sheet) and (c) as a result of such transaction, the natural monopoly’s revenue from the natural monopolistic activities exceeds 1% of its total revenue.

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 ongoing 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

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

199 50% 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 website. 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 10% 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 Strategic Investment Laws.

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% 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 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 deposits), LLC Medvezhy Ruchey (Norilsk-1 and Tailing storage No. 1 of Norilsk Concentrator), LLC Maslovskoye (Maslovskoye deposit), JSC Kola “GMK” (the holder of licences with respect to Zhdanovskoye, Kaula, Kotselvaara-Kammikivy, Semiletka, Zapolyarnoye, Tundrovoe, Bystrinskoye, Verkhnee, and Sputnik deposits), LLC Bystrinskoe GRK (the holder of licence with respect to Bystrinskoye area) and JSC Norilskgazprom (the holder of licence with respect to Pelyatkinskoye, Yuzhno-Soleninskoye and Severo-Soleninskoye deposits) 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% or more, or in case of the acquisition by foreign states, international organisations, foreign investors that do not provide information on their beneficiaries, beneficial owners or controlling persons to the FAS (“non-disclosing investors”) or entities under their control of more than 5%, of the voting shares of a Strategic Subsoil Company is subject to prior approval, where foreign states, international organisations, non-disclosing investors 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% (but less than 75%) 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

200 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% 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 buyout 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.

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 general 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.

Prior to 1 March 2018, the Russian Currency Law and CBR Instruction No. 138-I dated 4 June 2012 set forth the requirement for Russian residents to open a “transaction passport” (pasport sdelki) with an authorised Russian bank prior to any transactions subject to currency control. This procedure was applicable, 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).

Starting from 1 March 2018, under a new CBR Instruction No. 181-I dated 16 August 2017, Russian residents are no longer required to open “transaction passports”, but are required instead to register the export or import operations or loans subject to currency control with an authorised Russian bank. “Transaction passports” not completed as of 1 March 2018 are deemed completed and will remain in the

201 currency control files. The Russian Currency Law has not yet been amended to reflect the abolishment of the requirement to open a “transaction passport”.

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 Law of the Russian Federation “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 Law of the Russian Federation “On the State Guarantees and Compensation for Persons Working and Residing in the Far North Regions and Areas of Equal Status” No. 4520-1 dated 19 February 1993, as amended, such employees are entitled to certain additional benefits, including higher salaries and bonuses, as well as 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 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.

202 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 whose labour conditions, based on a special assessment, are classified as harmful conditions of the second, third or fourth degree 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.

Prior to 1 January 2019, the retirement age in the Russian Federation was generally 60 years for males and 55 years for females. Starting from 1 January 2019, the retirement age in Russia is being gradually being raised from 60 to 65 years for males and from 55 to 60 years for females by 2028. The retirement age thresholds applicable to certain categories of individuals have remained unchanged following the retirement age reform. In particular, 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, 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. The law provides that from 1 January 2019, the minimum monthly salary is will be set at an amount equal to the minimum subsistence level in Russia for the second quarter of the previous year. Starting from 1 January 2019, the minimum monthly salary is set at an amount of 11,280 roubles, and, from 1 January 2020, it is expected to be set at an amount of 12,130 roubles. Salaries of the Group’s employees are generally higher than the statutory 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

203 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:

 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.

204 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.

205 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, its re-registration as a designated activity company under the Companies Acts 2014, and those related to the issue of previous loan participation notes for the purposes of funding loans to the Borrower and the issue of the Notes. The Issuer has no employees.

206 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:

Lester Almojuela 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 2017 and 2016 together with the audit reports thereon, have been filed with the Central Bank. 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.

207 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 7received 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

208  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),

 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.

209 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 24 October 2019 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.$750,000,000 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 11969870 (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, 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; “Chita Project” means a development project for the construction and exploitation of a mining plant in the Gazimuro-Zavodskoy region of Zabaykalskiy Kray, development and exploitation of the relevant mining site, and construction of any relevant infrastructure, including a railroad; “Chita Project Companies” means each of GRK Eastern Geology Limited, GRK Bystrinskoe LLC, Shirinskoe LLC, Vostokgeology LLC, any shareholder of GRK Eastern Geology Limited that is neither NN nor a Material Subsidiary and any direct or indirect Subsidiary of GRK Eastern Geology Limited; “Closing Date” means 28 October 2019; “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

210 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;

“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; “EBITDA” means, in relation to any Relevant Period, the total consolidated operating profit of the Group for that Relevant Period:

(a) before taking into account: (i) Interest Expense; (ii) Tax; (iii) any share of the profit of any associated company or undertaking, except for dividends received in cash by any member of the Group; (iv) extraordinary and exceptional items; and (b) after adding back all amounts provided for depreciation and amortisation for that Relevant Period, as determined from the most recent annual consolidated financial statements of the Group prepared using IFRS and for that Relevant Period.

“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 Regulation S Global Certificate and the Rule 144A Global Certificate; “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);

211 “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 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; “Interest Expense” means, in relation to any Relevant Period, all interest and other financing charges (including commission and commitment fees and amounts payable in respect of any instrument treated as a debt instrument in the financial statements of the Group prepared in accordance with IFRS) and the interest element of any lease or hire purchase payments in respect of any lease or hire purchase contract which is, in accordance with IFRS, recognised as a balance sheet liability (whether, in each case, paid, payable or capitalised) accrued by the Group in respect of such Relevant Period. “Interest Payment Date” means 28 April and 28 October of each year, commencing on 28 April 2020; “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 sub-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 sub-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: (i) any acquisition, restructuring, reorganisation, consolidation, sale or

212 disposal of or any other event or circumstance relating solely to the Chita Project or any Chita Project Company or (ii) 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) that at such time has earnings before interest, tax, depreciation and amortisation (calculated on the same basis as EBITDA) exceeding 10 per cent. of EBITDA 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 sub-clause 9.2, provided that notwithstanding paragraphs (a) and (b) above neither any Chita Project Company nor any Subsidiary of NN whose principal asset or assets are the Chita Project or any Chita Project Company shall be, or be deemed to be, a Material Subsidiary; “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 24 October 2019, 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; “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;

213 (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 (as defined below) 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; “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 listing of the Notes; “Rate of Interest” has the meaning assigned to such term in sub-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

214 Agent by such Reference Treasury Dealer at 5:00 pm (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; “Regulation S 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; “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; “Relevant Period” means each period of 12 months ending on the last day of each financial year; “Repayment Date” means 28 October 2024; “Reserved Rights” has the meaning specified in the Trust Deed; “Rule 144A 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 to qualified institutional buyers (as defined in Rule 144A under the Securities Act) that are also qualified purchasers (as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act of 1940) in reliance on the exemption from registration under the Securities Act provided by Rule 144A thereunder; “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 encumbrance or security interest securing any obligation of any person; “Subscription Agreement” means the agreement between NN, the Lender and the Managers (as defined therein) dated on or about 24 October 2019 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; “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

215 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.

216 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.$750,000,000. 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.$129,059.98 (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.

217 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 1:30 pm (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 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 ongoing fees calculated as the sum of 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 3.375 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.$16.88 per each U.S.$1,000 of the Loan (each such U.S.$1,000, 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 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 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) the Closing Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date.

218 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 the 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.

219 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 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 a 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 the 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 a 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 relevant Global Certificate be updated to reflect such cancellation) on the date specified in the Instructions or Request (as the case may be) whereupon the relevant 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 sub-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 sub-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

220 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. 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 sub-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 it 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 5 Business Days of demand. Any notification by the Lender to NN in connection with this sub-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 sub-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 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).

221 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 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

222 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 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 sub-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 sub-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 tax 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;

223 (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; (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 in Ireland, while the Notes will be treated as a liability of the Lender under generally accepted accounting practices applicable to the Lender in Ireland; (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:

224 (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 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 items (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 item (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.

225 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; (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, unless, in the case of any such reorganisation or analogous event in respect of NN, NN is a surviving entity. This sub-clause 9.2 shall not apply to any reorganisation (including, without limitation, any amalgamation, demerger, merger or corporate reconstruction) or other analogous event in which any Subsidiary of NN consolidates with, accedes to, merges into or transfers all or part of its assets to NN or any other Subsidiary of NN. 9.3 Delivery of Information 9.3.1 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. 9.3.2 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. 9.3.3 NN will ensure that each set of consolidated financial statements delivered by it pursuant to this sub-clause 9.3 is accompanied by a report or review thereon by or of its auditors (including any accompanying notes). 9.3.4 NN will deliver to the Lender and the Trustee, at the same time as the annual financial statements are sent pursuant to Clause 9.3.1 above, and also within 14 days of any

226 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 5 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. 9.3.5 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, on request 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, 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, in the case of (i) above only, at the same time as the annual financial statements are sent pursuant to Clause 9.3.1 above, and in each case also within 14 days of any request of the Lender or the Trustee. 9.3.6 NN undertakes to furnish to the Lender such information as the Irish Stock Exchange plc trading as Euronext Dublin (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. 9.3.7 NN agrees that any information provided to the Lender pursuant to this sub-clause 9.3 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 Information and Compliance 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 under Section 1471(b) of the U.S. 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 U.S. 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 any legislation, regulations or guidance enacted in any jurisdiction that seeks to implement a similar reporting or withholding regime, as well as any other tax reporting or information exchange regime to which a party is subject. 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

227 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 the amount of such Indebtedness referred to in items (i) and/or (ii) above individually or in the aggregate exceeds U.S.$150,000,000 (or 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, 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,

228 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 (where applicable), the jurisdiction of its incorporation (if different), has an analogous effect to any of the events referred to in sub-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 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 or 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 Clause 8 and sub-clause 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 sub-clause 13.4 below)), NN

229 shall pay to the Lender within 5 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 sub-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 sub-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 sub-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 sub-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 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 sub-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 sub-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 sub-clause 12.2.2, NN may assume the defence of the Claim at its own expense with legal advisers chosen by it and

230 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 a Claim for which indemnification is sought without the consent of NN. If NN assumes the defence of the Claim, NN shall not be liable for any fees or expenses of legal advisers of the indemnified parties incurred thereafter in connection with the Claim, 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 sub-clauses 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 sub-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 sub-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. 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,

231 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 sub-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. 13.6 Notices 13.6.1 Method Any communication under this Agreement shall be given by letter, fax or electronic communication (provided that in the case of electronic communication such communication shall be also concurrently made by fax): in the case of notices to NN, to it at:

Address PJSC MMC Norilsk Nickel 1st Krasnogvardeyskiy proezd, 15

232 “Mercury” Moscow City Tower Moscow, 123100 Russian Federation

Fax: + 7 495 785 58 08

Attention: Head of Corporate Finance

E-mail: [email protected], with a copy to: [email protected]

and in the case of notices to the Lender, to it at:

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, fax or email as any party may hereafter specify in writing to the other. 13.6.2 Deemed Receipt Any such communication shall take effect, in the case of a letter, at the time of delivery, in the case of a fax, when the relevant delivery receipt is received by the sender, in the case of an electronic communication, when the relevant receipt of such communication being read is given, or where no read receipt is requested by the sender, at the time of sending, provided that no delivery failure notification is received by the sender within 24 hours of sending such communication (provided that, in any event, an electronic communication shall be also concurrently made by fax); provided that any communication which is received (or deemed to take effect in accordance with the foregoing) after 5:00pm on a business day 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. 13.7 Assignment 13.7.1 Subject to sub-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

233 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 sub-clauses 6.4, 6.5 or Clause 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. 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 sub-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, and administered by the LCIA (formerly, the London Court of International Arbitration) in accordance with its rules (the “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

234 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. 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

235 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 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 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 sub-clause 13.19 shall survive the termination of this Agreement.

236 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 Certificates.

The U.S.$750,000,000 3.375 per cent. Loan Participation Notes due 2024 (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 28 October 2019 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.$750,000,000 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 24 October 2019 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, the Agents, the Account Bank 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 24 October 2019 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”, respectively, which expressions shall include any successors), Citigroup Global Markets Europe AG as the registrar (the “Registrar”, which expression shall include any successors), and any other paying agent, together with the Principal Paying Agent (the “Paying Agents”) and the Trustee. References

237 herein to the “Agents” are to the Registrar, the Paying Agents 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 by appointment during normal business hours at (i) the registered office of the Trustee being, at the date hereof, at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom; (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

238 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;

(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

239 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 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

240 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 Noteholders 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.

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 (i) a Rule 144A Global Certificate (the “Rule 144A Global Certificate”), interests in which are to be sold to qualified institutional buyers (each a “QIB”), within the meaning of, and pursuant to, Rule 144A (“Rule 144A”) under the U.S. Securities Act of 1933 (the “Securities Act”), each of whom is a qualified purchaser (“QP”) (as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act of 1940) and (ii) a Regulation S Global Certificate (the “Regulation S Global Certificate” and, together with the Rule 144A Global Certificate, the “Global Certificates”), 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”) which will each be exchangeable for Notes in definitive, fully registered form in the limited circumstances specified in the Global Certificates 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.

241 (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 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.

242 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, rescission, 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 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 3.375 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.

243 In these Conditions, “Interest Payment Date” means 28 April and 28 October of each year commencing on 28 April 2020.

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 28 October 2024 (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, the Principal Paying Agent and the Noteholders in accordance with Condition 13.

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”).

Immediately on receipt of such notice, the Issuer shall forward it to the Noteholders (in accordance with Condition 13), 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

244 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 5(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 13), 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.

The Issuer’s obligations in respect of this Condition 5(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 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.

245 The Issuer may compel any beneficial owner of Rule 144A Certificates to certify that it is a QIB that is also a QP and may compel any such beneficial owner to sell its interest in such Rule 144A Certificates, or may sell such interest on behalf of such holder, if such holder is a U.S. person that is not a QIB that is also a QP.

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 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 (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 on the business day preceding the due date for payment (for value the next business day).

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

246 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 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, the Agents, the Account Bank 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

247 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 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

248 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.

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 6 (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.

249 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.

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.

250 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 or express written notice 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.

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 plc, trading as Euronext Dublin (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.

251 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.

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.

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

The Global Note Certificates

The Regulation S Notes will be evidenced on issue by the Regulation S 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 Regulation S Global Note Certificate may be held only through Euroclear or Clearstream, Luxembourg at any time. See “Clearing and Settlement—Book-Entry Procedures for the Global Note Certificates”. By acquisition of a beneficial interest in the Regulation S 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 (a) to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or the account of a QIB that is also a QP, in each case in accordance with any applicable securities laws of any state of the United States. See “Transfer Restrictions”.

The Rule 144A Notes will be evidenced on issue by the Rule 144A Global Note Certificate deposited with a custodian for, and registered in the name of a nominee of, DTC. Beneficial interests in the Rule 144A Global Note Certificate may only be held through DTC at any time. See “Clearing and Settlement—Book-Entry Procedures for the Global Note Certificates”. By acquisition of a beneficial interest in the Rule 144A Global Note Certificate, the purchaser thereof will be deemed to represent, among other things, that it is a QIB and that, if in the future it determines to transfer such beneficial interest, it will transfer such interest in accordance with the procedures and restrictions contained in the Trust Deed. See “Transfer Restrictions”.

Beneficial interests in Global Note Certificates will be subject to certain restrictions on transfer set forth therein and in the Trust Deed and the Global Note Certificates will bear the applicable legends regarding the restrictions set forth under “Transfer Restrictions”. A beneficial interest in the Regulation S Global Note Certificate may be transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate only in denominations greater than or equal to the minimum denominations applicable to interests in the Rule 144A Global Note Certificate and only upon receipt by the Registrar of a written certification (in the form provided in a Paying Agency Agreement relating to the Notes (the “Paying Agency Agreement”)) to the effect that the transferor reasonably believes that the transferee is a QIB and that such transaction is in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Rule 144A Global Note Certificate may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate only upon receipt by the Registrar of a written certification (in the form provided in the Paying Agency Agreement) from the transferor to the effect that the transfer is being made in an offshore transaction in accordance with Regulation S.

Any beneficial interest in the Regulation S Global Note Certificate that is transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate will, upon transfer, cease to be an interest in the Regulation S Global Note Certificate and become an interest in the Rule 144A Global Note Certificate, and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Rule 144A Global Note Certificate for as long as it remains such an interest. Any beneficial interest in the Rule 144A Global Note Certificate that is transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate will, upon transfer, cease to be an interest in the Rule 144A Global Note Certificate and become an interest in the Regulation S Global Note Certificate and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the

253 Regulation S Global Note Certificate for so long as it remains such an interest. No service charge will be made for any registration of transfer or exchange of Notes, but the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Except in the limited circumstances described below, owners of beneficial interests in Global Note Certificates 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) a Global Note Certificate is held by or on behalf of (A) DTC, and DTC notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depository with respect to the Global Note Certificate or ceases to be a “clearing agency” registered under the Exchange Act or if at any time it is no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice or becoming aware of such ineligibility on the part of DTC or (B) 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 relevant 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, a 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 only one of the Global Note Certificates (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.

“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 relevant 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

254 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 a Global Note Certificate must provide the Registrar with (a) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Notes and (b) in the case of the Rule 144A Global Note Certificate only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange or, in the case of simultaneous sale pursuant to Rule 144A, a certification that the transfer is being made in compliance with the provisions of Rule 144A to a QIB that is also a QP. Definitive Certificates issued in exchange for a beneficial interest in the Rule 144A Global Note Certificate shall bear the legend applicable to transfer pursuant to Rule 144A, as set forth under “Transfer Restrictions”.

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. Upon the transfer, exchange or replacement of a Rule 144A Definitive Certificate bearing the legend referred to under “Transfer Restrictions”, or upon specific request for removal of the legend on a Rule 144A Definitive Certificate, the Issuer will deliver only Rule 144A Definitive Certificates that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act and the Investment Company Act.

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 a Global Certificate shall be made to the person who appears at the relevant time on the register of Noteholders as holder of the relevant Global Certificate against presentation and (if no further payment falls to be made on it) surrender thereof to or to the order of the Principal 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 relevant 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 relevant Global Certificate falling due after the Exchange Date, unless the exchange of the relevant 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 DTC, 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 DTC, 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.

255 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 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, DTC or any other clearing system (as the case may be).

Record Date

All payments in respect of Notes represented by a 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 (i) in respect of the Regulation S Global Note Certificate, held on behalf of Euroclear or Clearstream, Luxembourg, a day when Euroclear or Clearstream, Luxembourg is open for business and (ii) in respect of the Rule 144A Global Note Certificate held on behalf of DTC, a day when DTC 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 relevant 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 Certificates 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 relevant Global Certificate is issued shall be authorised as the beneficiaries of the trusts set out in the Trust Deed to the extent of the

256 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 a Global Certificate has been exchanged or cancelled the holder hereof shall, except as provided in the relevant 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.

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

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

257 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.

Rule 144A Notes

Each purchaser of Rule 144A Notes, by accepting delivery of this Prospectus and the Notes, will be deemed to have represented, agreed and acknowledged that:

1. It is (a) a QIB that is also a QP, (b) not a broker-dealer that owns and invests on a discretionary basis less than U.S.$25 million in securities of unaffiliated issuers, (c) not a participant-directed employee plan, such as a 401(k) plan, (d) acquiring such Notes for its own account, or for the account of one or more QIBs each of which is also a QP, (e) not formed for the purpose of investing in the Notes or the Issuer, and (f) aware, and each beneficial owner of such Notes has been advised, that the seller of such Notes to it may be relying on Rule 144A.

2. It will (a) along with each account for which it is purchasing, hold and transfer beneficial interests in the Rule 144A Notes in a principal amount that is not less than U.S.$200,000 and (b) provide notice of these transfer restrictions to any subsequent transferees. In addition, it understands that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositories.

3. It understands that the Rule 144A Notes have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or for the account of one or more QIBs that are also QPs each of which is purchasing not less than U.S.$200,000 principal amount of Notes or (b) in an offshore transactions to a person, that is not a U.S. person (within the meaning of Regulation S) in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, and in each case in accordance with any applicable securities laws of any State of the United States.

4. It understands that the Issuer has the power under the Trust Deed to compel any beneficial owner of Rule 144A Notes that is not a QIB and also a QP to sell its interest in the Rule 144A Notes, or may sell such interest on behalf of, or purchase such interest from, such owner at a price equal to the least of (x) the purchase price therefor paid by the beneficial owner, (y) 100 percent of the principal amount thereof or (z) the fair market value thereof. The Issuer has the right to refuse to honour the transfer of an interest in the Rule 144A Notes to a U.S. person who is not a QIB and also a QP.

5. It understands that the Rule 144A Notes, unless otherwise agreed between the Issuer and the Trustee in accordance with applicable law, will bear a legend to the following effect:

THIS NOTE AND THE LOAN IN RESPECT THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “QIB”) THAT IS ALSO A

258 QUALIFIED PURCHASER (A “QP”) WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940 (THE “INVESTMENT COMPANY ACT”) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB THAT IS ALSO A QP WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, AND IN AN AMOUNT FOR EACH ACCOUNT OF NOT LESS THAN U.S.$200,000 PRINCIPAL AMOUNT OF NOTES OR (2) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”), AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTES IN RESPECT HEREOF OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE OR EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF THIS NOTE, THE TRUSTEE OR ANY INTERMEDIARY. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR RESALES OF THIS NOTE.

EACH BENEFICIAL OWNER HEREOF REPRESENTS THAT (1) IT IS A QIB THAT IS ALSO A QP; (2) IT IS NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS; (3) IT IS NOT A PARTICIPANT-DIRECTED EMPLOYEE PLAN, SUCH AS A 401 (k) PLAN; (4) IT IS HOLDING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QIB THAT IS ALSO A QP; (5) IT WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER OR THIS NOTE; (6) IT, AND EACH ACCOUNT FOR WHICH IT HOLDS NOTES, WILL HOLD AND TRANSFER AT LEAST U.S.$200,000 IN PRINCIPAL AMOUNT OF NOTES; (7) IT UNDERSTANDS THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES AND (8) IT WILL PROVIDE NOTICE OF THE FOREGOING TRANSFER RESTRICTIONS TO ITS SUBSEQUENT TRANSFEREES.

THE BENEFICIAL OWNER HEREOF HEREBY ACKNOWLEDGES THAT, IF AT ANY TIME WHILE IT HOLDS AN INTEREST IN THIS NOTE IT IS A PERSON WHO IS NOT A QIB THAT IS ALSO A QP, THE ISSUER MAY (A) COMPEL IT TO SELL ITS INTEREST IN THIS NOTE TO A PERSON (1) WHO IS ALSO A QIB THAT IS ALSO A QP AND WHO IS OTHERWISE QUALIFIED TO PURCHASE THIS NOTE IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) IN AN OFFSHORE TRANSACTION TO A PERSON THAT IS NOT A U.S. PERSON IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S OR (B) COMPEL THE BENEFICIAL OWNER TO SELL ITS INTEREST IN THIS NOTE TO THE ISSUER OR AN AFFILIATE OF THE ISSUER OR TRANSFER ITS INTEREST IN THIS NOTE TO A PERSON DESIGNATED BY OR ACCEPTABLE TO THE ISSUER AT A PRICE EQUAL TO THE LEAST OF (X) THE PURCHASE PRICE THEREFOR PAID BY THE BENEFICIAL OWNER, (Y) 100 PERCENT OF THE PRINCIPAL AMOUNT THEREOF OR (Z) THE FAIR MARKET VALUE THEREOF. THE ISSUER HAS THE RIGHT TO REFUSE TO HONOR A TRANSFER OF AN INTEREST IN THIS NOTE TO A PERSON WHO IS NOT A QIB AND ALSO A QP. THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT COMPANY ACT.

259 BY ACCEPTING THIS NOTE (OR ANY INTEREST IN THE NOTES REPRESENTED HEREBY) EACH BENEFICIAL OWNER HEREOF, AND EACH FIDUCIARY ACTING ON BEHALF OF THE BENEFICIAL OWNER (BOTH IN ITS INDIVIDUAL AND CORPORATE CAPACITY), WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT, DURING THE PERIOD IT HOLDS ANY INTEREST IN THIS NOTE (1) EITHER (A) IT IS NOT, AND IT IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THIS NOTE (OR ANY INTEREST THEREIN) WILL NOT BE, OR BE ACTING ON BEHALF OF) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) SUBJECT TO THE PROVISIONS OF PART 4 OF SUBTITLE B OF TITLE I OF ERISA, A PLAN TO WHICH SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (“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 FOR THE PURPOSES OF ERISA OR THE CODE BY REASON OF SUCH AN EMPLOYEE BENEFIT PLAN’S OR PLAN’S INVESTMENT IN SUCH ENTITY (EACH, A “BENEFIT PLAN INVESTOR”) OR A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN OR ARRANGEMENT WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE AND/OR THE FIDUCIARY RESPONSIBILITY AND/OR THE PROHIBITED TRANSACTION PROVISIONS OF ERISA AND/OR SECTION 4975 OF THE CODE (“SIMILAR LAWS”) 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) IT IS, OR IS ACTING ON BEHALF OF A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN OR ARRANGEMENT SUBJECT TO SIMILAR LAWS, AND SUCH ACQUISITION DOES NOT AND WILL NOT RESULT IN A NON EXEMPT VIOLATION OF ANY SIMILAR LAWS AND WILL NOT SUBJECT THE ASSETS OF THE ISSUER TO ANY SIMILAR LAWS; AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THIS NOTE 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 PURCHASE, HOLDING AND DISPOSITION OF THIS NOTE. NO PURCHASE BY OR TRANSFER TO A BENEFIT PLAN INVESTOR OF THIS NOTE, OR ANY INTEREST HEREIN, WILL BE EFFECTIVE, AND NEITHER THE ISSUER NOR THE TRUSTEE WILL RECOGNIZE 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 IN THIS PROSPECTUS.

THE ISSUER MAY COMPEL EACH BENEFICIAL OWNER HEREOF TO CERTIFY PERIODICALLY THAT SUCH OWNER IS A QIB AND ALSO A QP.

6. It understands and acknowledges that its purchase, holding and disposition of such Notes constitutes a representation and agreement by it that at the time of purchase and throughout the period it holds such Notes or any interest therein (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

260 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 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.

7. It acknowledges that the Issuer, the Company, the Registrars, the Managers and their respective affiliates, and others will rely upon the truth and accuracy of the above acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Rule 144A Notes is no longer accurate, it shall promptly notify the Issuer, the Company and the Managers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts who are QIBs that are also QPs, it represents that it has sole investment discretion with respect to each such account, and that it has full power to make the above acknowledgements, representations and agreements on behalf of each such account.

8. It understands that the Rule 144A Notes will be evidenced by the Rule 144A Global Note Certificate. Before any interest in the Rule 144A Global Note Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreement) as to compliance with applicable securities laws. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

Regulation S Notes

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

1. It is, or at the time Regulation S Notes are purchased will be, the beneficial owner of such Regulation S 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 Regulation S 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 (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believes is a QIB that is also a QP purchasing for its own account or for the account of a QIB that is also a QP or (b) 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, in the case of (a) and (b), in accordance with any applicable securities laws of any state or other jurisdiction of the United States.

3. It understands that the Regulation S Notes will be evidenced by the Regulation S Global Note Certificate. Before any interest in the Regulation S Global Note Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreement) as to compliance with applicable securities laws.

261 4. 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.

262 CLEARING AND SETTLEMENT

Book-Entry Procedures for the Global Note Certificates

Custodial and depository links are to be established among Euroclear, Clearstream, Luxembourg and DTC 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 Regulation S 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.

DTC

DTC has advised the Issuer as follows: DTC is a limited-purpose trust company organised under the laws of the State of New York, a “banking organization” under the laws of the State of New York, a member of the U.S. Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants (“DTC Participants”) and facilitate the clearance and settlement of securities transactions between DTC Participants through electronic computerised book-entry changes in accounts of its DTC Participants, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to DTC is available to others, such as banks, securities brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly.

Investors may hold their interests in the Rule 144A Global Note Certificate directly through DTC if they are DTC Participants in the DTC system, or indirectly through organisations which are DTC Participants in such system.

DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more DTC Participants and only in respect of such portion of the aggregate principal amount of the relevant Rule 144A Global Note Certificate as to which such DTC Participant or DTC Participants has or have given such direction.

263 Book-Entry Ownership

Euroclear and Clearstream, Luxembourg

The Regulation S 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.

DTC

The Rule 144A Global Note Certificate will have a CUSIP number, an ISIN and a Common Code and will be deposited with a custodian (the “Custodian”) for, and registered in the name of a nominee of, DTC. The Custodian and DTC will electronically record the principal amount of the Notes held within the DTC, system. The address of DTC is 55 Water Street, New York, New York 10041, United States of America.

Relationship of Participants with Clearing Systems

Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the holder of a Note evidenced by a Global Note Certificate must look solely to Euroclear, Clearstream, Luxembourg or DTC (as the case may be) for his share of each payment made by the Issuer to the holder of such Global Note Certificate and in relation to all other rights arising under that Global Note Certificate, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or DTC (as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by a 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 relevant 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 or DTC Participants (as the case may be) in any clearing system to owners of beneficial interests in such Global Note Certificate held through such Direct Participants or DTC Participants (as the case may be) 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 such Global Note Certificate and the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of such 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 any 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 or DTC Participants (as the case may be), 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’, Indirect Participants’ or DTC Participants’ records (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

264 well as periodic statements of their holdings, from the Direct Participant, Indirect Participant or DTC 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, Indirect Participants or DTC 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 any 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 or DTC Participants (as the case may be) to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct Participants or the DTC Participants (as the case may be) 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 or DTC Participants (as the case may be), by Direct Participants to Indirect Participants, and by Direct Participants, Indirect Participants or DTC 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 Certificates to such persons may be limited. In particular, because DTC can only act on behalf of DTC Participants the ability of a person having an interest in the Rule 144A Global Note Certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

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.

Trading between DTC Participants

Secondary market sales of book-entry interests in the Notes between DTC Participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to U.S. corporate debt obligations in DTC’s Same-Day Funds Settlement system in same-day funds, if payment is effected in U.S. dollars, or free of payment, if payment is not effected in U.S. dollars. Where payment is not effected in U.S. dollars, separate payment arrangements outside DTC; are required to he made between DTC Participants.

Trading between DTC Seller and Euroclear/Clearstream, Luxembourg Purchaser

When book-entry interests in Notes are to be transferred from the account of a DTC Participant holding a beneficial interest in the Rule 144A Global Note Certificate to the account of a Euroclear or Clearstream, Luxembourg accountholder wishing to purchase a beneficial interest in the Regulation S Global Note Certificate (subject to the certification procedures provided in the Paying Agency Agreement), the DTC Participant will deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg accountholder to DTC by 12:00 p.m., New York time, on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant

265 Euroclear or Clearstream, Luxembourg Participant. On the settlement date, the custodian of the Rule 144A Global Note Certificate will instruct the Registrar to (1) decrease the amount of Notes registered in the name of Cede & Co. and evidenced by the Rule 144A Global Note Certificate of the relevant class and (2) increase the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Regulation S Global Note Certificate. Book-entry interests will be delivered free of payment to Euroclear or Clearstream, Luxembourg, as the case may be, for credit to the relevant accountholder on the first business day following the settlement date.

Trading between Euroclear/Clearstream, Luxembourg Seller and DTC Purchaser

When book-entry interests in the Notes are to be transferred from the account of a Euroclear or Clearstream, Luxembourg accountholder to the account of a DTC Participant wishing to purchase a beneficial interest in the Rule 144A Global Note Certificate (subject to the certification procedures provided in the Paying Agency Agreement), the Euroclear or Clearstream, Luxembourg participant must send to Euroclear or Clearstream, Luxembourg delivery free of payment instructions by 7:45 p.m., Brussels or Luxembourg time, one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg, as the case may be, will in turn transmit appropriate instructions to the common depository for Euroclear and Clearstream, Luxembourg and the Registrar to arrange delivery to the DTC Participant on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant Euroclear or Clearstream, Luxembourg accountholder, as the case may be. On the settlement date, the common depositary for Euroclear and Clearstream, Luxembourg will (a) transmit appropriate instructions to the custodian of the Rule 144A Global Note Certificate who will in turn deliver such book-entry interests in the Notes free of payment to the relevant account of the DTC Participant and (b) instruct the Registrar to (1) decrease the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Regulation S Global Note Certificate; and (2) increase the amount of Notes registered in the name of Cede & Co. and evidenced by the Rule 144A Global Note Certificate.

Although Euroclear, Clearstream, Luxembourg and DTC have agreed to the foregoing procedures in order to facilitate transfers of beneficial interest in Global Note Certificates among participants and accountholders of Euroclear, Clearstream, Luxembourg and DTC, they are under no obligation to perform or continue to perform such procedure, and such procedures may be discontinued at any time. None of the Issuer, the Trustee or any Agent will have the responsibility for the performance, by Euroclear, Clearstream, Luxembourg or DTC or their respective Direct Participants, Indirect Participants or DTC Participants, as the case may be, of their respective obligations under the rules and procedures governing their operations.

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.

266 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% 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

267 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 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.

268 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 recognised 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);

269  a foreign legal entity or organisation recognised as a Russian tax resident based on Russian domestic law (in case the Russian Federation is recognised 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);

 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.

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

270 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 (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% (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.

271 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 Income on the Loan” 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.

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% (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% (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

272 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.

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

273 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.

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 should have the beneficial ownership right to receive income (i.e., to be a person qualified as a “beneficial owner of income” - the concept of beneficial ownership for Russian tax purposes is discussed in “Risks relating to taxation” section) and 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 2017 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 recognised as a personal identity document of a

274 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.

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 the Russian Tax Code 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 (subject to limitations described below).

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.

275 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%, 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. 4393-U of the Central Bank of the Russian Federation dated 30 May 2017 (the “List”). Euronext Dublin, Euroclear and Clearstream, Luxembourg are included in the List. The List also includes Depository Trust and Clearing Company (DTCC) while Depository Trust Company (DTC), which a subsidiary of DTCC, is not directly and explicitly included in the List. Therefore, there is a risk that the Russian tax authorities could apply a formalistic approach and take a position that DTC is not a qualifying foreign depository organisation.

(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 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 Rule 144A Notes are delisted from Euronext Dublin, then such notes may potentially not fall within the definition of traded bonds under the Russian Tax Code (as DTC is not explicitly mentioned in the List), and therefore, there is a risk that the Company may be required to withhold Russian withholding tax from interest payments made by the Company to the Issuer. In any case, if the Notes are simultaneously (i) delisted from Euronext Dublin 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 traded bonds 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. 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

276 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% (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% (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.

Taxation of Noteholders

Withholding Tax

In general, tax at the standard rate of income tax (currently 20%) 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 Euronext Dublin) 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:

277 (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

(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% 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 –

(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,

278 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 Euronext Dublin 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%) 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 Taxes Consolidation Act 1997 (“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

279 which is either in force or which is not yet in force but which will come into force once all 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%) 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 issue, transfer or redemption of the Notes provided 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.

280 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS

The following is a discussion of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of the Notes by U.S. Holders (as defined below) that purchase the Notes at their issue price (generally the first price at which a substantial amount of the Notes is sold for money, excluding sales to bond houses, brokers or similar persons or organisations acting in the capacity of underwriters, placement agents or wholesalers) pursuant to the Offering and hold such Notes as capital assets. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated or proposed thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect, or to different interpretation. This discussion does not address all of the U.S. federal income tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances (including U.S. Holders that are directly or indirectly related to the Issuer or the Company and accrual method U.S. Holders that have an “applicable financial statement”) or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, dealers in securities or other U.S. Holders that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, U.S. Holders that hold a Note as part of a straddle, hedge, conversion or other integrated transaction or U.S. Holders that have a “functional currency” other than the U.S. dollar). This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations.

As used in this discussion, the term “U.S. Holder” means a beneficial owner of a Note that, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United States, (ii) a corporation created or organised in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (y) that has in effect a valid election under applicable U.S. Treasury regulations to be treated as a United States person.

If an entity treated as a partnership for U.S. federal income tax purposes invests in a Note, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner in such entity. Any such entity should consult its own tax adviser regarding the U.S. federal income tax considerations applicable to it and its partners relating to the purchase, ownership and disposition of a Note.

EACH PERSON CONSIDERING AN INVESTMENT IN THE NOTES SHOULD CONSULT ITS OWN TAX ADVISERS REGARDING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES.

Characterisation of the Notes

There are no regulations, published rulings or judicial decisions addressing the characterisation for U.S. federal income tax purposes of securities issued under substantially the same circumstances and with substantially the same terms as the Notes. To the extent that it is relevant to U.S. Holders, the Issuer intends to take the position that the Notes constitute debt for U.S. federal income tax purposes. However, no ruling will be obtained from the U.S. Internal Revenue Service (the “IRS”) with respect to the characterisation of the Notes as debt, and there can be no assurance that the IRS or the courts would

281 agree with this characterisation of the Notes. If, due to the capital structure of the Issuer or otherwise, the Notes were treated as equity interests in the Issuer, U.S. Holders would be treated as owning interests in a “passive foreign investment company” (“PFIC”). Treatment of the Notes as equity interests in a PFIC could have adverse U.S. federal income tax consequences to U.S. Holders. Accordingly, U.S. Holders should consult their own tax advisers regarding the characterisation of the Notes for U.S. federal income tax purposes and the consequences of owning an equity interest in a PFIC. The remainder of this discussion assumes that the Notes will be treated as debt for U.S. federal income tax purposes.

Certain Additional Payments

In certain circumstances, payments other than stated principal and interest may be made with respect to the Notes. For example, under certain circumstances, additional payments may need to be made (i) on account of withholding taxes imposed by Ireland as described above under the heading “Terms and Conditions of the Notes—Taxation” or (ii) when the Issuer receives a Make Whole Prepayment Amount as a result of NN’s exercise of certain of its prepayment options as described above under the heading “Terms and Conditions of the Notes – Redemption and Purchase”.

U.S. Treasury regulations provide special rules for contingent payment debt instruments that, if applicable, could cause the timing, amount and character of a U.S. Holder’s income, gain or loss with respect to the Notes to be different from those described below. The Issuer intends to treat the possibility of making any of the above payments as not causing the Notes to be contingent payment debt instruments. The Issuer’s treatment will be binding on all U.S. Holders, except a U.S. Holder that discloses its differing treatment in a statement attached to its timely filed U.S. federal income tax return for the taxable year during which such U.S. Holder acquired its Notes. However, the Issuer’s treatment is not binding on the IRS. If the IRS were to challenge the Issuer’s treatment, a U.S. Holder might be required to accrue income on the Notes in excess of stated interest and to treat as ordinary income, rather than capital gain, gain recognised on the disposition of the Notes. In any event, if any such payment is actually made, the timing, amount and character of a U.S. Holder’s income, gain or loss with respect to the Notes may be affected. The remainder of this discussion assumes that the Notes will not be treated as contingent payment debt instruments.

Interest on the Notes

In general, interest payable on a Note (without reduction for any non-U.S. tax withheld with respect to such payment) will be taxable to a U.S. Holder as ordinary interest income when it is received or accrued, in accordance with such U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. The Notes are not expected to be issued with more than de minimis OID. OID will be considered to be de minimis if it is less than 0.25% of the principal amount multiplied by the number of complete years to maturity of the Notes. However, if the Notes are issued with more than de minimis OID, each U.S. Holder generally will be required to include OID in its income (as interest) as it accrues, regardless of its regular method of accounting for U.S. federal income tax purposes, using a constant yield method, before such U.S. Holder receives any payment attributable to such income. The remainder of this discussion assumes that the Notes are not issued with more than de minimis OID.

Interest income on the Notes generally will be treated as income from sources outside the United States and generally will be categorised for U.S. foreign tax credit purposes as “passive category income” or, in the case of some U.S. Holders, as “general category income”. The rules relating to U.S. foreign tax credits are very complex, and each U.S. Holder should consult its own tax adviser regarding the application of such rules.

282 Sale, Exchange, Retirement or Other Disposition of the Notes

Upon the sale, exchange, retirement or other disposition of a Note, a U.S. Holder generally will recognise gain or loss in an amount equal to the difference between the amount realised on such sale, exchange, retirement or other disposition (which does not include any amount attributable to accrued stated interest, which, if not previously included in such U.S. Holder’s income, will be taxable as interest income to such U.S. Holder) and such U.S. Holder’s adjusted tax basis in such Note. Any gain or loss so recognised generally will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder has held such Note for more than one year at the time of such sale, exchange, retirement or other disposition. Net long-term capital gain of certain non-corporate U.S. Holders generally is subject to preferential rates of tax. The deductibility of capital losses is subject to limitations. Such gain or loss generally will be from sources within the United States.

Medicare Tax

In addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income”, which may include all or a portion of their interest income with respect to, and net gain from the sale, exchange, retirement or other disposition of, a Note.

Information Reporting and Backup Withholding

Under certain circumstances, information reporting and/or backup withholding may apply to a U.S. Holder with respect to payments of interest on, or proceeds from the sale, exchange, retirement or other disposition of, a Note, unless an applicable exemption is satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by such U.S. Holder on a timely basis to the IRS.

Disclosure Requirements for Specified Foreign Financial Assets

Individual U.S. Holders (and certain U.S. entities specified in U.S. Treasury regulations) who, during any taxable year, hold any interest in any “specified foreign financial asset” generally will be required to file with their U.S. federal income tax returns certain information on IRS Form 8938 (or any successor form) if the aggregate value of all such assets exceeds certain specified amounts. “Specified foreign financial asset” generally includes any financial account maintained with a non-U.S. financial institution and may also include the Notes if they are not held in an account maintained with a financial institution. Substantial penalties may be imposed, and the period of limitations on assessment and collection of U.S. federal income taxes may be extended, in the event of a failure to comply. U.S. Holders should consult their own tax advisers as to the possible application to them of this filing requirement.

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) payments of certain U.S. source income, including interest and 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”). 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 debt obligations that are issued on or before the date that is six months after the date on which the final U.S. Treasury regulations

283 defining foreign passthru payments (“passthru payment regulations”) are filed 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 Company or the Issuer (or if the Notes are held through an FFI, such FFI) may be required, pursuant to 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 Company, 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 or the Loan are materially modified 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 Company or the Issuer or a financial institution through which the Notes are held may be required to apply FATCA withholding tax to any payment with respect to the Notes treated as a foreign passthru payment made on or after the date that is two years after 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). Neither the Issuer nor the Company will 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.

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.

284 SUBSCRIPTION AND SALE

Each of Citigroup Global Markets Limited, J.P. Morgan Securities plc, Société Générale, Bank GPB International S.A., ING Bank N.V., London Branch, Sberbank CIB (UK) Limited and VTB Capital plc (together, the “Managers” and each, a “Manager”) have, in a subscription agreement dated 24 October 2019 (the “Subscription Agreement”) among the Issuer, the Company and the 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. To the extent that any Manager that is not a U.S. registered broker dealer intends to effect any sales of the Notes in the United States, it will only do so through one or more U.S. registered broker dealers as permitted by the guidelines promulgated by the Financial Industry Regulatory Authority.

The Managers are entitled to commissions and reimbursement of certain expenses pursuant to the Subscription Agreement. The 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 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 Managers may be required to make because of those liabilities.

Selling Restrictions

United States

The Notes and the Loan (the "Securities") 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 pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Securities are being offered and sold only to (1) QIBs, in reliance on Rule 144A, that are also QPs and (2) to persons who are not U.S. persons in reliance on Regulation S.

Each Manager has severally represented that it has offered and sold the Securities, and agrees that it will offer and sell the Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, (the "Distribution Compliance Period") only in accordance with Rule 903 of Regulation S, except that the Managers may offer or sell the Securities within the United States to QIBs who are also QPs in reliance on Rule 144A as set forth below. Accordingly, neither it, its affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts (as such term is defined in Regulation S) with respect to the Securities, and it and they have complied and will comply with the offering restrictions requirement of Regulation S.

Each Manager has severally agreed that, at or prior to confirmation of a sale of Notes (other than a sale pursuant to Rule 144A), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the Distribution Compliance Period a confirmation or notice to substantially the following effect:

“The securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (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 (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date of the offering, except in either case in accordance with (A) Regulation S under the Securities Act (“Regulation S”) in an offshore transaction to a person who is not a U.S. person or (B) Rule 144A under the Securities Act to a person that the seller reasonably believes is a qualified

285 institutional buyer (within the meaning of Rule 144A under the Securities Act) that is also a qualified purchaser (as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940). Terms used above which are not otherwise defined have the meanings given to them by Regulation S under the Securities Act.”

Terms used in this paragraph and not otherwise defined herein have the meanings given to them by Regulation S.

Each Manager has severally represented, warranted and undertaken that neither it nor any of its affiliates, nor any person acting on its or their behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer and sale of the Securities in the United States.

Each Manager has severally represented, warranted and undertaken that:

(a) it has offered and sold and will offer and sell the Notes in the United States only to persons whom it reasonably believes are QIBs and QPs who can represent that (A) they are QPs who are QIBs within the meaning of Rule 144A; (B) they are not broker-dealers who own and invest on a discretionary basis less than U.S.$25 million in securities of unaffiliated issuers; (C) they are not participant-directed employee plans, such as a 401(k) plan; (D) they are acting for their own account, or the account of one or more QIBs each of which is a QP; (E) they are not formed for the purpose of investing in the Notes or the Issuer; (F) each account for which they are purchasing will hold and transfer at least U.S.$200,000 in principal amount of Notes at any time; (G) they understand that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositories; and (H) they will provide notice of the transfer restrictions set forth in the Prospectus to any subsequent transferees; and

(b) itis aQIBanda QP.

Each Manager has severally represented that it has not entered and agrees that it will not enter into any contractual arrangement with any distributor (as that term is defined in Regulation S) with respect to the distribution or delivery of the Notes, except with its affiliates or with the prior written consent of the Issuer and NN.

Each Manager may, through its respective U.S. registered broker-dealer affiliates, arrange for the offer and resale of the Notes in the United States only to QIBs that are QPs in accordance with Rule 144A.

Prohibition of Sales to EEA Retail Investors

Each Manager has severally and not jointly nor jointly and severally represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the European Economic Area. For the purposes of this provision the expression “retail investor” means a person who is one (or more) of the following:

(a) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(b) a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

United Kingdom

Each Manager severally and not jointly nor jointly and severally has represented and agreed that:

286  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

 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 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 Manager has represented and agreed that:

(a) it will not underwrite the issue of, or place, the Notes otherwise than in conformity with the provisions of the European Union (Markets in Financial Instruments) Regulations 2017 (as amended, the “MiFID II Regulations”), including, without limitation, Regulation 5 (Requirement for authorisation (and certain provisions concerning MTFs and OTFs)) thereof, any rule or any code of conduct made under the MiFID II Regulations, and the provisions of the Investor Compensation Act 1998 (as amended);

(b) 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 1942-2018 (as amended) and any codes of practice made under Section 117(1) of the Central Bank Act 1989 (as amended);

(c) 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 Regulation (EU) 2017/1129 and any rules issued by the Central Bank of Ireland (the “Central Bank”) under Section 1363 of the Companies Act; and

(d) 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 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

287 defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO.

Singapore

Each Manager severally acknowledged that the Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each 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 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, as modified or amended from time to time (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 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 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 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 Managers following a change in a relevant law, regulation or directive.

The 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 Managers performed various investment banking, financial advisory, and other services for the Company, for which they received customary fees, and the Managers and their respective affiliates may provide such services in the future. Certain of the 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 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.

288 GENERAL INFORMATION

1. The Notes have been accepted for clearance through Euroclear, Clearstream, Luxembourg and DTC. The Common Code and the ISIN numbers for the Regulation S Notes are 206999225 and XS2069992258, respectively. The Common Code, CUSIP and ISIN numbers for the Rule 144A Notes are 207162124, 55315N AC7 and US55315NAC74, respectively.

2. The Legal Entity Identifier code of the Issuer is 635400IPHIGSTULPX313.

3. The Legal Entity Identifier code of the Company is 253400JPTEEW143W3E47.

4. 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.

5. Application has been made to Euronext Dublin for the Notes to be admitted to the Official List and to trading on the Regulated 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 regulated market of Euronext Dublin for the purposes of the Prospectus Regulation.

6. For so long as any of the Notes are admitted to the Official List and to trading on the Regulated Market, 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 (available at: https://www.ise.ie/debt_documents/Issuer%20Constitution_2097a188-f057-4731-85b0- a47432d2cea2.PDF);

(c) the articles of association of the Company (also available at: https://www.nornickel.com/files/en/corporate_documents/constituent_documents/Annex -ARTICLES-OF-ASSOCIATION.pdf);

(d) the Financial Statements, including the independent auditor’s reports thereon. The Financial Statements are also available:

 the 2019 Interim Consolidated Financial Statements – at: https://www.nornickel.com/upload/iblock/b8d/IFRS_Eng_USD_Consolidation_Rep orting.pdf;

 the 2018 Interim Consolidated Financial Statements – at: https://www.nornickel.com/upload/iblock/2a0/IFRS_Eng_USD_Consolidation_Rep orting.pdf;

 the 2018 Consolidated Financial Statements – at: https://www.nornickel.com/upload/iblock/0c3/12M_2018_IFRS_Consolidation_FS _Eng_USD.pdf; and

289  the 2017 Consolidated Financial Statements – at: https://www.nornickel.com/upload/iblock/735/ifrs_eng_usd_consolidation_reportin g_12m2017.pdf;

(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 2017 and 2016 (also available at: https://www.ise.ie/ debt_documents/Issuer%202017%20Financial%20Statements_2dac87c8-dc35-4211- ba47-7c57c1a7384b.PDF for the year ended 31 December 2017 and https://www.ise.ie/debt_documents/Issuer%202016%20Financial%20Statements_f4bdff a9-a931-4edc-9be3-a360784b01a4.PDF for the year ended 31 December 2016).

7. This Prospectus will be published on the website of Euronext Dublin at https://www.ise.ie/Market-Data-Announcements/Debt/Individual-Debt-Instrument-Data/Dept- Security-Documents/?progID=-1&uID=4605&FIELDSORT=fileDate.

8. The Trust Deed will be filed with Euronext Dublin and published at https://www.ise.ie/Market-Data-Announcements/Debt/Individual-Debt-Instrument-Data/Dept- Security-Documents/?progID=-1&uID=4605&FIELDSORT=docId.

9. The Loan Agreement has been authorised by a decision of the Board of Directors of the Company on 10 October 2019. 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 22 October 2019.

10. 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 Ireland for maintaining the Loan or for issuing the Notes.

11. Since 31 December 2017, there has been no material adverse change in the financial position or prospects of the Issuer. The Issuer has no subsidiaries.

12. Save for the fees payable to the 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.

13. There has been no significant change in the financial performance or financial position of the Company or of the Group since 30 June 2019 and no material adverse change in the prospects of the Company or of the Group since 31 December 2018.

14. 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.

15. With respect to the unaudited interim condensed consolidated financial information for the periods ended 30 June 2019 and 30 June 2018 included herein, the independent auditor has reported that they applied limited procedures in accordance with professional standards for a

290 review of such information. However, their separate report included in the Group’s interim condensed consolidated financial statements for the period, ended 30 June 2019 and interim condensed consolidated financial statements for the period ended 30 June 2018, and included herein, states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. The Annual Consolidated Financial Statements and related notes of the Group as at and for the years ended 31 December 2018 and 2017 included in this Prospectus have been reported on by JSC KPMG, independent auditors, as stated in their reports appearing herein, of Naberezhnaya Tower, Block C, Floor 31, 10 Presnenskaya Naberezhnaya, Moscow 123112, Russian Federation. JSC KPMG is a member of the Self-Regulation organisation of auditors “Russian Union of auditors” (Association) (Rossiyskiy Soyuz auditorov).

16. 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.

17. 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.

18. 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.

19. The Issuer estimates the total expenses related to the admission of the Notes to trading on the Market to be EUR 5,000.

20. The Issuer does not intend to provide any post-issuance transaction information regarding the Notes or the Loan.

21. Citigroup Global Markets Deutschland AG will act as Registrar in relation to the Notes.

22. The loan to value ratio of the Notes is 100%.

23. 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).

291 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.

Balance reserves Balance reserves of ore calculated in accordance with the Russian classification of reserves and forecast reserves of solid mineral deposits.

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.

292 Term or expression Meaning

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%).

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 for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. Indicated mineral resources have a lower level of confidence than that applying to measured mineral resources and may only be converted to probable ore reserves.

293 Term or expression Meaning

Inferred mineral resources Resources representing that part of mineral resources for which quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Inferred mineral resources have a lower level of confidence than that applying to indicated mineral resources and must not be converted to ore reserves. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.

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 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 for which quantity, grade (or quality), densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of modifying factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered. measured mineral resources have a higher level of confidence than that applying to either indicated mineral resources or inferred mineral resources. It may be converted to proved ore reserves or under certain circumstances to probable ore reserves.

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).

294 Term or expression Meaning

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).

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.

295 Term or expression Meaning

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 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.

296 Term or expression Meaning

4 PGM Platinum, palladium, rhodium and gold.

297 APPENDIX – CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX MONTHS ENDED 30 JUNE 2019 Independent auditors’ report on review of interim condensed consolidated financial statements...... F-4 Interim condensed consolidated income statement...... F-6 Interim condensed consolidated statement of comprehensive ...... F-7 Interim condensed consolidated statement of financial position...... F-8 Interim condensed consolidated statement of cash flows ...... F-9 Interim condensed consolidated statement of changes in equity ...... F-11 Notes to the interim condensed consolidated financial statements ...... F-12 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX MONTHS ENDED 30 JUNE 2018 Independent auditors’ report on review of interim condensed consolidated financial statements...... F-32 Interim condensed consolidated income statement...... F-34 Interim condensed consolidated statement of comprehensive income ...... F-35 Interim condensed consolidated statement of financial position...... F-36 Interim condensed consolidated statement of cash flows ...... F-37 Interim condensed consolidated statement of changes in equity ...... F-39 Notes to the interim condensed consolidated financial statements ...... F-40 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2018 Independent auditors’ report ...... F-63 Consolidated income statement...... F-67 Consolidated statement of comprehensive income ...... F-68 Consolidated statement of financial position ...... F-69 Consolidated statement of cash flows...... F-70 Consolidated statement of changes in equity ...... F-72 Notes to the consolidated financial statements ...... F-73 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2017 Independent auditors’ report ...... F-118 Consolidated income statement...... F-122 Consolidated statement of comprehensive income ...... F-123 Consolidated statement of financial position ...... F-124 Consolidated statement of cash flows...... F-125 Consolidated statement of changes in equity ...... F-127 Notes to the consolidated financial statements ...... F-128

298 Mining and Metallurgical Company Norilsk Nickel

Interim condensed consolidated financial statements (unaudited) for the six months ended 30 June 2019

F-1 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019

INDEX Page

JcPcT\T]c ^U \P]PVT\T]clb aTb_^]bXQX[XcXTb U^a cWT _aT_PaPcX^] and approval of the interim condensed consolidated financial statements for the six months ended 30 June 2019 1

A]ST_T]ST]c PdSXc^abl aT_^ac on review of interim condensed consolidated financial statements 2-3

Interim condensed consolidated financial statements for the six months ended 30 June 2019:

Interim condensed consolidated income statement 4

Interim condensed consolidated statement of comprehensive income 5

Interim condensed consolidated statement of financial position 6

Interim condensed consolidated statement of cash flows 7-8

Interim condensed consolidated statement of changes in equity 9

Notes to the interim condensed consolidated financial statements 10-26

F-2 F-3 F-4 F-5 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

For the six For the six months ended months ended Notes 30 June 2019 30 June 2018 Revenue Metal sales 6 5,940 5,473 Other sales 352 361 Total revenue 6,292 5,834

Cost of metal sales 7 (2,181) (2,195) Cost of other sales (355) (334) Gross profit 3,756 3,305

General and administrative expenses 8 (443) (461) Selling and distribution expenses 9 (55) (35) Impairment of non-financial assets 12 (5) (6) Other operating income/(expenses), net 10 18 (80) Operating profit 3,271 2,723

Foreign exchange gain/(loss), net 548 (453) Finance costs, net 11 (89) (246) Income from investments 43 32 Profit before tax 3,773 2,056

Income tax expense (776) (403) Profit for the period 2,997 1,653

Attributable to: Shareholders of the parent company 2,881 1,675 Non-controlling interests 116 (22) 2,997 1,653

EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 18.2 10.6

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 4 F-6 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

For the six For the six months ended months ended 30 June 2019 30 June 2018 Profit for the period 2,997 1,653 Other comprehensive income/(loss) Items to be reclassified to profit or loss in subsequent periods: Effect of translation of foreign operations (3) (2) Other comprehensive loss to be reclassified to profit or loss in subsequent periods, net (3) (2) Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency 378 (474) Other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods, net 378 (474) Other comprehensive income/(loss) for the period, net of tax 375 (476) Total comprehensive income for the period, net of tax 3,372 1,177

Attributable to: Shareholders of the parent company 3,226 1,226 Non-controlling interests 146 (49) 3,372 1,177

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 5 F-7 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) AT 30 JUNE 2019 US Dollars million

Notes At 30 June 2019 At 31 December 2018 ASSETS Non-current assets Property, plant and equipment 12 11,236 9,934 Intangible assets 185 163 Other financial assets 13 201 141 Deferred tax assets 79 73 Other non-current assets 14 326 386 12,027 10,697 Current assets Inventories 14 2,470 2,280 Trade and other receivables 327 204 Advances paid and prepaid expenses 89 75 Other financial assets 13 69 147 Income tax receivable 9 92 Other taxes receivable 340 271 Cash and cash equivalents 15 3,488 1,388 Other current assets 86 97 6,878 4,554 Assets classified as held for sale 12 51 i 6,929 4,554 TOTAL ASSETS 18,956 15,251

EQUITY AND LIABILITIES Capital and reserves Share capital 16 6 6 Share premium 1,254 1,254 Translation reserve (4,998) (5,343) Retained earnings 8,259 7,306 Equity attributable to shareholders of the parent company 4,521 3,223 Non-controlling interests 396 250 4,917 3,473 Non-current liabilities Loans and borrowings 17 8,493 8,208 Lease liabilities 17 185 16 Provisions 442 365 Trade and other long-term payables 224 200 Derivative financial instruments i 61 Deferred tax liabilities 294 385 Other long-term liabilities 55 185 9,693 9,420 Current liabilities Loans and borrowings 17 132 209 Lease liabilities 17 35 6 Trade and other payables 1,358 1,551 Dividends payable 18 1,996 6 Employee benefit obligations 336 307 Provisions 70 77 Derivative financial instruments i 5 Income tax payable 36 35 Other taxes payable 223 162 Other current liabilities 146 i 4,332 2,358 Liabilities associated with assets classified as held for sale 12 14 i 4,346 2,358 TOTAL LIABILITIES 14,039 11,778 TOTAL EQUITY AND LIABILITIES 18,956 15,251

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 6 F-8 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

For the six For the six months ended months ended 30 June 2019 30 June 2018 OPERATING ACTIVITIES Profit before tax 3,773 2,056 Adjustments for: Depreciation and amortisation 443 350 Impairment of non-financial assets 5 6 Loss on disposal of property, plant and equipment 5 i Change in provisions and allowances 6 (3) Finance costs and income from investments, net 46 214 Foreign exchange (gain)/loss, net (548) 453 Other 27 9 3,757 3,085 Movements in working capital: Inventories 98 131 Trade and other receivables (111) (173) Advances paid and prepaid expenses (8) (30) Other taxes receivable (54) 33 Employee benefit obligations 11 (29) Trade and other payables (303) 536 Provisions (26) (22) Other taxes payable 32 2 Cash generated from operations 3,396 3,533 Income tax paid (809) (390) Net cash generated from operating activities 2,587 3,143

INVESTING ACTIVITIES Purchase of property, plant and equipment (481) (503) Purchase of other financial assets (5) i Purchase of intangible assets (19) (33) Purchase of other non-current assets i (99) Loans issued (2) (3) Proceeds from repayment of loans issued 2 4 Net change in deposits placed 80 51 Proceeds from disposal of property, plant and equipment 3 1 Interest and other investment income received 41 39 Net cash used in investing activities (381) (543)

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 7 F-9 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 (CONTINUED) US Dollars million

For the six For the six months ended months ended 30 June 2019 30 June 2018 FINANCING ACTIVITIES Proceeds from loans and borrowings 727 1,210 Repayments of loans and borrowings (639) (879) Payments of lease liabilities (24) (5) Dividends paid (1) (1) Interest paid (202) (264) Net cash (used in)/generated from financing activities (139) 61

Net increase in cash and cash equivalents 2,067 2,661 Cash and cash equivalents at the beginning of the period 1,388 852 Less: cash and cash equivalents related to assets classified as held for sale at the end of the period (25) i Effects of foreign exchange differences on balances of cash and cash equivalents 58 (75) Cash and cash equivalents at the end of the period (note 15) 3,488 3,438

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 8 F-10 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

Equity attributable to shareholders of the parent company Non- Share Translation Retained controlling Notes Share capital premium reserve earnings Total interests Total Balance at 1 January 2018 6 1,254 (4,490) 7,557 4,327 331 4,658 Profit/(loss) for the period i i i 1,675 1,675 (22) 1,653 Other comprehensive loss i i (449) i (449) (27) (476) Total comprehensive income/(loss) for the period i i (449) 1,675 1,226 (49) 1,177 Dividends 18 i i i (1,524) (1,524) (1) (1,525) Balance at 30 June 2018 6 1,254 (4,939) 7,708 4,029 281 4,310

Balance at 1 January 2019 6 1,254 (5,343) 7,306 3,223 250 3,473 Profit for the period i i i 2,881 2,881 116 2,997 Other comprehensive income i i 345 i 345 30 375 Total comprehensive income for the period i i 345 2,881 3,226 146 3,372 Dividends 18 i i i (1,928) (1,928) i (1,928) Balance at 30 June 2019 6 1,254 (4,998) 8,259 4,521 396 4,917

The accompanying notes on pages 10 - 26 form an integral part of the interim condensed consolidated financial statements 9

F-11 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million 1. GENERAL INFORMATION Organisation and principal business activities Public Joint-Jc^RZ ;^\_P]h jEX]X]V P]S ETcP[[daVXRP[ ;^\_P]h FâX[bZ FXRZT[k &cWT j;^\_P]hk â jEE; FâX[bZ FXRZT[k' fPb X]Râ_âPcTS X] cWT IdbbXP] >TSTaPcX^] ^] 0 Bd[h -553* KWT _aX]RX_P[ PRcXeXcXTb of the Company and Xcb bdQbXSXPaXTb &cWT j?a^d_k' PaT Tg_[âPcX^]( TgcaPRcX^]( aTUX]X]V Û âT P]S nonmetallic minerals and sale of base and precious metals produced from ore.

Major production facilities of the Group are located in Taimyr and Kola Peninsulas and the Zabaikalsky region of the Russian Federation, and in Finland.

Foreign currency exchange rates Exchange rates used in the preparation of the interim condensed consolidated financial statements were as follows:

At 30 June 2019 At 30 June 2018 At 31 December 2018

Russian Rouble/US Dollar Period-end rates 63.08 62.76 69.47 Average for the reporting period ended 65.34 59.35 62.71

South African Rand/US Dollar Period-end rates 14.07 13.75 14.35 Average for the reporting period ended 14.38 12.29 13.18

Euro/US Dollar Period-end rates 0.88 0.86 0.87 Average for the reporting period ended 0.88 0.83 0.85

2. BASIS OF PREPARATION The interim condensed consolidated financial statements for the six months ended 30 June 2019 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting &jAAS 34k'*

The interim condensed consolidated financial statements of the Group do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction fXcW cWT ?a^d_lb P]]dP[ R^]b^[XSPcTS UX]P]RXP[ bcPcT\T]cb U^a cWT hTPa T]STS /- IJk'*

The Group issues a separate set of IFRS interim condensed consolidated financial statements to comply with the requirements of Russian Federal Law No. 208 On consolidated financial statements &j.,4->Ok' which was adopted on 27 July 2010.

10 F-12 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied in the preparation of these interim condensed consolidated financial bcPcT\T]cb PaT VT]TaP[[h R^]bXbcT]c fXcW cW^bT P__[XTS X] cWT _aT_PaPcX^] ^U cWT ?a^d_lb P]]dP[ R^]b^[XSPcTS financial statements as at and for the year ended 31 December 2018 except for changes related to the adoption of IFRS 16 Leases.

Adoption of new and revised standards and interpretations The Group initially adopted IFRS 16 Leases in the preparation of these interim condensed consolidated financial statements for the six months ended 30 June 2019 from 1 January 2019. In accordance with the modified retrospective approach on the initial application of the standard the comparative information for the six months ended 30 June 2018 and for the year ended 31 December 2018 has not been restated.

In accordance with modified retrospective approach as of the date of initial application: ' for leases previously classified as operating lease in line with IAS 17 Leases lease liabilities were recognised at the present value of the remaining lease payments, discounted using the weighted average incremental borrowing rate at that date (as at 1 January 2019: 5.55% per annum); ' right-of-use assets were recognised in the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to the respective lease contracts.

On the initial application of IFRS 16 Leases the Group has recognised additional lease liabilities (both current and non-current) in the amount of USD 204 million (see below). These leases were classified as operating lease applying IAS 17 Leases and not recognised as lease liabilities before 1 January 2019.

At 1 January 2019

Future minimum lease payments due under non-cancellable operating lease agreements at 31 December 2018 611 Less Current leases (13) Variable lease payments that do not depend on an index or a rate (103) Future lease payments for leased items not transferred to the lessee at 1 January 2019 (158) Effect of discounting of payments (133) Lease liabilities additionally recognised at 1 January 2019 204 Plus Finance lease liabilities recognised at 31 December 2018 22 Lease liabilities recognised at 1 January 2019 226

The Group applied the following practical expedients on the initial application of IFRS 16 Leases: ' applied this standard to the contracts that were previously identified as leases in line with IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease; ' did not recognise lease liabilities in respect of the current leases expiring within 12 months of the date of the initial application; ' did not perform impairment review of right-of-use assets due to the absence of the onerous lease contracts according to IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application; ' excluded initial direct costs from the measurement of right-of-use assets; ' used hindsight, such as determination of the lease term if the contract contains options to extend or terminate the lease.

11 F-13 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million Leases For contracts entered into after 1 January 2019 the Group assesses at the inception of a contract whether it or its components is, or contains, a lease. The Group recognises a right-of-use asset and a corresponding lease liability, if a lease contract transfers to the lessee the right to control the use of the identified asset for a period of time in exchange for a consideration, except for current leases with the term of 12 months or less. The Group recognises lease payments associated with current leases as an expense on a straight-line basis over the lease term. Land plots lease payments are treated as variable payments, if they are linked to land cadastral value and changes in the latter do not depend on market rental rates. The Group recognises variable lease payments as an expense in the period when the event that triggers those payments occurs. Right-of-use assets are initially recognised at cost that comprise when applicable: ' the initial amount of the lease liability; ' any lease payments made at or before the lease commencement date; ' any initial direct costs incurred by the lessee; ' an estimate of costs to be incurred by the lessee for retirement the underlying asset and restoration the site on which it is located. Right-of-use assets are subsequently measured at cost less any accumulated depreciation and any accumulated impairment losses, adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated on a straight-line basis over their estimated economic useful lives or over the term of the lease, if shorter. Right-of-use assets are presented in property, plant and equipment in the interim condensed consolidated statement of financial position. The lease payments are discounted using interest rate implicit in the lease (if that rate can be readily determined) or using Group incremental borrowing rate at the inception date determined based on lease term and currency of the lease payments. Adoption of other new and revised standards and interpretations Adoption of amendments to the following Standards for annual periods from 1 January 2019 did not have material impact on the accounting policies, financial position or results of the Group: ' IFRIC 23 Uncertainty over Income Tax Treatments; ' IFRS 9 Financial Instruments (amended); ' IAS 28 Investments in Associates and Joint Ventures (amended); ' IAS 19 Employee Benefits (amended); ' Annual Improvements to IFRSs 2015-2017 Cycle. The Group did not early adopt any other standard, interpretation or amendment that had been issued but was not yet effective. Reclassification Finance lease liabilities recognised in line with IAS 17 Leases are presented as lease liabilities in the interim condensed consolidated statement of financial position at 31 December 2018 (previously presented in loans and borrowings). Certain cost items presented in the interim condensed consolidated income statements were also reclassified from cost of metal sales to general and administrative expenses to conform with the current period presentation.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The critical accounting judgements, estimates and assumptions made by management of the Group and applied in these interim condensed consolidated financial statements for the six months ended 30 June 2019 are consistent with those applied in the preparation of annual consolidated financial statements of the Group for the year ended 31 December 2018.

12 F-14 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

5. SEGMENT 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 includes mining and metallurgy operations, transport services, energy, repair and maintenance services located in Taimyr Peninsula. GMK Group metal sales to external customers include metal volumes processed at KGMK Group metallurgy facilities. GMK Group other sales to external customers primarily include revenue for energy and utilities services provided in Taimyr Peninsula; intersegment revenue from metal sales includes sale of semi-products to NN Harjavalta segment, and starting May 2019 to KGMK Group segment, for further processing. ' KGMK Group segment includes mining and metallurgy operations, energy, exploration activities located in Kola Peninsula. KGMK Group revenue from other sales includes intersegment metal processing services under tolling arrangement provided to other segments and energy and utilities services provided to external customers in Kola Peninsula. Intersegment revenue from metal sales previously included sale of semi-products to NN Harjavalta for further processing. ' NN Harjavalta segment includes refinery operations located in Finland. NN Harjavalta sales primarily include metal produced from semi-products purchased from GMK Group segment (previously: from GMK Group and KGMK Group segments). ' GRK Bystrinskoye segment includes metal mining and processing operations located in the Zabaikalsky region of the Russian Federation. ' Other mining segment primarily includes 50% Group interest in metal mining and processing joint operations of Nkomati Nickel Mine &jFZ^\PcXk', as well as certain other mining and exploration activities located in Russia and abroad. Other mining segment sales primarily include Group 50% share in sales of metal semi-products produced by Nkomati. ' Other non-metallurgical segment includes resale of third party refined metal products, other trading operations, supply chain management, transport services, energy and utility, research and other activities located in Russia and abroad. Other non-metallurgical segment metal sales also include resale of 50% metal semi-products produced by Nkomati. Other sales of Other non-metallurgical segment primarily include revenue from passenger air transportation, freight transportation services and fuel sales.

;â_âPcT PRcXeXcXTb Û cWT ?a^d_ S^ ]^c aT_aTbT]c P] ^_TaPcX]V bTV\T]c( X]R[dST _aX\PaX[h WTPS`dPacTabl general and administrative expenses and treasury operations of the Group and are presented as Unallocated.

The amounts in respect of the reportable segments in the disclosure below are stated before intersegment eliminations, except for: ' balances of intercompany loans and borrowings and interest accruals; ' intercompany investments; ' accrual of intercompany dividends.

Amounts are measured on the same basis as those in the interim condensed consolidated financial statements.

13 F-15 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following tables present revenue, measure of segment profit or loss (EBITDA) and other segment information from continuinV ^_TaPcX^]b aTVPaSX]V cWT ?a^d_lb reportable segments for the six months ended 30 June 2019 and 30 June 2018, respectively.

Other For the six months ended GMK KGMK NN GRK Other non-metal- Elimi- 30 June 2019 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 4,839 260 518 i 74 249 i 5,940 Other sales to external customers 82 19 4 1 i 246 i 352 Inter-segment metal sales 1,154 i i i i i (1,154) i Inter-segment other sales 42 186 i i i 152 (380) i Total revenue 6,117 465 522 1 74 647 (1,534) 6,292 Segment EBITDA 4,300 87 40 160 (4) 12 (494) 4,101 Unallocated (382) Consolidated EBITDA 3,719 Depreciation and amortisation (443) Impairment of non-financial assets (5) Finance costs (89) Foreign exchange gain, net 548 Other income and expenses, net 43 Profit before tax 3,773

Other segment information Purchase of property, plant and equipment and intangible assets 328 106 6 32 2 26 i 500 Depreciation and amortisation 356 46 13 11 2 15 i 443 Impairment/(reversal of impairment) of non-financial assets (11) 3 i i 13 i i 5

F-16 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) Other For the six months ended GMK KGMK NN GRK Other non-metal- Elimi- 30 June 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 4,377 141 483 i 59 413 i 5,473 Other sales to external customers 85 18 3 i 2 253 i 361 Inter-segment metal sales 319 124 i i i i (443) i Inter-segment other sales 35 203 i i i 147 (385) i Total revenue 4,816 486 486 i 61 813 (828) 5,834 Segment EBITDA 3,296 129 24 5 6 (1) (23) 3,436 Unallocated (357) Consolidated EBITDA 3,079 Depreciation and amortisation (350) Impairment of non-financial assets (6) Finance costs (246) Foreign exchange loss, net (453) Other income and expenses, net 32 Profit before tax 2,056

Other segment information Purchase of property, plant and equipment and intangible assets 287 134 4 88 10 13 i 536 Depreciation and amortisation 277 38 9 4 8 14 i 350 Impairment of non- financial assets 2 3 i i 1 i i 6

F-17 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) KWT U^[[^fX]V cPQ[Tb _aTbT]c PbbTcb P]S [XPQX[XcXTb ^U cWT ?a^d_lb aT_^acPQ[T bTV\T]cb Pc /, Bd]T .,-5 P]S /-

Other GMK KGMK NN GRK Other non-metal- Elimi- At 31 December 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Inter-segment assets 292 114 140 24 i 57 (627) i Segment assets 9,903 996 451 1,492 88 792 (56) 13,666 Total segment assets 10,195 1,110 591 1,516 88 849 (683) 13,666 Unallocated 1,585 Total assets 15,251 Inter-segment liabilities 139 63 122 39 5 259 (627) i Segment liabilities 1,756 134 100 68 26 1,028 i 3,112 Total segment liabilities 1,895 197 222 107 31 1,287 (627) 3,112 Unallocated 8,666 Total liabilities 11,778

F-18 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following table presents segment metal sales to external customers breakdown by metal for the six months ended 30 June 2019 and 30 June 2018, respectively.

Other For the six months ended GMK KGMK NN Other non-metal- 30 June 2019 Group Group Harjavalta mining lurgical Total Nickel 843 203 387 33 33 1,499 Copper 1,299 31 43 6 6 1,385 Palladium 2,092 7 55 17 203 2,374 Platinum 313 3 6 4 4 330 Other metals 292 16 27 14 3 352 4,839 260 518 74 249 5,940

Other For the six months ended GMK KGMK NN Other non-metal- 30 June 2018 Group Group Harjavalta mining lurgical Total Nickel 932 109 387 33 33 1,494 Copper 1,337 18 41 5 4 1,405 Palladium 1,560 i 19 8 363 1,950 Platinum 323 3 3 3 3 335 Other metals 225 11 33 10 10 289 4,377 141 483 59 413 5,473

F-19 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

6. METAL SALES KWT ?a^d_lb \TcP[ bP[Tb to TgcTa]P[ Rdbc^\Tab PaT STcPX[TS QT[^f &QPbTS ^] TgcTa]P[ Rdbc^\Tabl [^RPcX^]b':

For the six months ended Other 30 June 2019 Total Nickel Copper Palladium Platinum metals Europe 3,315 619 1,151 1,031 308 206 Asia 1,456 582 99 720 15 40 North and South America 913 202 42 591 4 74 Russian Federation and CIS 256 96 93 32 3 32 5,940 1,499 1,385 2,374 330 352

For the six months ended 30 June 2018 Europe 3,125 675 1,182 781 302 185 Asia 1,406 511 132 690 26 47 North and South America 674 176 i 462 i 36 Russian Federation and CIS 268 132 91 17 7 21 5,473 1,494 1,405 1,950 335 289

Metal revenue for the six months ended 30 June 2019 included net fair value loss of USD 21 million in respect of forward contracts expected to be settled by metal physical delivery or on a net basis (for the six months ended 30 June 2018: net gain in the amount of USD 31 million).

For the six months ended 30 June 2019, metal revenue included net loss of USD 24 million from market- linked contract price adjustments in respect of certain provisionally priced contracts, primarily for sale of other metals in Europe and Asia.

7. COST OF METAL SALES For the six For the six months ended months ended 30 June 2019 30 June 2018 Cash operating costs Labour 615 660 Materials and supplies 275 325 Purchases of raw materials and semi-products 246 259 Purchases of refined metals for resale 192 196 Mineral extraction tax and other levies 110 110 Third party services 96 91 Electricity and heat energy 77 74 Fuel 48 45 Transportation expenses 38 32 Sundry costs 76 70 Total cash operating costs 1,773 1,862 Depreciation and amortisation 340 325 Decrease in metal inventories 68 8 Total 2,181 2,195

18 F-20 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million 8. GENERAL AND ADMINISTRATIVE EXPENSES For the six For the six months ended months ended 30 June 2019 30 June 2018 Staff costs 301 306 Third party services 41 45 Taxes other than mineral extraction tax and income tax 38 51 Depreciation and amortisation 33 20 Transportation expenses 8 6 Rent expenses 1 11 Other 21 22 Total 443 461

9. SELLING AND DISTRIBUTION EXPENSES For the six For the six months ended months ended 30 June 2019 30 June 2018 Marketing expenses 22 9 Transportation expenses 22 18 Staff costs 7 6 Other 4 2 Total 55 35

10. OTHER OPERATING INCOME/#EXPENSES$, NET For the six For the six months ended months ended 30 June 2019 30 June 2018 Net income earned during the pre-commissioning stage 155 19 Social expenses (112) (98) Change in allowances (11) (10) Other, net (14) 9 Total 18 (80)

11. FINANCE COSTS, NET For the six For the six months ended months ended 30 June 2019 30 June 2018 Interest expense, net of amounts capitalised 162 191 Unwinding of discount on provisions and payables 42 52 Fair value gain on the cross-currency interest rate swap (117) i Other, net 2 3 Total 89 246

19 F-21 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million 12. PROPERTY, PLANT AND EQUIPMENT During the six months ended 30 June 2019, additions of property, plant and equipment amounted to USD 524 million (for the six months ended 30 June 2018: USD 660 million). At 30 June 2019 capital construction-in-progress included USD 93 million of irrevocable letters of credit opened for property, plant and equipment purchases (31 December 2018: USD 197 million), representing security deposits placed in banks at the end of the period. Capitalised borrowing costs for the six months ended 30 June 2019 amounted to USD 96 million (for the six months ended 30 June 2018: USD 79 million). Annual capitalisation rate used to determine the amount of borrowing costs was 5.28% at 30 June 2019 (30 June 2018: 5.10%). At 30 June 2019 mining assets and mine development cost included USD 3,409 million of mining assets under development (31 December 2018: USD 2,868 million). At 30 June 2019 non-mining assets included USD 47 million of investment property (31 December 2018: USD 44 million). At 30 June 2019 non-mining assets included USD 210 million of right-of-use assets recognised in line with IFRS 16 Leases (initial adoption of IFRS 16 Leases as at 1 January 2019: USD 204 million).

In June 2019 the Group entered into the agreement to sell its subsidiary located in the Russian Federation. At 30 June 2019 respective assets and liabilities, including property, plant and equipment in the amount of USD 18 million were classified as assets held for sale. The sale of 100% share in the subsidiary was completed in July 2019. Impairment At 30 June 2019 the Group identified indicators of further impairment of Nkomati Nickel Mine (Nkomati) assets based on the analysis of several scenarios of Nkomati development, as well as Nkomati performance results against budget and management expectations, and performed an impairment test using a discounted RPbW U[^f \^ST[ P__a^PRW* 8b P aTbd[c( cWT RPaahX]V eP[dT ^U cWT ?a^d_lb bWPaT X] FZ^\PcX _a^_Tach( _[P]c and equipment was impaired in full. Impairment loss in the amount of USD 12 million was recognised in impairment of non-financial assets in the interim condensed consolidated income statement for the six months ended 30 June 2019. 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 are assessed as a separate cash-generating unit with its value-in- use being determined using a discounted cash flow model approach at each subsequent reporting date. At 30 June 2019 the Group identified indicators for the partial reversal of previously recognised impairment, primarily due to an increase in regulated gas tariffs, and performed an impairment test. As a result, a gain of USD 15 million on impairment reversal was recognised in impairment of non-financial assets in the interim condensed consolidated income statement for the six months ended 30 June 2019. Accumulated impairment loss, net of respective accumulated depreciation had no impairment been recognised, amounted to USD 208 million at 30 June 2019. During the six months ended 30 June 2019 the Group recognised additional impairment losses in the amount of USD 8 million in respect of specific individual assets (for the six months ended 30 June 2018: USD 6 million).

20 F-22 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million 1 13. OTHER FINANCIAL ASSETS At 30 June 2019 At 31 December 2018 Non-current Loans issued and other receivables 146 130 Derivative financial instruments 47 3 Bank deposits 8 8 Total non-current 201 141

Current Loans issued and other receivables 58 57 Derivative financial instruments 5 7 Bank deposits 6 83 Total current 69 147

14. INVENTORIES

At 30 June 2019 At 31 December 2018 Refined metals and other metal products 424 526 Less: Adjustment to net realisable value (38) i Work-in-process and semi-products 1,337 1,138 Less: Allowance for work-in-process (4) (4) Total metal inventories 1,719 1,660

Materials and supplies 808 662 Less: Allowance for obsolete and slow-moving items (57) (42) Materials and supplies, net 751 620 Inventories 2,470 2,280

At 31 December 2018 part of metal semi-products stock in the amount of USD 88 million was presented in other non-current assetb PRR^aSX]V c^ ?a^d_lb _a^SdRcX^] _[P]b.

1 15. CASH AND CASH EQUIVALENTS

At 30 June 2019 At 31 December 2018 Current accounts - RUB 34 49 - USD 402 398 - EUR 28 13 - other 95 64 Bank deposits - RUB 1,592 i - USD 1,318 850 - other 3 10 Other cash and cash equivalents 16 4 Total 3,488 1,388

Bank deposits At 30 June 2019 interest rate on RUB-denominated deposits held in banks was in the range from 7.20% to 7.65% per annum (31 December 2018: no RUB-denominated deposits), on USD-denominated deposits held in banks in the range from 1.55% to 2.50% per annum (31 December 2018: from 1.70% to 3.95% per annum).

21 F-23 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million 16. SHARE CAPITAL Authorised and issued ordinary shares At 30 June 2019, 31 December 2018 and 30 June 2018 the Grouplb ]d\QTa ^U PdcW^aXbTS P]S XbbdTS ordinary shares was 158,245,476.

Weighted average number of issued shares outstanding Weighted average number of shares used in the calculation of basic and diluted earnings per shares for the six months ended 30 June 2019 and 30 June 2018 was 158,245,476 shares.

1 17. LOANS AND BORROWINGS, LEASE LIABILITIES

Fixed or Average nominal floating rate during the interest six months ended At 30 June At 31 December Currency rate 30 June 2019, % Maturity 2019 2018 Unsecured loans USD floating 3.98% 2019-2024 3,793 3,837 RUB fixed 8.30% 2021 951 864 RUB floating 8.50% 2019 127 i EUR floating 0.85% 2019-2028 32 19 Secured loans RUB fixed 9.75% 2021-2022 10 9 Total loans 4,913 4,729 Bonds USD fixed 5.24% 2020-2023 3,474 3,472 RUB fixed 11.60% 2026 238 216 Total bonds 3,712 3,688 Total loans and borrowings 8,625 8,417 Less: current portion due within twelve months and presented as current loans and borrowings (132) (209) Non-current loans and borrowings 8,493 8,208

Average borrowing rate during the six months ended At 30 June At 31 December Currency 30 June 2019, % Maturity 2019 2018 Lease liabilities USD 4.87% 2020-2029 144 2 RUB 8.49% 2020-2099 54 i EUR 2.02% 2020-2050 21 19 other 4.24% 2020-2022 1 1 Total lease liabilities 220 22 Less: current lease liabilities (35) (6) Non-current lease liabilities 185 16

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.

At 30 June 2019 loans were secured by property, plant and equipment with a carrying amount of USD 8 million (31 December 2018: USD 8 million).

At 30 June 2019 lease liabilities with original maturity in excess of 15 years amounted to USD 12 million.

22 F-24 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

18. DIVIDENDS On 10 June 2019( cWT 8]]dP[ ?T]TaP[ bWPaTW^[STabl \TTcX]V STR[PaTS SXeXST]Sb U^a the year ended 31 December 2018 in the amount of RUB 792.52 (USD 12.19) per share with the total amount of USD 1,928 million. The dividends were paid to the shareholders in July 2019. On 19 September 2018, the Extraordinary General shareholdersl meeting declared interim dividends in respect of the six months ended 30 June 2018 in the amount of RUB 776.02 (USD 11.45) per share with the total amount of USD 1,813 million. The dividends were paid to the shareholders in October 2018. G] .4 Bd]T .,-4( cWT 8]]dP[ ?T]TaP[ bWPaTW^[STabl \TTcX]V STR[PaTS SXeXST]Sb U^a cWT hTPa T]STS 31 December 2017 in the amount of RUB 607.98 (USD 9.63) per share with the total amount of USD 1,524 million. The dividends were paid to the shareholders in July 2018.

19. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES Related parties include major shareholders and entities under their ownership and control, Nkomati joint operation 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 assets and services and Sale of goods and services other operating expenses For the six For the six For the six For the six months ended months ended months ended months ended Transactions with related parties 30 June 2019 30 June 2018 30 June 2019 30 June 2018 Entities under ownership and control of the Group's major shareholders i 4 45 60 Joint operation of the Group i 1 64 53 Total i 5 109 113

Accounts receivable Accounts payable Outstanding balances with At 30 June At 31 December At 30 June At 31 December related parties 2019 2018 2019 2018 Entities under ownership and control of the Group's major shareholders 1 1 3 1 Joint operation of the Group 4 8 5 3 Total 5 9 8 4

23 F-25 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

20. COMMITMENTS AND CONTINGENCIES Capital commitments At 30 June 2019, contractual capital commitments amounted to USD 807 million (31 December 2018: USD 544 million).

Leases The Group is a party to a number of lease contracts with variable lease payments that do not depend on an index or market rental rates, and hence are not recognised as lease liabilities. At 30 June 2019 total future non-discounted variable lease payments under such contracts with the maturity up to 2067 amounted to USD 184 million.

At 30 June 2019 future lease payments for leased items not transferred to the lessee and not recognised as lease liabilities amounted to USD 158 million.

Litigation The Group is involved in legal disputes in the ordinary course of its operations. At 30 June 2019, total claims under unresolved litigation with the probability of their unfavorable resolution assessed as possible amounted to approximately USD 14 million (31 December 2018: USD 13 million).

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 provisions 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 cWT R^d]caXTb X] fWXRW Xc ^_TaPcTb* KWT ?a^d_lb ^_TaPcX^]b X]e^[eT _^[[dcP]c T\XbbX^]b c^ PXa P]S fPcTa objects as well as formation and disposal of production wastes.

24 F-26 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

20. COMMITMENTS AND CONTINGENCIES (CONTINUED) 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 ?a^d_lb QdbX]Tbb \PX][h ST_T]Sb ^] cWT TUUTRcXeT]Tbb ^U TR^]^\XR \TPbdaTb d]STacPZT] Qh cWT government as well as the development of legal system.

Starting 2014, the United States of America, the European Union and some other countries have imposed and expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian rouble, a reduction in both local and foreign direct investment inflows and certain restrictions for operations with individuals and legal entities under sanctions, including financing and investment activities. Management assesses the changes in the Russian business environment did not significantly affect the operations, financial results and the financial position of the Group as of the date of issue of these interim condensed consolidated financial statements. The longer-term effects of the imposed and possible additional sanctions are difficult to determine.

21. FAIR VALUE OF FINANCIAL INSTRUMENTS Management believes that the carrying value of financial instruments such as cash and cash equivalents (refer to note 15), other financial assets (refer to note 13), trade and other short-term accounts receivable and current accounts payable approximates to their fair value or may not significantly differ from it. Derivative financial instruments measured at fair value through profit or loss include a cross-currency interest rate swap, Level 2 of fair value hierarchy. Other current liabilities classified as measured at fair value through profit or loss include a liability on the execution of a put option related to transactions with non-controlling interest owners, Level 3 of fair value hierarchy. At 30 June 2019 trade and other short- term accounts receivable include USD 154 million of short-term trade accounts receivable measured at fair value through profit or loss upon recognition, Level 2 of fair value hierarchy (31 December 2018: USD 120 million).

Financial instruments that are measured at fair value subsequent to initial recognition, are grouped into Levels 1 to 3 of fair value hierarchy based on the degree to which their 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 assets or liabilities, either directly or indirectly; and ' Level 3 fair value measurements are those derived from valuation techniques that include inputs for assets or liabilities that are not based on observable market data.

25 F-27 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2019 US Dollars million

21. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The information below presents financial liabilities not measured at fair value, including loans and borrowings (refer to note 17), trade and other long-term payables.

At 30 June 2019 At 31 December 2018 Fair value Fair value Carrying value Level 1 Carrying value Level 1 Fixed rate bonds 3,712 3,860 3,688 3,705 Total bonds 3,712 3,860 3,688 3,705

Fair value Fair value Loans, including: Carrying value Level 2 Carrying value Level 2 Floating rate loans 3,952 3,924 3,856 3,654 Fixed rate loans 961 948 873 861 Total loans 4,913 4,872 4,729 4,515

Fair value Fair value Carrying value Level 2 Carrying value Level 2 Trade and other long-term payables 224 232 200 210 Total trade and other long-term payables 224 232 200 210

The fair value of financial liabilities presented in table above is determined as follows: ' the fair value of bonds was determined based on market quotations existing at the reporting dates; ' the fair value of floating rate and fixed rate loans at 30 June 2019 was determined 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 fair value of trade and other long-term payables at 30 June 2019 was determined based on the present value of future cash flows, discounted at the best management estimation of market rates.

The Group applies derivative financial instruments including cross-currency interest swaps in order to manage currency risk by matching cash flows from revenue denominated in USD and financial liabilities denominated in RUB. The fair value of cross-currency interest rate swap is determined as the present value of future cash flows discounted at the interest rates applicable to the currencies of the corresponding cash flows and available at the reporting date. The fair value is subject to a credit risk adjustment that reflects the credit risk of the Group and of the counterparty, which is calculated based on credit spreads derived from tradeable financial instruments effective at the reporting date.

22. EVENTS SUBSEQUENT TO THE REPORTING DATE G] ., 8dVdbc .,-5 cWT 9^PaS ^U

In August 2019 the Group extended USD-denominated loan agreement for USD 200 million from October 2020 to February 2023. The Group also entered into a new RUB-denominated committed credit line in the total amount of USD 475 million (using RUB/USD rate on 30 June 2019). No amounts were draw-down under this facility at the issue date.

26 F-28

Mining and Metallurgical Company Norilsk Nickel

Interim condensed consolidated financial statements (unaudited) for the six months ended 30 June 2018

F-29

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018

INDEX Page

Statement of management’s responsibilities for the preparation and approval of the interim condensed consolidated financial statements for the six months ended 30 June 2018 1

Independent auditors’ report on review of interim condensed consolidated financial statements 2-3

Interim condensed consolidated financial statements for the six months ended 30 June 2018:

Interim condensed consolidated income statement 4

Interim condensed consolidated statement of comprehensive income 5

Interim condensed consolidated statement of financial position 6

Interim condensed consolidated statement of cash flows 7-8

Interim condensed consolidated statement of changes in equity 9

Notes to the interim condensed consolidated financial statements 10-29

F-30 F-31 F-32 F-33

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

For the six For the six months ended months ended Notes 30 June 2018 30 June 2017 Revenue Metal sales 6 5,473 3,896 Other sales 361 352 Total revenue 5,834 4,248

Cost of metal sales 7 (2,212) (1,906) Cost of other sales (334) (309) Gross profit 3,288 2,033

General and administrative expenses 8 (444) (353) Selling and distribution expenses 9 (35) (28) Impairment of non-financial assets (6) (25) Other net operating expenses 10 (80) (215) Operating profit 2,723 1,412

Foreign exchange (loss)/gain, net (453) 21 Finance costs 11 (246) (265) Gain from disposal of subsidiaries and assets classified as held for sale 16 – 16 Income from investments, net 32 34 Profit before tax 2,056 1,218

Income tax expense (403) (303) Profit for the period 1,653 915

Attributable to: Shareholders of the parent company 1,675 918 Non-controlling interests (22) (3) 1,653 915

EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 10.6 5.8

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

4 F-34

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

For the six For the six months ended months ended 30 June 2018 30 June 2017 Profit for the period 1,653 915 Other comprehensive (loss)/income Items to be reclassified to profit or loss in subsequent periods: Effect of translation of foreign operations (2) 9 Other comprehensive (loss)/income to be reclassified to profit or loss in subsequent periods, net (2) 9 Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency (474) 153 Other comprehensive (loss)/income not to be reclassified to profit or loss in subsequent periods, net (474) 153 Other comprehensive (loss)/income for the period, net of tax (476) 162 Total comprehensive income for the period, net of tax 1,177 1,077

Attributable to: Shareholders of the parent company 1,226 1,080 Non-controlling interests (49) (3) 1,177 1,077

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

5 F-35

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) AT 30 JUNE 2018 US Dollars million

Notes At 30 June 2018 At 31 December 2017 ASSETS Non-current assets Property, plant and equipment 12 10,336 10,960 Intangible assets 154 148 Other financial assets 13 201 192 Deferred tax assets 77 77 Other non-current assets 14 545 732 11,313 12,109 Current assets Inventories 14 2,596 2,689 Trade and other receivables 465 327 Advances paid and prepaid expenses 89 71 Other financial assets 13 62 99 Income tax receivable 93 82 Other taxes receivable 245 296 Cash and cash equivalents 15 3,438 852 Other current assets 102 110 7,090 4,526 TOTAL ASSETS 18,403 16,635

EQUITY AND LIABILITIES Capital and reserves Share capital 17 6 6 Share premium 1,254 1,254 Translation reserve (4,939) (4,490) Retained earnings 7,708 7,557 Equity attributable to shareholders of the parent company 4,029 4,327 Non-controlling interests 18 281 331 4,310 4,658 Non-current liabilities Loans and borrowings 19 9,150 8,236 Provisions 432 464 Trade and other long-term payables 396 402 Deferred tax liabilities 403 407 Other long-term liabilities 118 116 10,499 9,625 Current liabilities Loans and borrowings 19 118 817 Trade and other payables 1,301 783 Dividends payable 20 1,539 6 Employee benefit obligations 316 377 Provisions 164 189 Derivative financial instruments 4 24 Income tax payable 10 9 Other taxes payable 142 147 3,594 2,352 TOTAL LIABILITIES 14,093 11,977 TOTAL EQUITY AND LIABILITIES 18,403 16,635

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

6 F-36

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

For the six For the six months ended months ended 30 June 2018 30 June 2017 OPERATING ACTIVITIES Profit before tax 2,056 1,218 Adjustments for: Depreciation and amortisation 350 307 Impairment of non-financial assets 6 25 Gain from disposal of subsidiaries and assets classified as held for sale – (16) Change in provisions and allowances (3) 48 Finance costs and income from investments, net 214 231 Foreign exchange loss/(gain), net 453 (21) Other 9 8 3,085 1,800 Movements in working capital: Inventories 131 (107) Trade and other receivables (173) (50) Advances paid and prepaid expenses (30) (17) Other taxes receivable 33 18 Employee benefit obligations (29) 24 Trade and other payables 536 (172) Provisions (22) (30) Other taxes payable 2 21 Cash generated from operations 3,533 1,487 Income tax paid (390) (320) Net cash generated from operating activities 3,143 1,167

INVESTING ACTIVITIES Purchase of property, plant and equipment (503) (697) Purchase of intangible assets (33) (14) Purchase of other non-current assets (99) (82) Loans issued (3) (9) Proceeds from repayment of loans issued 4 38 Net change in deposits placed 51 (50) Proceeds from sale of other financial assets – 5 Proceeds from disposal of property, plant and equipment 1 20 Proceeds from disposal of subsidiaries and assets classified as held for sale – 88 Interest and other investment income received 39 46 Net cash used in investing activities (543) (655)

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

7 F-37

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 (CONTINUED) US Dollars million

For the six For the six months ended months ended 30 June 2018 30 June 2017 FINANCING ACTIVITIES Proceeds from loans and borrowings 1,210 1,655 Repayments of loans and borrowings (879) (1,344) Financial lease payments (5) (6) Dividends paid (note 20) (1) (1,172) Interest paid (264) (310) Proceeds from sale of a non-controlling interest in a subsidiary (note 18) – 21 Net cash generated from/(used in) financing activities 61 (1,156)

Net increase/(decrease) in cash and cash equivalents 2,661 (644) Cash and cash equivalents at the beginning of the period 852 3,325 Effects of foreign exchange differences on balances of cash and cash equivalents (75) (35) Cash and cash equivalents at the end of the period (note 15) 3,438 2,646

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

8 F-38

MINING AND METALLURGICAL COMPANY NORILSK NICKEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

Equity attributable to shareholders of the parent company Non- Share Translation Retained controlling Notes Share capital premium reserve earnings Total interests Total Balance at 1 January 2017 6 1,254 (4,778) 7,340 3,822 74 3,896 Profit/(loss) for the period – – – 918 918 (3) 915 Other comprehensive income – – 162 – 162 – 162 Total comprehensive income/(loss) for the period – – 162 918 1,080 (3) 1,077 Dividends 20 – – – (1,239) (1,239) – (1,239) Increase in non-controlling interest due to decrease in ownership of a subsidiary 18 – – – 4 4 17 21 Other effects related to transactions with non-controlling interest owners – – – (100) (100) – (100) Balance at 30 June 2017 6 1,254 (4,616) 6,923 3,567 88 3,655

Balance at 1 January 2018 6 1,254 (4,490) 7,557 4,327 331 4,658 Profit/(loss) for the period – – – 1,675 1,675 (22) 1,653 Other comprehensive loss – – (449) – (449) (27) (476) Total comprehensive income/(loss) for the period – – (449) 1,675 1,226 (49) 1,177 Dividends 20 – – – (1,524) (1,524) (1) (1,525) Balance at 30 June 2018 6 1,254 (4,939) 7,708 4,029 281 4,310

The accompanying notes on pages 10 - 29 form an integral part of the interim condensed consolidated financial statements

9 F-39 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 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.

Major production facilities of the Group are located in Taimyr and Kola Peninsulas and the Chita region of the Russian Federation, and in Finland.

Foreign currency exchange rates Exchange rates used in the preparation of the interim condensed consolidated financial statements were as follows:

At 30 June 2018 At 30 June 2017 At 31 December 2017

Russian Rouble/US Dollar Period-end rates 62.76 59.09 57.60 Average for the reporting period ended 59.35 57.99 58.35

South African Rand/US Dollar Period-end rates 13.75 12.96 12.36 Average for the reporting period ended 12.29 13.22 13.30

Australian Dollar/US Dollar Period-end rates 1.35 1.30 1.28 Average for the reporting period ended 1.30 1.33 1.30

Hong Kong Dollar/US Dollar Period-end rates 7.85 7.80 7.81 Average for the reporting period ended 7.84 7.77 7.79

2. BASIS OF PREPARATION The interim condensed consolidated financial statements for the six months ended 30 June 2018 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”).

The interim condensed consolidated financial statements of the Group do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

10 F-40 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied in the preparation of these interim condensed consolidated financial statements are generally consistent with those applied in the preparation of the Group’s annual consolidated financial statements as at and for the year ended 31 December 2017 except for changes related to the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

Adoption of new and revised standards and interpretations The Group has initially adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments from 1 January 2018.

The Group has adopted IFRS 15 Revenue from Contracts with Customers using cumulative effect method with the effect of initially applying the standard recognised at the date of initial application, i.e. 1 January 2018. Therefore, comparative information for the six months ended 30 June 2017 has not been restated. The adoption of IFRS 15 Revenue from Contracts with Customers had no material effect on the Group’s consolidated financial statements as at 1 January 2018 and as at 30 June 2018 and for the six months then ended.

The Group has taken an exemption not to restate comparative information for prior periods with respect to classification requirements of IFRS 9 Financial Instruments. Therefore, the information presented as at 31 December 2017 does not generally reflect the requirements of classification of IFRS 9 Financial Instruments but rather those of IAS 39 Financial Instruments: Recognition and Measurement.

Trade receivables on provisionally priced contracts where price is not settled until a predetermined future date that were classified as loans and receivables under IAS 39 Financial Instruments: Recognition and Measurement are classified as at 30 June 2018 at fair value through profit or loss and remeasured at each reporting date using the forward price for the period equivalent to that outlined in the contract (mark-to- market adjustment).

There are no material differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 Financial Instruments.

The significant accounting policies in respect of revenue from contracts with customers and financial instruments in effect from 1 January 2018 are set out below.

Revenue recognition Metal sales revenue

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, is recognised in the consolidated financial statements as and when they are delivered. A gain or loss on forward contracts that are expected to be settled by physical delivery or on net basis is measured at fair value recognised in revenue and disclosed separately from revenue from contracts with customers.

11 F-41 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

Other revenue

Revenue from service contracts is recognised when the services are rendered and the outcome can be reliably measured.

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 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 amortised cost;  financial assets at fair value through other comprehensive income; and  financial assets at fair value through profit or loss.

The classification of financial assets depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows and is determined at the time of initial recognition.

Effective interest method

The effective interest method is used for calculating the amortised cost of a financial asset and for 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 or other comprehensive income.

Financial assets at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value though profit or loss:  it is held within a business model whose objective is to hold assets to collect contractual cash flows; and  its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Group generally classifies trade and other receivables (excluding trade receivables on provisionally priced contracts), loans issued and bank deposits as financial assets at amortised cost.

Financial assets at fair value through other comprehensive income

A debt instrument is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated as at fair value though profit or loss:  it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and  its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

At initial recognition the Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading. This election is made on an instrument-by-instrument basis. 12 F-42 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

Currently the Group does not classify any financial assets as at fair value through other comprehensive income.

Financial assets at fair value through profit or loss

All financial assets not classified as measured at amorised cost or fair value through other comprehensive income are classified as financial assets at fair value through profit or loss.

Trade receivables on provisionally priced contracts and derivative financial assets are classified as measured at fair value through profit or loss. Trade receivables on provisionally priced contracts remeasured at each reporting date using the forward price for the period equivalent to that outlined in the contract.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on a financial asset measured at amortised cost using one of the two methods:

Lifetime expected credit losses Trade and other receivables

Financial assets other than trade and other receivables if the credit risk on that financial asset has increased significantly since initial recognition 12-month expected credit losses Financial assets other than trade and other receivables at initial since the reporting date recognition

Financial assets other than trade and other receivables for which credit risk has not increased significantly since initial recognition

When determining whether the credit risk of the financial asset has increased significantly since initial recognition and when estimating expected credit loss, the Group considers reasonable and supportable information that is relevant and available, including both quantitative and qualitative information and analysis based on Group’s historical experience and forward-looking information.

The Group assumes that expected credit loss for all trade and other receivables which are due in excess of 365 days is equal to their carrying amount. Loss allowance for trade and other receivables that are past due for less than 365 days is estimated based on the expected probability of repayment and the length of the overdue period.

When trade and other receivables are considered uncollectible, it is written off against the loss allowance. Changes in the loss allowance are recognised in the consolidated income statement.

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 instrument at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

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.

13 F-43 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

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. Derivative financial liabilities are classified as measured at fair value through profit or loss.

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.

Adoption of other new and revised standards and interpretations Adoption of amendments to the following Standards for annual periods from 1 January 2018 did not have material impact on the accounting policies, financial position or results of the Group:  IFRS 1 First-time Adoption of International Financial Reporting Standards (amended);  IFRS 2 Share-based Payment (amended);  IFRS 4 Insurance Contracts (amended);  IAS 28 Investments in Associates and Joint Ventures (amended);  IAS 40 Investment Property (amended);  IFRIC 22 Foreign Currency Transactions and Advance Consideration.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 16 Leases replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 Leases will be adopted by the Group starting 1 January 2019.

The Group is currently in the process of assessing the impact of the new guidance for leases on its financial statements. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised in the statement of the financial position for almost all leases, as the distinction between operating and finance leases will no longer apply. The only exceptions are short-term and low- value leases. The actual impact of applying IFRS 16 Leases on the consolidated financial statements in the period of initial application will depend on future economic conditions, including the Group’s borrowing rate at 1 January 2019, the composition of the Group’s lease portfolio at that date, the Group’s latest assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions. In addition, the method of recognition of expenses related to those leases will change because IFRS 16 Leases replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.

The Group will finalise the assessment and disclose the impact of the IFRS 16 Leases in the annual consolidated financial statements as for the year ended 31 December 2018.

14 F-44 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

Reclassification Comparative information for the six months ended 30 June 2017 in respect of the Group interest in Nkomati Nickel Mine was recast in accordance with the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, since the criteria for its classification as an asset held for sale were no longer met as at 31 December 2017.

For the six months ended 30 June 2018, revenue from sales of semi-products is allocated to revenue from each metal sales as per respective metal content in a semi-product rather than being presented under a separate “semi-products” caption (refer to note 6). Information for the six months ended 30 June 2017 has been reclassified to conform with the current period presentation.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The critical accounting judgements, estimates and assumptions made by management of the Group and applied in these interim condensed consolidated financial statements for the six months ended 30 June 2018 are consistent with those applied in the preparation of annual consolidated financial statements of the Group for the year ended 31 December 2017.

15 F-45 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

5. SEGMENT INFORMATION Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the Management Board.

The Group is currently updating its management accounting system to account for business changes. As a result, GRK Bystrinskoye segment is now presented separately from Other mining segment, trading operations presentation was amended as set out below.

Management has determined the following operating segments:  GMK Group segment includes mining and metallurgy operations, transport services, energy, repair and maintenance services located in Taimyr Peninsula. GMK Group sales to external customers include metal volumes processed at KGMK Group metallurgy facilities. GMK Group other sales to external customers primarily include revenue for energy and utilities services provided in Taimyr Peninsula; intersegment revenue from metal sales includes sale of semi-products to NN Harjavalta segment for further processing.  KGMK Group segment includes mining and metallurgy operations, energy, exploration activities located in Kola Peninsula. KGMK Group revenue from other sales includes intersegment metal processing services under tolling arrangement provided to other segments and energy and utilities services provided to external customers in Kola Peninsula. Intersegment revenue from metal sales includes sale of semi-products to NN Harjavalta for further processing.  NN Harjavalta segment includes refinery operations located in Finland. NN Harjavalta sales primarily include metal produced from semi-products purchased from GMK Group and KGMK Group segments.  GRK Bystrinskoye segment includes metal mining and processing operations located in the Chita region of the Russian Federation.  Other mining segment primarily includes 50% Group interest in metal mining and processing joint operations of Nkomati Nickel Mine (“Nkomati”), as well as certain other mining and exploration activities located in Russia and abroad. Other mining segment sales primarily include Group share at sales of metal semi-products produced by Nkomati.  Other non-metallurgical segment includes resale of third party refined metal products, other trading operations, supply chain management, transport services, energy and utility, research and other activities located in Russia and abroad. Other non-metallurgical segment also includes resale of 50% metal semi-products produced by Nkomati. Other sales of Other non-metallurgical segment primarily include revenue from passenger air transportation, freight transportation services and fuel sales.

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.

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.

Amounts are measured on the same basis as those in the consolidated financial statements. Information for the six months ended 30 June 2017 and as at 31 December 2017 has been presented to conform with the current period presentation. Previously, the Group’s all metal trading operations (including own metal) were included in Other non-metallurgical.

16 F-46 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following tables present revenue, measure of segment profit or loss (EBITDA) and other segment information from continuing operations regarding the Group’s reportable segments for the six months ended 30 June 2018 and 30 June 2017, respectively.

Other For the six months ended GMK KGMK NN GRK Other non-metal- Elimi- 30 June 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 4,377 141 483 – 59 413 – 5,473 Other sales to external customers 85 18 3 – 2 253 – 361 Inter-segment metal sales 319 124 – – – – (443) – Inter-segment other sales 35 203 – – – 147 (385) – Total revenue 4,816 486 486 – 61 813 (828) 5,834 Segment EBITDA 3,296 129 24 5 6 (1) (23) 3,436 Unallocated (357) Consolidated EBITDA 3,079 Depreciation and amortisation (350) Impairment of non-financial assets (6) Finance costs (246) Foreign exchange loss, net (453) Other income and expenses, net 32 Profit before tax 2,056

Other segment information Purchase of property, plant and equipment and intangible assets 287 134 4 88 10 13 – 536 Depreciation and amortisation 277 38 9 4 8 14 – 350 Impairment of non- financial assets 2 3 – – 1 – – 6

17 F-47 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) Other For the six months ended GMK KGMK NN GRK Other non-metal- Elimi- 30 June 2017 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 3,094 217 354 – 49 182 – 3,896 Other sales to external customers 89 19 1 – 5 238 – 352 Inter-segment metal sales 203 – – – – – (203) – Inter-segment other sales 34 179 – – – 208 (421) – Total revenue 3,420 415 355 – 54 628 (624) 4,248 Segment EBITDA 2,012 71 45 (3) – 1 12 2,138 Unallocated (394) Consolidated EBITDA 1,744 Depreciation and amortisation (307) Impairment of non-financial assets (25) Finance costs (265) Foreign exchange gain, net 21 Other income and expenses, net 50 Profit before tax 1,218

Other segment information Purchase of property, plant and equipment and intangible assets 453 69 3 143 12 31 – 711 Depreciation and amortisation 251 31 12 – – 13 – 307 Impairment of non- financial assets 24 – – – – 1 – 25

18 F-48 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following tables present assets and liabilities of the Group’s reportable segments at 30 June 2018 and 31 December 2017, respectively.

Other GMK KGMK NN GRK Other non-metal- Elimi- At 30 June 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Inter-segment assets 428 149 109 34 15 46 (781) – Segment assets 10,838 995 452 1,479 91 860 (52) 14,663 Total segment assets 11,266 1,144 561 1,513 106 906 (833) 14,663 Unallocated 3,740 Total assets 18,403 Inter-segment liabilities 143 50 109 59 9 411 (781) – Segment liabilities 2,144 171 72 75 20 638 – 3,120 Total segment liabilities 2,287 221 181 134 29 1,049 (781) 3,120 Unallocated 10,973 Total liabilities 14,093

Other GMK KGMK NN GRK Other non-metal- Elimi- At 31 December 2017 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Inter-segment assets 346 207 172 2 9 54 (790) – Segment assets 11,536 975 390 1,518 118 935 (42) 15,430 Total segment assets 11,882 1,182 562 1,520 127 989 (832) 15,430 Unallocated 1,205 Total assets 16,635 Inter-segment liabilities 89 135 124 43 1 398 (790) – Segment liabilities 2,228 157 73 89 32 171 – 2,750 Total segment liabilities 2,317 292 197 132 33 569 (790) 2,750 Unallocated 9,227 Total liabilities 11,977

19 F-49 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following table presents segment metal sales to external customers breakdown by metal for the six months ended 30 June 2018 and 30 June 2017, respectively.

For the six Other months ended GMK KGMK NN Other non-metal- 30 June 2018 Group Group Harjavalta mining lurgical Total Nickel 932 109 387 33 33 1,494 Copper 1,337 18 41 5 4 1,405 Palladium 1,560 – 19 8 363 1,950 Platinum 323 3 3 3 3 335 Other metals 225 11 33 10 10 289 4,377 141 483 59 413 5,473

For the six Other months ended GMK KGMK NN Other non-metal- 30 June 2017 Group Group Harjavalta mining lurgical Total Nickel 656 137 272 25 24 1,114 Copper 974 50 30 5 6 1,065 Palladium 1,029 5 20 10 142 1,206 Platinum 284 15 6 5 5 315 Other metals 151 10 26 4 5 196 3,094 217 354 49 182 3,896

20 F-50 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

6. METAL SALES The Group’s metal sales to external customers are detailed below (based on external customers’ locations):

For the six months ended Other 30 June 2018 Total Nickel Copper Palladium Platinum metals Europe 3,125 675 1,182 781 302 185 Asia 1,406 511 132 690 26 47 North and South America 674 176 – 462 – 36 Russian Federation and CIS 268 132 91 17 7 21 5,473 1,494 1,405 1,950 335 289

For the six months ended 30 June 2017 Europe 2,160 523 954 361 183 139 Asia 900 354 26 412 84 24 North and South America 571 142 – 409 – 20 Russian Federation and CIS 265 95 85 24 48 13 3,896 1,114 1,065 1,206 315 196

Metal revenue for the six months ended 30 June 2018 included net gain of USD 31 million in respect of forward contracts measured at fair value that are expected to be settled by metal physical delivery or on a net basis (for the six months ended 30 June 2017: net loss in the amount of USD (3) million).

7. COST OF METAL SALES

For the six For the six months ended months ended 30 June 2018 30 June 2017 Cash operating costs Labour 675 694 Materials and supplies 325 294 Purchases of raw materials and semi-products 259 142 Purchases of refined metals for resale 196 134 Mineral extraction tax and other levies 110 106 Third party services 91 105 Electricity and heat energy 74 69 Fuel 45 48 Transportation expenses 32 30 Sundry costs 72 75 Total cash operating costs 1,879 1,697 Depreciation and amortisation 325 276 Decrease/(increase) in metal inventories 8 (67) Total 2,212 1,906

21 F-51 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

8. GENERAL AND ADMINISTRATIVE EXPENSES

For the six For the six months ended months ended 30 June 2018 30 June 2017 Staff costs 291 235 Taxes other than mineral extraction tax and income tax 51 39 Third party services 33 22 Depreciation and amortisation 20 15 Rent expenses 11 13 Transportation expenses 6 3 Other 32 26 Total 444 353

9. SELLING AND DISTRIBUTION EXPENSES

For the six For the six months ended months ended 30 June 2018 30 June 2017 Transportation expenses 18 15 Marketing expenses 9 5 Staff costs 6 5 Other 2 3 Total 35 28

10. OTHER NET OPERATING EXPENSES

For the six For the six months ended months ended 30 June 2018 30 June 2017 Social expenses 98 196 Change in allowances 10 19 Net income earned during the pre-commissioning stage (19) – Other (9) – Total 80 215

11. FINANCE COSTS

For the six For the six months ended months ended 30 June 2018 30 June 2017 Interest expense on borrowings net of amounts capitalised 191 195 Unwinding of discount on provisions and payables 52 70 Other 3 – Total 246 265

22 F-52 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

12. PROPERTY, PLANT AND EQUIPMENT During the six months ended 30 June 2018, additions of property, plant and equipment amounted to USD 660 million (for the six months ended 30 June 2017: USD 923 million).

At 30 June 2018 capital construction-in-progress included USD 92 million of irrevocable letters of credit opened for fixed assets purchases (31 December 2017: USD 225 million), representing security deposits placed in banks at the end of the period.

Capitalised borrowing costs for the six months ended 30 June 2018 amounted to USD 79 million (for the six months ended 30 June 2017: USD 133 million). Annual capitalisation rate used to determine the amount of borrowing costs equals to 5.10% per annum (30 June 2017: 6.65%).

At 30 June 2018 mining assets and mine development cost included USD 3,322 million of mining assets under development (31 December 2017: USD 3,728 million).

At 30 June 2018 non-mining assets included USD 49 million of investment property (31 December 2017: USD 55 million).

1 13. OTHER FINANCIAL ASSETS

At 30 June 2018 At 31 December 2017 Non-current Loans issued and other receivables 200 190 Bank deposits 1 2 Total non-current 201 192

Current Loans issued and other receivables 3 1 Bank deposits 45 94 Derivative financial instruments 14 4 Total current 62 99

23 F-53 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

14. INVENTORIES

At 30 June 2018 At 31 December 2017 Refined metals and other metal products 569 655 Work-in-process and semi-products 1,335 1,333 Less: Allowance for work-in-process (4) (4) Total metal inventories 1,900 1,984

Materials and supplies 731 739 Less: Allowance for obsolete and slow-moving items (35) (34) Materials and supplies, net 696 705 Inventories 2,596 2,689

At 30 June 2018 part of metal semi-products stock in the amount of USD 221 million (31 December 2017: USD 453 million) was presented in other non-current assets according to Group’s production plans.

1 15. CASH AND CASH EQUIVALENTS

At 30 June 2018 At 31 December 2017 Current accounts - RUB 51 76 - USD 423 334 - EUR 23 10 - other 13 14 Bank deposits - RUB 1,523 – - USD 877 290 - EUR 465 17 - other 51 105 Restricted cash and cash equivalents – 2 Other cash and cash equivalents 12 4 Total 3,438 852

16. DISPOSAL OF SUBSIDIARIES On 6 April 2017, the Group sold its interest in a subsidiary, which owns real estate for a consideration of USD 113 million, of which USD 101 million was received during the six months ended 30 June 2017 and the remaining amount was received as of 31 December 2017. Proceeds from disposal of the subsidiary in the amount of USD 83 million were recognised in the interim condensed consolidated statement of cash flows for the six months ended 30 June 2017, net of disposed cash and cash equivalents of USD 16 million and transaction costs of USD 2 million. Gain on disposal in the amount of USD 17 million was recognised

in the interim condensed consolidated income statement for the six months ended 30 June 2017.

17. SHARE CAPITAL Authorised and issued ordinary shares As at 30 June 2018, 31 December 2017 and 30 June 2017 the Group’s number of authorised and issued ordinary shares was 158,245,476.

24 F-54 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

18. NON-CONTROLLING INTERESTS In May 2017 the Group sold a 2.66% share in Bystrinskoye project for USD 21 million to Highland Fund. In October 2017 the Group sold a 36.66% share in Bystrinskoye project for USD 275 million to a related party.

1 19. LOANS AND BORROWINGS Average nominal Fixed or rate during floating the six months At At interest ended 30 June 30 June 31 December Currency rate 2018, % Maturity 2018 2017 Unsecured loans USD floating 3.24% 2018-2023 3,850 2,898 RUB fixed 8.30% 2021 956 1,042 EUR floating 0.85% 2019-2028 11 4 CNY fixed 4.35% 2018 45 – Secured loans USD floating 5.75% 2019-2024 634 582 RUB fixed 9.35% 2018-2022 37 34 Total loans 5,533 4,560 Corporate bonds USD fixed 5.08% 2020-2023 3,471 4,206 RUB fixed 11.60% 2026 239 259 3,710 4,465 Finance leasing EUR fixed 6.85% 2026 21 23 USD fixed 4.20% 2019 3 4 ZAR floating 12.19% 2018-2019 1 1 25 28 Total 9,268 9,053 Less: current portion due within twelve months and presented as short-term loans and borrowings (118) (817) Long-term loans and borrowings 9,150 8,236

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.

At 30 June 2018 loans were secured by property, plant and equipment with a carrying amount of USD 20 million (31 December 2017: USD 15 million). At 30 June 2018 and 31 December 2017 100% shares of the Group’s subsidiary LLC “GRK “Bystrinskoye” were under pledge.

25 F-55 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

20. DIVIDENDS On 28 June 2018, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2017 in the amount of RUB 607.98 (USD 9.63) per share with the total amount of USD 1,524 million. The dividends are paid in accordance with legislation in July and August 2018.

On 29 September 2017, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 6 months ended 30 June 2017 in the amount of RUB 224.20 (USD 3.84) per share with the total amount of USD 607 million. The dividends were paid to the shareholders in October 2017.

On 16 December 2016, the Extraordinary General shareholders’ 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 1,172 million recognised in the interim condensed consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.

21. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES Related parties include major shareholders and entities under their ownership and control, Nkomati joint operation 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 assets and services and Sale of goods and services other operating expenses For the six For the six For the six For the six months ended months ended months ended months ended Transactions with related parties 30 June 2018 30 June 2017 30 June 2018 30 June 2017 Entities under ownership and control of the Group's major shareholders 4 3 60 109 Joint operation of the Group 1 – 53 53 Total 5 3 113 162

Accounts receivable Accounts payable Outstanding balances with At 30 June At 31 December At 30 June At 31 December related parties 2018 2017 2018 2017 Entities under ownership and control of the Group's major shareholders 1 – 4 2 Joint operation of the Group 3 – 7 9 Total 4 – 11 11

26 F-56 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

22. COMMITMENTS AND CONTINGENCIES Capital commitments At 30 June 2018, contractual capital commitments amounted to USD 779 million (31 December 2017: USD 801 million).

Litigation At 30 June 2018 the Group is involved in legal disputes in the ordinary course of its operations. At 30 June 2018, total claims under unresolved litigation with the probability of their unfavorable resolution being assessed as possible amounted to approximately USD 23 million (31 December 2017: USD 25 million).

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.

In 2017 the Russian tax authorities completed a transfer pricing audit of the Group’s metal export sales for the year ended 31 December 2013, which did not result in significant additional tax charges.

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.

27 F-57 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

22. COMMITMENTS AND CONTINGENCIES (CONTINUED) 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.

23. FAIR VALUE OF FINANCIAL INSTRUMENTS Management believes that the carrying value of financial instruments such as cash and cash equivalents (refer to note 15), other financial assets, trade and other short-term accounts receivable and current accounts payable approximates to their fair value or may not significantly differ from it. At 30 June 2018 trade and other short-term accounts receivable include USD 309 million of short-term trade accounts receivable classified as measured at fair value through profit or loss upon recognition, Level 2 of fair value hierarchy.

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 assets or liabilities, either directly or indirectly; and  Level 3 fair value measurements are those derived from valuation techniques that include inputs for assets or liabilities that are not based on observable market data.

28 F-58 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2018 US Dollars million

23. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The information below presents financial instruments not measured at fair value, including loans and borrowings, trade and other long-term payables.

At 30 June 2018 At 31 December 2017 Fair value Fair value Carrying value Level 1 Carrying value Level 1 Fixed rate corporate bonds 3,710 3,731 4,465 4,685 Total 3,710 3,731 4,465 4,685

Fair value Fair value Loans and borrowings, including: Carrying value Level 2 Carrying value Level 2 Floating rate loans and borrowings 4,495 4,238 3,484 3,439 Fixed rate loans and borrowings 1,038 1,014 1,076 1,055 Total 5,533 5,252 4,560 4,494

Fair value Fair value Carrying value Level 2 Carrying value Level 2 Trade and other long-term payables 396 380 402 440 Total 396 380 402 440

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 30 June 2018 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 fair value of trade and other long-term payables at 30 June 2018 was calculated based on the present value of future cash flows, discounted at the best management estimation of market rates.

29 F-59 Mining and Metallurgical Company Norilsk Nickel

Consolidated financial statements for the year ended 31 December 2018

F-60 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

INDEX Page

LfSfW_W`f aX _S`SYW_W`fpe dWeba`e[T[^[f[We Xad fZW bdWbSdSf[a` and approval of the consolidated financial statements for the year ended 31 December 2018 1

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Consolidated financial statements for the year ended 31 December 2018:

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 12-53

F-61 F-62 F-63 F-64 F-65 F-66 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

For the year ended For the year ended Notes 31 December 2018 31 December 2017 Revenue Metal sales 6 10,962 8,415 Other sales 708 731 Total revenue 11,670 9,146

Cost of metal sales 7 (4,536) (3,968) Cost of other sales (622) (632) Gross profit 6,512 4,546

General and administrative expenses 8 (859) (759) Selling and distribution expenses 9 (92) (75) Impairment of non-financial assets 14 (50) (227) Other operating income and expenses 10 (95) (362) Operating profit 5,416 3,123

Foreign exchange (loss)/gain, net (1,029) 159 Finance costs 11 (580) (535) Gain from disposal of subsidiaries 20 m 20 Income from investments 12 95 77 Profit before tax 3,902 2,844

Income tax expense 13 (843) (721) Profit for the year 3,059 2,123

Attributable to: Shareholders of the parent company 3,085 2,129 Non-controlling interests (26) (6) 3,059 2,123

EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 21 19.5 13.5

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 6 F-67 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

For the year ended For the year ended 31 December 2018 31 December 2017 Profit for the year 3,059 2,123 Other comprehensive (loss)/income Items to be reclassified to profit or loss in subsequent periods: Effect of translation of foreign operations (2) 15 Other comprehensive (loss)/income to be reclassified to profit or loss in subsequent periods, net (2) 15 Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency (905) 277 Other comprehensive (loss)/income not to be reclassified to profit or loss in subsequent periods, net (905) 277 Other comprehensive (loss)/income for the year, net of tax (907) 292 Total comprehensive income for the year, net of tax 2,152 2,415

Attributable to: Shareholders of the parent company 2,232 2,417 Non-controlling interests (80) (2) 2,152 2,415

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 7 F-68 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2018 US Dollars million

At 31 December At 31 December Notes 2018 2017 ASSETS Non-current assets Property, plant and equipment 14 9,934 10,960 Intangible assets 163 148 Other financial assets 15 141 192 Deferred tax assets 13 73 77 Other non-current assets 17 386 732 10,697 12,109 Current assets Inventories 17 2,280 2,689 Trade and other receivables 18 204 327 Advances paid and prepaid expenses 75 71 Other financial assets 15 147 99 Income tax receivable 92 82 Other taxes receivable 16 271 296 Cash and cash equivalents 19 1,388 852 Other current assets 97 110 4,554 4,526 TOTAL ASSETS 15,251 16,635

EQUITY AND LIABILITIES Capital and reserves Share capital 21 6 6 Share premium 1,254 1,254 Translation reserve (5,343) (4,490) Retained earnings 27 7,306 7,557 Equity attributable to shareholders of the parent company 3,223 4,327 Non-controlling interests 22 250 331 3,473 4,658 Non-current liabilities Loans and borrowings 23 8,224 8,236 Provisions 25 365 464 Trade and other long-term payables 200 402 Derivative financial instruments 61 m Deferred tax liabilities 13 385 407 Other long-term liabilities 185 116 9,420 9,625 Current liabilities Loans and borrowings 23 215 817 Trade and other payables 26 1,551 783 Dividends payable 27 6 6 Employee benefit obligations 24 307 377 Provisions 25 77 189 Derivative financial instruments 5 24 Income tax payable 35 9 Other taxes payable 16 162 147 2,358 2,352 TOTAL LIABILITIES 11,778 11,977 TOTAL EQUITY AND LIABILITIES 15,251 16,635

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 8 F-69 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

For the year ended For the year ended 31 December 2018 31 December 2017 OPERATING ACTIVITIES Profit before tax 3,902 2,844 Adjustments for: Depreciation and amortisation 765 645 Impairment of non-financial assets 50 227 Loss on disposal of property, plant and equipment 1 9 Gain from disposal of subsidiaries m (20) Change in provisions and allowances 61 41 Finance costs and income from investments, net 485 458 Foreign exchange loss/(gain), net 1,029 (159) Other 46 58 6,339 4,103 Movements in working capital: Inventories 297 (346) Trade and other receivables 102 (174) Advances paid and prepaid expenses (5) 10 Other taxes receivable (15) (5) Employee benefit obligations 11 9 Trade and other payables 676 (1,118) Provisions (28) (48) Other taxes payable (97) 2 Cash generated from operations 7,280 2,433 Income tax paid (787) (670) Net cash generated from operating activities 6,493 1,763

INVESTING ACTIVITIES Purchase of property, plant and equipment (1,480) (1,940) Purchase of intangible assets (73) (62) Purchase of other non-current assets (104) (88) Loans issued (7) (18) Proceeds from repayment of loans issued 13 48 Net change in deposits placed 5 (80) Proceeds from sale of other financial assets m 9 Proceeds from disposal of property, plant and equipment 3 29 Proceeds from disposal of subsidiaries m 99 Interest and other investment income received 81 67 Net cash used in investing activities (1,562) (1,936)

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 9 F-70 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018 (CONTINUED) US Dollars million

For the year ended For the year ended 31 December 2018 31 December 2017 FINANCING ACTIVITIES Proceeds from loans and borrowings 2,173 4,233 Repayments of loans and borrowings (2,547) (3,140) Financial lease payments (9) (10) Dividends paid (note 27) (3,369) (2,971) Dividends paid to non-controlling interest (1) (1) Interest paid (551) (642) Proceeds from sale of a non-controlling interest in a subsidiary (note 22) m 294 Net cash used in financing activities (4,304) (2,237)

Net increase/(decrease) in cash and cash equivalents 627 (2,410) Cash and cash equivalents at the beginning of the year 852 3,325 Effects of foreign exchange differences on balances of cash and cash equivalents (91) (63) Cash and cash equivalents at the end of the year 1,388 852

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 10 F-71 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 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 2017 6 1,254 i (4,778) 7,340 3,822 74 3,896 Profit/(loss) for the year m m m m 2,129 2,129 (6) 2,123 Other comprehensive income m m m 288 m 288 4 292 Total comprehensive income/(loss) for the year i i i 288 2,129 2,417 (2) 2,415 Dividends 27 m m m m (1,846) (1,846) (1) (1,847) Increase in non-controlling interest due to decrease in ownership of a subsidiary 22 m m m m 35 35 259 294 Other effects related to transactions with non-controlling interest owners m m m m (100) (100) m (100) Decrease in non-controlling interest due to increase in ownership of a subsidiary m m m m (1) (1) 1 i Balance at 31 December 2017 6 1,254 i (4,490) 7,557 4,327 331 4,658

Profit/(loss) for the year m m m m 3,085 3,085 (26) 3,059 Other comprehensive loss m m m (853) m (853) (54) (907) Total comprehensive income/(loss) for the year i i i (853) 3,085 2,232 (80) 2,152 Dividends 27 m m m m (3,336) (3,336) (1) (3,337) Balance at 31 December 2018 6 1,254 i (5,343) 7,306 3,223 250 3,473

The accompanying notes on pages 12 - 53 form an integral part of the consolidated financial statements 11 F-72 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 1. GENERAL INFORMATION Organisation and principal business activities Public Joint-LfaU] =a_bS`k nG[`[`Y S`V GWfS^^gdY[US^ =a_bS`k Had[ê] H[U]Wô 'fZW n=a_bS`ko ad nGG= Had[ê] H[U]Wô( iSe [ÙadbadSfWV [` fZW Kgee[S` @WVWdSf[an on 4 July 1997. The principal activities aX fZW =a_bS`k S`V [fe egTe[V[Sd[We 'fZW nAdagbo( SdW WjbâdSf[a`* WjfdSUf[a`* dWX[`[`Y aX adW S`V 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 and the Zabaikalsky region 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 @[`S`U[S^ KWbadf[`Y LfS`VSdVe 'nC@KLo(,

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 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 'nFSi 0.6-@Ro( VSfWV 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 upon initial recognition, in accordance with IAS 2 Inventories; ' mark-to-market valuation of certain classes of financial instruments, in accordance with IFRS 9 Financial Instruments (IAS 39 Financial Instruments: Recognition and Measurement for comparative information).

2. CHANGES IN ACCOUNTING POLICIES The accounting policies applied in the preparation of these consolidated financial statements are generally Uaè[efW`f i[fZ fZaeW Sbb^[WV [` fZW bdWbSdSf[a` aX fZW Adagbpe Uaèa^[VSfWV X[`SÙ[S^ efSfW_W`fe Se Sf S`V Xad the year ended 31 December 2017 except for the changes related to the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

Adoption of new and revised standards and interpretations The Group has initially adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments from 1 January 2018.

The Group has adopted IFRS 15 Revenue from Contracts with Customers at the date of initial application using the cumulative effect method with no material effect a` fZW Adagbpe consolidated financial statements as at 31 December 2018 and for the year then ended. Comparative information for the year 31 December 2017 has not been restated.

12 F-73 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

2. CHANGES IN ACCOUNTING POLICIES (CONTINUED) Trade receivables on provisionally priced contracts where price is not settled until a predetermined future date that were classified as loans and receivables under IAS 39 Financial Instruments: Recognition and Measurement are classified as at 31 December 2018 at fair value through profit or loss and remeasured at each reporting date using the forward price for the period equivalent to that outlined in the contract (mark- to-market adjustment).

There were no material differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 Financial Instruments as at 31 December 2018.

The significant accounting policies in respect of revenue from contracts with customers and financial instruments in effect from 1 January 2018 are set out in note 3.

Adoption of other new and revised standards and interpretations Adoption of amendments to the following Standards for annual periods from 1 January 2018 did not have material impact on the accounting policies, financial position or results of the Group: ' IFRS 1 First-time Adoption of International Financial Reporting Standards (amended); ' IFRS 2 Share-based Payment (amended); ' IFRS 4 Insurance Contracts (amended); ' IAS 28 Investments in Associates and Joint Ventures (amended); ' IAS 40 Investment Property (amended); ' IFRIC 22 Foreign Currency Transactions and Advance Consideration.

Standards and interpretations in issue but not yet effective The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Effective for annual periods Standards and Interpretations beginning on or after IFRS 16 Leases 1 January 2019 IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 IFRS 17 Insurance Contracts 1 January 2021

Management of the Group plans to adopt S^^ aX fZW STahW efS`VSdVe S`V [`fWdbdWfSf[a`e [` fZW Adagbpe consolidated financial statements for the respective periods.

IFRS 16 Leases replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases Q Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 Leases will be adopted by the Group starting 1 January 2019.

IFRS 16 Leases requires the lessee to adopt a unified approach to the presentation of lease agreements. Under the new standard, an asset (the right to use the leased item) and a financial liability of the lessee to pay rentals are recognised for most lease agreements. The Group plans to use the exemption on lease contracts for which the lease term is less than 12 months. The Group plans to adopt IFRS 16 Leases in accordance with the modified retrospective approach as follows: ' at the date of initial application in respect of leases previously classified as operating leases under IAS 17 Leases, lease liabilities will be measured at the present value of the remaining future lease payments discounted at the incremental borrowing rate; ' a right-of-use asset is generally recognised in the amount equal to the corresponding lease liability; ' comparative information for the year ended 31 December 2018 will not be restated.

13 F-74 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

2. CHANGES IN ACCOUNTING POLICIES (CONTINUED) The Group preliminarily estimated impact of the initial application of IFRS 16 Leases on its consolidated financial position: recognition of approximately USD 200 million of lease liabilities and respective right- of-use assets with no effect on retained earnings as at 1 January 2019.

With respect to the subsequent impact on the consolidated income statement (as opposed to the current presentation of operating lease expenses), the Group will present depreciation charges for right-of-use assets, as well as interest expense on lease liabilities (unwinding of discount).

Reclassification For the year ended 31 December 2018, revenue from sales of semi-products is allocated to revenue from each metal sales as per respective metal content in a semi-product rather than being presented under S eWbSdSfW neW_[-bdaVgUfeo USbf[a` 'dWXWd fa `afW 4(, C`Xad_Sf[a` Xad fZW kWSd W`VWV 1/ >WUW_TWd 0017 has been reclassified to conform with the current period presentation.

1 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 eWbSdSfW^k Xda_ fZW Adagbpe Wcg[fk fZWdW[`, Ha`-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-Ua`fda^^[`Y [`fWdWefep bdabadf[a`SfW eZSdW aX fZW dWUaY`[eWV S_ag`fe aX fZW SUcg[dWWpe [VW`f[X[ST^W `Wf SeeWfe, MZW UZa[UW aX 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.

=ZS`YWe [` fZW Adagbpe ai`WdeZ[b [`fWdWef [` S egTe[V[Sdk fZSf Va `af dWeg^f [` fZW Adagb ^ae[`Y Ua`fda^ SdW 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.

14 F-75 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor. The Group recognises in relation to its interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation; and its expenses, including its share of any expenses incurred jointly. The Group accounts for its investments in joint ventures using the equity method.

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-Ua`fda^^[`Y [`fWdWefe [` fZW SUcg[dWW* S`V fZW XS[d hS^gW aX fZW SUcg[dWdpe 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 [`fWdWefe [` fZW SUcg[dWW S`V fZW XS[d hS^gW aX fZW SUcg[dWdpe bdWh[age^k ZW^V [`fWdWef [` fZW SUcg[dWW '[X S`k(* 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.

Functional and presentation currency The individual financial statements of each Group entity are presented in its functional currency.

MZW Kgee[S` KagT^W 'nKN

15 F-76 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) MZW bdWeW`fSf[a` UgddWÙk aX fZW Uaèa^[VSfWV X[`SÙ[S^ efSfW_W`fe aX fZW Adagb [e NL >a^^Sd 'nNL>o(, 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; ' 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 each quarter with the exception of proceeds from and repayments of loans and borrowings, dividends paid and advances received, proceeds 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 MdSèSUf[aè [` UgddWÙ[We afZWd fZS` fZW W`f[fkpe XgÙf[a`S^ UgddWÙk 'XadW[Y` UgddWÙ[We( SdW dWUadVWV Sf 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. 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 2018 2017

Russian Rouble/US Dollar 31 December 69.47 57.60 Average for the year ended 31 December 62.71 58.35

South African Rand/US Dollar 31 December 14.35 12.36 Average for the year ended 31 December 13.18 13.30

Euro/US Dollar 31 December 0.87 0.84 Average for the year ended 31 December 0.85 0.89

Chinese Yuan/US Dollar 31 December 6.88 6.51 Average for the year ended 31 December 6.62 6.70

16 F-77 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue recognition Metal sales revenue

Revenue from contracts that are entered into and continue to meet the Grouppe WjbWUfWV eS^W dWcg[dW_W`fe designated for that purpose at their inception and are expected to be settled by physical delivery, is recognised in the consolidated financial statements as and when they are delivered. A gain or loss on forward contracts that are expected to be settled by physical delivery or on net basis is measured at fair value recognised in revenue and disclosed separately from revenue from contracts with customers.

Other revenue

Revenue from service contracts is recognised over-time when the services are rendered.

Dividends and interest income Dividend income from investments is dWUaY`[eWV iZW` fZW Adagbpe d[YZf fa dWUW[hW 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.

17 F-78 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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.

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 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 respective services.

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.

18 F-79 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Current tax

Deferred tax

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 directly attributable borrowings costs.

Mine development costs are transferred to mining assets and start to be depreciated when a new mine reaches commercial production quantities.

19 F-80 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Mining assets are recorded at cost less accumulated depreciation 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 and interest capitalised.

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 2 m 50 years ' machinery, equipment and transport 1 m 25 years ' other non-mining assets 1 m 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 operation.

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.

20 F-81 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 m 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.

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.

Inventories Refined metals

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.

Materials and supplies

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

21 F-82 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 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 amortised cost; ' financial assets at fair value through other comprehensive income; and ' financial assets at fair value through profit or loss.

The classification of financial assets depends on the Grouppe business model for managing the financial assets and the contractual terms of the cash flows and is determined at the time of initial recognition.

Effective interest method

Income is recognised on an effective interest basis for debt securities other than those financial assets designated at fair value through profit or loss or other comprehensive income.

Financial assets at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at fair value though profit or loss: ' it is held within a business model whose objective is to hold assets to collect contractual cash flows; and ' its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Group generally classifies cash and cash equivalents, trade and other receivables (excluding trade receivables on provisionally priced contracts), loans issued and bank deposits as financial assets at amortised cost.

Financial assets at fair value through other comprehensive income

A debt instrument is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated at fair value though profit or loss: ' it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and ' its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

22 F-83 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial assets at fair value through profit or loss

All financial assets not classified as measured at amorised cost or fair value through other comprehensive income are classified as financial assets at fair value through profit or loss.

Trade receivables on provisionally priced contracts and derivative financial assets are measured at fair value through profit or loss. Trade receivables on provisionally priced contracts are remeasured at each reporting date using the forward price for the period equivalent to that outlined in the contract.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on a financial asset measured at amortised cost using one of the two methods:

Lifetime expected credit losses Trade and other receivables

Financial assets other than trade and other receivables for which credit risk has not increased significantly since initial recognition

When determining whether the credit risk of the financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available, including both quantitative and qualitative information and S`S^ke[e TSeWV a` Adagbpe Z[efad[US^ WjbWd[W`UW S`V XadiSdV-looking information.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The Group assumes that expected credit loss for all trade and other receivables, which are overdue in excess of 365 days is equal to their carrying amount. To measure the expected credit losses, trade and other receivables that are past due for less than 365 days are grouped based on the length of the overdue period to which respective expected loss rates are applied. The expected loss rates are based on the historical credit loss experience, adjusted to reflect current and forward-looking information on the ability of the customers to settle the receivables.

When trade and other receivables are considered uncollectible, they are written off against the loss allowance. Changes in the loss allowance are recognised in the consolidated income statement.

Derecognition of financial assets

23 F-84 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Derivative financial liabilities are measured at fair value through profit or loss.

Effective interest method

Derecognition of financial liabilities

MZW Adagb VWdWUaY`[eWe X[`S`U[S^ ^[ST[^[f[We iZW`* S`V a`^k iZW`* fZW Adagbpe aT^[YSf[a`e SdW V[eUZSdYed, 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.

Decommissioning obligations Decommissioning obligations include direct asset decommissioning costs as well as related land restoration costs.

Future decommissioning and other related obligations, discounted to present value, are recognised at the moment when the legal or constructive obligation in relation to such costs arises and the future costs can be reliably estimated. These costs are 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.

24 F-85 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Preparation of the consolidated financial statements in accordance with IFKL dWcg[dWe fZW Adagbpe 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 non-financial assets; ' provisions and allowances; ' decommissioning obligations; ' income taxes and ' contingencies.

Useful economic lives of property, plant and equipment Carrying value of tZW Adagbpe _[`[`Y SeeWfe* U^See[X[WV i[fZ[` bdabWdfk* b^S`f S`V Wcg[b_W`f* is depreciated 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 depreciation of mining assets. 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 non-financial 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.

25 F-86 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED) Provisions and allowances The Group creates an allowance for obsolete and slow-moving inventories. 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 MZW Adagbpe _[`[`Y S`V WjbâdSf[a` SUf[h[f[We SdW egT\WUf fa hSd[age W`h[da`_W`fS^ ^Sie S`V dWYg^Sf[aè, MZW Adagb Wef[_SfWe VWUa__[ee[a`[`Y aT^[YSf[aè TSeWV a` _S`SYW_W`fpe g`VWdefS`V[`Y aX fZW UgddW`f ^WYS^ requirements in the various jurisdictions in which it operates, terms of the license agreements and internally generated engineering estimates. Provisions are recognised, based on present values, for decommissioning and land restoration costs as soon as the obligations arise. 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.

26 F-87 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

5. SEGMENT INFORMATION Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the Management Board.

The Group has updated its management accounting system to account for business changes. As a result, GRK Bystrinskoye segment is now presented separately from Other mining segment, trading operations presentation was amended as set out below.

Management has determined the following operating segments: ' GMK Group segment includes mining and metallurgy operations, transport services, energy, repair and maintenance services located in Taimyr Peninsula. GMK Group metal sales to external customers include metal volumes processed at KGMK Group metallurgy facilities. GMK Group other sales to external customers primarily include revenue for energy and utilities services provided in Taimyr Peninsula; intersegment revenue from metal sales includes sale of semi-products to NN Harjavalta segment for further processing. ' KGMK Group segment includes mining and metallurgy operations, energy, exploration activities located in Kola Peninsula. KGMK Group revenue from other sales includes intersegment metal processing services under tolling arrangements provided to other segments and energy and utilities services provided to external customers in Kola Peninsula. Intersegment revenue from metal sales include sale of semi-products to NN Harjavalta for further processing. ' NN Harjavalta segment includes refinery operations located in Finland. NN Harjavalta sales primarily include metal produced from semi-products purchased from GMK Group and KGMK Group segments. ' GRK Bystrinskoye segment includes ore mining and processing operations located in the Zabaikalsky region of the Russian Federation. ' Other mining segment primarily includes 50% Group interest in metal mining and processing joint operations of Nkomati Nickel Mine 'nH]a_Sf[o(, as well as certain other mining and exploration activities located in Russia and abroad. Other mining segment sales primarily include Group share at sales of metal semi-products produced by Nkomati. ' Other non-metallurgical segment includes resale of third party metal products, other trading operations, supply chain management, transport services, energy and utility, research and other activities located in Russia and abroad. Other non-metallurgical segment also includes resale of 50% metal semi-products produced by Nkomati. Other sales of Other non-metallurgical segment primarily include revenue from passenger air transportation, freight transportation services and fuel sales.

Corporate activities of the Group Va `af dWbdWeW`f S` abWdSf[`Y eWY_W`f* [`U^gVW bd[_Sd[^k ZWSVcgSdfWdep general and administrative expenses and treasury operations of the Group and are presented as Unallocated.

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.

Amounts are measured on the same basis as those in the consolidated financial statements. Information for the year ended 31 December 2017 and as at 31 December 2017 has been presented to conform with the current period presentation. JdWh[age^k* S^^ fZW Adagbpe _WfS^ fdSV[`Y abWdSf[a`e '[`U^gV[`Y ai` _WfS^( were included in Other non-metallurgical.

27 F-88 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) The following tables present revenue, measure of segment profit or loss (EBITDA) and other segment information from continuinY abWdSf[a`e dWYSdV[`Y fZW Adagbpe reportable segments for the year ended 31 December 2018 and 31 December 2017, respectively.

Other For the year ended GMK KGMK NN GRK Other non-metal- Elimi- 31 December 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 8,787 361 1,020 m 107 687 m 10,962 Other sales to external customers 160 33 6 6 1 502 m 708 Inter-segment metal sales 720 154 m m m m (874) i Inter-segment other sales 75 363 m 2 m 325 (765) i Total revenue 9,742 911 1,026 8 108 1,514 (1,639) 11,670 Segment EBITDA 6,602 190 71 96 (6) 50 (13) 6,990 Unallocated (759) Consolidated EBITDA 6,231 Depreciation and amortisation (765) Impairment of non-financial assets (50) Finance costs (580) Foreign exchange loss, net (1,029) Other income and expenses, net 95 Profit before tax 3,902

Other segment information Purchase of property, plant and equipment and intangible assets 1,016 292 18 168 21 38 m 1,553 Depreciation and amortisation 612 82 24 13 6 28 m 765 Impairment of non- financial assets 8 3 m m 39 m m 50

28 F-89 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) Other For the year ended GMK KGMK NN GRK Other non-metal- Elimi- 31 December 2017 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Metal sales to external customers 6,712 347 835 m 128 393 m 8,415 Other sales to external customers 176 34 5 14 m 502 m 731 Inter-segment metal sales 500 122 m m m m (622) i Inter-segment other sales 59 394 m 1 m 391 (845) i Total revenue 7,447 897 840 15 128 1,286 (1,467) 9,146 Segment EBITDA 4,559 182 61 (65) (3) 18 (34) 4,718 Unallocated (723) Consolidated EBITDA 3,995 Depreciation and amortisation (645) Impairment of non-financial assets (227) Finance costs (535) Foreign exchange gain, net 159 Other income and expenses, net 97 Profit before tax 2,844

Other segment information Purchase of property, plant and equipment and intangible assets 1,225 228 16 449 20 64 m 2,002 Depreciation and amortisation 463 61 25 m 72 24 m 645 Impairment of non- financial assets 101 3 m m 122 1 m 227

29 F-90 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED)

The following table presents segment metal sales to external customers breakdown by metal for the year ended 31 December 2018 and 31 December 2017, respectively.

Other For the year ended GMK KGMK NN Other non-metal- 31 December 2018 Group Group Harjavalta mining lurgical Total Nickel 1,827 275 805 53 53 3,013 Copper 2,824 51 86 8 8 2,977 Palladium 2,990 1 55 18 610 3,674 Platinum 574 3 7 6 6 596 Other metals 572 31 67 22 10 702 8,787 361 1,020 107 687 10,962

Other For the year ended GMK KGMK NN Other non-metal- 31 December 2017 Group Group Harjavalta mining lurgical Total Nickel 1,409 254 647 53 53 2,416 Copper 2,268 49 79 13 13 2,422 Palladium 2,056 11 36 23 308 2,434 Platinum 618 6 10 10 10 654 Other metals 361 27 63 29 9 489 6,712 347 835 128 393 8,415

30 F-91 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

5. SEGMENT INFORMATION (CONTINUED) MZW Xa^^ai[`Y fST^We bdWeW`f SeeWfe S`V ^[ST[^[f[We aX fZW Adagbpe dWbadfST^W eWY_W`fe Sf 31 December 2018 and 31 December 2017, respectively. Other GMK KGMK NN GRK Other non-metal- Elimi- At 31 December 2018 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Inter-segment assets 292 114 140 24 m 57 (627) i Segment assets 9,903 996 451 1,492 88 792 (56) 13,666 Total segment assets 10,195 1,110 591 1,516 88 849 (683) 13,666 Unallocated 1,585 Total assets 15,251 Inter-segment liabilities 139 63 122 39 5 259 (627) i Segment liabilities 1,756 134 100 68 26 1,028 m 3,112 Total segment liabilities 1,895 197 222 107 31 1,287 (627) 3,112 Unallocated 8,666 Total liabilities 11,778

Other GMK KGMK NN GRK Other non-metal- Elimi- At 31 December 2017 Group Group Harjavalta Bystrinskoye mining lurgical nations Total Inter-segment assets 346 207 172 2 9 54 (790) i Segment assets 11,536 975 390 1,518 118 935 (42) 15,430 Total segment assets 11,882 1,182 562 1,520 127 989 (832) 15,430 Unallocated 1,205 Total assets 16,635 Inter-segment liabilities 89 135 124 43 1 398 (790) i Segment liabilities 2,128 157 73 89 32 171 m 2,650 Total segment liabilities 2,217 292 197 132 33 569 (790) 2,650 Unallocated 9,327 Total liabilities 11,977

31 F-92 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

6. METAL SALES MZW Adagbpe _WfS^ eS^We fa WjfWd`S^ Ugefa_Wde SdW VWfS[^WV TWâi 'TSeWV a` WjfWd`S^ Ugefa_Wdep âUSf[aè(:

For the year ended Other 31 December 2018 Total Nickel Copper Palladium Platinum metals Europe 5,868 1,323 2,356 1,216 514 459 Asia 2,929 1,090 386 1,313 41 99 North and South America 1,619 348 26 1,111 34 100 Russian Federation and CIS 546 252 209 34 7 44 10,962 3,013 2,977 3,674 596 702

For the year ended 31 December 2017 Europe 4,753 1,084 2,130 756 449 334 Asia 1,939 804 115 825 119 76 North and South America 1,166 313 m 807 m 46 Russian Federation and CIS 557 215 177 46 86 33 8,415 2,416 2,422 2,434 654 489

Metal revenue for the year ended 31 December 2018 included net gain of USD 12 million in respect of forward contracts measured at fair value that are expected to be settled by metal physical delivery or on a net basis (for the year ended 31 December 2017: net loss in the amount of USD (26) million).

7. COST OF METAL SALES

For the year ended For the year ended 31 December 2018 31 December 2017 Cash operating costs Labour 1,311 1,392 Materials and supplies 727 732 Purchases of raw materials and semi-products 436 297 Purchases of refined metals for resale 430 530 Mineral extraction tax and other levies 212 221 Third party services 200 242 Electricity and heat energy 143 143 Fuel 87 81 Transportation expenses 70 65 Sundry costs 158 152 Total cash operating costs 3,774 3,855 Depreciation and amortisation 653 630 Decrease/(increase) in metal inventories 109 (517) Total 4,536 3,968

32 F-93 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 8. GENERAL AND ADMINISTRATIVE EXPENSES

For the year ended For the year ended 31 December 2018 31 December 2017 Staff costs 541 478 Taxes other than mineral extraction tax and income tax 103 79 Third party services 93 97 Depreciation and amortisation 38 32 Rent expenses 23 25 Transportation expenses 9 8 Other 52 40 Total 859 759

9. SELLING AND DISTRIBUTION EXPENSES

For the year ended For the year ended 31 December 2018 31 December 2017 Transportation expenses 39 38 Marketing expenses 31 14 Staff costs 14 13 Other 8 10 Total 92 75

10. OTHER OPERATING INCOME AND EXPENSES

For the year ended For the year ended 31 December 2018 31 December 2017 Social expenses 207 303 Change in allowance for obsolete and slow-moving inventory 15 11 Change in allowance for expected credit losses 6 19 Net income earned during the pre-commissioning stage (106) m Other, net (27) 29 Total 95 362

11. FINANCE COSTS

For the year ended For the year ended 31 December 2018 31 December 2017 Interest expense on borrowings net of amounts capitalised 384 386 Unwinding of discount on provisions and payables 100 133 Changes in fair value of cross-currency interest rate swap 51 m Changes in fair value of non-current liabilities 46 m Other, net (1) 16 Total 580 535

33 F-94 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 12. INCOME FROM INVESTMENTS

For the year ended For the year ended 31 December 2018 31 December 2017 Interest income on bank deposits 59 39 Other, net 36 38 Total 95 77

13. INCOME TAX EXPENSE

For the year ended For the year ended 31 December 2018 31 December 2017 Current income tax expense 812 686 Deferred tax expense 31 35 Total 843 721

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 2018 31 December 2017 Profit before tax 3,902 2,844 Income tax at statutory rate of 20% 780 569 Allowance for deferred tax assets 29 38 Non-deductible impairment of non-financial assets 4 7 Non-deductible social expenses 54 73 Effect of different tax rates of subsidiaries operating in other jurisdictions (39) 8 Tax effect of other permanent differences 15 26 Total 843 721

The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 30%.

Deferred tax balances

Effect of translation At Recognised in Disposed on to At 31 December income disposal of presentation 31 December 2017 statement subsidiaries currency 2018 Property, plant and equipment 368 86 m (68) 386 Inventories 124 m m (17) 107 Trade and other receivables (3) (5) m 1 (7) Decommissioning obligations (69) 5 m 11 (53) Loans and borrowings, trade and other payables (69) (28) m 15 (82) Other assets 46 (18) m (4) 24 Other liabilities 8 (10) m m (2) Tax loss carried forward (75) 1 m 13 (61) Net deferred tax liabilities 330 31 i (49) 312

34 F-95 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

13. INCOME TAX EXPENSE (CONTINUED) Effect of translation At Recognised in Disposed on to At 31 December income disposal of presentation 31 December 2016 statement subsidiaries currency 2017 Property, plant and equipment 350 2 (4) 20 368 Inventories 102 16 m 6 124 Trade and other receivables (12) 9 m m (3) Decommissioning obligations (79) 16 m (6) (69) Loans and borrowings, trade and other payables (33) (35) m (1) (69) Other assets (10) 57 m (1) 46 Other liabilities 6 2 m m 8 Tax loss carried forward (41) (32) m (2) (75) Net deferred tax liabilities 283 35 (4) 16 330

Certain deferred tax assets and liabilities have been offset to the extent they relate to taxes levied on the Adagbpe W`f[f[We iZ[UZ 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 2018 At 31 December 2017 Deferred tax liability 385 407 Deferred tax asset (73) (77) Net deferred tax liabilities 312 330

Unrecognised deferred tax assets Deferred tax assets have not been recognised as follows:

At 31 December 2018 At 31 December 2017 Deductible temporary differences 100 104 Tax loss carry-forwards 191 219 Total 291 323

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 2018 deferred tax asset in the amount of USD 145 million related to tax loss arising on V[ebaeS^ aX IDL= nMZ[dV AW`WdSf[a` =a_bS`k aX fZW PZa^WeS^W ?^WUfd[U[fk GSd]Wfo 'nIAE-3o) (at 31 December 2017: USD 175 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 utilised without expiry only if the Company exits the tax consolidation group. Deferred tax assets in the amount of USD 46 million related to other non-expiring tax losses were not recognised due to specific rules stated by art. 283 of the Tax code of the Russian Federation (31 December 2017: USD 44 million). At 31 December 2018, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 1,558 million (31 December 2017: USD 1,459 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.

35 F-96 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 14. PROPERTY, PLANT AND EQUIPMENT

Non-mining assets Mining assets and mine Buildings, Machinery, Capital development structures equipment construction- cost and utilities and transport Other in-progress Total Cost Balance at 1 January 2017 7,314 2,855 2,976 215 1,387 14,747 Additions 1,429 m m m 840 2,269 Transfers m 247 477 84 (808) i Change in decommissioning provision (7) (13) m m m (20) Disposals (124) (150) (90) (23) (12) (399) Other (40) 42 (6) 2 2 i Effect of translation to presentation currency 422 153 150 11 75 811 Balance at 31 December 2017 8,994 3,134 3,507 289 1,484 17,408 Additions 925 m m m 798 1,723 Transfers m 304 348 9 (661) i Change in decommissioning provision (6) (1) m m m (7) Disposals (67) (4) (43) (4) (12) (130) Other (12) (13) 20 5 m i Effect of translation to presentation currency (1,589) (542) (586) (50) (251) (3,018) Balance at 31 December 2018 8,245 2,878 3,246 249 1,358 15,976 Accumulated depreciation and impairment Balance at 1 January 2017 (2,090) (1,413) (1,618) (72) (248) (5,441) Charge for the year (347) (97) (264) (24) m (732) Disposals 107 56 79 5 4 251 Impairment loss (154) (87) (7) m 21 (227) Other 4 (18) 16 (1) (1) i Effect of translation to presentation currency (120) (78) (82) (4) (15) (299) Balance at 31 December 2017 (2,600) (1,637) (1,876) (96) (239) (6,448) Charge for the year (350) (108) (291) (24) m (773) Disposals 62 3 38 3 2 108 Impairment loss (33) (31) (19) (2) 35 (50) Other 9 6 (12) (3) m i Effect of translation to presentation currency 460 274 329 19 39 1,121 Balance at 31 December 2018 (2,452) (1,493) (1,831) (103) (163) (6,042) Carrying value At 31 December 2017 6,394 1,497 1,631 193 1,245 10,960 At 31 December 2018 5,793 1,385 1,415 146 1,195 9,934

At 31 December 2018 capital construction-in-progress included USD 197 million of irrevocable letters of credit opened for fixed assets purchases (31 December 2017: USD 225 million), representing security deposits placed in banks. For the year ended 31 December 2018 purchases of property, plant and equipment in the consolidated statement of cash flows include USD 192 million related to these irrevocable letters of credit (for the year ended 31 December 2017: USD 210 million).

36 F-97 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Capitalised borrowing costs for the year ended 31 December 2018 amounted to USD 172 million (for the year ended 31 December 2017: USD 263 million). Capitalisation rate used to determine the amount of borrowing costs equals to 5.15% per annum (31 December 2017: 6.28%). At 31 December 2018 mining assets and mine development cost included USD 2,868 million of mining assets under development (31 December 2017: USD 3,728 million). At 31 December 2018 non-mining assets included USD 44 million of investment property (31 December 2017: USD 55 million). Impairment At 31 December 2017 the Group reclassified Nkomati Nickel Mine (Nkomati) from assets classified as held for sale and tested the assets for impairment. As a result, impairment loss in the amount of USD 129 million was recognised in impairment of non-financial assets in the consolidated income statement for the year ended 31 December 2017.

At 31 December 2018 the Group assessed indicators of further impairment based on Nkomati performance results against budget and management expectations as well as exchange rate and price forecasts.

As a result, the Group performed the impairment test and determined the value-in-use of the Adagbpe eZSdW in Nkomati property, plant and equipment in the amount of USD 12 million using a discounted cash flow model approach. Impairment loss in the amount of USD 39 million was recognised in impairment of non- financial assets in the consolidated income statement for the year ended 31 December 2018.

The most significant assumptions on the basis of which the value-in-use was determined 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 2028. Measurements were performed based on discounted cash flows expected to be generated by production assets. ' Management estimates market prices for metal concentrates based on adjusted commodity price forecast for metals. Commodities price forecast was based on consensus forecast. ' Production forecasts were primarily based on internal production reports available at the date of [_bS[d_W`f fWef S`V _S`SYW_W`fpe Seeg_bf[aè dWYSdV[`Y XgfgdW bdaVgUf[a` ^WhWê, ' Inflation forecasts were sourced from Economist Intelligence Unit report. Forecast for exchange rates was made based on expected ZAR and USD inflation indices, 5.6% and 2.5% respectively. ' A pre-tax nominal ZAR discount rate of 21.3% (31 December 2017: 21.6%) was estimated by dWXWdWÙW fa fZW iW[YZfWV ShWdSYW Uaef aX USb[fS^ Xad fZW Adagb S`V dWX^WUfe _S`SYW_W`fpe Wef[_SfWe of the risks specific to the production unit.

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 are assessed as a separate cash-generating unit with its value-in- use being determined using a discounted cash flow model approach at each subsequent reporting date. The most significant assumptions used in the discounted cash flow model at 31 December 2018 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 2030. Measurements were performed based on discounted cash flows expected to be generated by gas upstream assets. ' Management estimates prices for natural gas and gas condensate based on commodities price forecasts and government set prices. Commodities price forecast was based on consensus forecast. ' Production forecasts were primarily based on internal production reports available at the date of [_bS[d_W`f fWef S`V _S`SYW_W`fpe Seeg_bf[a`e dWYSdV[`Y XgfgdW bdaVgUf[a` ^WhW^e, ' MZW S_ag`fe S`V f[_[`Y aX USb[fS^ [`hWef_W`fe iWdW TSeWV a` _S`SYW_W`fpe XadWUSef,

37 F-98 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) ' Inflation used was projected within 2-5%. Forecast for exchange rates was based on Oxford Economics forecast. ' A pre-tax nominal RUB discount rate of 15.8% (31 December 2017: 15.8%) was estimated by dWXWdW`UW fa fZW iW[YZfWV ShWdSYW Uaef aX USb[fS^ S`V dWX^WUfe _S`SYW_W`fpe Wef[_SfWe aX fZW d[eks specific to the production units. As a result, impairment loss in the amount of USD 8 million was recognised in impairment of non-financial assets in the consolidated income statement for the year ended 31 December 2018 (for the year ended 31 December 2017: USD 48 million). Accumulated impairment loss, net of respective accumulated depreciation had no impairment been recognised, amounted to USD 243 million at 31 December 2018. During the year ended 31 December 2018 the Group recognised additional impairment losses in the amount of USD 3 million in respect of specific individual assets (for the year ended 31 December 2017:

USD 50 million).1

1 15. OTHER FINANCIAL ASSETS At 31 December 2018 At 31 December 2017 Non-current Loans issued and other receivables 133 190 Bank deposits 8 2 Total non-current 141 192

Current Loans issued and other receivables 57 1 Bank deposits 83 94 Derivative financial instruments 7 4 Total current 147 99

16. OTHER TAXES At 31 December 2018 At 31 December 2017 Taxes receivable Value added tax recoverable 244 257 Other taxes 28 40 272 297 Less: Allowance for value added tax recoverable (1) (1) Other taxes receivable 271 296 Taxes payable Value added tax 74 66 Social security contributions 37 26 Property tax 23 22 Other 28 33 Other taxes payable 162 147

38 F-99 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 17. INVENTORIES

At 31 December 2018 At 31 December 2017 Refined metals and other metal products 526 655 Work-in-process and semi-products 1,138 1,333 Less: Allowance for work-in-process (4) (4) Total metal inventories 1,660 1,984

Materials and supplies 662 739 Less: Allowance for obsolete and slow-moving items (42) (34) Materials and supplies, net 620 705 Inventories 2,280 2,689

At 31 December 2018 part of metal semi-products stock in the amount of USD 88 million (31 December 2017: USD 453 million) was presented in other non-current assete SUUadV[`Y fa Adagbpe bdaVgUf[a` b^S`e.

18. TRADE AND OTHER RECEIVABLES

At 31 December 2018 At 31 December 2017 Trade receivables from metal sales 143 251 Other receivables 131 168 274 419 Less: Allowance for expected credit losses (70) (92) Trade and other receivables, net 204 327 In 2018 and 2017, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest bearing. At 31 December 2018 trade and other short-term accounts receivable include USD 120 million of short- term trade accounts receivable measured at fair value through profit or loss upon recognition, Level 2 of fair value hierarchy (31 December 2017: USD 214 million). At 31 December 2018 and 2017, 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 2018 was 23 days (2017: 23 days). No interest was charged on these receivables. C`U^gVWV [` fZW Adagbpe afZWd dWUW[hST^We as at 31 December 2018 were debtors with a carrying value of USD 29 million (31 December 2017: USD 34 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 2018 At 31 December 2017 Less than 180 days 24 25 180-365 days 5 9 29 34 Movement in the allowance for expected credit losses was as follows: At 31 December 2018 At 31 December 2017 Balance at beginning of the year 92 81 Change in allowance 5 16 Accounts receivable written-off (12) (9) Effect of translation to presentation currency (15) 4 Balance at end of the year 70 92

39 F-100 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

# 19. CASH AND CASH EQUIVALENTS

At 31 December 2018 At 31 December 2017 Current accounts - USD 398 334 - RUB 49 76 - EUR 13 10 - other 64 14 Bank deposits - USD 850 290 - EUR m 17 - other 10 105 Restricted cash and cash equivalents m 2 Other cash and cash equivalents 4 4 Total 1,388 852

Bank deposits Interest rate on USD-denominated deposits held in banks was in the range from 1.70% to 3.95% (31 December 2017: from 1.07% to 2.29%) per annum. Interest rate on EUR-denominated deposits held in banks at 31 December 2017 was 0.30% per annum. Interest rate on deposits held in banks denominated in other currencies was in the range from 0.75% to 2.29% (31 December 2017: from 0.97% to 1.10%) per annum.

20. DISPOSAL OF SUBSIDIARIES On 6 April 2017, the Group sold its interest in a subsidiary which owns real estate for a consideration of USD 113 million. Proceeds from disposal of the subsidiary in the amount of USD 95 million were recognised in the consolidated statement of cash flows, net of disposed cash and cash equivalents of USD 16 million and transaction costs of USD 2 million. Gain on disposal in the amount of USD 16 million was recognised in the consolidated income statement.

21. SHARE CAPITAL Authorised and issued ordinary shares ;e Sf 1/ >WUW_TWd 0./6 S`V 1/ >WUW_TWd 0./5 fZW Adagbpe `g_TWd aX SgfZad[eWV S`V [ssued ordinary shares was 158,245,476.

Earnings per share

For the year ended For the year ended 31 December 2018 31 December 2017 Basic earnings per share (US Dollars per share): 19.5 13.5

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 2018 31 December 2017 Profit for the year attributable to shareholders of the parent company 3,085 2,129

Weighted average number of shares used in the calculation of basic and diluted earnings per share for the year ended 31 December 2018 and for the year ended 31 December 2017 was 158,245,476 shares.

As at 31 December 2018 and 31 December 2017, the Group had no securities, which would have a dilutive effect on earnings per share of ordinary stock.

40 F-101 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

22. NON-CONTROLLING INTEREST In May 2017 the Group sold a 2.66% share in Bystrinskoye project for USD 21 million to Highland Fund. In October 2017 the Group sold a 36.66% share in Bystrinskoye project for USD 275 million to a related party.

At 31 December 2018 and 31 December 2017 aggregate financial information relating to the subsidiary, FF= nAKE n

At 31 December 2018 At 31 December 2017 Non-current assets 1,258 1,281 Current assets 195 117 Non-current liabilities (790) (593) Current liabilities (139) (156) Net assets 524 649 Net assets attributable to non-controlling interest 262 325

For the year ended For the year ended 31 December 2018 31 December 2017 Net loss for the year (61) (32) Other comprehensive (loss)/income for the year (104) 31 Total comprehensive loss for the year (165) (1) Loss attributable to non-controlling interest (31) (6) Other comprehensive (loss)/income attributable to non-controlling interest (52) 5

For the year ended For the year ended 31 December 2018 31 December 2017 Cash flows from/(used in) operating activities 72 (42) Cash flows used in investing activities (190) (423) Cash flows from financing activities 142 458 Net increase/(decrease) in cash and cash equivalents 24 (7)

41 F-102 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 1 23. LOANS AND BORROWINGS

Fixed or Average nominal floating rate during the year At At interest ended 31 December 31 December 31 December Currency rate 2018, % Maturity 2018 2017 Unsecured loans USD floating 3.45% 2019-2023 3,837 2,898 RUB fixed 8.30% 2021 864 1,042 EUR floating 0.85% 2019-2028 19 4 Secured loans USD floating 5.75% 2018 m 582 RUB fixed 9.75% 2021-2022 9 34 Total loans 4,729 4,560 Corporate bonds USD fixed 5.24% 2020-2023 3,472 4,206 RUB fixed 11.60% 2026 216 259 3,688 4,465 Finance leasing EUR fixed 7.47% 2025-2026 19 23 USD fixed 5.35% 2019 2 4 ZAR floating 12.08% 2020 1 1 22 28 Total 8,439 9,053 Less: current portion due within twelve months and presented as short-term loans and borrowings (215) (817) Long-term loans and borrowings 8,224 8,236

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. Changes in loans and borrowings, including interest, for the year ended 31 December 2018 consist of changes from financing cash flows in the amount of USD (934) million, effect of changes in foreign exchange rates of USD (230) million and other non-cash changes of USD 542 million (for the year ended 31 December 2017: changes from financing cash flows in the amount of USD 441 million, effect of changes in foreign exchange rates of USD 103 million and other non-cash changes of USD 667 million). At 31 December 2018 loans were secured by property, plant and equipment with a carrying amount of USD 8 million (31 December 2017: USD 15 million). ;f 1/ >WUW_TWd 0./5 /..$ eZSdWe aX fZW Adagbpe egTe[V[Sdk FF= nAKE n

24. EMPLOYEE BENEFIT OBLIGATIONS

At 31 December 2018 At 31 December 2017 Accrual for annual leave 177 203 Wages and salaries 147 168 Other 22 22 Total obligations 346 393 Less: non-current obligations (39) (16) Current obligations 307 377

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 2018 31 December 2017 Pension Fund of the Russian Federation 278 311 Mutual accumulated pension plan 7 8 Other 7 5 Total 292 324

42 F-103 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 25. PROVISIONS

At 31 December 2018 At 31 December 2017 Current provisions Decommissioning obligations 21 26 Provision for social commitments 53 28 Tax provision 2 134 Other provisions 1 1 Total current provisions 77 189 Non-current provisions Decommissioning obligations 316 396 Provision for social commitments 49 68 Total non-current provisions 365 464 Total 442 653

Social Decommissioning commitments Tax Other Total Balance at 1 January 2017 397 62 124 41 624 Provision accrued 6 42 2 2 52 Settlements during the year m (21) (2) (41) (64) Change in estimates (38) 4 m m (34) Unwinding of discount 35 6 m m 41 Effect of translation to presentation currency 22 3 10 (1) 34 Balance at 31 December 2017 422 96 134 1 653 Provision accrued m 47 21 2 70 Settlements during the year (22) (29) (144) (3) (198) Change in estimate (21) (2) m m (23) Unwinding of discount 29 5 m m 34 Effect of translation to presentation currency (71) (15) (9) 1 (94) Balance at 31 December 2018 337 102 2 1 442

Decommissioning obligations Key assumptions used in estimation of decommissioning obligations were as follows:

At 31 December 2018 At 31 December 2017 Discount rates Russian entities 7.7% - 8.9% 6.9% - 9,1% Discount rates non-Russian entities 3% - 9% 3% - 8% Expected closure date of mines up to 2068 up to 2071 Expected inflation over the period from 2019 to 2038 3.0% - 4.5% 2.9% - 4.9% Expected inflation over the period from 2039 onwards 2.9% - 3.0% 2.9% Present value of expected cost to be incurred for settlement of decommissioning obligations was as follows:

At 31 December 2018 At 31 December 2017 Due from second to fifth year 149 202 Due from sixth to tenth year 24 23 Due from eleventh to fifteenth year 27 39 Due from sixteenth to twentieth year 86 77 Due thereafter 30 55 Total 316 396

43 F-104 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

25. PROVISIONS (CONTINUED) Social commitments In 2010 the Group entered into multilateral agreements with the Government of the Russian Federation and the Krasnoyarsk Regional Government for construction of pre-schools and other items of social infrastructure in Norilsk and Dudinka till 2020, and for resettlement of families currently residing in Norilsk and Dudinka to other Russian regions with more favorable living conditions till 2020. In 2017 the Group entered into agreements with the Zabaikalsky Regional Government for construction and development of industrial, social and other infrastructure till 2026. The provisions represent present value of the best estimate of the future outflow of economic benefits to settle these obligations.

26. TRADE AND OTHER PAYABLES

At 31 December 2018 At 31 December 2017 Financial liabilities Trade payables 357 426 Payables for acquisition of property, plant and equipment 192 186 Other creditors 110 140 Total financial liabilities 659 752 Non-financial liabilities Advances received on contracts with customers 892 31 Total non-financial liabilities 892 31 Total 1,551 783

MZW _Sfgd[fk bdaX[^W aX fZW Adagbpe X[`S`U[S^ ^[ST[^[f[We iSe Se Xa^^aie8

At 31 December 2018 At 31 December 2017 Due within one month 183 194 Due from one to three months 192 244 Due from three to twelve months 284 314 Total 659 752

27. DIVIDENDS On 19 September 2018, the Extraordinary General shareholdersp meeting declared interim dividends in respect of the 6 months ended 30 June 2018 in the amount of RUB 776.02 (USD 11.45) per share with the total amount of USD 1,813 million. The dividends were paid to the shareholders in October 2018 in the amount of USD 1,841 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates.

On 28 June 2018, the Annual General shareholVWdep _WWf[`Y VWU^SdWV V[h[VW`Ve Xad fZW kWSd W`VWV 31 December 2017 in the amount of RUB 607.98 (USD 9.63) per share with the total amount of USD 1,524 million. The dividends were paid to the shareholders in July 2018 in the amount of USD 1,527 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates. On 29 September 2017, the Extraordinary General shareholdersp meeting declared interim dividends in respect of the 6 months ended 30 June 2017 in the amount of RUB 224.20 (USD 3.84) per share with the total amount of USD 607 million. The dividends were paid to the shareholders in October 2017 in the amount of USD 610 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates.

44 F-105 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

27. DIVIDENDS (CONTINUED) On 9 June 2017, the Annual General shareholdersp meeting declared dividends for the year ended 31 December 2016 in the amount of RUB 446.10 (USD 7.83) per share with the total amount of USD 1,239 million. The dividends were paid to the shareholders in July 2017 in the amount of USD 1,188 million recognised in the consolidated cash flow statement, using prevailing RUB/USD rates on the payment dates. On 16 December 2016, the Extraordinary General shareholdersp 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 1,172 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 major shareholders and entities under their ownership and control, Nkomati joint operation 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. Sale of goods and services and Purchase of assets and services and participating shares other operating expenses For the year For the year For the year For the year ended ended ended ended 31 December 31 December 31 December 31 December Transactions with related parties 2018 2017 2018 2017 Entities under ownership and control of the Group's major shareholders 7 279 64 115 Joint operation of the Group m 1 86 107 Total 7 280 150 222

Accounts receivable Accounts payable Outstanding balances with At 31 December At 31 December At 31 December At 31 December related parties 2018 2017 2018 2017 Entities under ownership and control of the Group's major shareholders 1 m 1 2 Joint operation of the Group 8 m 3 9 Total 9 i 4 11 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 2018 remuneration of key management personnel of the Group included salary and performance bonuses amounted to USD 109 million (for the year ended 31 December 2017: USD 103 million).

45 F-106 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

29. COMMITMENTS Capital commitments At 31 December 2018, contractual capital commitments amounted to USD 544 million (31 December 2017: USD 801 million). Operating leases MZW ^S`V b^afe [` fZW Kgee[S` @WVWdSf[a` iZWdW fZW Adagbpe bdaVgUf[a` XSU[^[f[We SdW ^aUSfWV SdW ai`WV Tk the state. The Group leases land through operating lease agreements, which expire in various years through 2099. According to the terms of lease agreements the rent rate is revised periodically subject to the decision of the relevant local authorities. At 31 December 2018, thirteen aircraft lease agreements (31 December 2017: ten) were in effect. The lease agreements have an average life of twelve (31 December 2017: seven) 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 2018 At 31 December 2017 Due within one year 32 38 From one to five years 95 97 Thereafter 95 18 Total 222 153

Future minimum lease payments due under non-cancellable operating lease agreements for land, buildings and other assets were as follows: At 31 December 2018 At 31 December 2017 Due within one year 44 36 From one to five years 128 103 Thereafter 217 138 Total 389 277

Social commitments The Group contributes to mandatory and voluntary social programs and maintains social assets in fZW âUSf[aè iZWdW [f ZSe [fe _S[` abWdSf[`Y XSU[^[f[We, MZW Adagbpe eaU[S^ SeeWfe Se iW^^ Se âUS^ eaU[S^ programs benefit the community at large S`V SdW àf àd_S^^k dWefd[UfWV fa fZW Adagbpe W_bâkWWe, MZW Adagbpe Ua__[f_W`fe SdW Xg`VWV Xda_ [fe ai` USeZ dWeagdUWe,

30. CONTINGENCIES Litigation At 31 December 2018 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 2018, total claims under unresolved litigation amounted to approximately USD 13 million (31 December 2017: USD 25 million). 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.

46 F-107 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

30. CONTINGENCIES (CONTINUED) 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.

In 2017 the Russian tax SgfZad[f[We Ua_b^WfWV S fdS`eXWd bd[U[`Y SgV[f aX fZW Adagbpe _WfS^ Wjbadf eS^We Xad the year ended 31 December 2013, which did not result in significant additional tax charges.

Environmental matters The Group is subject to extensive federal, state and local environmental controls and regulations in fZW Uag`fd[We [` iZ[UZ [f abWdSfWe, MZW Adagbpe abWdSf[a`e [`ha^hW ba^^gfS`f W_[ee[a`e fa S[d S`V iSfWd objects as well as formation and disposal of production wastes.

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 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 Adagbpe Tge[`Wee _S[`^k VWbW`V on the effectiveness of economic measures undertaken by the government as well as the development of legal system.

Starting 2014, the United States of America, the European Union and some other countries have imposed and expanded economic sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased economic uncertainty, including more volatile equity markets, a depreciation of the Russian rouble, a reduction in both local and foreign direct investment inflows and certain restrictions for operations with individuals and legal entities under sanctions, including financing and investment activities. Management assesses the changes in the Russian business environment did not significantly affect the operations, financial results and the financial position of the Group as of the date of issue of these consolidated financial statements. The longer-term effects of the imposed and possible additional sanctions are difficult to determine.

47 F-108 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million

31. FINANCIAL RISK MANAGEMENT Capital risk management MZW Adagb _S`SYWe [fe USb[fS^ efdgUfgdW [` adVWd fa eSXWYgSdV fZW Adagbpe ST[^[fk fa 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 ratio of Net Debt to ?;* fa W`egdW fZSf [f [e [` ^[`W i[fZ fZW Adagbpe X[`Sncial policy aimed at preserving investment grade credit ratings.

MZW ta_bS`k _S[`fS[`e <<<- investment grade ratings, assigned by rating agencies Fitch and S&P's. I` 07 DS`gSdk 0./6 GaaVkpe dSf[`Y SYW`Uk upgraded fZW =a_bS`kpe dSf[`Y Xda_

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 fZW Adagbpe WjbaegdW fa egUZ d[e]e, 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 aX fZW Adagb, MZW Adagbpe [`fWdWef dSfW d[e] Sd[eWe Xda_ ^a`Y- 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 financial results sensitivity to a 2 percentage points increase in floating interest rate. The sensitivity analysis is prepared assuming that the amount of loans and borrowings at floating rates outstanding at the reporting date was outstanding for the whole year.

~~2% floating rate increase impact For the year ended For the year ended 31 December 2018 31 December 2017 Loss before tax 77 70~~

Changes in interest rates impact the value of cross-currency interest swap as follows: 1% increase in RUB interest rate results in a loss of USD 20 million, 1% decrease in USD interest rate results in a loss of USD 23 million. GS`SYW_W`f TW^[WhWe fZSf fZW Adagbpe WjbaegdW fa [`fWdWef dSfW d[e] X^gUfgSf[a`e VaWe `af require additional hedging activities.

~~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.~~

~~48 F-109 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million~~

31. FINANCIAL RISK MANAGEMENT (CONTINUED) MZW _S\ad bSdf aX fZW Adagbpe dWhW`gW S`V dW^SfWV fdSVW SUUag`fe dWUW[hST^W 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 2018 and 31 December 2017 were as follows: At 31 December 2018 At 31 December 2017 Other Other USD EUR currencies USD EUR currencies Cash and cash equivalents 1,234 13 74 609 28 121 Trade and other receivables 265 3 4 384 4 4 Other assets 380 73 8 141 297 15 Total assets 1,879 89 86 1,134 329 140 Trade and other payables 249 114 10 290 80 14 Loans and borrowings 7,308 19 3 7,684 5 m Other liabilities 160 19 m 136 23 m Total liabilities 7,717 152 13 8,110 108 14

Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if the risk of a potential loss is at an acceptable level. The Group estimates 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, as follows:

~~US Dollar 20% strengthening against Russian Rouble For the year ended For the year ended 31 December 2018 31 December 2017 Loss before tax 1,344 1,395~~

A[hW` fZSf fZW Adagbpe WjbaegdW fa UgddW`Uk d[e] for the monetary assets and liabilities is offset by the revenue denominated in USD, _S`SYW_W`f TW^[WhWe fZSf fZW Adagbpe WjbaegdW fa UgddW`Uk d[e] [e acceptable. The Group does not apply hedge instruments. The Group applies derivative financial instruments including cross-currency interest swaps in order to manage currency risk by matching cash flows from revenue denominated in USD and financial liabilities denominated in RUB.

Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit risk arises from cash and cash equivalents, bank deposits as well as credit exposures to customers, including outstanding uncollafWdS^[eWV fdSVW S`V afZWd dWUW[hST^We, MZW Adagbpe exposure to credit risk is continuously monitored and controlled.

~~49 F-110 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million~~

~~31. FINANCIAL RISK MANAGEMENT (CONTINUED) The outstanding balances with ten major counterparties are presented below. The banks have a minimum aX ss) UdWV[f dSf[`Y,~~

Outstanding balance Cash and cash equivalents At 31 December 2018 At 31 December 2017 Bank A 417 224 Bank B 402 143 Bank C 214 125 Bank D 75 102 Bank E 64 80 Total 1,172 674 Trade and other receivables Company A 50 66 Company B 38 41 Company C 34 23 Company D 20 18 Company E 15 16 Total 157 164

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 fZW Adagbpe Ugefa_Wde are presented below:

For the year ended 31 December 2018 For the year ended 31 December 2017 Number of Turnover Number of Turnover customers USD million % customers USD million % Largest customer 1 1,564 13 1 1,319 14 Next 9 largest customers 9 3,461 30 9 2,936 32 Total 10 5,025 43 10 4,255 46 Next 10 largest customers 10 1,965 17 10 1,494 16 Total 20 6,990 60 20 5,749 62 Remaining customers 4,680 40 3,397 38 Total 11,670 100 9,146 100

~~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 2018 At 31 December 2017 Cash and cash equivalents 1,388 852 Loans, trade and other receivables 394 518 Irrevocable letters of credit 203 248 Bank deposits 91 96~~

~~50 F-111 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 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 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 budgeting procedures.

The following table contains fZW _Sfgd[fk bdaX[^W aX fZW Adagbpe Taddai[`Ye and derivatives (maturity profiles for trade and other payables are presented in note 26) based on contractual undiscounted payments, including interest:

Due Due Due from Due in Due Due in Due in At within from one three to the in the the the Due 31 December one to three twelve second third fourth fifth there- 2018 Total month months months year year year year after Fixed rate bank loans and borrowings Principal 4,595 1 m 4 987 871 1,507 1,003 222 Interest 1,022 m 30 249 280 213 142 46 62 5,617 1 30 253 1,267 1,084 1,649 1,049 284 Floating rate bank loans and borrowings Principal 3,883 5 m 205 957 1,202 1,302 202 10 Interest 363 4 21 102 123 77 33 3 m 4,246 9 21 307 1,080 1,279 1,335 205 10 Total 9,863 10 51 560 2,347 2,363 2,984 1,254 294 Cross-currency interest rate swap Payable 1,008 m 10 31 41 926 m m m Receivable (1,067) m (18) (54) (72) (923) (59) i (8) (23) (31) 3 i i i

Due Due Due from Due in Due Due in Due in At within from one three to the in the the the Due 31 December one to three twelve second third fourth fifth there- 2017 Total month months months year year year year after Fixed rate bank loans and borrowings Principal 5,586 1 1 766 6 988 1,049 1,506 1,269 Interest 1,189 m 36 239 258 257 188 106 105 6,775 1 37 1,005 264 1,245 1,237 1,612 1,374 Floating rate bank loans and borrowings Principal 3,510 9 m 29 236 996 1,028 808 404 Interest 246 5 8 51 65 52 33 20 12 3,756 14 8 80 301 1,048 1,061 828 416 Total 10,531 15 45 1,085 565 2,293 2,298 2,440 1,790

~~At 31 December 2018 the Group had available committed financing facilities for the management of its day to day liquidity requirements of USD 4,290 million (31 December 2017: USD 3,554 million).~~

~~51 F-112 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 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 19), other financial assets (refer to note 15), trade and other short-term accounts receivable (refer to note 18) and current accounts payable (refer to note 26) approximates to their fair value or may not significantly differ from it. Derivative financial instruments measured at fair value through profit or loss include cross-currency interest rate swap, Level 2 of fair value hierarchy. Other long-term liabilities classified as measured at fair value through profit or loss include a liability on the execution of a put option related to transactions with non-controlling interest owners, Level 3 of fair value hierarchy. Certain financial instruments, such as finance leases obligations, were excluded from fair value analysis due to their insignificance and management believes that their carrying value either approximates or is not significantly different from their fair value. Financial instruments that are measured at fair value subsequent to initial recognition, are grouped into Levels 1 to 3 of fair value hierarchy based on the degree to which their 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 below presents financial instruments not measured at fair value, including loans and borrowings, trade and other long-term payables.

At 31 December 2018 At 31 December 2017 Fair value Fair value Carrying value Level 1 Carrying value Level 1 Fixed rate corporate bonds 3,688 3,705 4,465 4,685 Total 3,688 3,705 4,465 4,685 Fair value Fair value Loans and borrowings, including: Carrying value Level 2 Carrying value Level 2 Floating rate loans and borrowings 3,856 3,654 3,484 3,439 Fixed rate loans and borrowings 873 861 1,076 1,055 Total 4,729 4,515 4,560 4,494 Fair value Fair value Carrying value Level 2 Carrying value Level 2 Trade and other long-term payables 200 210 402 440 Total 200 210 402 440

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 2018 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 fair value of trade and other long-term payables at 31 December 2018 was calculated based on the present value of future cash flows, discounted at the best management estimation of market rates.

The fair value of cross-currency interest rate swap is calculated as the present value of future cash flows discounted at the interest rates applicable to the currencies of the corresponding cash flows and available at the reporting date. The fair value is subject to a credit risk adjustment that reflects the credit risk of the Group and of the counterparty, which is calculated based on credit spreads derived from current tradeable financial instruments. 52 F-113 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 US Dollars million 33. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES Effective % held Subsidiaries by operating segments Country Nature of business At 31 December 2018 At 31 December 2017

GMK Group DL= nHad[ê]k Ea_T[`Sfo Russian Federation Rental of property 100 100 DL= nMS[_kdYSlo Russian Federation Gas extraction 100 100 DL= nHad[ê]YSlbda_o Russian Federation Gas extraction 100 100 DL= nHad[ê]transYSlo Russian Federation Gas transportation 100 100 DL= nMS[_kdW`WdYao Russian Federation Rental of equipment 100 100 Electricity production and DL= nNTEKo Russian Federation distribution 100 100 FF= nZSCo Russian Federation Construction 100 100 FF= nHad[ê]`[U]W^dW_a`fo Russian Federation Repairs 100 100 FF= nHad[ê]k[ aTWebWUZ[hSgeZk[ Production of spare Ua_b^Wjo Russian Federation parts 100 100 LLC nGWVhWlZk[ dgUZWko Russian Federation Mining 100 100

KGMK Group Mining and DL= nEa^e]SkS AGEo Russian Federation metallurgy 100 100 LL= nJWUZW`YSefdako Russian Federation Repairs 100 100 Norilsk Nickel Harjavalta Norilsk Nickel Harjavalta OY Finland Metallurgy 100 100 GRK Bystrinskoye FF= nAKE n

~~Effective % held Joint operations by operating segments Country Nature of business At 31 December 2018 At 31 December 2017 Other mining Republic of Nkomati Nickel Mine South Africa Mining 50 50~~

~~34. EVENTS SUBSEQUENT TO THE REPORTING DATE On 12 @WTdgSdk 0./7 GaaVkpe rating agency upgraded the =a_bS`kpe credit rating to the Baa2 level with stable outlook.~~

~~53 F-114~~

~~Mining and Metallurgical Company Norilsk Nickel~~

~~Consolidated financial statements for the year ended 31 December 2017~~

~~F-115~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017~~

~~INDEX Page~~

~~Statement of management’s responsibilities for the preparation and approval of the consolidated financial statements for the year ended 31 December 2017 1~~

~~Independent Auditors’ report 2-5~~

~~Consolidated financial statements for the year ended 31 December 2017:~~

~~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 12-51~~

~~F-116 F-117 F-118 F-119 F-120 F-121~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~For the year ended For the year ended Notes 31 December 2017 31 December 2016 Revenue Metal sales 6 8,415 7,646 Other sales 731 613 Total revenue 9,146 8,259~~

~~Cost of metal sales 7 (3,968) (3,633) Cost of other sales (632) (508) Gross profit 4,546 4,118~~

General and administrative expenses 8 (759) (581) Selling and distribution expenses 9 (75) (111) Impairment of non-financial assets 14 (227) (61) Other net operating expenses 10 (362) (84) Operating profit 3,123 3,281

Foreign exchange gain, net 159 491 Finance costs 11 (535) (453) Impairment of available-for-sale investments 15 – (153) Gain/(loss) from disposal of subsidiaries and assets classified as held for sale 20 20 (4) Income from investments, net 12 77 114 Profit before tax 2,844 3,276

~~Income tax expense 13 (721) (745) Profit for the year 2,123 2,531~~

~~Attributable to: Shareholders of the parent company 2,129 2,536 Non-controlling interests (6) (5) 2,123 2,531~~

~~EARNINGS PER SHARE Basic and diluted earnings per share attributable to shareholders of the parent company (US Dollars per share) 21 13.5 16.1~~

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~6 F-122~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

For the year ended For the year ended 31 December 2017 31 December 2016 Profit for the year 2,123 2,531 Other comprehensive income Items to be reclassified to profit or loss in subsequent periods: Effect of translation of foreign operations 15 13 Other comprehensive income to be reclassified to profit or loss in subsequent periods, net 15 13 Items not to be reclassified to profit or loss in subsequent periods: Effect of translation to presentation currency 277 561 Other comprehensive income not to be reclassified to profit or loss in subsequent periods, net 277 561 Other comprehensive income for the year, net of tax 292 574 Total comprehensive income for the year, net of tax 2,415 3,105

~~Attributable to: Shareholders of the parent company 2,417 3,106 Non-controlling interests (2) (1) 2,415 3,105~~

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~7 F-123~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2017 US Dollars million~~

At 31 December At 31 December Notes 2017 2016 ASSETS Non-current assets Property, plant and equipment 14 10,960 9,306 Intangible assets 148 94 Other financial assets 15 192 190 Other taxes receivable 16 1 2 Deferred tax assets 13 77 72 Other non-current assets 17 731 1,013 12,109 10,677 Current assets Inventories 17 2,689 1,912 Trade and other receivables 18 327 173 Advances paid and prepaid expenses 71 66 Other financial assets 15 99 8 Income tax receivable 82 82 Other taxes receivable 16 296 277 Cash and cash equivalents 19 852 3,325 Other current assets 110 3 4,526 5,846 TOTAL ASSETS 16,635 16,523

EQUITY AND LIABILITIES Capital and reserves Share capital 21 6 6 Share premium 1,254 1,254 Translation reserve (4,490) (4,778) Retained earnings 27 7,557 7,340 Equity attributable to shareholders of the parent company 4,327 3,822 Non-controlling interests 22 331 74 4,658 3,896 Non-current liabilities Loans and borrowings 23 8,236 7,276 Provisions 25 464 441 Trade and other long-term payables 402 523 Deferred tax liabilities 13 407 355 Other long-term liabilities 116 50 9,625 8,645 Current liabilities Loans and borrowings 23 817 579 Trade and other payables 26 783 1,613 Dividends payable 27 6 1,164 Employee benefit obligations 24 377 301 Provisions 25 189 183 Derivative financial instruments 24 1 Income tax payable 9 2 Other taxes payable 16 147 139 2,352 3,982 TOTAL LIABILITIES 11,977 12,627 TOTAL EQUITY AND LIABILITIES 16,635 16,523

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~8 F-124~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

For the year ended For the year ended 31 December 2017 31 December 2016 OPERATING ACTIVITIES Profit before tax 2,844 3,276 Adjustments for: Depreciation and amortisation 645 557 Impairment of non-financial assets 227 61 Impairment of available for sale investments – 153 Loss on disposal of property, plant and equipment 9 16 (Gain)/loss from disposal of subsidiaries and assets classified as held for sale (20) 4 Change in provisions and allowances 41 13 Finance costs and income from investments, net 458 360 Foreign exchange gain, net (159) (491) Other 58 9 4,103 3,958 Movements in working capital: Inventories (346) (751) Trade and other receivables (174) (3) Advances paid and prepaid expenses 10 13 Other taxes receivable (5) (36) Employee benefit obligations 9 44 Trade and other payables (1,118) 835 Provisions (48) (45) Other taxes payable 2 26 Cash generated from operations 2,433 4,041 Income tax paid (670) (530) Net cash generated from operating activities 1,763 3,511

INVESTING ACTIVITIES Purchase of property, plant and equipment (1,940) (1,667) Purchase of other financial assets – (150) Purchase of intangible assets (62) (47) Purchase of other non-current assets (88) (31) Loans issued (18) (103) Proceeds from repayment of loans issued 48 – Net change in deposits placed (80) (10) Proceeds from sale of other financial assets 25 10 Proceeds from disposal of property, plant and equipment 29 1 Proceeds from disposal of subsidiaries and assets classified as held for sale 99 3 Interest received 51 74 Net cash used in investing activities (1,936) (1,920)

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~9 F-125~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017 (CONTINUED) US Dollars million~~

For the year ended For the year ended 31 December 2017 31 December 2016 FINANCING ACTIVITIES Proceeds from loans and borrowings 4,233 936 Repayments of loans and borrowings (3,140) (1,741) Financial lease payments (10) (5) Dividends paid (2,971) (1,232) Dividends paid to non-controlling interest (1) – Interest paid (642) (591) Proceeds from sale of a non-controlling interest in a subsidiary 294 80 Sale of own shares from treasury stock – 154 Net cash used in financing activities (2,237) (2,399)

Net decrease in cash and cash equivalents (2,410) (808) Cash and cash equivalents at the beginning of the year 3,325 4,098 Effects of foreign exchange differences on balances of cash and cash equivalents (63) 35 Cash and cash equivalents at the end of the year 852 3,325

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~10 F-126~~

~~MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2017 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 2016 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 27 – – – – (1,708) (1,708) – (1,708) Increase in non-controlling interest due to decrease in ownership of a subsidiary 22 – – – – 25 25 55 80 Sale of own shares from treasury stock – – 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

Profit/(loss) for the year – – – – 2,129 2,129 (6) 2,123 Other comprehensive income – – – 288 – 288 4 292 Total comprehensive income/(loss) for the year – – – 288 2,129 2,417 (2) 2,415 Dividends 27 – – – – (1,846) (1,846) (1) (1,847) Increase in non-controlling interest due to decrease in ownership of a subsidiary 22 – – – – 35 35 259 294 Other effects related to transactions with non-controlling interest owners – – – – (100) (100) – (100) Decrease in non-controlling interest due to increase in ownership of a subsidiary – – – – (1) (1) 1 – Balance at 31 December 2017 6 1,254 – (4,490) 7,557 4,327 331 4,658

~~The accompanying notes on pages 12 - 51 form an integral part of the consolidated financial statements~~

~~11 F-127 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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.~~

~~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 Group issues a separate set of IFRS consolidated financial statements to comply with the requirements of Russian Federal Law No. 208 On consolidated financial statements (“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.

2. CHANGES IN ACCOUNTING POLICIES Reclassification Information for the year ended 31 December 2016 was recasted in accordance with requirement of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations since the criteria for classification of Nkomati as assets held for sale were no longer met as at 31 December 2017 (refer to note 20).

At 31 December 2017 management reassessed classification of some expenses of cost of metal 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 9). Information for the year ended 31 December 2016 has been reclassified to conform with the current period 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 2017.

Adoption of amendments to the existing Standards detailed below did not have significant impact on the accounting policies, financial position or performance of the Group:  IFRS 12 Disclosure of Interests in Other Entities (amended);  IAS 7 Statement of Cash Flows (amended);  IAS 12 Income Taxes (amended).

~~12 F-128 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

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 and not early adopted:

~~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 15 Revenue from Contracts with Customers 1 January 2018 IAS 28 Investments in Associates and Joint Ventures (amended) 1 January 2018 IAS 40 Investment Property (amended) 1 January 2018 IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 IFRS 16 Leases 1 January 2019 IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 IFRS 17 Insurance Contracts 1 January 2021

~~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.~~

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018, early adoption is permitted) replaces IAS 39 Financial Instruments: Recognition and Measurement and introduces new classification and measurement, ‘expected losses’ impairment model for financial assets and new rules for hedge accounting. The standard will not materially affect the consolidated financial statements of the Group.

IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018, early adoption is permitted) establishes a comprehensive framework for accounting of revenue from customers. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and certain interpretations. The standard introduces 5-step model for revenue from contracts with customers. According to IFRS 15, revenue is measured in the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. Based on the performed assessment, the new standard is not expected to affect significantly the Group’s consolidated financial statements.

~~1 3. SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation Subsidiaries~~

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.

~~13 F-129 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

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.

~~Joint arrangements~~

Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor. The Group applies the following accounting to joint operations and joint ventures. The Group recognises in relation to its interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation; and its expenses, including its share of any expenses incurred jointly. The Group accounts for joint ventures using the equity method.

~~Business combinations~~

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.

~~14 F-130 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~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.

If criteria of classification as held for sale are no longer met, the Group ceases to classify non-current assets and disposal groups as held for sale. Such non-current assets and disposal groups is measured at the lower of its carrying amount before the classification as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the non-current assets and disposal groups not been classified as held for sale, and its recoverable amount at the date of the subsequent decision not to sell. Financial statements for the periods since classification as held for sale shall be amended accordingly if the disposal group or non-current asset that ceases to be classified as held for sale is a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate.

~~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.

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 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;  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 each quarter 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.

~~15 F-131 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

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 2017 At 31 December 2016~~

~~Russian Rouble/US Dollar 31 December 57.60 60.66 Average for the year ended 31 December 58.35 67.03~~

~~South African Rand/US Dollar 31 December 12.36 13.78 Average for the year ended 31 December 13.30 14.68~~

~~Australian Dollar/US Dollar 31 December 1.28 1.39 Average for the period ended 1.30 1.34~~

~~Hong Kong Dollar/US Dollar 31 December 7.81 7.75 Average for the year ended 31 December 7.79 7.76~~

~~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.

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.

~~16 F-132 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~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 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.~~

~~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. Long term employee benefits obligations are discounted to net present value.

~~17 F-133 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~Defined contribution plans~~

~~The Group contributes to the following major defined contribution plans:  Pension Fund of the Russian Federation;  Mutual accumulated pension plan.~~

~~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.

~~Deferred tax~~

~~18 F-134 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~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.

~~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.~~

~~19 F-135 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~Research and exploration expenditure written-off before development and construction starts is not subsequently capitalised, even if a commercial discovery subsequently occurs.~~

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.~~

~~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.

~~Materials and supplies~~

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

~~20 F-136 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

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 may include investments in listed and unlisted equity securities, that are not classified in other categories.~~

~~21 F-137 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 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.

~~22 F-138 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~Derecognition of financial assets~~

~~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.~~

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.

~~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. 23 F-139 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES 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. 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.

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.

~~24 F-140 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

The Group also creates a provision for obsolete and slow-moving inventories. 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.

~~25 F-141 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 1 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;  “KGMK Group” 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.

Amounts are measured on the same basis as those in the consolidated financial statements. Information for the year ended 31 December 2016 has been presented to conform with the current period 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 year ended 31 December 2017 and 31 December 2016, respectively.

Other Other For the year ended GMK KGMK NN metallur- non-metal- Elimi- 31 December 2017 Group Group Harjavalta gical lurgical nations Total Revenue from external customers 7,064 357 840 34 851 – 9,146 Inter-segment revenue 607 531 – 107 415 (1,660) – Total revenue 7,671 888 840 141 1,266 (1,660) 9,146 Segment EBITDA 4,701 169 84 (53) 114 (377) 4,638 Unallocated (643) Consolidated EBITDA 3,995 Depreciation and amortisation (645) Impairment of non-financial assets (227) Finance costs (535) Foreign exchange gain, net 159 Other income and expenses, net 97 Profit before tax 2,844

Other segmental information Purchase of property, plant and equipment and intangible assets 1,225 228 16 469 64 – 2,002 Depreciation and amortisation 508 63 25 73 23 (47) 645 Impairment of non- financial assets 101 3 – 122 1 – 227

~~26 F-142 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~5. SEGMENTAL INFORMATION (CONTINUED)~~

Other Other For the year ended GMK KGMK NN metallur- non-metal- Elimi- 31 December 2016 Group Group Harjavalta gical lurgical nations Total Revenue from external customers 5,981 465 727 7 1,079 – 8,259 Inter-segment revenue 213 199 – 77 620 (1,109) – Total revenue 6,194 664 727 84 1,699 (1,109) 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 491 Other income and expenses, net (43) Profit before tax 3,276

Other segmental information Purchase of property, plant and equipment and intangible assets 1,284 93 16 288 33 – 1,714 Depreciation and amortisation 435 41 28 – 23 30 557 Impairment of non- financial assets 50 2 – – 9 – 61

~~The following tables present assets and liabilities of the Group’s reportable segments at 31 December 2017 and 31 December 2016, respectively.~~

Other Other GMK KGMK NN metallur- non-metal- Elimi- At 31 December 2017 Group Group Harjavalta gical lurgical nations Total Inter-segment assets 346 207 172 11 54 (790) – Segment assets 11,424 963 384 1,500 1,584 (425) 15,430 Total segment assets 11,770 1,170 556 1,511 1,638 (1,215) 15,430 Unallocated 1,205 Total assets 16,635 Inter-segment liabilities 89 135 124 43 399 (790) – Segment liabilities 2,228 157 73 121 171 – 2,750 Total segment liabilities 2,317 292 197 164 570 (790) 2,750 Unallocated 9,227 Total liabilities 11,977

Other Other GMK KGMK NN metallur- non-metal- Elimi- At 31 December 2016 Group Group Harjavalta gical lurgical nations Total Inter-segment assets 296 79 160 35 49 (619) – Segment assets 9,922 768 383 868 793 (111) 12,623 Total segment assets 10,218 847 543 903 842 (730) 12,623 Unallocated 3,900 Total assets 16,523 Inter-segment liabilities 113 87 77 27 315 (619) – Segment liabilities 2,241 113 102 266 862 – 3,584 Total segment liabilities 2,354 200 179 293 1,177 (619) 3,584 Unallocated 9,043 Total liabilities 12,627

~~The Group’s non-current assets are primarily located in the Russian Federation and Finland. 27 F-143 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 2017 Total Nickel Copper Palladium Platinum products metals Europe 4,753 1,067 2,098 736 441 85 326 Asia 1,939 709 6 762 97 331 34 North and South America 1,166 313 – 807 – – 46 Russian Federation and CIS 557 215 177 41 85 8 31 8,415 2,304 2,281 2,346 623 424 437

For the 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 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

~~7. COST OF METAL SALES~~

For the year ended For the year ended 31 December 2017 31 December 2016 Cash operating costs Labour 1,377 1,145 Materials and supplies 703 520 Purchases of metals for resale 530 184 Purchases of raw materials and semi-products 297 292 Mineral extraction tax and other levies 221 122 Third party services 204 170 Electricity and heat energy 132 101 Production costs related to the joint operation 93 79 Fuel 81 60 Transportation expenses 64 71 Sundry costs 150 143 Total cash operating costs 3,852 2,887 Depreciation and amortisation 630 456 (Increase)/decrease in metal inventories (514) 290 Total 3,968 3,633

~~28 F-144 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 8. GENERAL AND ADMINISTRATIVE EXPENSES~~

For the year ended For the year ended 31 December 2017 31 December 2016 Staff costs 478 376 Taxes other than mineral extraction tax and income tax 79 58 Third party services 72 55 Depreciation and amortisation 32 20 Rent expenses 25 19 Transportation expenses 8 6 Other 65 47 Total 759 581

~~9. SELLING AND DISTRIBUTION EXPENSES~~

~~For the year ended For the year ended 31 December 2017 31 December 2016 Transportation expenses 38 23 Marketing expenses 14 7 Staff costs 13 13 Export duties 1 61 Other 9 7 Total 75 111~~

~~10. OTHER NET OPERATING EXPENSES~~

For the year ended For the year ended 31 December 2017 31 December 2016 Social expenses 303 111 Change in allowance for doubtful debts 19 14 Change in allowance for obsolete and slow-moving inventory 11 (2) Change in provision for reconfiguration of production facilities (4) (33) Other 33 (6) Total 362 84

~~11. FINANCE COSTS~~

For the year ended For the year ended 31 December 2017 31 December 2016 Interest expense on borrowings net of amounts capitalised 386 403 Unwinding of discount on provisions and payables 133 46 Other 16 4 Total 535 453

~~29 F-145 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 12. INCOME FROM INVESTMENTS, NET~~

~~For the year ended For the year ended 31 December 2017 31 December 2016 Interest income on bank deposits 39 78 Realised gain on disposal of investments 1 4 Other 37 32 Total 77 114~~

~~13. INCOME TAX EXPENSE~~

~~For the year ended For the year ended 31 December 2017 31 December 2016 Current income tax expense 686 686 Deferred tax expense 35 59 Total 721 745~~

For the year ended For the year ended 31 December 2017 31 December 2016 Profit before tax 2,844 3,276 Income tax at statutory rate of 20% 569 655 Allowance for deferred tax assets 38 18 Non-deductible impairment of financial and non-financial assets 7 41 Non-deductible social expenses 73 31 Effect of different tax rates of subsidiaries operating in other jurisdictions 8 (27) Tax effect of other permanent differences 26 27 Total 721 745

~~The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 39%.~~

~~Deferred tax balances~~

Effect of translation At Recognised in Disposed on to At 31 December income disposal of presentation 31 December 2016 statement subsidiaries currency 2017 Property, plant and equipment 350 2 (4) 20 368 Inventories 102 16 – 6 124 Trade and other receivables (12) 9 – – (3) Decommissioning obligations (79) 16 – (6) (69) Loans and borrowings, trade and other payables (33) (35) – (1) (69) Other assets (10) 57 – (1) 46 Other liabilities 6 2 – – 8 Tax loss carried forward (41) (32) – (2) (75) Net deferred tax liabilities 283 35 (4) 16 330

~~30 F-146 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~13. INCOME TAX EXPENSE (CONTINUED)~~

Effect of translation At Recognised in Disposed on to At 31 December income disposal of presentation 31 December 2015 statement subsidiaries currency 2016 Property, plant and equipment 251 58 – 41 350 Inventories 91 (6) – 17 102 Trade and other receivables (6) (2) – (4) (12) Decommissioning obligations (62) (4) – (13) (79) Loans and borrowings, trade and other payables (16) (9) – (8) (33) Other assets (10) (2) – 2 (10) Other liabilities 4 – – 2 6 Tax loss carried forward (53) 24 – (12) (41) Net deferred tax liabilities 199 59 – 25 283

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 2017 At 31 December 2016 Deferred tax liability 407 355 Deferred tax asset (77) (72) Net deferred tax liabilities 330 283~~

~~Unrecognised deferred tax assets~~

~~Deferred tax assets have not been recognised as follows:~~

~~At 31 December 2017 At 31 December 2016 Deductible temporary differences 104 90 Tax loss carry-forwards 219 214 Total 323 304~~

At 31 December 2017 deferred tax asset in amount of USD 175 million related to tax loss arising on disposal of OJSC “Third Generation Company of the Wholesale Electricity Market” (“OGK-3 (at 31 December 2016: USD 166 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 utilised only if the Company exits the tax consolidation group without expiry.

Unrecognised deferred tax assets in the amount of USD 44 million related to other tax losses will not expire and can be utilised according to specific rules stated by art. 283 of the Tax code of the Russian Federation (31 December 2016: USD 48 million).

At 31 December 2017, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 1,459 million (31 December 2016: USD 1,104 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.

~~31 F-147 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 14. PROPERTY, PLANT AND EQUIPMENT~~

Non-mining assets Mining assets and mine Buildings, Machinery, Capital development structures equipment construction- cost and utilities and transport Other in-progress Total Cost Balance at 1 January 2016 5,101 2,002 2,319 106 1,308 10,836 Additions 1,232 – – – 674 1,906 Transfers – 450 363 59 (872) – Change in decommissioning provision (18) 5 – – – (13) Disposals (59) (11) (100) (7) (31) (208) Other (49) 7 (37) 26 53 – Effect of translation to presentation currency 1,107 402 431 31 255 2,226 Balance at 31 December 2016 7,314 2,855 2,976 215 1,387 14,747 Additions 1,429 – – – 840 2,269 Transfers – 247 477 84 (808) – Change in decommissioning provision (7) (13) – – – (20) Disposals (124) (150) (90) (23) (12) (399) Other (40) 42 (6) 2 2 – Effect of translation to presentation currency 422 153 150 11 75 811 Balance at 31 December 2017 8,994 3,134 3,507 289 1,484 17,408 Accumulated depreciation and impairment Balance at 1 January 2016 (1,588) (1,040) (1,277) (46) (244) (4,195) Charge for the year (213) (97) (201) (14) – (525) Disposals 47 7 90 3 19 166 Impairment loss (7) (70) (2) – 18 (61) Other (11) 2 14 (5) – – Effect of translation to presentation currency (318) (215) (242) (10) (41) (826) Balance at 31 December 2016 (2,090) (1,413) (1,618) (72) (248) (5,441) Charge for the year (347) (97) (264) (24) – (732) Disposals 107 56 79 5 4 251 Impairment loss (154) (87) (7) – 21 (227) Other 4 (18) 16 (1) (1) – Effect of translation to presentation currency (120) (78) (82) (4) (15) (299) Balance at 31 December 2017 (2,600) (1,637) (1,876) (96) (239) (6,448) Carrying value At 31 December 2016 5,224 1,442 1,358 143 1,139 9,306 At 31 December 2017 6,394 1,497 1,631 193 1,245 10,960

At 31 December 2017 capital construction-in-progress included USD 225 million of irrevocable letters of credit opened for fixed assets purchases (31 December 2016: USD 87 million), representing security deposits placed in banks. For the year ended 31 December 2017 purchases of property, plant and equipment in the consolidated statement of cash flows include USD 210 million related to these irrevocable letters of credit (for the year ended 31 December 2016: USD 78 million).

~~32 F-148 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Capitalised borrowing costs for the year ended 31 December 2017 amounted to USD 263 million (for the year ended 31 December 2016: USD 202 million). Capitalisation rate used to determine the amount of borrowing costs equals to 6.28% per annum (31 December 2016: 6.59%). At 31 December 2017 mining assets and mine development cost included USD 3,728 million of mining assets under development (31 December 2016: USD 2,994 million).

~~At 31 December 2017 non-mining assets included USD 55 million of investment property (31 December 2016: USD 136 million).~~

Impairment At 31 December 2017 the Group reclassified Nkomati Nickel Mine from assets classified as held for sale and tested the assets for impairment. The value in use of USD 49 million was determined by the Group using a discounted cash flow model approach. 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 2027. Measurements were performed based on discounted cash flows expected to be generated by production assets.  Management estimates metal concentrates market prices based on adjusted commodity price forecast for metals. 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.  Inflation forecasts were sourced from Economist Intelligence Unit report. Inflation used was projected within 2-5%. Forecast for exchange rates was made based on expected ZAR and USD inflation indices.  A pre-tax nominal ZAR discount rate of 21.6% 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 129 million was recognised in impairment of non- financial assets in the consolidated income statement for the year ended 31 December 2017.~~

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. The Group recognised impairment loss related to the gas extraction assets in the amount of USD 50 million in impairment of non-financial assets in the consolidated income statement for the year ended 31 December 2016.

~~At 31 December 2017 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 2030. 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 4-7%. Forecast for exchange rates was made based on expected RUR and USD inflation indices.  A pre-tax nominal RUR discount rate of 15.8% 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.

~~33 F-149 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) As a result, gas extraction assets were fully impaired. Impairment loss in the amount of USD 43 million was recognised in impairment of non-financial assets in the consolidated income statement for the year ended 31 December 2017.

During the year ended 31 December 2017 additional impairment losses in the amount of USD 55 million were recognised in respect of specific individual assets, primarily mining assets (for the year ended 31 December 2016: USD 11 million in respect of specific individual assets, primarily non-mining assets).

1 15. OTHER FINANCIAL ASSETS At 31 December 2017 At 31 December 2016 Non-current Loans issued and other receivables 190 176 Bank deposits 2 10 Available-for-sale investments – 4 Total non-current 192 190

~~Current Loans issued and other receivables 1 6 Bank deposits 94 – Derivative financial instruments 4 2 Total current 99 8~~

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 for the year ended 31 December 2016.

~~Bank deposits Interest rate on long-term RUB-denominated deposits held in banks was 5.10% (31 December 2016: 5.10%) per annum.~~

~~Interest rate on long-term EUR-denominated deposits held in banks was 0.30% (31 December 2016: no EUR-denominated deposits held in banks) per annum.~~

~~Interest rate on current ZAR-denominated deposits held in banks was in the range from 6.68% to 7.42% (31 December 2016: from 6.80% to 7.45%) per annum.~~

~~16. OTHER TAXES~~

At 31 December 2017 At 31 December 2016 Taxes receivable Value added tax recoverable 258 244 Other taxes 40 35 298 279 Less: Allowance for value added tax recoverable (1) – Total 297 279 Less: Non-current portion of other taxes receivable (1) (2) Other taxes receivable 296 277 Taxes payable Value added tax 66 70 Social security contributions 26 27 Property tax 22 18 Mineral extraction tax 17 11 Other 16 13 Other taxes payable 147 139 34 F-150 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 17. INVENTORIES~~

~~At 31 December 2017 At 31 December 2016 Refined metals 655 310 Work-in-process and semi-products 1,333 901 Less: Allowance for work-in-process (4) – Total metal inventories 1,984 1,211~~

~~Materials and supplies 739 728 Less: Allowance for obsolete and slow-moving items (34) (27) Materials and supplies, net 705 701 Inventories 2,689 1,912~~

At 31 December 2017 part of metal semi-products stock in the amount of USD 453 million (31 December 2016: USD 830 million) was presented in other non-current assets according to Group’s production plans.

~~18. TRADE AND OTHER RECEIVABLES~~

At 31 December 2017 At 31 December 2016 Trade receivables from metal sales 251 95 Other receivables 168 159 419 254 Less: Allowance for doubtful debts (92) (81) Trade and other receivables, net 327 173

~~In 2017 and 2016, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest bearing.~~

~~At 31 December 2017 and 2016, 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 2017 was 33 days (2016: 32 days). No interest was charged on these receivables.~~

Included in the Group’s other receivables at 31 December 2017 were debtors with a carrying value of USD 34 million (31 December 2016: 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 2017 At 31 December 2016 Less than 180 days 25 41 180-365 days 9 4 34 45~~

~~Movement in the allowance for doubtful debts was as follows:~~

At 31 December 2017 At 31 December 2016 Balance at beginning of the year 81 54 Change in allowance 16 14 Accounts receivable written-off (9) (2) Effect of translation to presentation currency 4 15 Balance at end of the year 92 81

~~35 F-151 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 1 19. CASH AND CASH EQUIVALENTS~~

At 31 December 2017 At 31 December 2016 Current accounts - foreign currencies 358 389 - RUB 76 58 Bank deposits - foreign currencies 412 1,739 - RUB – 1,119 Restricted cash and cash equivalents 2 8 Other cash and cash equivalents 4 12 Total 852 3,325

20. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES 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 amounted to USD 337 million subject to certain adjustments under agreement. Under the terms of the agreements, the buyer assumed all attributable decommissioning rehabilitation obligations related to the assets. On 2 April 2015, the Group sold its 85% stake in Tati Nickel Mining Company.

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.

Management believes that the criteria for held for sale are no longer met for Nkomati as at 31 December 2017. At 31 December 2017 Nkomati is presented as a joint operation and the Group recognises its share in assets, liabilities, income and expenses of Nkomati. Financial statements for the periods since classification of Nkomati as held for sale have been amended accordingly. After reclassification Nkomati assets were tested for impairment (refer to note 14).

~~36 F-152 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

20. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES (CONTINUED) Information for the year ended 31 December 2016 has been reclassified to conform with the current period presentation: At 31 December 2016 Adjustments to the consolidated statement of As previously financial position reported Reclassification Reclassified Property, plant and equipment 9,099 207 9,306 Other non-current financial assets 187 3 190 Deferred tax assets 56 16 72 Inventories 1,895 17 1,912 Trade and other receivables 170 3 173 Advances paid and prepaid expenses 65 1 66 Other taxes receivable 276 1 277 Cash and cash equivalents 3,301 24 3,325

Assets classified as held for sale 206 (206) - 66 Non-current loans and borrowings 7,274 2 7,276 Non-current provisions 435 6 441 Deferred tax liabilities 303 52 355 Current loans and borrowings 578 1 579 Trade and other payables 1,609 4 1,613 Employee benefit obligations 299 2 301 Other taxes payable 138 1 139

~~Liabilities associated with assets classified as held 2 (2) - for sale 66~~

For the year ended 31 December 2016 Adjustments to the consolidated income As previously statement reported Reclassification Reclassified Foreign exchange gain, net 485 6 491 Share of profits of associates 6 (6) - -

For the year ended 31 December 2016 Adjustments to the consolidated statement of As previously cash flows reported Reclassification Reclassified OPERATING ACTIVITIES Adjustments to profit before tax for: Foreign exchange gain, net (485) (6) (491) Share of profits of associates (6) 6 - - Movements in working capital: Trade and other payables 816 19 835 19 INVESTING ACTIVITIES Purchase of property, plant and equipment (1,648) (19) (1,667) (19)

On 6 April 2017, the Group sold its interest in a subsidiary which owns real estate for a consideration of USD 113 million. Proceeds from disposal of the subsidiary in the amount of USD 95 million were recognised in the consolidated statement of cash flows, net of disposed cash and cash equivalents of USD 16 million and transaction costs of USD 2 million. Gain on disposal in the amount of USD 16 million was recognised in the consolidated income statement.

~~37 F-153 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

20. ASSETS CLASSIFIED AS HELD FOR SALE AND DISPOSAL OF SUBSIDIARIES (CONTINUED) 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.

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.

~~21. SHARE CAPITAL Authorised and issued ordinary shares~~

~~2017 2016 At 1 January 158,245,476 156,995,401 Sale of own shares from treasury stock – 1,250,075 At 31 December 158,245,476 158,245,476~~

~~During the year ended 31 December 2016, the Group sold 1,250,075 treasury shares for a cash consideration in the amount of USD 158 million.~~

~~Earnings per share~~

~~For the year ended For the year ended 31 December 2017 31 December 2016 Basic earnings per share (US Dollars per share): 13.5 16.1~~

~~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 2017 31 December 2016 Profit for the year attributable to shareholders of the parent company 2,129 2,536~~

For the year ended For the year ended 31 December 2017 31 December 2016 Weighted average number of shares on issue 158,245,476 156,995,401 Effect of sale of own shares from treasury stock – 54,648 Weighted average number of issued common shares outstanding 158,245,476 157,050,049

~~As at 31 December 2017 and 31 December 2016, the Group had no securities, which would have a dilutive effect on earnings per share of ordinary stock.~~

~~38 F-154 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

22. NON-CONTROLLING INTEREST In July 2016 the Group sold a 10.67% share in Bystrinskoye project for USD 80 million to a Chinese investor Highland Fund. In May 2017 the Group sold a 2.66% share in Bystrinskoye project for USD 21 million to Highland Fund. In October 2017 the Group sold a 36.66% share in Bystrinskoye project for USD 275 million to a related party.

~~At 31 December 2017 and 31 December 2016 aggregate financial information relating to the subsidiary that has material non-controlling interest, before any intra-group eliminations, is presented below:~~

At 31 December 2017 At 31 December 2016 Non-current assets 1,281 741 Current assets 117 114 Non-current liabilities (593) (174) Current liabilities (156) (105) Net assets 649 576 Net assets attributable to non-controlling interest 325 61

For the year ended For the year ended 31 December 2017 31 December 2016 Loss for the year (32) (5) Other comprehensive income/(loss) for the year 31 82 Total comprehensive loss for the year (1) 77 Loss attributable to non-controlling interest (6) (1) Other comprehensive income attributable to non- controlling interest 5 9

For the year ended For the year ended 31 December 2017 31 December 2016 Cash flows used in operating activities (42) (63) Cash flows used in investing activities (422) (163) Cash flows from financing activities 459 239 Net (decrease)/increase in cash and cash equivalents (7) 13

~~39 F-155 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 1 23. LOANS AND BORROWINGS~~

Fixed or Average nominal floating rate during the year At At interest ended 31 December 31 December 31 December Currency rate 2017, % Maturity 2017 2016 Unsecured loans USD floating 3.38% 2017-2023 2,898 2,707 RUB fixed 11.90% 2021 1,042 1,990 EUR floating 0.85% 2019-2028 4 – Secured loans USD floating 6.72% 2019-2024 582 165 RUB fixed 8.38% 2017-2022 34 – Total loans 4,560 4,862 Corporate bonds USD fixed 5.05% 2018-2023 4,206 2,715 RUB fixed 11.60% 2026 259 247 4,465 2,962 Finance leasing EUR fixed 7.10% 2026 23 24 USD fixed 4.20% 2019 4 7 ZAR floating 12.19% 2017-2019 1 – 28 31 Total 9,053 7,855 Less: current portion due within twelve months and presented as short-term loans and borrowings (817) (579) Long-term loans and borrowings 8,236 7,276

~~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.~~

Changes in loans and borrowings, including interest, for the year ended 31 December 2017 consist of changes from financing cash flows in the amount of USD 441 million, effect of changes in foreign exchange rates of USD 103 million and other non-cash changes of USD 667 million (for the year ended 31 December 2016: changes from financing cash flows in the amount of USD (1,401) million, effect of changes in foreign exchange rates of USD 346 million and other non-cash changes of USD 697 million).

At 31 December 2017 loans were secured by property, plant and equipment with a carrying amount of USD 15 million (31 December 2016: USD 752 million). At 31 December 2017 and 31 December 2016 100% shares of the Group’s subsidiary LLC “GRK “Bystrinskoye” were under pledge.

~~24. EMPLOYEE BENEFIT OBLIGATIONS~~

At 31 December 2017 At 31 December 2016 Accrual for annual leave 203 179 Wages and salaries 168 148 Other 22 22 Total obligations 393 349 Less: non-current obligations (16) (48) Current obligations 377 301

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 2017 31 December 2016 Pension Fund of the Russian Federation 311 273 Mutual accumulated pension plan 8 7 Other 5 5 Total 324 285 40 F-156 MINING AND METALLURGICAL COMPANY NORILSK NICKEL

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 25. PROVISIONS~~

At 31 December 2017 At 31 December 2016 Current provisions Tax provision 134 124 Provision for social commitments 28 19 Decommissioning obligations 26 – Other provisions 1 40 Total current provisions 189 183 Non-current provisions Decommissioning obligations 396 397 Provision for social commitments 68 43 Other long-term provisions – 1 Total non-current provisions 464 441 Total 653 624

Social Decommissioning commitments Tax Other Total Balance at 1 January 2016 314 50 127 77 568 Provision accrued – 12 3 4 19 Settlements during the year – (16) (5) (30) (51) Change in estimates (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 397 62 124 41 624 Provision accrued 6 42 2 2 52 Settlements during the year – (21) (2) (41) (64) Change in estimate (38) 4 – – (34) Unwinding of discount 35 6 – – 41 Effect of translation to presentation currency 22 3 10 (1) 34 Balance at 31 December 2017 422 96 134 1 653

~~Decommissioning obligations Key assumptions used in estimation of decommissioning obligations were as follows:~~

At 31 December 2017 At 31 December 2016 Discount rates Russian entities 6.9% - 9,1% 8.5% - 8.6% Discount rates non-Russian entities 3% - 5% 3% - 5% Expected closure date of mines up to 2071 up to 2059 Expected inflation over the period from 2018 to 2037 3.0% - 4.9% 3.1% - 4.7% Expected inflation over the period from 2038 onwards 2.9% 2.9%

~~Present value of expected cost to be incurred for settlement of decommissioning obligations was as follows:~~

At 31 December 2017 At 31 December 2016 Due from second to fifth year 202 265 Due from sixth to tenth year 23 44 Due from eleventh to fifteenth year 39 10 Due from sixteenth to twentieth year 77 26 Due thereafter 55 52 Total 396 397

~~41 F-157 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 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 and the Trans-Baikal Regional Governments for construction of pre-schools and other items of social infrastructure in Norilsk, Dudinka and Chita, 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~~

At 31 December 2017 At 31 December 2016 Financial liabilities Trade payables 426 602 Payables for acquisition of property, plant and equipment 186 146 Other creditors 140 147 Total financial liabilities 752 895 Non-financial liabilities Advances received 31 718 Total non-financial liabilities 31 718 Total 783 1,613

~~The maturity profile of the Group’s financial liabilities was as follows:~~

~~At 31 December 2017 At 31 December 2016 Due within one month 194 189 Due from one to three months 244 209 Due from three to twelve months 314 497 Total 752 895~~

27. DIVIDENDS On 29 September 2017, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 6 months ended 30 June 2017 in the amount of RUB 224.20 (USD 3.84) per share with the total amount of USD 607 million. The dividends were paid to the shareholders in October 2017 in the amount of USD 610 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.

On 9 June 2017, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2016 in the amount of RUB 446.10 (USD 7.83) per share with the total amount of USD 1,239 million. The dividends were paid to the shareholders in July 2017 in the amount of USD 1,189 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.

On 16 December 2016, the Extraordinary General shareholders’ 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 1,172 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.

~~42 F-158 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

27. DIVIDENDS (CONTINUED) 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 statement of cash flows, using prevailing RUB/USD rates on the payment dates.

On 19 December 2015, the Extraordinary General shareholders’ 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 recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.

28. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES Related parties include major 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. Sale of goods and services and Purchase of assets and services and participating shares other operating expenses For the year For the year For the year For the year ended ended ended ended 31 December 31 December 31 December 31 December Transactions with related parties 2017 2016 2017 2016 Entities under ownership and control of the Group's major shareholders 279 13 115 177 Joint operation of the Group 1 2 107 169 Total 280 15 222 346

Accounts payable, loans and Accounts receivable borrowings received Outstanding balances with At 31 December At 31 December At 31 December At 31 December related parties 2017 2016 2017 2016 Entities under ownership and control of the Group's major shareholders – – 2 2 Joint operation of the Group – 1 9 20 Total – 1 11 22

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 2017 remuneration of key management personnel of the Group included salary and performance bonuses amounted to USD 103 million (for the year ended 31 December 2016: USD 62 million).

~~43 F-159 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~29. COMMITMENTS Capital commitments At 31 December 2017, contractual capital commitments amounted to USD 801 million (31 December 2016: USD 1,138 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 2066. 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 2017 At 31 December 2016 Due within one year 36 29 From one to five years 103 78 Thereafter 138 109 Total 277 216

At 31 December 2017, ten aircraft lease agreements (31 December 2016: ten) were in effect. The lease agreements have an average life of seven (31 December 2016: five) 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 2017 At 31 December 2016 Due within one year 38 43 From one to five years 97 70 Thereafter 18 – Total 153 113

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.~~

30. CONTINGENCIES Litigation At 31 December 2017 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 2017, total claims under unresolved litigation amounted to approximately USD 25 million (31 December 2016: USD 25 million).

~~44 F-160 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 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.

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.

~~45 F-161 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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.

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.

The Сompany maintains BBB- investment grade ratings, assigned by rating agencies Fitch and S&P's. On 29 January 2018 Moody’s rating agency raised the Company’s rating from Ba1 to the investment grade level Baa3 and changed the outlook from stable to positive.

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~~

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 2017 31 December 2016 Loss 70 57~~

~~Management believes that the Group’s exposure to interest rate risk fluctuations does not require additional hedging activities.~~

~~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.~~

~~46 F-162 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

31. FINANCIAL RISK MANAGEMENT (CONTINUED) 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.

At 31 December 2017 At 31 December 2016 Other Other USD HKD currencies USD HKD currencies Cash and cash equivalents 609 100 49 1,053 1,014 57 Trade and other receivables 384 – 8 163 – 7 Other assets 141 – 312 140 – 101 Total assets 1,134 100 369 1,356 1,014 165 Trade and other payables 290 – 94 263 – 74 Loans and borrowings 7,684 – 5 5,584 – – Other liabilities 36 – 23 15 – 24 Total liabilities 8,010 – 122 5,862 – 98

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 2017 31 December 2016 Loss 1,375 901~~

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 a counterparty will default on its contractual obligations resulting in a 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.

~~47 F-163 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million~~

~~31. FINANCIAL RISK MANAGEMENT (CONTINUED) The balances of ten major counterparties are presented below. The banks have a minimum of ВВ+ credit rating.~~

Outstanding balance Cash and cash equivalents and bank deposits At 31 December 2017 At 31 December 2016 Bank A 224 1,014 Bank B 143 653 Bank C 125 521 Bank D 102 381 Bank E 80 226 Total 674 2,795 Trade receivables Company A 66 11 Company B 41 9 Company C 23 7 Company D 18 7 Company E 16 6 Total 164 40

For the year ended For the year ended 31 December 2017 31 December 2016 Number of Turnover Number of Turnover customers USD million % customers USD million % Largest customer 1 1,319 14 1 973 12 Next 9 largest customers 9 2,936 32 9 2,587 31 Total 10 4,255 46 10 3,560 43 Next 10 largest customers 10 1,494 16 10 1,154 14 Total 20 5,749 62 20 4,714 57 Remaining customers 3,397 38 3,545 43 Total 9,146 100 8,259 100

~~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 2017 At 31 December 2016 Cash and cash equivalents 852 3,325 Loans, trade and other receivables 518 355 Irrevocable letters of credit 248 101 Bank deposits 96 10~~

~~48 F-164 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 following table contains the maturity profile of the Group’s borrowings (maturity profiles for other liabilities are presented in note 26) based on contractual undiscounted payments, including interest:

Due Due Due from Due in Due Due in Due in At within from one three to the in the the the Due 31 December one to three twelve second third fourth fifth there- 2017 Total month months months year year year year after Fixed rate bank loans and borrowings Principal 5,586 1 1 766 6 988 1,049 1,506 1,269 Interest 1,189 – 36 239 258 257 188 106 105 6,775 1 37 1,005 264 1,245 1,237 1,612 1,374 Floating rate bank loans and borrowings Principal 3,510 9 – 29 236 996 1,028 808 405 Interest 246 5 8 51 65 52 33 20 10 3,756 14 8 80 302 1,048 1,061 828 415 Total 10,531 15 45 1,085 566 2,293 2,298 2,440 1,789

Due Due Due from Due in Due Due in Due in At within from one three to the in the the the Due 31 December one to three twelve second third fourth 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 2,902 11 134 431 445 556 222 609 494 Interest 419 4 18 71 83 73 63 43 64 3,321 15 152 502 528 629 285 652 558 Total 10,199 15 228 864 1,686 1,691 1,939 1,765 2,011

~~At 31 December 2017 the Group had available financing facilities for the management of its day to day liquidity requirements of USD 3,554 million (31 December 2016: USD 2,622 million).~~

~~49 F-165 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 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 19), short-term accounts receivable and payable 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.

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, trade and other long-term payables, whose carrying values differ from their fair values.

~~At 31 December 2017 At 31 December 2016 Fair value Fair value Carrying value Level 1 Carrying value Level 1 Fixed rate corporate bonds 4,465 4,685 2,962 3,171 Total 4,465 4,685 2,962 3,171~~

Fair value Fair value Loans and borrowings, including: Carrying value Level 2 Carrying value Level 2 Floating rate loans and borrowings 3,484 3,439 2,872 2,734 Fixed rate loans and borrowings 1,076 1,055 1,990 2,121 Total 4,560 4,494 4,862 4,855

~~Fair value Fair value Carrying value Level 2 Carrying value Level 2 Trade and other long-term payables 402 440 523 523 Total 402 440 523 523~~

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 2017 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 fair value of trade and other long-term payables at 31 December 2017 was calculated based on the present value of future cash flows, discounted at the best management estimation of market rates.

~~50 F-166 MINING AND METALLURGICAL COMPANY NORILSK NICKEL~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 US Dollars million 33. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES AND ASSOCIATES~~

~~Effective % held~~

~~Subsidiaries by business segments Country Nature of business At 31 December 2017 At 31 December 2016~~

~~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 LLC “Norilskyi obespechivaushyi Production of spare 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 50.01 89.33 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 JSC “Enisey River Shipping River shipping Company” Russian Federation operations 100 100~~

~~LLC “Aeroport Norilsk” Russian Federation Airport 100 100~~

~~JSC “AK “NordStar” Russian Federation Aircompany 100 100~~

~~Effective % held Joint operations by business segments Country Nature of business At 31 December 2017 At 31 December 2016 Other metallurgical Republic of Nkomati Nickel Mine South Africa Mining 50 50~~

34. EVENTS SUBSEQUENT TO THE REPORTING DATE In January 2018 the Company borrowed the second tranche in the amount of USD 1,100 million under the USD 2,500 million syndicated loan, signed in December 2017 with the syndicate of international financial institutions. The existing facility has been fully drawn down.

~~In January 2018 the Company made an early repayment of USD 120 million under the bilateral credit facility with JSC “Nordea Bank” with the total credit limit of USD 220 million.~~

~~In February 2018 the Group signed metal sales agreement with Societe Generale under terms of USD 300 million prepayment.~~

During January and February 2018 the Company signed two confirmed credit lines with PJSC VTB Bank and JSC Gasprombank in the amount of RUB 30 billion and RUB 20 billion accordingly and an unconfirmed credit line facility with JSC Gasprombank in the amount of RUB 20 billion. At the publication date there was no draw-down under these facilities.

~~51 F-167 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~~

MANAGERS Bank GPB International S.A. Citigroup Global Markets ING Bank N.V., London (Gazprombank) Limited Branch 15, rue Bender Citigroup Centre 8-10 Moorgate L-1229 Luxembourg Canary Wharf London EC2R 6DA London E14 5LB United Kingdom United Kingdom

J.P. Morgan Securities plc Sberbank CIB (UK) Limited Société Générale 25 Bank Street 85 Fleet Street 4th Floor 29, boulevard Haussmann Canary Wharf London EC4Y 1AE 75009 Paris London E14 5JP United Kingdom France United Kingdom 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 MANAGERS 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 LEGAL ADVISER TO THE TRUSTEE As to English law Linklaters LLP One Silk Street London EC2Y 8HQ United Kingdom

~~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 OOO PricewaterhouseCoopers Advisory 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 Branch Citigroup Global Markets Europe Limited Citigroup Centre AG Citigroup Centre Canada Square Reuterweg 16 Canada Square Canary Wharf 60323 Frankfurt Canary Wharf London E14 5LB Germany London E14 5LB United Kingdom United Kingdom

~~LISTING AGENT Arthur Cox Listing Services Limited Ten Earlsfort Terrace Dublin 2 Ireland~~